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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K







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

For the fiscal year ended December 31, 2007

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





UNION SECURITY LIFE INSURANCE
COMPANY

OF NEW YORK

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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





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.    Yes  x    No   ̈

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     ̈  Smaller Reporting Company

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, 2008, 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, 2007

TABLE OF CONTENTS



|            |  |                                                                                                              |  |           
|----------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----------
|Item Number |  |                                                                                                              |  | 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 |  | 5         
|            |  |                                                                                                             
|6.          |  | Selected Financial Data                                                                                      |  | 5         
|            |  |                                                                                                             
|7.          |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 5         
|            |  |                                                                                                             
|7A.         |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 6         
|            |  |                                                                                                             
|8.          |  | Financial Statements and Supplementary Data                                                                  |  | 8         
|            |  |                                                                                                             
|9.          |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 8         
|            |  |                                                                                                             
|9A.         |  | Controls and Procedures                                                                                      |  | 8         
|            |  |                                                                                                             
|9B.         |  | Other Information                                                                                            |  | 9         
|            |  |                                                                                                             
|            |  | PART III                                                                                                     |  |           
|            |  |                                                                                                             
|10.         |  | Directors, Executive Officers and Corporate Governance                                                       |  | 9         
|            |  |                                                                                                             
|11.         |  | Executive Compensation                                                                                       |  | 9         
|            |  |                                                                                                             
|12.         |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 9         
|            |  |                                                                                                             
|13.         |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 9         
|            |  |                                                                                                             
|14.         |  | Principal Accounting Fees and Services                                                                       |  | 9         



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|           |  |                                            |  |   
|---------- |  | ------------------------------------------ |  | --
|           |  | PART IV                                    |  |   
|           |  |                                           
|15.        |  | Exhibits and Financial Statement Schedules |  | 10
|           | 
|Signatures |  | 12                                        



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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.



1



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##### Table of Contents

PART I



|Item 1. | Business
|------- | --------

Legal Organization

Union Security Life Insurance Company of New York 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 Company, Union
Security Life, we, us or our refer to Union Security Life Insurance Company of New York.

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

Business Organization

Union Security Life, which is licensed to sell life, health and annuity insurance only in New York State, writes insurance products that are marketed in
New York State by the Assurant Employee Benefits and Assurant Solutions operating segments (see Assurants 2007 Form 10-K for a full description of each of these segments). 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
2007, approximately 91% was from the Assurant Employee Benefits segment, approximately 8% from the Assurant Solutions segment, and the remaining from the other Assurant segments. 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 of America (U.S.) have switched from offering credit insurance to their credit card customers to offering their own
banking-approved debt protection programs. Debt protection is not an insurance product, but rather a service that is voluntarily added by customers as an addendum to a loan.

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 with
the Securities and Exchange Commission (the SEC) as securities. 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 coinsurance 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, 2008, we had approximately 14 employees in our sales offices
in New York, New York. In addition, two Assurant employees, subject to a lease arrangement, spend at least a portion of their time working for us at our headquarters in Fayetteville, New York.



2



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Our Annual Reports on Form 10-K, quarterly reports on Form 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 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 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 our 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;
| | - |  | ----------------



| |  |  | level of consumer lending;
| | - |  | --------------------------



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



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



| |  |  | Failure to Accurately Predict Benefits and Other Costs and Claims. We may be unable to accurately predict 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Reinsurers Failure to Fulfill Obligations. In 2001, the Company 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 The Hartford fails to fulfill these obligations, the Company will be obligated to make these payments. The Company would be responsible to administer this business in the event of a default by the reinsurer. In 2000, the
Company divested its LTC operations to John Hancock Life Insurance Company (John Hancock) through a reinsurance agreement. If John Hancock fails to fulfill its obligations, the Company would be obligated to make these payments.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Risks related to litigation and regulatory actions. From time to time we may be involved in various regulatory investigations and examinations
relating to our insurance and other related business operations. We are subject to comprehensive regulation and oversight by insurance departments in jurisdictions in which we do business. These insurance departments have broad administrative powers
with respect to all aspects of the insurance business and, in particular, monitor the manner in which an insurance company offers, sells and administers its products. Therefore, we may from time to time be subject to a variety of legal and
regulatory actions relating to our current and past business operations and practices.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The prevalence and
outcomes of any such actions cannot be predicted, and no assurances can be given that such actions or any litigation would not materially adversely affect our results of operations and financial condition. In addition, if we were to experience
difficulties with our relationship with a regulatory body in a given jurisdiction, it could have a material adverse effect on our ability to do business in that jurisdiction.

One particular area of focus which has affected our parent, Assurant, has been the accounting treatment for finite reinsurance or other
non-traditional or loss mitigation insurance products. For specific details, please see the Risk Factor entitled Our business is subject to risks related to litigation and regulatory actions in our parents
Annual Report on Form 10-K, which we incorporate by reference herein. Some state regulators have made routine inquiries to some of Assurants insurers regarding finite reinsurance. We depend on our parent, Assurant, for certain administrative,
strategic and operational support. We cannot predict at this time the effect that current litigation, investigations and regulatory activity will have on Assurant or our business, but any adverse outcome could have a material adverse affect on our
business, results of operations or financial condition.

For additional risks that relate to our business, we incorporate by reference the
Risk Factors in Assurants Annual Report on Form 10-K 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 Fayetteville, 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.



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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, 2008, we had 100,000 shares of common stock outstanding, all of which are
owned directly by Assurant. We have no equity compensation plan. We paid $12,000, $10,000, and $4,100 in dividends to our stockholder in 2007, 2006 and 2005, 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 Operations
|------- | -------------------------------------------------------------------------------------

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 elsewhere in this report, particularly under the headings Item 1A-Risk Factors and Forward-Looking
Statements.

The table below presents information regarding our results of operations:



|                                                         |  |                                |        |   |      |   |        |  
|-------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -
|                                                         |  | For the Year EndedDecember 31, |       
|                                                         |  | 2007                           |        |   | 2006 |  
|                                                         |  | (in thousands)                 |       
|Revenues:                                                |  |                                |        |   |      |   |        |  
|Net earned premiums and other considerations             |  | $                              | 60,212 |   |      | $ | 61,338 |  
|Net investment income                                    |  |                                | 9,096  |   |      |   | 9,175  |  
|Net realized (losses) on investments                     |  |                                | (873   | ) |      |   | (173   | )
|Amortization of deferred gains on disposal of businesses |  |                                | 842    |   |      |   | 200    |  
|Fees and other income                                    |  |                                | 70     |   |      |   | 47     |  
|                                                         |  |                                |        |   |      |   |        |  
|Total revenues                                           |  |                                | 69,347 |   |      |   | 70,587 |  
|                                                         |  |                                |        |   |      |   |        |  
|Benefits, losses and expenses:                           |  |                                |        |   |      |   |        |  
|Policyholder benefits                                    |  |                                | 40,690 |   |      |   | 32,284 |  
|Selling, underwriting and general expenses (1)           |  |                                | 17,040 |   |      |   | 17,781 |  
|                                                         |  |                                |        |   |      |   |        |  
|Total benefits, losses and expenses                      |  |                                | 57,730 |   |      |   | 50,065 |  
|                                                         |  |                                |        |   |      |   |        |  
|Income before income tax expense                         |  |                                | 11,617 |   |      |   | 20,522 |  
|Income tax expense                                       |  |                                | 3,957  |   |      |   | 7,081  |  
|                                                         |  |                                |        |   |      |   |        |  
|Net income                                               |  | $                              | 7,660  |   |      | $ | 13,441 |  
|                                                         |  |                                |        |   |      |   |        |  



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



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Year Ended December 31, 2007 Compared to December 31, 2006

Net Income

Net income decreased
$5,781, or 43%, to $7,660 for the year ended December 31, 2007 from $13,441 for the year ended December 31, 2006. This decrease is primarily due to a one-time reserve adjustment of approximately $2,100 (after-tax) resulting from a
clarification of the definition of pre-existing condition from the State of New York Insurance Department, approximately $1,400 (after-tax) of income related to a refund of previously paid policyholder benefits received in 2006, and less favorable
experience in our group disability and group life businesses.

Total Revenues

Total revenues decreased $1,240, or 2%, to $69,347 for the year ended December 31, 2007 from $70,587 for the year ended December 31, 2006. This
decrease is primarily due to the continued decline of our domestic credit business and an increase in net realized losses of $700, of which $641 was the result of write-downs of other than temporary impairments in our investment portfolio. Partially
offsetting these decreases was an increase to amortization of deferred gains on disposal of businesses of $641 which is primarily the result of a prior year reduction of approximately $600 after an annual review of estimates affecting the deferred
gains on disposal of businesses was conducted.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses increased $7,665, or 15%, to $57,730 for the year ended December 31, 2007 from $50,065 for the year ended
December 31, 2006. This increase is primarily due to an increase in policyholder benefits of $8,406 which was driven by a one-time reserve adjustment resulting from a clarification of the definition of pre-existing condition from the State of
New York Insurance Department. Also contributing to the increase in policyholder benefits was a prior year refund of previously paid policyholder benefits which was accounted for as a reduction to policyholder benefits, and less favorable experience
than prior year in our group disability and group life businesses. Partially offsetting these increases was income stemming from our completed clients commission reconciliation project.



|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 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 securities, mortgage-backed and asset-backed securities and commercial mortgage



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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, 2007, we held $104,156 of fixed maturity securities at fair market value and $30,746 of commercial mortgages at amortized cost for a combined total of 93% of total invested assets.
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.

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 maturity 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 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 $106,821 of reinsurance recoverables at December 31, 2007, 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. We believe that a majority of our reinsurance exposure has been ceded to companies rated A- or better by A.M. Best.

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.



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|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
|-------- | -----------------------

Disclosure
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, 2007. 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.

Managements Annual Report on Internal Control Over Financial Reporting

The management of the Company is responsible
for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. A companys internal control over financial reporting includes policies and procedures
that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Companys management assessed its internal control over financial reporting as of December 31, 2007 using criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.

Management, including the Companys chief executive officer and its chief financial
officer, based on their evaluation of the Companys internal control over financial reporting (as defined in Securities Exchange Act Rule 13a-15(f)), have concluded that the Companys internal control over financial reporting was effective
as of December 31, 2007.



8



---

##### Table of Contents

There have been no changes in the Companys internal control over financial reporting that occurred
during the Companys fourth fiscal quarter in 2007 that have materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



|Item 9B. | Other Information
|-------- | -----------------

None.

PART III



|Item 10. | Directors, Executive Officers and 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 Management and 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 2007. 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, 2007 and 2006.



|                                   |  |                                    |     |            |                                    |   |        |   |            |  |     |  
|---------------------------------- |  | ---------------------------------- | --- | ---------- | ---------------------------------- | - | ------ | - | ---------- |  | --- | -
|                                   |  | Fiscal Year EndedDecember 31, 2007 |     |            | Fiscal Year EndedDecember 31, 2006 |  
|Description of Fees (in thousands) |  | Amount                             |     | Percentage |                                    |   | Amount |   | Percentage | 
|Audit fees                         |  | $                                  | 120 |            | 100                                | % |        | $ | 166        |  | 100 | %
|Audit related fees                 |  |                                    |    |            |                                   |   |        |   |           |  |    |  
|Tax fees                           |  |                                    |    |            |                                   |   |        |   |           |  |    |  
|All other fees                     |  |                                    |    |            |                                   |   |        |   |           |  |    |  

Assurants Board of Directors adopted written procedures for pre-approval of services by the
independent registered public accounting firm, including procedures relating to the Committee's power to:



| |  |  | Retain and terminate independent registered public accounting firm and approve all audit engagement fees and terms;
| | - |  | -------------------------------------------------------------------------------------------------------------------



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



| |  |  | Directly oversee the work of any independent registered public accounting firm employed by the Company, including the resolution of any disagreement between
management and the independent registered public accounting firm 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 the Company and the independent registered public accounting firm, other
than prohibited non-auditing services.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9



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##### Table of Contents

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 the Company constitutes not
more than 5% of the total amount of revenues paid by the Company to its auditor during the fiscal year in which the non-audit services are provided; (ii) such services were not recognized by the Company 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 who are members of the Board to whom authority to grant such approvals has been delegated by the Assurant Audit Committee. 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.

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:



|                                                                                                                                                        |  |     
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Financial Statements of Union Security Life Insurance Company of New York                                                                               |  | Page
|Report of Independent Registered Public Accounting Firm                                                                                                 |  | F-1 
|Balance Sheets of Union Security Life Insurance Company of New York at December 31, 2007 and 2006                                                       |  | F-2 
|Statements of Operations of Union Security Life Insurance Company of New York for the Years Ended December 31, 2007, 2006 and 2005                      |  | F-3 
|Statements of Changes in Stockholders Equity of Union Security Life Insurance Company of New York for the Years Ended December 31, 2007, 2006 and 2005 |  | F-4 
|Statements of Cash Flows of Union Security Life Insurance Company of New York for the Years Ended December 31, 2007, 2006 and 2005                      |  | 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 our website, located at www.assurant.com.



10



---

##### Table of Contents

|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).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|24.1 | Power of Attorney.
|---- | ------------------



|31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
|---- | ------------------------------------------------------------------



|31.2 | Rule 13a-14(a)/15d-14(a) Certification of President.
|---- | ----------------------------------------------------



|31.3 | Rule 13a-14(a)/15d-14(a) Certification of Chief 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 President 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.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|32.3 | 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.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11



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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 February 29, 2008.



UNION SECURITY LIFE INSURANCE COMPANY OF NEW YORKBy:

/s/ Michael J. PeningerName:

Michael J. PeningerTitle:

Chief Executive 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 February 29, 2008.



|                                            |  |                                                                                
|------------------------------------------- |  | -------------------------------------------------------------------------------
|Signature                                   |  | Title                                                                          
|                                            | 
|/s/ Michael J. Peninger Michael J. Peninger |  | Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
|                                            | 
|* Manuel J. Becerra                         |  | President (Principal Executive Officer)                                        
|                                            | 
|* Terry J. Kryshak                          |  | Senior Vice President and Director                                             
|                                            | 
|/s/ Tamrha V. Mangelsen Tamrha V. Mangelsen |  | Treasurer and Chief Financial Officer (Principal Financial Officer)            
|                                            | 
|* Paula M. SeGuin                           |  | Chief Administrative Officer and Assistant Secretary and Director              
|                                            | 
|* Melissa J.T. Hall                         |  | Assistant Treasurer and Director                                               
|                                            | 
|* Allen R. Freedman                         |  | Director                                                                       
|                                            | 
|* H. Carroll Mackin                         |  | Director                                                                       
|                                            | 
|* Dale E .Gardner                           |  | Director                                                                       
|                                            | 
|* Esther L. Nelson                          |  | Director                                                                       



|      |  |                           
|----- |  | --------------------------
|     
|      | 
|By:   |  | /s/    Michael J. Peninger
|Name: |  | Michael J. Peninger       
|      |  | Attorney-in-Fact          



12



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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 direct wholly-owned subsidiary of Assurant, Inc. at December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2007 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

February 29, 2008

Minneapolis, Minnesota



F-1



---

##### Table of Contents

Union Security Life Insurance Company of New York

Balance Sheets

At December 31, 2007 and 2006





|                                                                                                                   |  |                                                            |         |                  |   |        
|------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------- | ------- | ---------------- | - | -------
|                                                                                                                   |  | December 31,2007                                           |         | December 31,2006
|                                                                                                                   |  | (in thousands except numberof shares and per shareamounts)
|Assets                                                                                                             |  |                                                            |         |                  |   |        
|Investments:                                                                                                       |  |                                                            |         |                  |   |        
|Fixed maturity securities available for sale, at fair value (amortized cost$101,129 in 2007 and $107,827 in 2006) |  | $                                                          | 104,156 |                  | $ | 111,522
|Equity securities available for sale, at fair value (cost$8,940 in 2007 and $9,455 in 2006)                       |  |                                                            | 7,811   |                  |   | 9,381  
|Commercial mortgage loans on real estate, at amortized cost                                                        |  |                                                            | 30,746  |                  |   | 21,686 
|Policy loans                                                                                                       |  |                                                            | 104     |                  |   | 120    
|Short-term investments                                                                                             |  |                                                            | 588     |                  |   | 2,401  
|Other investments                                                                                                  |  |                                                            | 2,191   |                  |   | 2,524  
|                                                                                                                   |  |                                                            |         |                  |   |        
|Total investments                                                                                                  |  |                                                            | 145,596 |                  |   | 147,634
|Cash and cash equivalents                                                                                          |  |                                                            | 4,016   |                  |   | 5,600  
|Premiums and accounts receivable                                                                                   |  |                                                            | 3,373   |                  |   | 3,383  
|Reinsurance recoverables                                                                                           |  |                                                            | 106,821 |                  |   | 101,283
|Accrued investment income                                                                                          |  |                                                            | 1,546   |                  |   | 1,581  
|Tax receivable                                                                                                     |  |                                                            | 2,671   |                  |   | 1,273  
|Deferred acquisition costs                                                                                         |  |                                                            | 1,037   |                  |   | 1,188  
|Deferred income taxes, net                                                                                         |  |                                                            | 1,055   |                  |   | 1,485  
|Goodwill                                                                                                           |  |                                                            | 2,038   |                  |   | 2,038  
|Other assets                                                                                                       |  |                                                            | 84      |                  |   | 85     
|Assets held in separate accounts                                                                                   |  |                                                            | 20,331  |                  |   | 21,948 
|                                                                                                                   |  |                                                            |         |                  |   |        
|Total assets                                                                                                       |  | $                                                          | 288,568 |                  | $ | 287,498
|                                                                                                                   |  |                                                            |         |                  |   |        
|Liabilities                                                                                                        |  |                                                            |         |                  |   |        
|Future policy benefits and expenses                                                                                |  | $                                                          | 45,532  |                  | $ | 40,381 
|Unearned premiums                                                                                                  |  |                                                            | 11,194  |                  |   | 10,979 
|Claims and benefits payable                                                                                        |  |                                                            | 142,595 |                  |   | 138,880
|Commissions payable                                                                                                |  |                                                            | 4,425   |                  |   | 4,634  
|Reinsurance balances payable                                                                                       |  |                                                            | 1,361   |                  |   | 514    
|Funds held under reinsurance                                                                                       |  |                                                            | 75      |                  |   | 76     
|Deferred gains on disposal of businesses                                                                           |  |                                                            | 4,412   |                  |   | 5,254  
|Accounts payable and other liabilities                                                                             |  |                                                            | 5,068   |                  |   | 4,507  
|Due to affiliates                                                                                                  |  |                                                            | 432     |                  |   | 1,576  
|Liabilities related to separate accounts                                                                           |  |                                                            | 20,331  |                  |   | 21,948 
|                                                                                                                   |  |                                                            |         |                  |   |        
|Total liabilities                                                                                                  |  |                                                            | 235,425 |                  |   | 228,749
|                                                                                                                   |  |                                                            |         |                  |   |        
|Commitments and contingencies (Note 16)                                                                            |  |                                                            |         |                  |   |        
|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                                                                                                  |  |                                                            | 6,903   |                  |   | 11,389 
|Accumulated other comprehensive income                                                                             |  |                                                            | 1,234   |                  |   | 2,354  
|                                                                                                                   |  |                                                            |         |                  |   |        
|Total stockholders equity                                                                                         |  |                                                            | 53,143  |                  |   | 58,749 
|                                                                                                                   |  |                                                            |         |                  |   |        
|Total liabilities and stockholders equity                                                                         |  | $                                                          | 288,568 |                  | $ | 287,498
|                                                                                                                   |  |                                                            |         |                  |   |        

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, 2007, 2006 and 2005





|                                                         |  |                          |        |   |      |   |        |      |  |   |       
|-------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------
|                                                         |  | Years Ended December 31,
|                                                         |  | 2007                     |        |   | 2006 |   |        | 2005
|                                                         |  | (in thousands)          
|Revenues                                                 |  |                          |        |   |      |   |        |      |  |   |       
|Net earned premiums and other considerations             |  | $                        | 60,212 |   |      | $ | 61,338 |      |  | $ | 59,598
|Net investment income                                    |  |                          | 9,096  |   |      |   | 9,175  |      |  |   | 8,756 
|Net realized (losses) gains on investments               |  |                          | (873   | ) |      |   | (173   | )    |  |   | 146   
|Amortization of deferred gains on disposal of businesses |  |                          | 842    |   |      |   | 200    |      |  |   | 1,038 
|Fees and other income                                    |  |                          | 70     |   |      |   | 47     |      |  |   | 31    
|                                                         |  |                          |        |   |      |   |        |      |  |   |       
|Total revenues                                           |  |                          | 69,347 |   |      |   | 70,587 |      |  |   | 69,569
|                                                         |  |                          |        |   |      |   |        |      |  |   |       
|Benefits, losses and expenses                            |  |                          |        |   |      |   |        |      |  |   |       
|Policyholder benefits                                    |  |                          | 40,690 |   |      |   | 32,284 |      |  |   | 34,571
|Amortization of deferred acquisition costs               |  |                          | 1,432  |   |      |   | 1,084  |      |  |   | 981   
|Underwriting, general and administrative expenses        |  |                          | 15,608 |   |      |   | 16,697 |      |  |   | 16,656
|                                                         |  |                          |        |   |      |   |        |      |  |   |       
|Total benefits, losses and expenses                      |  |                          | 57,730 |   |      |   | 50,065 |      |  |   | 52,208
|                                                         |  |                          |        |   |      |   |        |      |  |   |       
|Income before provision for income taxes                 |  |                          | 11,617 |   |      |   | 20,522 |      |  |   | 17,361
|Provision for income taxes                               |  |                          | 3,957  |   |      |   | 7,081  |      |  |   | 5,957 
|                                                         |  |                          |        |   |      |   |        |      |  |   |       
|Net income                                               |  | $                        | 7,660  |   |      | $ | 13,441 |      |  | $ | 11,404
|                                                         |  |                          |        |   |      |   |        |      |  |   |       

See the accompanying notes to the financial statements



F-3



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##### Table of Contents

Union Security Life Insurance Company of New York

Statements of Changes in Stockholders Equity

Years Ended December 31, 2007, 2006 and 2005





|                                                             |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|------------------------------------------------------------ |  | -------------- | ----- | ------------------------ | - | ---------------- |  | - | ----------------------------------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                                             |  | CommonStock    |       | AdditionalPaid-inCapital |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome |   |  | Total |       
|                                                             |  | (in thousands) |      
|Balance, January 1, 2005                                     |  | $              | 2,000 |                          | $ | 43,006           |  | $ | 644                                 |   |  | $     | 5,839  |   |  | $ | 51,489  |  
|Dividends                                                    |  |                |      |                          |   |                 |  |   | (4,100                              | ) |  |       |       |   |  |   | (4,100  | )
|Comprehensive income:                                        |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Net income                                                   |  |                |      |                          |   |                 |  |   | 11,404                              |   |  |       |       |   |  |   | 11,404  |  
|Other comprehensive income:                                  |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Net change in unrealized gains on securities, net of taxes   |  |                |      |                          |   |                 |  |   |                                    |   |  |       | (2,350 | ) |  |   | (2,350  | )
|                                                             |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Total comprehensive income                                   |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   | 9,054   |  
|                                                             |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Balance, December 31, 2005                                   |  |                | 2,000 |                          |   | 43,006           |  |   | 7,948                               |   |  |       | 3,489  |   |  |   | 56,443  |  
|Dividends                                                    |  |                |      |                          |   |                 |  |   | (10,000                             | ) |  |       |       |   |  |   | (10,000 | )
|Comprehensive income:                                        |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Net income                                                   |  |                |      |                          |   |                 |  |   | 13,441                              |   |  |       |       |   |  |   | 13,441  |  
|Other comprehensive income:                                  |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Net change in unrealized gains on securities, net of taxes   |  |                |      |                          |   |                 |  |   |                                    |   |  |       | (1,135 | ) |  |   | (1,135  | )
|                                                             |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Total comprehensive income                                   |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   | 12,306  |  
|                                                             |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Balance, December 31, 2006                                   |  |                | 2,000 |                          |   | 43,006           |  |   | 11,389                              |   |  |       | 2,354  |   |  |   | 58,749  |  
|Dividends                                                    |  |                |      |                          |   |                 |  |   | (12,000                             | ) |  |       |       |   |  |   | (12,000 | )
|Cumulative effect of change in accounting principle (Note 2) |  |                |      |                          |   |                 |  |   | (146                                | ) |  |       |       |   |  |   | (146    | )
|Comprehensive income:                                        |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Net income                                                   |  |                |      |                          |   |                 |  |   | 7,660                               |   |  |       |       |   |  |   | 7,660   |  
|Other comprehensive income:                                  |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Net change in unrealized gains on securities, net of taxes   |  |                |      |                          |   |                 |  |   |                                    |   |  |       | (1,120 | ) |  |   | (1,120  | )
|                                                             |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Total comprehensive income                                   |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   | 6,540   |  
|                                                             |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  
|Balance, December 31, 2007                                   |  | $              | 2,000 |                          | $ | 43,006           |  | $ | 6,903                               |   |  | $     | 1,234  |   |  | $ | 53,143  |  
|                                                             |  |                |       |                          |   |                  |  |   |                                     |   |  |       |        |   |  |   |         |  

See the accompanying notes to the financial statements



F-4



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##### Table of Contents

Union Security Life Insurance Company of New York

Statements of Cash Flows

Years Ended December 31, 2007, 2006 and 2005





|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                  |  | Years Ended December 31, |        
|                                                                                  |  | 2007                     |         |   | 2006 |   |         | 2005 | 
|                                                                                  |  | (in thousands)           |        
|Operating activities                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income                                                                        |  | $                        | 7,660   |   |      | $ | 13,441  |      |  | $ | 11,404  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |         |   |      |   |         |      |  |   |         |  
|Change in reinsurance recoverables                                                |  |                          | (5,538  | ) |      |   | (6,623  | )    |  |   | (1,053  | )
|Change in premiums and accounts receivable                                        |  |                          | 12      |   |      |   | 303     |      |  |   | 1,754   |  
|Change in deferred acquisition costs                                              |  |                          | (74     | ) |      |   | 249     |      |  |   | (314    | )
|Change in accrued investment income                                               |  |                          | 35      |   |      |   | 24      |      |  |   | 96      |  
|Change in insurance policy reserves and expenses                                  |  |                          | 9,081   |   |      |   | 5,294   |      |  |   | (4,394  | )
|Change in accounts payable and other liabilities                                  |  |                          | (1,113  | ) |      |   | 2,880   |      |  |   | (1,107  | )
|Change in commissions payable                                                     |  |                          | (209    | ) |      |   | 171     |      |  |   | (538    | )
|Change in reinsurance balances payable                                            |  |                          | 847     |   |      |   | (2,082  | )    |  |   | 87      |  
|Change in funds held under reinsurance                                            |  |                          | (1      | ) |      |   | (7      | )    |  |   | (6      | )
|Amortization of deferred gains on disposal of businesses                          |  |                          | (842    | ) |      |   | (200    | )    |  |   | (1,038  | )
|Change in income taxes                                                            |  |                          | (286    | ) |      |   | (25     | )    |  |   | 1,875   |  
|Net realized losses (gains) on investments                                        |  |                          | 873     |   |      |   | 173     |      |  |   | (146    | )
|Other                                                                             |  |                          | (58     | ) |      |   | 135     |      |  |   | 57      |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net cash provided by operating activities                                         |  |                          | 10,387  |   |      |   | 13,733  |      |  |   | 6,677   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                                                  |  |                          |        
|Investing activities                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Sales of:                                                                         |  |                          |         |   |      |   |         |      |  |   |         |  
|Fixed maturity securities available for sale                                      |  |                          | 19,739  |   |      |   | 12,994  |      |  |   | 18,531  |  
|Equity securities available for sale                                              |  |                          | 3,081   |   |      |   | 3,812   |      |  |   | 1,143   |  
|Maturities, prepayments, and scheduled redemption of:                             |  |                          |         |   |      |   |         |      |  |   |         |  
|Fixed maturity securities available for sale                                      |  |                          | 6,289   |   |      |   | 8,635   |      |  |   | 15,909  |  
|Purchase of:                                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Fixed maturity securities available for sale                                      |  |                          | (19,089 | ) |      |   | (15,827 | )    |  |   | (35,839 | )
|Equity securities available for sale                                              |  |                          | (3,093  | ) |      |   | (4,342  | )    |  |   | (1,700  | )
|Change in commercial mortgage loans on real estate                                |  |                          | (9,060  | ) |      |   | (7,690  | )    |  |   | (4,871  | )
|Change in short-term investments                                                  |  |                          | 1,813   |   |      |   | 940     |      |  |   | 1,234   |  
|Change in other invested assets                                                   |  |                          | 333     |   |      |   | 504     |      |  |   | 537     |  
|Change in policy loans                                                            |  |                          | 16      |   |      |   | (22     | )    |  |   | (18     | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) investing activities                               |  |                          | 29      |   |      |   | (996    | )    |  |   | (5,074  | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                                                  |  |                          |        
|Financing activities                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Dividends paid                                                                    |  |                          | (12,000 | ) |      |   | (10,000 | )    |  |   | (4,100  | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net cash (used in) financing activities                                           |  |                          | (12,000 | ) |      |   | (10,000 | )    |  |   | (4,100  | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Change in cash and cash equivalents                                               |  |                          | (1,584  | ) |      |   | 2,737   |      |  |   | (2,497  | )
|Cash and cash equivalents at beginning of period                                  |  |                          | 5,600   |   |      |   | 2,863   |      |  |   | 5,360   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                        | 4,016   |   |      | $ | 5,600   |      |  | $ | 2,863   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|                                                                                  |  |                          |        
|Supplemental information:                                                         |  |                          |         |   |      |   |         |      |  |   |         |  
|Income taxes paid (net of refunds)                                                |  | $                        | 4,243   |   |      | $ | 7,107   |      |  | $ | 4,081   |  

See the accompanying notes to the financial statements



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|1. | Nature of Operations
|-- | --------------------

Union Security Life Insurance
Company of New York (the Company) is a provider of life insurance products including group disability insurance, group dental insurance, group life insurance and credit insurance. The Company is a wholly-owned subsidiary of Assurant,
Inc. (the Parent). The Parent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.



|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). Amounts are presented in United States of America (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 gain 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 2007 presentation.

Revenue Recognition

The
Company recognizes 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.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





Investments

Fixed maturity 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 fixed maturity 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 loss analysis. A loan is considered individually impaired when it becomes probable that 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 on investments.

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 watch-list, 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 write-down 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 are recognized on the specific identification basis.

Investment
income is recorded as earned net of investment expenses. The interest method is used to recognize interest income on commercial mortgage loans.

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.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





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 principally 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.

Receivables

The Company
records a receivable when revenue has been recognized but the cash has not been collected. The Company maintains an allowance for doubtful accounts, if necessary, for probable losses resulting from the inability to collect payments.

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 Companys 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, if necessary, on the basis of periodic evaluations of balances due from reinsurers, reinsurer solvency, managements experience, and current economic
conditions.

Reinsurance balances payable include amounts related to ceded premiums and estimated amounts related to assumed paid or
incurred losses, which are reported 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 recorded for temporary differences between the financial reporting basis and income tax
basis of assets



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





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.

The Company classifies net interest expense and
any applicable penalties as a component of income tax expense.

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.

Premium deficiency 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 as incurred. Expenditures for improvements are capitalized and depreciated over the remaining useful life
of the asset.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





Property and equipment also includes capitalized software costs, which represent costs directly
related to obtaining, developing or upgrading internal use software. Such costs are capitalized and amortized using the straight-line method over their estimated useful lives.

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 fair value of 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s
2007 and 2006 impairment tests concluded that goodwill was not impaired.

Other Assets

Other assets include prepaid items and intangible assets. Intangible assets that have finite lives, including customer relationships, customer contracts
and other intangible assets, are amortized over their estimated useful lives. Intangible assets deemed to have indefinite useful lives, primarily certain state licenses, are not amortized and are subject to annual impairment tests. An impairment
exists if the carrying amount of the indefinite-lived intangible asset exceeds its fair value. For other intangible assets subject to amortization, an impairment is recognized if the carrying amount is not recoverable and exceeds the fair value of
the intangible asset.

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 (with matching liabilities) 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 because they are administered by the reinsurers.

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).



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





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.

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 in 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. However, based on information currently available, we believe that our reserve estimates are adequate.

Long Duration Contracts

The
Companys long duration contracts are comprised of traditional life insurance no longer offered and FFG and LTC disposed businesses. Future policy benefits and expense reserves on LTC, life insurance policies and annuity contracts that are no
longer offered and the traditional life insurance contracts within FFG 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.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





Short Duration Contracts

The Companys short duration contracts are comprised of group term life contracts, group disability contracts, medical contracts, dental contracts
and credit life business. For short duration contracts, claims and benefits payable reserves are recorded 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 and IBNR reserves are recorded at an amount equal to the net present value of the expected future claims 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.

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

Deferred Gain on Disposal of
Businesses

The Company recorded deferred gain on disposal of businesses utilizing reinsurance. On March 1, 2000, the Parent
sold its LTC business using a coinsurance contract. On April 2, 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
gain on these disposals was deferred and reported as a liability. The liability is decreased and recognized as revenue over the estimated life of the contracts terms. The Company reviews and evaluates the estimates affecting the deferred gain
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 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.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





Fees and Other Income

The Company derives fee income primarily from providing administrative services. Fee income is recognized 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 recorded as incurred.

Leases

The Company records 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).
This requires the Company to evaluate each contingent matter separately. A loss contingency is recorded if reasonably estimable and probable. The 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 records an estimated reserve at the low end of the estimated range. Contingencies affecting the Company primarily relate to litigation matters which are
inherently difficult to evaluate and are subject to significant changes. The Company believes the contingent amounts recorded are adequate and reasonable.

Recent Accounting Pronouncements - Adopted

On January 1, 2007, the Company adopted
Statement of Position No. 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. Prior to the adoption of the SOP 05-1, certain internal replacements were accounted for as continuations of the replaced contract. Therefore, the accounting policy for certain
internal replacements has changed as a result of the adoption of this SOP. At adoption, the Company recognized a $225 decrease to deferred acquisition costs, which was accounted for as a $146 (after-tax) reduction to the January 1, 2007 balance
of retained earnings.

On January 1, 2007, the Company adopted Statement of Financial Accounting Standards (FAS)
No. 155, Accounting for Certain Hybrid Financial Instrumentsan amendment of FASB Statements No. 133 and 140(FAS 155). This statement resolves issues addressed in FAS 133 Implementation Issue



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





No. D1, Application of Statement 133 to Beneficial Interest in Securitized Financial Assets. FAS 155 (a) permits fair value remeasurement for any
hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; (b) clarifies which interest-only strips and principal-only strips are not subject to the requirements of FAS 133; (c) establishes a
requirement to evaluate beneficial interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation;
(d) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (e) eliminates restrictions on a qualifying special-purpose entitys ability to hold passive derivative financial
instruments that pertain to beneficial interests that are or contain a derivative financial instrument. FAS 155 also requires presentation within the financial statements that identifies those hybrid financial instruments for which the fair value
election has been applied and information on the statement of operations impact of the changes in fair value of those instruments. The adoption of FAS 155 did not have a material impact on the Companys financial position or results of
operations.

On January 1, 2007, the Company adopted the provisions of Financial Accounting Statements Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109(FIN 48). There was no impact as a result of adoption on the Companys January 1, 2007 retained
earnings. See Note 4 for further information regarding the adoption of FIN 48.

Recent Accounting Pronouncements  Not Yet
Adopted

In September 2006, the FASB issued FAS No. 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. The Company is required to adopt FAS 157 on January 1, 2008. The adoption of FAS 157 will not have an impact
on the Companys financial position or results of operations.

In February 2007, the FASB issued FAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities(FAS 159). FAS 159 provides a choice to measure many financial instruments and certain other items at fair value on specified election dates and requires disclosures about the
election of the fair value option. 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. The Company is required
to adopt FAS 159 on January 1, 2008. The Company has chosen not to elect the fair value option for any financial or non-financial instruments as of the adoption date thus the adoption of FAS 159 will not have an impact on the Companys
financial position or results of operations.

In December 2007, the FASB issued FAS No. 141R, Business Combinations(FAS
141R). FAS 141R replaces FASB Statement No. 141, Business Combinations(FAS 141).FAS 141R retains the fundamental requirements in FAS 141 that the purchase method of accounting be used for all business
combinations, that an acquirer be identified for each business combination and for goodwill to be recognized and measured as a residual. FAS 141R expands the definition of transactions and events that qualify as business combinations to all
transactions and other events in which one entity obtains control



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





over one or more other businesses. FAS 141R broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests
transferred as a result of business combinations. FAS 141R also increases the disclosure requirements for business combinations in the financial statements. FAS 141R is effective for fiscal periods beginning after December 15, 2008. Therefore,
the Company is required to adopt FAS 141R on January 1, 2009. The Company is currently evaluating the requirements of FAS 141R and the potential impact on the Companys financial position and results of operations.

In December 2007, the FASB issued FAS No. 160, Non-controlling Interest in Consolidated Financial Statementsan amendment of ARB No. 51(FAS 160). FAS 160 requires that a non-controlling interest in a subsidiary be separately reported within equity and the amount of consolidated net income attributable to the non-controlling interest be presented in the statement of
operations. FAS 160 also calls for consistency in reporting changes in the parents ownership interest in a subsidiary and necessitates fair value measurement of any non-controlling equity investment retained in a deconsolidation. FAS 160 is
effective for fiscal periods beginning after December 15, 2008. Therefore, the Company is required to adopt FAS 160 on January 1, 2009. The Company is currently evaluating the requirements of FAS 160 and the potential impact on the
Companys financial position and results of operations.

In February 2008, the FASB issued Financial Statement of Position FAS 157-2
(FSP FAS 157-2). FSP FAS 157-2 defers the effective date of FAS 157 for all non-financial assets and non-financial liabilities measured on a non-recurring basis to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years. Therefore, the Company is required to adopt the FAS 157 requirements for its non-financial assets and non-financial liabilities measured on a non-recurring basis on January 1, 2009. The Company is currently evaluating
the requirements of FAS 157 for its non-financial assets and non-financial liabilities measured on a non-recurring basis and the potential impact on the Companys financial position and results of operations.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|3. | Investments
|-- | -----------

The cost or amortized cost, gross
unrealized gains and losses and fair value of fixed maturity and equity securities as of December 31, 2007 are as follows:



|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|---------------------------------------------------------------- |  | -------------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                                                                 |  | Cost orAmortizedCost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Fixed maturity securities:                                       |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|United States Government and government agencies and authorities |  | $                    | 401     |                      | $ | 82                    |  | $ |           |   |  | $ | 483    
|States, municipalities and political subdivisions                |  |                      | 13,509  |                      |   | 245                   |  |   | (4         | ) |  |   | 13,750 
|Foreign governments                                              |  |                      | 3,547   |                      |   | 341                   |  |   |           |   |  |   | 3,888  
|Public utilities                                                 |  |                      | 13,698  |                      |   | 537                   |  |   | (46        | ) |  |   | 14,189 
|Mortgage-backed securities                                       |  |                      | 16,889  |                      |   | 213                   |  |   | (175       | ) |  |   | 16,927 
|All other corporate                                              |  |                      | 53,085  |                      |   | 2,451                 |  |   | (617       | ) |  |   | 54,919 
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Total fixed maturities                                           |  |                      | 101,129 |                      |   | 3,869                 |  |   | (842       | ) |  |   | 104,156
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Equity securities:                                               |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Non-sinking fund preferred stocks                                |  | $                    | 8,940   |                      | $ | 23                    |  | $ | (1,152     | ) |  | $ | 7,811  
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        

The cost or amortized cost, gross unrealized gains and losses and fair value of fixed maturity and
equity securities as of December 31, 2006 are as follows:



|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|---------------------------------------------------------------- |  | -------------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                                                                 |  | Cost orAmortizedCost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Fixed maturity securities:                                       |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|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 
|Mortgage-backed securities                                       |  |                      | 22,902  |                      |   | 129                   |  |   | (164       | ) |  |   | 22,867 
|All other corporate                                              |  |                      | 61,405  |                      |   | 2,743                 |  |   | (303       | ) |  |   | 63,845 
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Total fixed maturities                                           |  |                      | 107,827 |                      |   | 4,278                 |  |   | (583       | ) |  |   | 111,522
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Equity securities:                                               |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Non-sinking fund preferred stocks                                |  | $                    | 9,455   |                      | $ | 109                   |  | $ | (183       | ) |  | $ | 9,381  
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        

The cost or amortized cost and fair value of fixed maturity securities at December 31, 2007
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.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|                                       |  |                      |         |            |   |        
|-------------------------------------- |  | -------------------- | ------- | ---------- | - | -------
|                                       |  | Cost orAmortizedCost |         | Fair Value
|Due in one year or less                |  | $                    | 2,308   |            | $ | 2,330  
|Due after one year through five years  |  |                      | 20,641  |            |   | 21,419 
|Due after five years through ten years |  |                      | 25,957  |            |   | 26,334 
|Due after ten years                    |  |                      | 35,334  |            |   | 37,146 
|                                       |  |                      |         |            |   |        
|Total                                  |  |                      | 84,240  |            |   | 87,229 
|Mortgage-backed securities             |  |                      | 16,889  |            |   | 16,927 
|                                       |  |                      |         |            |   |        
|Total                                  |  | $                    | 101,129 |            | $ | 104,156
|                                       |  |                      |         |            |   |        

Major categories of net investment income are as follows:



|                                         |  |                          |       |   |      |   |       |      |  |   |       |  
|---------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                         |  | Years Ended December 31, |      
|                                         |  | 2007                     |       |   | 2006 |   |       | 2005 | 
|Fixed maturity securities                |  | $                        | 6,673 |   |      | $ | 6,951 |      |  | $ | 7,135 |  
|Equity securities                        |  |                          | 617   |   |      |   | 596   |      |  |   | 581   |  
|Commercial mortgage loans on real estate |  |                          | 1,451 |   |      |   | 1,075 |      |  |   | 645   |  
|Policy loans                             |  |                          | 8     |   |      |   | 9     |      |  |   | 7     |  
|Short-term investments                   |  |                          | 138   |   |      |   | 206   |      |  |   | 158   |  
|Other investments                        |  |                          | 202   |   |      |   | 242   |      |  |   | 275   |  
|Cash and cash equivalents                |  |                          | 282   |   |      |   | 355   |      |  |   | 180   |  
|                                         |  |                          |       |   |      |   |       |      |  |   |       |  
|Investment income                        |  |                          | 9,371 |   |      |   | 9,434 |      |  |   | 8,981 |  
|Investment expenses                      |  |                          | (275  | ) |      |   | (259  | )    |  |   | (225  | )
|                                         |  |                          |       |   |      |   |       |      |  |   |       |  
|Net investment income                    |  | $                        | 9,096 |   |      | $ | 9,175 |      |  | $ | 8,756 |  
|                                         |  |                          |       |   |      |   |       |      |  |   |       |  

The net realized (losses) gains recorded in income for 2007, 2006 and 2005 are summarized as
follows:



|                            |  |                          |      |   |      |   |      |      |  |   |     |  
|--------------------------- |  | ------------------------ | ---- | - | ---- | - | ---- | ---- |  | - | --- | -
|                            |  | Years Ended December 31, |     
|                            |  | 2007                     |      |   | 2006 |   |      | 2005 | 
|Fixed maturity securities   |  | $                        | (312 | ) |      | $ | (219 | )    |  | $ | 172 |  
|Equity securities           |  |                          | (524 | ) |      |   | (121 | )    |  |   | (26 | )
|                            |  |                          |      |   |      |   |      |      |  |   |     |  
|Total marketable securities |  |                          | (836 | ) |      |   | (340 | )    |  |   | 146 |  
|Other                       |  |                          | (37  | ) |      |   | 167  |      |  |   |    |  
|                            |  |                          |      |   |      |   |      |      |  |   |     |  
|Total                       |  | $                        | (873 | ) |      | $ | (173 | )    |  | $ | 146 |  
|                            |  |                          |      |   |      |   |      |      |  |   |     |  

Proceeds from sales of available for sale securities were $22,822, $16,806, and $19,674 during
2007, 2006 and 2005, respectively. Gross gains of $576, $91 and $498 and gross losses of $771, $419 and $332 were realized on dispositions in 2007, 2006 and 2005, respectively. For securities sold at a loss during 2007, the average period of time
these securities were trading continuously below book value was approximately 15 months.

The Company recorded $641, $12 and $20 of
realized losses in 2007, 2006 and 2005, respectively, associated with other-than-temporary declines in value of available for sale securities.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





The investment category and duration of the Companys gross unrealized losses on fixed maturity
and equity securities at December 31, 2007 are as follows:



|                                                   |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |        |  
|-------------------------------------------------- |  | ------------------- | ------ | ---------------- | ----------------- | ---- | ---------- | ----- | ---------------- | ----- |  | ---------- | ---- | ---------------- |  | - | ------ |  | - | ------ | -
|                                                   |  | Less than 12 months |        |                  | 12 Months or More |      |            | Total |                 
|                                                   |  | Fair Value          |        | UnrealizedLosses |                   |      | Fair Value |       | UnrealizedLosses |       |  | Fair Value |      | UnrealizedLosses | 
|Fixed maturity securities:                         |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |        |  
|States, municipalities, and political subdivisions |  | $                   | 797    |                  | $                 | (4   | )          |       | $                |      |  | $          |     |                  |  | $ | 797    |  | $ | (4     | )
|Public utilities                                   |  |                     | 1,812  |                  |                   | (17  | )          |       |                  | 931   |  |            | (29  | )                |  |   | 2,743  |  |   | (46    | )
|Mortgage backed securities                         |  |                     | 874    |                  |                   | (125 | )          |       |                  | 3,611 |  |            | (50  | )                |  |   | 4,485  |  |   | (175   | )
|All other corporate bonds                          |  |                     | 9,389  |                  |                   | (437 | )          |       |                  | 2,778 |  |            | (180 | )                |  |   | 12,167 |  |   | (617   | )
|                                                   |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |        |  
|Total fixed maturities                             |  | $                   | 12,872 |                  | $                 | (583 | )          |       | $                | 7,320 |  | $          | (259 | )                |  | $ | 20,192 |  | $ | (842   | )
|                                                   |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |        |  
|Equity securities                                  |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |        |  
|Non-sinking fund preferred stocks                  |  | $                   | 5,353  |                  | $                 | (944 | )          |       | $                | 1,594 |  | $          | (208 | )                |  | $ | 6,947  |  | $ | (1,152 | )
|                                                   |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |        |  

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



|                                  |  |                        |        |                  |                      |      |            |       |                  |        |  |            |      |                  |  |   |        |  |   |      |  
|--------------------------------- |  | ---------------------- | ------ | ---------------- | -------------------- | ---- | ---------- | ----- | ---------------- | ------ |  | ---------- | ---- | ---------------- |  | - | ------ |  | - | ---- | -
|                                  |  | Less than 12 months(1) |        |                  | 12 Months or More(1) |      |            | Total |                 
|                                  |  | Fair Value             |        | UnrealizedLosses |                      |      | Fair Value |       | UnrealizedLosses |        |  | Fair Value |      | UnrealizedLosses | 
|Fixed maturity securities:        |  |                        |        |                  |                      |      |            |       |                  |        |  |            |      |                  |  |   |        |  |   |      |  
|Foreign governments               |  | $                      |       |                  | $                    |     |            |       | $                | 1,492  |  | $          | (38  | )                |  | $ | 1,492  |  | $ | (38  | )
|Public utilities                  |  |                        | 2,151  |                  |                      | (57  | )          |       |                  | 980    |  |            | (21  | )                |  |   | 3,131  |  |   | (78  | )
|Mortgage backed securities        |  |                        | 4,796  |                  |                      | (21  | )          |       |                  | 6,481  |  |            | (143 | )                |  |   | 11,277 |  |   | (164 | )
|All other corporate bonds         |  |                        | 12,679 |                  |                      | (138 | )          |       |                  | 4,863  |  |            | (165 | )                |  |   | 17,542 |  |   | (303 | )
|                                  |  |                        |        |                  |                      |      |            |       |                  |        |  |            |      |                  |  |   |        |  |   |      |  
|Total fixed maturities            |  | $                      | 19,626 |                  | $                    | (216 | )          |       | $                | 13,816 |  | $          | (367 | )                |  | $ | 33,442 |  | $ | (583 | )
|                                  |  |                        |        |                  |                      |      |            |       |                  |        |  |            |      |                  |  |   |        |  |   |      |  
|Equity securities                 |  |                        |        |                  |                      |      |            |       |                  |        |  |            |      |                  |  |   |        |  |   |      |  
|Non-sinking fund preferred stocks |  | $                      | 1,336  |                  | $                    | (22  | )          |       | $                | 3,867  |  | $          | (161 | )                |  | $ | 5,203  |  | $ | (183 | )
|                                  |  |                        |        |                  |                      |      |            |       |                  |        |  |            |      |                  |  |   |        |  |   |      |  



|(1) | Certain unrealized losses, which were previously classified in less than 12 months, have been appropriately classified as 12 months or more in 2007 with conforming changes in 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The total unrealized losses represent less than 8% and 2% of the aggregate fair value of the related securities at
December 31, 2007 and 2006, respectively. Approximately 77% and 31% of these unrealized losses have been in a continuous loss position for less than twelve months in 2007 and 2006, respectively. The total unrealized losses are comprised of 183
and 166 individual securities with all of the individual securities having an unrealized loss of less than $200 in 2007 and 2006, respectively. The total unrealized losses on securities that were in a continuous unrealized loss position for greater
than six months but less than 12 months were approximately $1,178 and $139 in 2007 and 2006, respectively. At December 31, 2007, approximately 23% of the unrealized losses for fixed maturity and equity securities were concentrated in the
banking industry with no exposure to any single issuer in the banking industry in excess of 5% of total unrealized losses.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





The cost or amortized cost and fair value of available for sale fixed maturity securities in an
unrealized loss position at December 31, 2007, by contractual maturity, is shown below:



|                                       |  |                      |        |           |   |       
|-------------------------------------- |  | -------------------- | ------ | --------- | - | ------
|                                       |  | Cost orAmortizedCost |        | FairValue
|Due in one year or less                |  | $                    | 11     |           | $ | 11    
|Due after one year through five years  |  |                      | 1,294  |           |   | 1,246 
|Due after five years through ten years |  |                      | 9,283  |           |   | 8,999 
|Due after ten years                    |  |                      | 5,786  |           |   | 5,451 
|                                       |  |                      |        |           |   |       
|Total                                  |  |                      | 16,374 |           |   | 15,707
|Mortgage-backed securities             |  |                      | 4,660  |           |   | 4,485 
|                                       |  |                      |        |           |   |       
|Total                                  |  | $                    | 21,034 |           | $ | 20,192
|                                       |  |                      |        |           |   |       

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 $641, $12 and $20 of other-than-temporary impairments as of December 31, 2007, 2006 and 2005, 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, 2007 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 ability and intent to hold these assets
until the date of recovery.

The following table represents our exposure to sub-prime and related mortgages within our fixed maturity
portfolio as well as the current net unrealized (loss) position at December 31, 2007.



|                                                                  |  |              |       |                        |      |   |                           |   |      |  
|----------------------------------------------------------------- |  | ------------ | ----- | ---------------------- | ---- | - | ------------------------- | - | ---- | -
|                                                                  |  | Market Value |       | Percentage ofPortfolio |      |   | Net Unrealized(Loss) Gain |  
|                                                                  |  |              |       | (in thousands)         |      |   |                           |  
|Fixed maturity portfolio:                                         |  |              |       |                        |      |   |                           |   |      |  
|Sub-prime first lien mortgages                                    |  | $            | 874   |                        | 0.84 | % |                           | $ | (126 | )
|Second lien mortgages (including sub-prime second lien mortgages) |  |              | 755   |                        | 0.72 | % |                           |   | 4    |  
|                                                                  |  |              |       |                        |      |   |                           |   |      |  
|Total exposure to sub-prime collateral                            |  | $            | 1,629 |                        | 1.56 | % |                           | $ | (122 | )
|                                                                  |  |              |       |                        |      |   |                           |   |      |  

The following table represents our exposure to sub-prime and related mortgages within our fixed
maturity portfolio as well as the current net unrealized gain (loss) position at December 31, 2006.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|                                                                  |  |              |       |                        |      |   |                           |   |    |  
|----------------------------------------------------------------- |  | ------------ | ----- | ---------------------- | ---- | - | ------------------------- | - | -- | -
|                                                                  |  | Market Value |       | Percentage ofPortfolio |      |   | Net Unrealized(Loss) Gain |  
|                                                                  |  |              |       | (in thousands)         |      |   |                           |  
|Fixed maturity portfolio:                                         |  |              |       |                        |      |   |                           |   |    |  
|Sub-prime first lien mortgages                                    |  | $            | 996   |                        | 0.89 | % |                           | $ | (4 | )
|Second lien mortgages (including sub-prime second lien mortgages) |  |              | 1,004 |                        | 0.90 | % |                           |   | 4  |  
|                                                                  |  |              |       |                        |      |   |                           |   |    |  
|Total exposure to sub-prime collateral                            |  | $            | 2,000 |                        | 1.79 | % |                           | $ |   |  
|                                                                  |  |              |       |                        |      |   |                           |   |    |  

Approximately 10% and 9% of the mortgage-backed securities had exposure to sub-prime mortgage
collateral at December 31, 2007 and 2006, respectively. This represents 1.56% and 1.79% of the total fixed maturity portfolio and 14.46% and less than 1% of the total unrealized loss position of the fixed maturity portfolio at December 31,
2007 and 2006. Of the securities with sub-prime exposure, all are investment grade rated. We have no sub-prime exposure to collateralized debt obligations as of December 31, 2007 or 2006. All mortgage-backed securities, including those with
sub-prime exposure, are reviewed as part of the ongoing other-than-temporary impairment monitoring process.

The Company has made
commercial mortgage loans, collateralized by the underlying real estate, on properties located throughout the U.S. At December 31, 2007, approximately 51% of the outstanding principal balance of commercial mortgage loans was concentrated in the
states of New York, California, 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 $443 to $2,750 at December 31, 2007 and from $621 to $1,762 at December 31, 2006. The mortgage loan valuation allowance for losses was $70 and $33 at December 31, 2007 and 2006, respectively.

At December 31, 2007 there were no loan commitments outstanding.

The Company has short term investments and fixed maturity securities carried at $483 and $440 at December 31, 2007 and 2006, respectively, on deposit with various governmental authorities as required by law.



|4. | Income Taxes
|-- | ------------

The Company is subject to U.S. tax
and files a consolidated federal income tax return with its parent, Assurant, Inc. Information about the Companys current and deferred tax expense follows:



|                         |  |                          |       |      |   |       |  |   |      
|------------------------ |  | ------------------------ | ----- | ---- | - | ----- |  | - | -----
|                         |  | Years Ended December 31,
|                         |  | 2007                     |       | 2006 |   | 2005 
|Current expense:         |  |                          |       |      |   |       |  |   |      
|Federal                  |  | $                        | 2,845 |      | $ | 5,955 |  | $ | 5,209
|                         |  |                          |       |      |   |       |  |   |      
|Total current expense    |  |                          | 2,845 |      |   | 5,955 |  |   | 5,209
|Deferred expense         |  |                          |       |      |   |       |  |   |      
|Federal                  |  |                          | 1,112 |      |   | 1,126 |  |   | 748  
|                         |  |                          |       |      |   |       |  |   |      
|Total deferred expense   |  |                          | 1,112 |      |   | 1,126 |  |   | 748  
|                         |  |                          |       |      |   |       |  |   |      
|Total income tax expense |  | $                        | 3,957 |      | $ | 7,081 |  | $ | 5,957
|                         |  |                          |       |      |   |       |  |   |      



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





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



|                                       |  |              |   |  |      |   |  |      |  
|-------------------------------------- |  | ------------ | - |  | ---- | - |  | ---- | -
|                                       |  | December 31, |  
|                                       |  | 2007         |   |  | 2006 |   |  | 2005 |  
|Federal income tax rate                |  | 35.0         | % |  | 35.0 | % |  | 35.0 | %
|Reconciling items:                     |  |              |   |  |      |   |  |      |  
|Tax exempt interest                    |  | (0.7         | ) |  | (0.1 | ) |  | (0.2 | )
|Dividends received deduction           |  | (0.4         | ) |  | (0.3 | ) |  | (0.2 | )
|Permanent nondeductible expenses       |  | 0.2          |   |  | 0.1  |   |  | 0.3  |  
|Change in reserve for prior year taxes |  |             |   |  |     |   |  | (0.4 | )
|Other                                  |  |             |   |  | (0.2 | ) |  | (0.2 | )
|                                       |  |              |   |  |      |   |  |      |  
|Effective income tax rate:             |  | 34.1         | % |  | 34.5 | % |  | 34.3 | %
|                                       |  |              |   |  |      |   |  |      |  

The Company adopted the provisions of FIN 48 on January 1, 2007. The adoption of this
interpretation had no impact on the Companys financial statements.

The Company files income tax returns in the U.S. and various
state and local jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2004. Substantially all state and local income tax matters have been concluded for the years through 1999.

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



|                                                  |  |              |       |      |   |      
|------------------------------------------------- |  | ------------ | ----- | ---- | - | -----
|                                                  |  | December 31,
|                                                  |  | 2007         |       | 2006
|Deferred tax assets:                              |  |              |       |      |   |      
|Accrued liabilities                               |  | $            | 380   |      | $ | 327  
|Deferred acquisition costs                        |  |              | 937   |      |   | 1,055
|Deferred gains on reinsurance                     |  |              | 1,544 |      |   | 1,839
|Investment adjustment                             |  |              | 221   |      |   | 1    
|                                                  |  |              |       |      |   |      
|Gross deferred tax assets                         |  |              | 3,082 |      |   | 3,222
|                                                  |  |              |       |      |   |      
|Deferred tax liabilities:                         |  |              |       |      |   |      
|Policyholder and separate account reserves        |  |              | 1,363 |      |   | 470  
|Unrealized gains on fixed maturities and equities |  |              | 664   |      |   | 1,267
|                                                  |  |              |       |      |   |      
|Gross deferred tax liabilities                    |  |              | 2,027 |      |   | 1,737
|                                                  |  |              |       |      |   |      
|Net deferred income tax asset                     |  | $            | 1,055 |      | $ | 1,485
|                                                  |  |              |       |      |   |      

As of December 31, 2007, the Company had no net operating or capital loss carryforwards for
U.S. federal income tax purposes.



F-21



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|5. | Premiums and Accounts Receivable
|-- | --------------------------------

Receivables are
reported net of an allowance for uncollectible items. A summary of such receivables is as follows:



|                              |  |              |       |      |   |      
|----------------------------- |  | ------------ | ----- | ---- | - | -----
|                              |  | December 31,
|                              |  | 2007         |       | 2006
|Insurance premiums receivable |  | $            | 3,205 |      | $ | 3,257
|Other receivables             |  |              | 168   |      |   | 126  
|                              |  |              |       |      |   |      
|Total                         |  |              | 3,373 |      |   | 3,383
|                              |  |              |       |      |   |      



|6. | 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, 2007 and 2006. All the outstanding shares at December 31, 2007 are owned by the
Parent (see Note 1). The Company paid dividends of $12,000, $10,000, and $4,100 at December 31, 2007, 2006 and 2005, 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 7).



|7. | 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 |  
|                                                        |  | 2007       |        |   | 2006                 |   |        | 2005 |  |   | 2007   |   |  | 2006 |       
|Based on statutory accounting practices                 |  | $          | 5,747  |   |                      | $ | 14,471 |      |  | $ | 10,538 |   |  | $    | 45,331 |   |  | $ | 52,054 |  
|Deferred acquisition costs                              |  |            | 73     |   |                      |   | (249   | )    |  |   | 314    |   |  |      | 1,037  |   |  |   | 1,188  |  
|Deferred and uncollected premiums                       |  |            |       |   |                      |   | (8     | )    |  |   | (11    | ) |  |      | 47     |   |  |   | 47     |  
|Policy and claim reserves                               |  |            | 2,225  |   |                      |   | 490    |      |  |   | 526    |   |  |      | 5,480  |   |  |   | 3,104  |  
|Investment valuation difference                         |  |            | (26    | ) |                      |   | 177    |      |  |   | 14     |   |  |      | 1,714  |   |  |   | 3,464  |  
|Commissions & fees                                      |  |            | 1,256  |   |                      |   | 92     |      |  |   | 534    |   |  |      | (270   | ) |  |   | (365   | )
|Deferred taxes                                          |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 54     |   |  |   | 948    |  
|Deferred gain on disposal of businesses                 |  |            | 171    |   |                      |   | 41     |      |  |   | 211    |   |  |      | (4,412 | ) |  |   | (5,254 | )
|Goodwill                                                |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 2,038  |   |  |   | 2,038  |  
|Income taxes                                            |  |            | (1,551 | ) |                      |   | (1,093 | )    |  |   | (747   | ) |  |      |       |   |  |   | 32     |  
|Pension                                                 |  |            | (148   | ) |                      |   | (150   | )    |  |   | (149   | ) |  |      | (748   | ) |  |   | (600   | )
|Reinsurance in unauthorized companies                   |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 20     |   |  |   | 424    |  
|Interest maintenance reserve, deferral and amortization |  |            | (83    | ) |                      |   | (239   | )    |  |   | 27     |   |  |      | 274    |   |  |   | 357    |  
|Asset valuation reserve                                 |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 981    |   |  |   | 1,143  |  
|Non-admitted assets and other                           |  |            | (4     | ) |                      |   | (91    | )    |  |   | 147    |   |  |      | 1,597  |   |  |   | 169    |  
|                                                        |  |            |        |   |                      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Based on generally accepted accounting principles       |  | $          | 7,660  |   |                      | $ | 13,441 |      |  | $ | 11,404 |   |  | $    | 53,143 |   |  | $ | 58,749 |  
|                                                        |  |            |        |   |                      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  

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 2007, the Company declared and paid dividends of $12,000, of which $5,005 was ordinary and $6,995 was extraordinary. In 2006, the Company declared
and paid dividends of $10,000, of which $4,703 was ordinary and $5,297 was extraordinary. The Company has the ability, under state regulatory requirements, to dividend up to $4,333 to the Parent in 2008 without permission from New York regulators.



F-22



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|8. | 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:



|                                                |  |      |         |      |   |        
|----------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                |  | 2007 |         | 2006
|Ceded future policy holder benefits and expense |  | $    | 45,871  |      | $ | 40,686 
|Ceded unearned premium                          |  |      | 10,038  |      |   | 9,625  
|Ceded claims and benefits payable               |  |      | 47,518  |      |   | 48,312 
|Ceded paid losses                               |  |      | 3,394   |      |   | 2,660  
|                                                |  |      |         |      |   |        
|Total                                           |  | $    | 106,821 |      | $ | 101,283
|                                                |  |      |         |      |   |        



F-23



---

##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





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



|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------------ | ------- | - | ------------- | - | ------- | ----- |  | - | ------------ | - |  | ------------- | ------- | - | ----- | - | ------- | ------------ |  | - | ------------- | - |  | ----- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                             |  | Years Ended December 31, |        
|                                             |  | 2007                     |         |   | 2006          |   |         | 2005  | 
|                                             |  | LongDuration             |         |   | ShortDuration |   |         | Total |  |   | LongDuration |   |  | ShortDuration |         |   | Total |   |         | LongDuration |  |   | ShortDuration |   |  | Total |        
|Direct                                       |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|Premiums and other considerations            |  | $                        | 10,340  |   |               | $ | 56,149  |       |  | $ | 66,489       |   |  | $             | 10,820  |   |       | $ | 60,482  |              |  | $ | 71,302        |   |  | $     | 11,247  |   |  | $ | 70,879  |   |  | $ | 82,126  |  
|Premiums assumed                             |  |                          |        |   |               |   | 18,228  |       |  |   | 18,228       |   |  |               |        |   |       |   | 19,384  |              |  |   | 19,384        |   |  |       |        |   |  |   | 11,402  |   |  |   | 11,402  |  
|Premiums ceded                               |  |                          | (10,340 | ) |               |   | (14,165 | )     |  |   | (24,505      | ) |  |               | (10,820 | ) |       |   | (18,528 | )            |  |   | (29,348       | ) |  |       | (11,247 | ) |  |   | (22,683 | ) |  |   | (33,930 | )
|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|Net earned premiums and other considerations |  | $                        |        |   |               | $ | 60,212  |       |  | $ | 60,212       |   |  | $             |        |   |       | $ | 61,338  |              |  | $ | 61,338        |   |  | $     |        |   |  | $ | 59,598  |   |  | $ | 59,598  |  
|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|Direct policyholder benefits                 |  | $                        | 14,118  |   |               | $ | 35,515  |       |  | $ | 49,633       |   |  | $             | 18,125  |   |       | $ | 34,334  |              |  | $ | 52,459        |   |  | $     | 17,931  |   |  | $ | 44,880  |   |  | $ | 62,811  |  
|Benefits assumed                             |  |                          |        |   |               |   | 17,424  |       |  |   | 17,424       |   |  |               |        |   |       |   | 17,335  |              |  |   | 17,335        |   |  |       |        |   |  |   | 8,384   |   |  |   | 8,384   |  
|Benefits ceded                               |  |                          | (14,112 | ) |               |   | (12,255 | )     |  |   | (26,367      | ) |  |               | (18,116 | ) |       |   | (19,394 | )            |  |   | (37,510       | ) |  |       | (17,925 | ) |  |   | (18,699 | ) |  |   | (36,624 | )
|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|Net policyholder benefits                    |  | $                        | 6       |   |               | $ | 40,684  |       |  | $ | 40,690       |   |  | $             | 9       |   |       | $ | 32,275  |              |  | $ | 32,284        |   |  | $     | 6       |   |  | $ | 34,565  |   |  | $ | 34,571  |  
|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  

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

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. The selection of reinsurance companies is based on criteria related to solvency and reliability and, to a lesser degree, diversification as
well as developing strong relationships with the Companys reinsurers for the sharing of risks. A.M. Best ratings for The Hartford and John Hancock, the reinsurers we have the most exposure to, are A+ and A++, respectively. The majority of our
remaining reinsurance exposure has been ceded to companies rated A- or better by A.M. Best.



F-24



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





Business Divestitures

The Company 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 Company entered into a reinsurance agreement with the
Hartford for the sale of its annuity business. The reinsurance recoverable from the Hartford was $3,258 and $4,185 as of December 31, 2007 and 2006, respectively. The Company would be responsible to administer this business in the event of a
default by the Hartford. 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 Company divested its LTC operations to John Hancock Life Insurance Company (John Hancock). Reinsurance recoverable from John Hancock was $53,803 and $46,115 as of December 31, 2007 and
2006, respectively.



|9. | Reserves
|-- | --------

The following table provides reserve
information by major lines of business as of December 31, 2007 and 2006:



|                                  |  |                                 |        |                   |   |             |  |                                 |         |                                 |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       
|--------------------------------- |  | ------------------------------- | ------ | ----------------- | - | ----------- |  | ------------------------------- | ------- | ------------------------------- | - | ---------------- |  | ----------- | ------ | ------------------------------- | - | ------ |  | - | ------- |  | - | ------
|                                  |  | December 31, 2007               |        | December 31, 2006
|                                  |  | FuturePolicyBenefitsandExpenses |        | UnearnedPremiums  |   | CaseReserve |  | IncurredBut NotReportedReserves |         | FuturePolicyBenefitsandExpenses |   | UnearnedPremiums |  | CaseReserve |        | IncurredBut NotReportedReserves
|Long Duration Contracts:          |  |                                 |        |                   |   |             |  |                                 |         |                                 |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       
|Life insurance no longer offered  |  | $                               | 179    |                   | $ | 1,475       |  | $                               |        |                                 | $ | 702              |  | $           |       |                                 | $ |       |  | $ |        |  | $ |      
|FFG and other disposed businesses |  |                                 | 45,349 |                   |   | 2,530       |  |                                 | 8,283   |                                 |   | 954              |  |             | 40,381 |                                 |   | 3,949  |  |   | 6,963   |  |   | 1,477 
|Short Duration Contracts:         |  |                                 |        |                   |   |             |  |                                 |         |                                 |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       
|Group term life                   |  |                                 |       |                   |   | 71          |  |                                 | 14,685  |                                 |   | 1,662            |  |             |       |                                 |   | 75     |  |   | 14,864  |  |   | 1,765 
|Group disability                  |  |                                 |       |                   |   | 293         |  |                                 | 98,166  |                                 |   | 8,468            |  |             |       |                                 |   | 306    |  |   | 94,242  |  |   | 6,352 
|Medical                           |  |                                 |       |                   |   | 7           |  |                                 | 786     |                                 |   | 27               |  |             |       |                                 |   | 4      |  |   | 849     |  |   | 24    
|Dental                            |  |                                 |       |                   |   | 60          |  |                                 | 37      |                                 |   | 830              |  |             |       |                                 |   | 48     |  |   | 51      |  |   | 1,176 
|Credit life and disability        |  |                                 | 4      |                   |   | 6,758       |  |                                 | 4,994   |                                 |   | 3,001            |  |             |       |                                 |   | 6,597  |  |   | 6,255   |  |   | 4,862 
|                                  |  |                                 |        |                   |   |             |  |                                 |         |                                 |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       
|Total                             |  | $                               | 45,532 |                   | $ | 11,194      |  | $                               | 126,951 |                                 | $ | 15,644           |  | $           | 40,381 |                                 | $ | 10,979 |  | $ | 123,224 |  | $ | 15,656
|                                  |  |                                 |        |                   |   |             |  |                                 |         |                                 |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       

The following table provides a roll-forward of the Companys product lines with the most significant short
duration claims and benefits payable balances; group term life and group disability lines of business. Claims and benefits payable is comprised of case and IBNR reserves.



F-25



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|                                                      |  |                |        |   |                 |   |         |  
|----------------------------------------------------- |  | -------------- | ------ | - | --------------- | - | ------- | -
|                                                      |  | Group TermLife |        |   | GroupDisability |  
|Balance as of January 1, 2005, 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 |  
|Less: Reinsurance ceded and other (1)                 |  |                | (401   | ) |                 |   | (31,670 | )
|                                                      |  |                |        |   |                 |   |         |  
|Balance as of January 1, 2007, net of reinsurance     |  |                | 16,228 |   |                 |   | 68,924  |  
|Incurred losses related to:                           |  |                |        |   |                 |   |         |  
|Current year                                          |  |                | 5,189  |   |                 |   | 19,500  |  
|Prior years interest                                 |  |                | 588    |   |                 |   | 3,166   |  
|Prior year(s)                                         |  |                | (1,465 | ) |                 |   | 439     |  
|                                                      |  |                |        |   |                 |   |         |  
|Total incurred losses                                 |  |                | 4,312  |   |                 |   | 23,105  |  
|Paid losses related to:                               |  |                |        |   |                 |   |         |  
|Current year                                          |  |                | 2,851  |   |                 |   | 3,807   |  
|Prior year(s)                                         |  |                | 1,737  |   |                 |   | 13,288  |  
|                                                      |  |                |        |   |                 |   |         |  
|Total paid losses                                     |  |                | 4,588  |   |                 |   | 17,095  |  
|Balance as of December 31, 2007, net of reinsurance   |  |                | 15,952 |   |                 |   | 74,934  |  
|Plus: Reinsurance ceded and other (1)                 |  |                | 395    |   |                 |   | 31,700  |  
|                                                      |  |                |        |   |                 |   |         |  
|Balance as of December 31, 2007, gross of reinsurance |  | $              | 16,347 |   |                 | $ | 106,634 |  
|                                                      |  |                |        |   |                 |   |         |  



|(1) | Reinsurance ceded and other includes claims and benefits payable balances 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





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).

Case and IBNR
reserves 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 case and IBNR reserves 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 case and IBNR reserves 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 case and IBNR reserves show
redundancies in 2005 and 2006 due to actual claim recovery rates exceeding those assumed in prior year reserves.

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, 2007 and 2006 liabilities include $71,838 and
$67,656, respectively, of such reserves. The amount of discounts deducted from outstanding reserves as of December 31, 2007 and 2006 are $25,753 and $21,166, respectively.

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).



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|10. | Fair Value Disclosures
|--- | ----------------------

FAS 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 sheet. 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 from being disclosed.

Fair values for fixed maturity securities, equity securities, and separate account assets (with
matching liabilities) are obtained from an independent pricing service which uses observable market information. In the measurement of the fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices
were not available.

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 include both
public and 144A securities, is primarily based on matrix pricing models or, in the case of private placements, excluding 144A securities, is 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 preferred stocks is primarily based on matrix
pricing models.

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: CAPCOs are reported at amortized cost, which
approximates 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.

Separate account assets and liabilities: separate account assets
(with matching liabilities) are reported at their estimated fair values, which are primarily based on quoted market prices.

Funds held
under reinsurance: the carrying amount reported approximates fair value due to the short maturity of the instruments.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|                                                                                                                |  |                   |         |                   |   |                |  |            |         |  |   |        
|--------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ----------------- | - | -------------- |  | ---------- | ------- |  | - | -------
|                                                                                                                |  | December 31, 2007 |         | December 31, 2006
|                                                                                                                |  | Carrying Value    |         | Fair Value        |   | Carrying Value |  | Fair Value
|Financial assets                                                                                                |  |                   |         |                   |   |                |  |            |         |  |   |        
|Cash and cash equivalents                                                                                       |  | $                 | 4,016   |                   | $ | 4,016          |  | $          | 5,600   |  | $ | 5,600  
|Fixed maturity securities                                                                                       |  |                   | 104,156 |                   |   | 104,156        |  |            | 111,522 |  |   | 111,522
|Equity securities                                                                                               |  |                   | 7,811   |                   |   | 7,811          |  |            | 9,381   |  |   | 9,381  
|Commercial mortgage loans on real estate                                                                        |  |                   | 30,746  |                   |   | 30,970         |  |            | 21,686  |  |   | 21,566 
|Policy loans                                                                                                    |  |                   | 104     |                   |   | 104            |  |            | 120     |  |   | 120    
|Short-term investments                                                                                          |  |                   | 588     |                   |   | 588            |  |            | 2,401   |  |   | 2,401  
|Other investments                                                                                               |  |                   | 2,191   |                   |   | 2,191          |  |            | 2,524   |  |   | 2,524  
|Assets held in separate accounts                                                                                |  |                   | 20,331  |                   |   | 20,331         |  |            | 21,948  |  |   | 21,948 
|Financial liabilities                                                                                           |  |                   |         |                   |   |                |  |            |         |  |   |        
|Policy reserves under investment products (Individual and group annuities, subject to discretionary withdrawal) |  | $                 | 2,889   |                   | $ | 2,876          |  | $          | 3,859   |  | $ | 3,842  
|Funds held under reinsurance                                                                                    |  |                   | 75      |                   |   | 75             |  |            | 76      |  |   | 76     
|Liabilities related to separate accounts                                                                        |  |                   | 20,331  |                   |   | 20,331         |  |            | 21,948  |  |   | 21,948 

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.



|11. | 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 costs allocated to the Company were approximately $124 for 2007, 2006
and 2005, respectively.

The Company participates in a contributory profit sharing plan, sponsored by our 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 $68, $48 and $33 for 2007, 2006 and 2005, respectively.

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 2007, 2006 and 2005 the Company incurred expenses related to retirement benefits of $24,
$26 and $25, respectively.



|12. | Deferred Acquisition Costs
|--- | --------------------------

Information regarding
deferred acquisition costs follows:



|                                                                           |  |              |        |   |      |   |        |      |  |   |       |  
|-------------------------------------------------------------------------- |  | ------------ | ------ | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                                           |  | December 31, |       
|                                                                           |  | 2007         |        |   | 2006 |   |        | 2005 | 
|Beginning balance                                                          |  | $            | 1,188  |   |      | $ | 1,437  |      |  | $ | 1,123 |  
|Costs deferred                                                             |  |              | 1,506  |   |      |   | 835    |      |  |   | 1,295 |  
|Amortization                                                               |  |              | (1,432 | ) |      |   | (1,084 | )    |  |   | (981  | )
|Cumulative effect of change in accounting principle for SOP 05-01 (Note 2) |  |              | (225   | ) |      |   |       |      |  |   |      |  
|                                                                           |  |              |        |   |      |   |        |      |  |   |       |  
|Ending balance                                                             |  | $            | 1,037  |   |      | $ | 1,188  |      |  | $ | 1,437 |  
|                                                                           |  |              |        |   |      |   |        |      |  |   |       |  



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|13. | Goodwill
|--- | --------

Information regarding goodwill follows:



|                  |  |              |       |      |   |       |  |   |      
|----------------- |  | ------------ | ----- | ---- | - | ----- |  | - | -----
|                  |  | December 31,
|                  |  | 2007         |       | 2006 |   | 2005 
|Beginning Balance |  | $            | 2,038 |      | $ | 2,038 |  | $ | 2,038
|Acquisitions      |  |              |      |      |   |      |  |   |     
|                  |  |              |       |      |   |       |  |   |      
|Ending Balance    |  | $            | 2,038 |      | $ | 2,038 |  | $ | 2,038
|                  |  |              |       |      |   |       |  |   |      



|14. | Other Comprehensive Income
|--- | --------------------------

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



|                                  |  |                                      |        |  
|--------------------------------- |  | ------------------------------------ | ------ | -
|                                  |  | Accumulated OtherComprehensiveIncome |       
|Balance at January 1, 2005        |  | $                                    | 5,839  |  
|Unrealized (losses) on securities |  |                                      | (2,350 | )
|                                  |  |                                      |        |  
|Balance at December 31, 2005      |  |                                      | 3,489  |  
|                                  |  |                                      |        |  
|Unrealized (losses) on securities |  |                                      | (1,135 | )
|                                  |  |                                      |        |  
|Balance at December 31, 2006      |  |                                      | 2,354  |  
|                                  |  |                                      |        |  
|Unrealized (losses) on securities |  |                                      | (1,120 | )
|                                  |  |                                      |        |  
|Balance at December 31, 2007      |  | $                                    | 1,234  |  
|                                  |  |                                      |        |  



|15. | 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, 2007, 2006 and 2005 were $9,605, $7,964 and $9,137, 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 $6,813, $6,916 and $6,588 of premium to USIC in 2007, 2006 and 2005, respectively. The Company has ceded
$29,569, $29,151 and $24,879 of reserves in 2007, 2006 and 2005, respectively, to USIC.



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##### Table of Contents

Union Security Life Insurance Company of New York

Notes to Financial Statements

December 31, 2007, 2006 and 2005

(In thousands except share data)





|16. | 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, 2007, the aggregate future minimum lease payment under
operating lease agreements that have initial or non-cancelable terms in excess of one year are:



|                                    |  |   |    
|----------------------------------- |  | - | ---
|2008                                |  | $ | 569
|2009                                |  |   | 228
|2010                                |  |   | 172
|2011                                |  |   |   
|2012                                |  |   |   
|Thereafter                          |  |   |   
|                                    |  |   |    
|Total minimum future lease payments |  | $ | 969
|                                    |  |   |    

Rent expense was $481, $564 and $623 for 2007, 2006 and 2005 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-31