FORM 10‐Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

         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 0‐5486

                         PRESIDENTIAL LIFE CORPORATION_________________________

              (Exact name of registrant as specified in its charter)

          Delaware                                  13‐2652144________________ (State or otherjurisdiction of           (I.R.S. Employer Identification No.)

  incorporation or organization)

69 Lydecker Street, Nyack, New York                            10960___________

(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code       845 ‐ 358‐2300_________

                                                                              

(Former name, former address and former fiscal year, if changed since last report)

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 suchreports), and (2) has been subject to such filing requirements for the past 90 days.    YES    X        NO      

There were 29,357,368 shares of common stock, par value $.01 per share of the issuer's common stock outstanding as of the close of business on August 10, 2004.

      **INDEX**

Part I ‐ Financial Information                                  Page No.

Item 1.  Consolidated Financial Statements

Consolidated Balance Sheets (Unaudited) June 30, 2004

and December 31, 2003.......................................            3

      Consolidated Statements of Income (Unaudited) For

      the Six Months Ended June 30, 2004 and 2003..............      4

     

Consolidated Statements of Income (Unaudited) - For

      the Three Months Ended June 30, 2004 and 2003..............              5

     

Consolidated Statements of Shareholders'

Equity (Unaudited) ‐ For the Six Months Ended

June 30, 2004 and 2003.....................................       6

Consolidated Statements of Cash Flows (Unaudited) ‐ For

the Six Months Ended June 30, 2004 and 2003..............      7

      Condensed Notes to (Unaudited) Consolidated Financial Statements..             8‐17

Independent Accountants' Review Report......................            18

Item 2.  Management's Discussion and Analysis of

Financial Condition and Results of Operations.........            19-32

Part II ‐ Other Information........................................            32

Item 1.  Legal Proceedings

Item 2.  Changes in Securities

Item 3.  Defaults Upon Senior Securities

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

Item 5.  Other Information

Item 6.  Exhibits and Reports on Form 8‐K

Signatures..........................................................      33

Certification of Chief Executive Officer ...........................     34

Certification of Principal Accounting Officer ......................      35

          

2.

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)
|                                                                                                                          | June 30,

2004

(Unaudited) |  | December 31,

2003 |
|--------------------------------------------------------------------------------------------------------------------------|-----------------------------|--|--------------------|
| ASSETS:                                                                                                                  |                             |  |                    |
| Investments:                                                                                                             |                             |  |                    |
|     Fixed maturities:                                                                                     |                             |  |                    |
|      Available for sale at market (Cost of                                                           |                             |  |                    |
|        $3,889,044 and $3,745,304, respectively)                                            |   $3,922,385           |  | $3,890,407    |
|      Common stocks (Cost of $28,776 and                                                              |                             |  |                    |
|       $31,271, respectively)                                                                    | 37,223                      |  | 39,652             |
|     Mortgage loans                                                                                        | 0                           |  | 9,142              |
|     Real estate                                                                                           | 415                         |  | 415                |
|     Policy loans                                                                                          | 18,008                      |  | 18,262             |
|     Short-term investments                                                                                | 16,630                      |  | 23,664             |
|     Other invested assets                                                                                 | 336,554                     |  | 323,139            |
|               Total Investments                              | 4,331,215                   |  | 4,304,681          |
|                                                                                                                          |                             |  |                    |
| Cash and cash equivalents                                                                                                | 8,296                       |  | 12,907             |
| Accrued investment income                                                                                                | 52,206                      |  | 50,956             |
| Amounts due from security transactions                                                                                   | 711                         |  | 1,196              |
| Federal income tax recoverable                                                                                           | 2,385                       |  | 27,137             |
| Deferred policy acquisition costs                                                                                        | 126,220                     |  | 108,713            |
| Furniture and equipment, net                                                                                             | 210                         |  | 200                |
| Amounts due from reinsurers                                                                                              | 15,509                      |  | 15,688             |
| Other assets                                                                                                             | 4,748                       |  | 5,094              |
| Assets held in separate account                                                                                          | 2,091                       |  | 2,450              |
|               TOTAL ASSETS                              | $4,543,591                  |  | $ 4,529,022        |
|                                                                                                                          |                             |  |                    |
| LIABILITIES AND SHAREHOLDERS' EQUITY:                                                                                    |                             |  |                    |
| Liabilities:                                                                                                             |                             |  |                    |
| Policy Liabilities:                                                                                                      |                             |  |                    |
|    Policyholders' account balances                                                                             | $3,166,225                  |  | $ 3,092,872        |
|    Future policy benefits:                                                                                     |                             |  |                    |
|     Annuity                                                                                               | 653,277                     |  | 646,958            |
|     Life and accident and Health                                                                          | 65,803                      |  | 65,425             |
|    Other policy liabilities                                                                                    | 6,876                       |  | 6,193              |
|               Total Policy Liabilities                  | 3,892,181                   |  | 3,811,448          |
|                                                                                                                          |                             |  |                    |
|                                                                                                                          |                             |  |                    |
| Short-term note payable                                                                                                  | 50,000                      |  | 50,000             |
| Notes Payable                                                                                                            | 100,000                     |  | 100,000            |
| Deferred federal income taxes                                                                                            | 7,777                       |  | 38,127             |
| Deposits on policies to be issued                                                                                        | 2,355                       |  | 11,795             |
| General expenses and taxes accrued                                                                                       | 6,202                       |  | 7,610              |
| Other liabilities                                                                                                        | 16,987                      |  | 18,827             |
| Liabilities related to separate account                                                                                  | 2,091                       |  | 2,450              |
|               Total Liabilities                         | 4,077,593                   |  | 4,040,257          |
|                                                                                                                          |                             |  |                    |
| Shareholders' Equity:                                                                                                    |                             |  |                    |
|    Capital stock ($.01 par value; authorized                                                                   |                             |  |                    |
|     100,000,000 shares; issued and outstanding,                                                           |                             |  |                    |
|     29,357,368 shares in 2004 and 29,334,668                                                              |                             |  |                    |
|     shares in 2003                                                                                        | 294                         |  | 293                |
|     Accumulated other comprehensive gain                                                                  | 35,915                      |  | 88,343             |
|    Retained earnings                                                                                           | 429,789                     |  | 400,129            |
|                 Total Shareholders' Equity         | 465,998                     |  | 488,765            |
|                TOTAL LIABILITIES AND SHAREHOLDERS' |                             |  |                    |
|                    EQUITY      | $4,543,591                  |  | $ 4,529,022        |
|                                                                                                                          |                             |  |                    |
| The accompanying notes are an integral part of these Unaudited Consolidated                                              |
| Financial Statements.                                                                                                    |

          3.

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)
|                                                                                         |    SIX MONTHS ENDED

    JUNE 30

    (UNAUDITED) |
|-----------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|
| REVENUES:                                                                               | 2004                                                                                      |  | 2003 |
|   Insurance Revenues:                                                              |                                                                                           |  |  |
|      Premiums                                                       | $                                                                                         |     4,868 |  | $ |      4,534 |
|      Annuity considerations                                         |      17,698                                                           |  | 18,510  |
|      Universal life and investment type policy                      |                                                                                           |  |  |
|         fee income                                   |       1,583                                                      |  | 552  |
|   Net investment income                                                            |     166,065                                                                |  | 135,649  |
|   Realized investment gains                                                        |      12,702                                                           |  | 8,523  |
|   Other income                                                                     |         563                                            |  | 1,280  |
|                                                                                         |                                                                                           |  |  |
|            TOTAL REVENUES             |     203,479                                                                |  | 169,048  |
|                                                                                         |                                                                                           |  |  |
| BENEFITS AND EXPENSES:                                                                  |                                                                                           |  |  |
|   Death and other life insurance benefits                                          |       6,019                                                      |  |        9,764  |
|   Annuity benefits                                                                 |      36,696                                                           |  | 35,584  |
|   Interest credited to policyholders' account                                      |                                                                                           |  |  |
|         balances                                     |      81,483                                                           |  | 79,665  |
|   Interest expense on notes payable                                                |       4,840                                                      |  | 4,871  |
|   Other interest and other charges                                                 |         421                                            |  | 213  |
|   Increase in liability for future policy benefits                                 |       5,925                                                      |  | 7,451  |
|   Commissions to agents, net                                                       |       5,702                                                      |  | 7,597  |
|   General expenses and taxes                                                       |       9,861                                                      |  | 6,506  |
|   Change in deferred policy acquisition costs                                      | (1,388)                                                                                   |  | (5,375) |
|                                                                                         |                                                                                           |  |  |
|            TOTAL BENEFIT AND EXPENSES |     149,559                                                                |  | 146,276  |
|                                                                                         |                                                                                           |  |  |
| Income before income taxes                                                              |      53,920                                                           |  | 22,772  |
|                                                                                         |                                                                                           |  |  |
| Provision (benefit) for income taxes                                                    |                                                                                           |  |  |
|   Current                                                                          |      20,587                                                           |  | 9,176  |
|   Deferred                                                                         | (1,938)                                                                                   |  | (2,297) |
|                                                                                         |      18,649                                                           |  | 6,879  |
|                                                                                         |                                                                                           |  |  |
| NET INCOME                                                                              | $                                                                                         |   35,271 |  | $ |    15,893 |
|                                                                                         |                                                                                           |  |  |
| Earnings per common share                                                               | $       1.20                                                |  | $         .54 |
|                                                                                         |                                                                                           |  |  |
| Weighted average number of shares outstanding                                           |                                                                                           |  |  |
| During the period                                                                       |   29,337,557                                                                         |  |    29,334,668 |
|                                                                                         |                                                                                           |  |  |
| The accompanying notes are an integral part of these Unaudited Consolidated             |
| Financial Statements.                                                                   |

          

4.

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)
|                                                                                         |    THREE MONTHS ENDED

    JUNE 30

    (UNAUDITED) |
|-----------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
| REVENUES:                                                                               |    2004                                                                           |  |      2003 |
|   Insurance Revenues:                                                              |                                                                                             |  |  |  |
|      Premiums                                                       | $                                                                                           |   2,060 |  | $ | 3,276  |
|      Annuity considerations                                         |      6,712                                                                   |  | 8,533  |
|      Universal life and investment type policy                      |                                                                                             |  |  |
|         fee income                                   |     1,206                                                                    |  | 231  |
|   Net investment income                                                            |    87,557                                                                         |  | 68,803  |
|   Realized investment gains                                                        |     7,070                                                                    |  | 13,566  |
|   Other income                                                                     |       664                                                          |  | (143) |
|                                                                                         |                                                                                             |  |  |
|            TOTAL REVENUES             |   105,269                                                                              |  | 94,266  |
|                                                                                         |                                                                                             |  |  |
| BENEFITS AND EXPENSES:                                                                  |                                                                                             |  |  |
|   Death and other life insurance benefits                                          |     2,836                                                                    |  | 5,900  |
|   Annuity benefits                                                                 |    18,113                                                                         |  | 17,849  |
|   Interest credited to policyholders' account                                      |                                                                                             |  |  |
|         balances                                     |    41,081                                                                         |  | 40,339  |
|   Interest expense on notes payable                                                |     2,448                                                                    |  | 2,413  |
|   Other interest and other charges                                                 |       214                                                          |  | 132  |
|   Increase in liability for future policy benefits                                 |     1,471                                                                    |  | 1,449  |
|   Commissions to agents, net                                                       |     2,182                                                                    |  | 3,988  |
|   General expenses and taxes                                                       |     4,016                                                                    |  | 3,868  |
|   Change in deferred policy acquisition costs                                      |       (404)                                                        |  | (1,962) |
|                                                                                         |                                                                                             |  |  |
|            TOTAL BENEFIT AND EXPENSES |    71,957                                                                         |  | 73,976  |
|                                                                                         |                                                                                             |  |  |
| Income before income taxes                                                              |    33,312                                                                         |  | 20,290  |
|                                                                                         |                                                                                             |  |  |
| Provision (benefit) for income taxes                                                    |                                                                                             |  |  |
|   Current                                                                          |    13,065                                                                         |  | 10,054  |
|   Deferred                                                                         |     (1,549)                                                                  |  | (3,942) |
|                                                                                         |    11,516                                                                         |  | 6,112  |
|                                                                                         |                                                                                             |  |  |
| NET INCOME                                                                              | $                                                                                           |    21,796 |  | $ | 14,178  |
|                                                                                         |                                                                                             |  |  |
| Earnings per common share                                                               |       .74                                                          |  | .48  |
|                                                                                         |                                                                                             |  |  |
| Weighted average number of shares outstanding                                           |                                                                                             |  |  |
| During the period                                                                       | 29,340,447                                                                                  |  | 29,334,668  |
|                                                                                         |                                                                                             |  |  |
| The accompanying notes are an integral part of these Unaudited Consolidated             |
| Financial Statements.                                                                   |                                                                                             |

5.

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003

                         (in thousands except shared data)

                                    (unaudited)
|                                                  | Capital Stock              |  | Additional

Paid-in-

Capital                         |  | Retained

Earnings                 |  | Accumulated

Other

Comprehensive

Income |  | Total                  |
|--------------------------------------------------|----------------------------|--|-------------------------------------------------------|--|------------------------------------|--|-------------------------------------------|--|------------------------|
| Balance at

January 1, 2003                      | $  293           |  |       

$  0  |  | $380,578                      |  | $  17,820                            |  | $398,691               |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Comprehensive Income:                            |                            |  |                                                       |  |                                    |  |                                           |  |                        |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Net Income                                       |                            |  |                                                       |  | 15,893                             |  |                                           |  |   15,893          |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Transition Adjustment                            |                            |  |                                                       |  |                                    |  |      (3,807)          |  |   (3,807)         |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Net Unrealized                                   |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Investment Gains                                 |                            |  |                                                       |  |                                    |  | 132,600                              |  |   132,600         |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                   |
| Comprehensive Income                             |                            |  |                                                       |  |                                    |  |                                           |  | 144,686           |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Purchase & Retirement of Stock               |                            |  |                                                  |  |                               |  |                                           |  |                   |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Dividends Paid to

Shareholders ($.10 per share) |                            |  |                                                       |  | (5,867)                            |  |                                           |  |   (5,867)         |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Balance at

  June 30, 2003                 | $ 293            |  | $ 0                                              |  | $390,604                      |  |    $146,613                     |  | $537,510               |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Balance at

January 1, 2004                      | $ 293                      |  |      $ 0                          |  | $ 400,129                          |  |     $88,343                |  | $ 488,765              |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Comprehensive Income:                            |                            |  |                                                       |  |                                    |  |                                           |  |                        |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Net Income                                       |                            |  |                                                       |  | 35,271                             |  |                                           |  |   35,271          |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Transition Adjustment                            |                            |  |                                                       |  |                                    |  |      (3,135)          |  |   (3,135)         |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Net Unrealized Investment Losses                 |                            |  |                                                       |  |                                    |  | (49,293)                                  |  |   (49,293)        |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Comprehensive Income                             |                            |  |                                                       |  |                                    |  |                                           |  |   (17,157)        |
|                                                  |                            |  |                                                       |  |           |  |                                           |  |         |
| Issuance of Shares

Under stock option plan      |      1 |  |                                                       |  |       247 |  |                                           |  |     248 |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Dividends paid to Shareholders ($.10 per share)  |                            |  |                                                       |  |   (5,858)                     |  |                                           |  |   (5,858)         |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |
| Balance at

June 30, 2004                        | $294                       |  |     $0                                 |  | $429,789                           |  |   $35,915                            |  | $465,998               |
|                                                  |                            |  |                                                       |  |                                    |  |                                           |  |                        |

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

                                   

6.

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
|                                                                  SIX MONTHS ENDED

                                                                 JUNE 30, 2004

                                                                   (UNAUDITED) |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        | 2004 |  | 2003 |   |
| OPERATING ACTIVITIES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |        |  |  |  |   |
|     Net Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        | $ | 35,271 |  | $ |   15,893 |   |
|     Adjustments to reconcile net income to net cash         provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |  |  |  |   |
|         Benefit for deferred income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |        |    (1,938) |  | (2,297) |   |
|         Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |      496 |  | 538  |   |
|         Net accrual of discount on fixed maturities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |   (13,582) |  | (12,435) |   |
|         Realized investment (gains) losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   (12,702) |  | (8,523) |   |
|     Changes in:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |  |  |  |   |
|         Accrued investment income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   (1,250) |  | (2,104) |   |
|         Deferred policy acquisition cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        |   (1,388) |  | (5,375) |   |
|         Federal income tax recoverable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |        |   24,752 |  | 8,882  |   |
|         Liability for future policy benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |    6,697 |  | 5,053  |   |
|         Other items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |    5,377 |  | 20,262  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |        |  |  |  |   |
|           Net Cash Provided By Operating Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   41,733 |  | 19,894  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  |  |  |   |
| INVESTING ACTIVITIES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |        |  |  |  |   |
|     Fixed Maturities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |  |  |  |   |
|       Available for Sale:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |  |  |  |   |
|         Acquisitions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        |   (318,961) |  | (845,347) |   |
|         Maturities, calls and repayments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        |   180,025 |  | 378,677  |   |
|         Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   16,082 |  | 385,269  |   |
|     Common Stocks:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |  |  |  |   |
|         Acquisitions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        |   (11,925) |  | (15,498) |   |
|         Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        |   16,880 |  | 8,539  |   |
|     Increase (decrease) in short-term investments         and policy loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |    7,288 |  | 270,846  |   |
|     Other Invested Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |        |  |  |  |   |
|        Additions to other invested assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |        |   (40,614) |  | (84,012) |   |
|        Distributions from other invested assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |   42,242 |  | 39,797  |   |
|     Mortgage loan on real estate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |   11,080 |  | 91  |   |
|     Amount due from security transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        |      485 |  | (2,814) |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  |  |  |   |
|         Net Cash (Used In)/Provided By In                   Investing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        | (97,418) |  | 135,548  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  |  |  |   |
| FINANCING ACTIVITIES:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |        |  |  |  |   |
|     Proceeds from dollar repurchase agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |        0 |  | 1,057,901  |   |
|     Repayment of dollar repurchase agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |        |       0 |  | (1,320,419) |   |
|     Increase in policyholders' account balances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   73,353 |  | 129,429  |   |
|     Bank overdrafts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |   (7,228) |  |       2,273 |   |
|     Deposits on policies to be issued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |   (9,440) |  | (635) |   |
|     Issuance of common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        |     247 |  |          0 |   |
|     Dividends paid to shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |        |   (5,858) |  | (5,867) |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  |  |  |   |
|         Net Cash Provided By/(Used In) Financing           Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        |   51,074 |  | (137,318) |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  |  |  |   |
|    (Decrease)/Increase in Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        |    (4,611) |  | 18,124  |   |
| Cash and Cash Equivalents at Beginning of Year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |        |   12,907 |  |      13,101 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  |  |  |   |
| Cash and Cash Equivalents at End of Period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        | $ |   8,296 |  | $ |   31,225 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  |  | $   (2,512) |
| Supplemental Cash Flow Disclosure:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |  |  |  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  |  |  |   |
|     Income Taxes Paid                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        | $ |   12,003 |  | $ |      295 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |        |  |  |  |   |
|     Interest Paid                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |        | $ | 4,202 |  | $ | 4,545  |   |

 

The accompanying notes are an integral part of these Unaudited Consolidated Financial Statements.

    

7.

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**PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES**

**  CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**A.   Business**

Presidential Life Corporation ("the Company"), through its wholly‐owned subsidiary, Presidential Life Insurance Company ("Insurance Company"), is engaged in the sale of life insurance and annuities.

**B. Basis of Presentation and Principles of Consolidation**

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") applicable to stock life insurance companies for interim financial statements andwith the requirements of Form 10‐Q.  Accordingly, they do not include all of the information and footnotes required by GAAP applicable to stock life insurance companies for complete financial statements.  In the opinion of management, all adjustments,consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Interim results for the six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.Management believes that, although the disclosures are adequate to make the information presented not misleading, the consolidated financial statements should be read in conjunction with the footnotes contained in the Company's audited consolidated financialstatements for the year ended December 31, 2003. 

**C.   Investments**

Fixed maturity investments available for sale represent investments, which may be sold in response to changes in various economic conditions.  These investments are carried at fair value and net unrealized gains (losses), net of the effects of amortization ofdeferred policy acquisition costs and deferred federal income taxes are credited or charged directly to shareholders' equity, unless a decline in market value is considered to be other than temporary in which case the investment is reduced to its net realizable valueand the loss is recorded in the income statement.  Equity securities include common stocks and non-redeemable preferred stocks and are carried at market value, with the related unrealized gains and losses, net of deferred federal income tax effect, if any,charged or credited directly to shareholders' equity, unless a decline in market value is deemed to be other than temporary in which case the investment is reduced to its net realizable value and the loss is recorded in the income statement.

Other invested assets are recorded using the equity method represents interests in limited partnerships, which principally are engaged in real estate, international opportunities, acquisitions of private growth companies, debt restructuring and merchantbanking.  In general, risks associated with such limited partnerships include those related to their underlying investments (i.e., equity securities, debt securities and real estate), plus a level of illiquidity, which is mitigated by the ability of the Companyto take annual distributions of partnership earnings.  To evaluate the appropriateness of the carrying value of a limited partnership interest, management maintains ongoing discussions with the investment manager and considers the limited partnership'soperation, its current and near term projected financial condition, earnings capacity, and distributions received by the Company during the year.  Because it is not practicable to obtain an independent valuation for each limited partnership interest, forpurposes of disclosure the market value of a limited partnership interest is estimated at book value. Management believes that the net realizable value of such limited partnership interests, in the aggregate, exceeds their related carrying value as of June 30,2004.  As of June 30, 2004, the Company was committed to contribute, if called upon, an aggregate of approximately $83.0 million of additional capital to certain of these limited partnerships.  However, management does not expect the entire amount to bedrawn down as certain of these limited partnerships are nearing the end of the period during which investors are required to make contributions.

8.

In evaluating whether an investment security or other investment has suffered an impairment in value which is deemed to be other than temporary, management considers all available evidence.  When a decline in the value of an investment security or otherinvestment is considered to be other than temporary, the investment is reduced to its net realizable or fair value, as applicable (which contemplates the price that can be obtained from the sale of such asset in the ordinary course of business) which becomes the newcost basis.  The amount of reduction is recorded in the income statement as a realized loss. A recovery from the adjusted cost basis is recognized as a realized gain only at sale.

As of May 2003, the Company no longer participates in "dollar roll" repurchase agreement transactions.  Dollar roll transactions involve the sale of certain mortgage-backed securities to a holding institution and a simultaneous agreement to purchasesubstantially similar securities for forward settlement at a lower dollar price.  The proceeds are invested in short‐term securities at a positive spread until the settlement date of the similar securities.  During this period, the holding institutionreceives all income and prepayments for the security.  Dollar roll repurchase agreement transactions are treated as financing transactions for financial reporting purposes.

Realized gains and losses on disposal of investments are determined for fixed maturities and equity securities by the specific‐identification method.

Investments in short‐term securities, which consist primarily of United States Treasury Notes and corporate debt issues maturing in less than one year, are recorded at amortized cost, which approximates market.  Mortgage loans are stated at theiramortized indebtedness.  Policy loans are stated at their unpaid principal balance.

The Company's investments in real estate include two buildings in Nyack, New York, which are occupied entirely by the Company.  The investments are carried at cost less accumulated depreciation.  Accumulated depreciation amounted to $206,800 and $206,800at June 30, 2004 and 2003, respectively, and both buildings are fully depreciated and have no depreciation expense.

Deferred Policy Acquisition Costs

****

The costs of acquiring new business (principally commissions, certain underwriting, agency and policy issue expenses), all of which vary with the production of new business, have generally been deferred.  When a policy is surrendered, the remainingunamortized cost is written off.  Deferred policy acquisition costs are subject to recoverability testing at time of policy issue and loss recognition testing at the end of each year.

For immediate annuities with life contingencies, deferred policy acquisition costs are amortized over the life of the contract, in proportion to expected future benefit payments.

For traditional life policies, deferred policy acquisition costs are amortized over the premium paying periods of the related policies using assumptions that are consistent with those used in computing the liability for future policy benefits.  Assumptions asto anticipated premiums are estimated at the date of policy issue and are consistently applied during the life of the contracts.  For these contracts the amortization periods generally are for the scheduled life of the policy, not to exceed 30 years.

Deferred policy acquisition costs are amortized over periods ranging from 15 to 25 years for universal life products and investment‐type products as a constant percentage of estimated gross profits arising principally from surrender charges and interest andmortality margins based on historical and anticipated future experience, updated regularly.  The effects of revisions to reflect actual experience on previous amortization of deferred policy acquisition costs, subject to the limitation that the accrued intereston the deferred acquisition costs balance may not exceed the amount of amortization for the year, are reflected in earnings in the period estimated gross profits are revised.

9.

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**E.   ****Future Policy Benefits**

Future policy benefits for traditional life insurance policies are computed using a net level premium method on the basis of actuarial assumptions as to mortality, persistency and interest established at policy issue.  Assumptions established at policy issueas to mortality and persistency are based on anticipated experience, which, together with interest and expense assumptions, provide a margin for adverse deviation.  Benefit liabilities for deferred annuities during the accumulation period are equal toaccumulated contract holders' fund balances and after annuitization are equal to the present value of expected future payments. 

**F.      Policyholders' Account Balances**

Policyholders' account balances for universal life and investment‐type contracts are equal to the policy account values.  The policy account values represent an accumulation of gross premium payments plus credited interest less mortality and expensecharges and withdrawals.

****

**G.      Federal Income Taxes**

The Company and its subsidiaries file a consolidated federal income tax return. The asset and liability method in recording income taxes on all transactions that have been recognized in the financial statements is used. SFAS 109 provides that deferred income taxesare adjusted to reflect tax rates at which future tax liabilities or assets are expected to be settled or realized.

**H.      Earnings Per Common Share  “EPS”**

Basic EPS is computed based upon the weighted average number of common shares outstanding during the quarter.  Diluted EPS is computed based upon the weighted average number of common shares including contingently issuable shares and other dilutiveitems.  The weighted average number of common shares used to compute diluted EPS for the six months ended June 30, 2004 and 2003 was 29,357,368 and 29,334,668 respectively.  The dilution from the potential exercise of stock options outstanding did notchange basic EPS.             

**I.    New Accounting Pronouncements**

In December 2003, the FASB issued Statement of Financial Accounting Standards ("SOFAS") No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits". This standard requires additional detailed disclosures regarding pension planassets, benefit obligations, cash flows, benefit costs and related information. With the exception of disclosures related to foreign plans, the new disclosures are required to be provided in annual statements of public entities with fiscal years ending after December15, 2003. The Company adopted the new disclosure requirements for all plans as of December 31, 2003.

Effective December 31, 2003, the Company adopted the disclosure requirements of Emerging Issues Task Force ("EITF") Issue No. 03-01, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments". Under the consensus, disclosures arerequired for unrealized losses on fixed maturity and equity securities accounted for under SFAS No. 115, "Accounting for Certain Investment in Debt and Equity Securities", and SFAS No. 124, "Accounting for Certain Investments Held by Not-for-Profit Organizations",that are classified as either available-for-sale or held-to-maturity. The disclosure requirements include quantitative information regarding the aggregate amount of unrealized losses and the associated fair value of the investments in an unrealized loss position,segregated into time periods for which the investments have been in an unrealized loss position. The consensus also requires certain qualitative disclosures about the unrealized holdings in order to provide additional information that the Company considered inconcluding that the unrealized losses were not other-than-temporary.  The recognition and impairment guidance of this

                             

10.

Issue should be applied to other-than-temporary impairment evaluations in reporting periods beginning after June 15, 2004.  Management is in the process of assessing the impact of adopting the recognition and measurement guidance of EITF Issue No. 03-01, butbelieves it will not have a material impact on the financial statements.

In December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants ("AcSEC") issued Statement of Position 03-3, "Accounting for Certain Loans or Debt Securities " (SOP 03-3).  SOP 03-3 addresses theaccounting for differences between contractual and expected cash flows to be collected from an investment in loans or fixed maturity securities (collectively hereafter referred to as "loan(s)") acquired in a transfer if those differences are attributable, at least inpart, to credit quality. SOP 03-3 limits the yield that may be accreted to the excess of the estimated undiscounted expected principal, interest and other cash flows over the initial investment in the loan. SOP 03-3 also requires that the excess of contractual cashflows over cash flows expected to be collected not be recognized as an adjustment of yield, loss accrual or valuation allowance. SOP 03-3 is effective for loans acquired in fiscal years beginning after December 15, 2004. For loans acquired in fiscal years beginningon or before December 15, 2004 and within the scope of Practice Bulletin 6 "Amortization of Discounts on Certain Acquired Loans", SOP 03-3, as it pertains to decreases in cash flows expected to be collected, should be applied prospectively for fiscal years beginningafter December 15, 2004. ****Management is in the process of assessing the impact of adopting SOP 03-3.

In July 2003, AcSEC issued a final Statement of Position 03-1, "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts" (the "SOP"). The major provisions of the SOP require: recognizingexpenses for a variety of contracts and contract features, including guaranteed minimum death benefits ("GMDB"), certain death benefits on universal-life type contracts and annuitization options, on an accrual basis versus the previous method of recognition uponpayment; reporting and measuring assets and liabilities of certain separate account products as general account assets and liabilities when specified criteria are not met; reporting and measuring the Company's interest in its separate accounts as general accountassets based on the insurer's proportionate beneficial interest in the separate account's underlying assets; and  Capitalizing sales inducements that meet specified criteria and amortizing such amounts over the life of the contracts using the same methodology asused for amortizing deferred acquisition costs ("DAC"). The SOP is effective for financial statements for fiscal years beginning after December 15, 2003. The adoption of SOP 03-1 had no impact on the Company’s consolidated financial statements. 

In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 150,**Accounting for Certain Financial Instruments **with Characteristics of Both Liabilities and Equity. Statement No. 150 establishes standardsfor how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. In addition, the Statement requires an issuer to classify certain instruments with specific characteristics described in it as liabilities.This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.  The adoption of Statement No. 150 did not have animpact on the Company's consolidated financial statements.

11.

     

In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 149, **Amendment of Statement 133 on Derivative **Instruments and Hedging Activities.  Statement No. 149 amends Statement 133 for decisionsmade (1) as part of the Derivatives Implementation Group process that effectively required amendments to Statement 133, (2) in connection with other Board projects dealing with financial instruments, and (3) in connection with implementation issues raised in relationto the application of the definition of a derivative.  The Statement clarifies under what circumstances a contract with an initial net investment meets the characteristics of a derivative discussed in paragraph 6(b) of Statement 133, clarifies when a derivativecontains a financing component, amends the definition of an underlying derivative to conform it to language used in FASB Interpretation No.45, **Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of**Indebtedness of Others, and amends certain other existing pronouncements. Those changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments. This statement is effective for contracts entered into or modified afterSeptember 30, 2003 and for hedging relationships designated after September 30, 2003. The adoption of Statement No. 149 had no impact on the Company's consolidated financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (2FIN 462). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in theentity do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31,2003. For variable interest entities entered into prior to February 1, 2003, FIN 46 is effective for the first interim or annual period beginning after June 15, 2003. In October 2003, the FASB issued FASB Staff Position (FSP) FIN 46-6, *Effective Date of FASBInterpretation, No. 46 Consolidation of Variable Interest Entities.* This FSP provides a deferral of interests held by public entities in a variable interest entity or potential variable interest entity until the end of the first interim or annual period afterDecember 15, 2003, if (a) the variable interest entity was created before February 1, 2003 and (b) the public entity has not issued financial statements reporting the variable interest entity that was created before February 1, 2003, in accordance with FIN 46, otherthan in the disclosure required by FIN 46. The FSP is effective for financial statements issued after October 9, 2003. The adoption of FIN 46 for variable entities created after February 1, 2003 did not have an impact on the consolidated financial statement of thecompany as of December 31, 2003. The adoption of the provision of FSP FIN 46-6, which is effective for the Company on March 31, 2004, had no impact on the Company’s consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others (2FIN 452).  FIN 45 requires entities to establish liabilitiesfor certain types of guarantees, and expands financial statement disclosures for others.   Disclosure requirements under FIN 45 are effective for financial statements of annual periods ending after December 15, 2002 and are applicable to all guaranteesissued by the guarantor subject to the provisions of FIN 45.  The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002.  The adoption of FIN 45 had noimpact on the Company’s consolidated financial statements.

     In October 2002, the FASB issued SFAS No.147, Acquisitions of Certain Financial Institutions (2SFAS 1472).  This statement, which provides guidance on the accounting for the acquisition of a financial institution, applies toall acquisitions except those between two or more mutual enterprises. The standard is effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The adoption of SFAS 147 did not have an impact on the Company¢s consolidatedfinancial statements.

12.

     

In August 2002, the FASB issued SFAS No.146, Accounting for Costs Associated with Exit or Disposal Activities (2SFAS 1462).  The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred ratherthan at the date of a commitment to an exit or disposal plan.  Previous accounting guidance was provided by EITF 94-3, 2Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred ina Restructuring)2. SFAS 146 replaces EITF 94-3. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002.  The adoption of SFAS 146 did not have an impact on the Company¢s consolidatedfinancial statements. 

In October 2001, the FASB issued SFAS No.144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144").  SFAS 144 provides a single model for accounting for long-lived assets to be disposed of, by superceding SFAS No. 121, Accounting forthe Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"), and the accounting and reporting provisions of Accounting Principles Board Opinion No.30, Reporting the Results of Operations - Reporting the Effects of Disposal of aSegment of a Business, and Extraordinary, Unusual and Infrequently occurring Events and Transactions ("APB 30").  Under SFAS 144, discontinued operations are measured at the lower of carrying value or fair value less cost to sell rather than on a net realizablevalue basis.  Future operating losses relating to discontinued operations are also no longer recognized before they occur.  SFAS 144 broadens the definition of a discontinued operation to include a component of an entity (rather than a segment of abusiness.)  SFAS 144 also requires long-lived assets to be disposed of other than by sale to be considered held and used until disposed.  SFAS 144 retains the basic provisions of (i) APB 30 regarding the presentation of discontinued operations in the incomestatement, (ii) SFAS 121 relating to recognition and measurement of impaired long-lived assets classified as held for sale.  SFAS 144 was effective beginning January 1, 2002.  The adoption of SFAS 144 by the Company did not have an impact on the Company'sconsolidated financial statements.

In July 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets.” SFAS No. 141 requires that all businesscombinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. SFAS No. 142 requires that ratable amortization of goodwill be replaced with periodic testsof the goodwill's impairment and identifiable intangible assets other than goodwill be amortized over their useful lives.  SFAS No. 141 is effective for acquisitions made after June 30, 2001.  The provisions of SFAS No. 142 were effective for fiscal yearsbeginning after December 15, 2001.  Adoption of SFAS 141 and SFAS 142 did not have an impact on the Company's consolidated financial statements.

In March 1999, the National Association of Insurance Commissioners (“NAIC”) adopted the Codification of Statutory Accounting Principles (the “Codification”). The Codification, which is intended to standardize regulatory accounting andreporting to state insurance departments, was effective January 1, 2002.  However, statutory accounting principles will continue to be established by individual state laws and permitted practices.  The New York State Insurance Department ("NYSID") requiredadoption of the Codification with certain modifications, for the preparation of statutory financial statements, effective January 1, 2001.  On October 1, 2002 NYSID modified its original adoption of Codification to allow for the recognition of Deferred TaxAssets (2DTA2) and Deferred Tax Liabilities (2DTL2), with certain restrictions.  This change allowed the Insurance Company to recognize a net DTA of approximately $16.5 million at December 31, 2003 for statutory reporting purposes. Theadoption of Codification by the NAIC and the Codification as modified by the NYSID, as currently interpreted, did not adversely affect statutory capital and surplus as of June 30, 2004. 

13.

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**2.    INVESTMENTS**

     There were no investments in any one issuer that aggregate 10% or more of Shareholder's Equity as of June 30, 2004.

The following information summarizes the components of net investment income:
|                              |  | June 30, 2004

(in thousands) |         |    June 30,2003

(in thousands) |   |    |
|------------------------------|--|-------------------------------|---------|-------------------------------------------|---|---------|
| Fixed maturities             |  | $                             | 136,035 |                                           | $ | 124,402 |  |
| Common stocks                |  | 317                           |         | 94                                        |   |
| Short‐term investments |  | 121                           |         | 1,756                                     |   |
| Other investment income      |  | 32,635                        |         | 12,726                                    |   |
|                              |  | 169,108                       |         | 138,978                                   |   |
|                              |  |                               |         |                                           |   |
| Less investment expenses     |  | 3,043                         |         | 3,329                                     |   |
|                              |  |                               |         |                                           |   |
| Net investment income        |  | $                             | 166,065 |                                           | $ | 135,649 |  |
|                              |  |                               |         |                                           |   |         |

As of June 30, 2004 and 2003 there were thirty-two fixed maturity investments with an aggregate carrying value of $213.3 million and thirty-nine fixed maturity investments with an aggregate carrying value of $227.4 million respectively, in the accompanying balancesheet which were non-income producing.  Eighteen of these fixed maturity investments in 2004 and eighteen in 2003 with an aggregate carrying value of $208.5, and $214.0 respectively, are defeased with U.S Treasuries in an amount sufficient to insure full paymentof principal. 

The following table presents the amortized cost and gross unrealized losses for securities where the estimated fair value had declined and remained below amortized cost at June 30, 2004:

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|                                                                          | Less Than 12 Months |  | 12 Months or More |  | Total          |
|--------------------------------------------------------------------------|---------------------|--|-------------------|--|----------------|
|                                                                          | Fair Value          |  | Unrealized Losses |  | Fair Value     |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |
| Description of Securities                                                |                     |  |                   |  | (in thousands) |  |  |  |  |
|                                                                          |                     |  |                   |  |                |  |  |  |  |  |  |
| US Treasury obligations and direct obligations of US Government Agencies | 315,842             |  | 14,158            |  | 96,028         |  | 11,422 |  | 411,870 |  | 25,580 |
| Corporate Bonds                                                          | 728,474             |  | 33,235            |  | 498,172        |  | 108,481 |  | 1,226,646 |  | 141,716 |
| Preferred Stocks                                                         | 39,912              |  | 2,666             |  | 9,322          |  | 1,507 |  | 49,234 |  | 4,173 |
| Subtotal Fixed Maturities                                                | 1,084,228           |  | 50,059            |  | 603,522        |  | 121,410 |  | 1,687,750 |  | 171,469 |
| Common Stock                                                             | 14,979              |  | 437               |  | 0              |  | 0 |  | 14,979 |  | 437 |
| Total Temporarily Impaired Securities                                    | 1,099,207           |  | 50,496            |  | 603,522        |  | 121,410 |  | 1,702,729 |  | 171,906 |
|                                                                          |                     |  |                   |  |                |  |  |  |  |  |  |

The following table presents the total gross unrealized losses for fixed maturities where the estimated fair value had declined and remained below amortized cost by June 30, 2004.
|                         |   

Gross                     Unrealized

Losses |   

% Of

Total | Gross Unrealized Losses For Principal Protected Notes | % Of

Total | Gross Unrealized

Losses Net of  Principal Protected Notes | % Of Total |   |
|-------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|-------------------------------------------------------|-------------|-----------------------------------------------------------------|------------|--------|
|                         |                                                                                                                                                                |                           |      (in thousands)               |             |                                                                 |            |        |
| Less than twelve months |                                                                                                                                                                | 50,059                    | 29.19                                                 | 563         | .78                                                             | 49,496     | 49.89  |   |
| Twelve months or more   |                                                                                                                                                                | 121,410                   | 70.81                                                 | 71,693      | 99.22                                                           | 49,717     | 50.11  |   |
|                         |                                                                                                                                                                |                           |                                                       |             |                                                                 |            |        |   |
| Total                   |                                                                                                                                                                | 171,469                   | 100.00                                                | 72,256      | 100.00                                                          | 99,213     | 100.00 |   |
|                         |                                                                                                                                                                |                           |                                                       |             |                                                                 |            |        |   |

14.

Approximately 59% of the securities with an unrealized loss for a period equal to or greater than twelve months are principal protected notes.  This structure utilizes AAA collateral such as U.S Treasury Strips, in conjunction with a variable ratecoupon.  The AAA rated collateral accretes to par at maturity, defeasing the security and thereby insulating the holder from any negative credit events which might interfere with the repayment of principal.

       The Company’s investments are primarily concentrated in a variety of fixed income securities that are exposed to a combination of credit risk and interest rate risk, each of which can impact fluctuations in overall marketvaluation.  During the second quarter of 2004, the portfolio experienced a decline in market value caused by a significant rise in interest rates, as the 10-year Treasury yield rose from 3.84% on March 31, 2004 to 4.58% on June 30, 2004.  This represented adecline in the market value of the benchmark 10-year Treasury of approximately 53⁄4 points or 5.7% of total value.  The 30-year Treasury yield rose from 4.77% to 5.29% during the same period, representing a decline in market value of approximately 7.81points or 7.17% of total value.  Given the strength of the overall economic recovery and the announced policies of the U.S. Federal Reserve, the Company anticipates a gradual rise in interest rates over the coming quarters of 2004 and 2005.  Federal Reservepolicies will tend to have a greater impact on the short-end of the Treasury yield curve, and, as a result, we anticipate that the Treasury yield curve will flatten over time.  This rise in overall interest rates may have a negative impact on the marketvaluation of the fixed income portfolio of the Insurance Company.  The Company’s book value will generally increase when interest rates decrease and decrease when interest rates increase.  The book value per share at June 30, 2004 and December 31,2003 was $15.88 and $16.66, respectively, reflecting the change in interest rates.

**3.   NOTES PAYABLE**

Notes payable at June 30, 2004 and 2003 consist of $100 million, 7 7/8% Senior Notes (Senior Notes) due February 15, 2009.  Interest is payable February 15 and August 15.  Debt issue costs are being amortized on the interest method over the term of thenotes.  As of June 30, 2004, unamortized costs were $1.0 million.  The total principal is due on February 15, 2009.  In addition, the Company had deferred losses of approximately $3.1 million recorded in accumulated other comprehensive income as ofJune 30, 2004, related to an interest rate lock agreement used to hedge the issuance of the Senior Notes.  The Company reclassifies the deferred loss from a liability to accummulated other comprehensive income over the term of the notes.  The Companyexpects to reclassify approximately $672,000 into earnings for the year 2004.

The indenture governing the Senior Notes contains covenants relating to limitations on liens and sale or issuance of capital stock of the Insurance Company.  In the event the Company violates such covenants as defined in the indenture, the Company may beobligated to offer to repurchase the entire outstanding principal amount of such notes. As of June 30, 2004, the Company believes that it is in compliance with all of the covenants.

The short-term note payable relates to a bank line of credit in the amount of $50,000,000 and provides for interest on borrowings based on market indices.  At June 30, 2004 and 2003 the Company had $50,000,000 and $50,000,000 outstanding, respectively. Theline of credit was renewed on April 22, 2004 for a period of one year with The Bank of New York.

**4.   SHAREHOLDERS' EQUITY**

     During 2004, the Company's Board of Directors maintained the quarterly dividend rate of $.10 per share.  The Company is authorized pursuant to a resolution of the Board of Directors to purchase 385,000 shares of common stock.

****

****

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**           **

****

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15.

****

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**COMPREHENSIVE INCOME (LOSS)**

****
|    

For the Six Months ended June 30, 2004                                               | Pre Tax

Amount |  | Tax

(Expense)/

  Benefit

(in       thousands) |  | After-Tax

Amount |
|----------------------------------------------------------------------------------------------------------|-----------------|--|-------------------------------------------------------------------------------------|--|-------------------|
|   Net unrealized gains/(losses) on investment        securities: |                 |  |                                                                                     |  |                   |
|                                                                                                          |                 |  |                                                                                     |  |                   |
|   Net unrealized holding losses arising during year                                                 | (103,973)       |  | (35,873)                                                                            |  | (68,100)          |
| Less: reclassification adjustment for gains                                                              |            |  |                                                                                     |  |                   |
|          Realized in net income                                  | 12,702          |  |   4,382                                                                        |  |   8,320      |
|        Change related to deferred acquisition costs                        | 16,010          |  |   5,523                                                                        |  | 10,487            |
| Net unrealized investment losses                                                                         |   (75,261) |  | (25,968)                                                                            |  | (49,293)          |
|                                                                                                          |                 |  |                                                                                     |  |                   |
| 2003                                                                                                     |                 |  |                                                                                     |  |                   |
| Net unrealized gains on investment securities:                                                           |                 |  |                                                                                     |  |                   |
|                                                                                                          |                 |  |                                                                                     |  |                   |
|   Net unrealized holding gains arising during year                                                  | 204,227         |  |   61,268                                                                       |  |   142,959    |
|   Less: reclassification adjustment for losses                                                      |                 |  |                                                                                     |  |                   |
|          Realized in net income                                  |   (8,523)  |  |    (2,557)                                                                |  |   (5,966)    |
|        Change related to deferred acquisition costs                        |   (6,276)  |  |    (1,883)                                                                |  |   (4,393)    |
| Net unrealized investment gains                                                                          |   189,428  |  | 56,828                                                                              |  |   132,600    |

**EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS**

****

# Components of Net Periodic Benefit Cost

****
|                                         |  | Six Months ended

June 30,2004         |                                        | Six Months ended

June 30, 2003       |
|-----------------------------------------|--|----------------------------------------|----------------------------------------|---------------------------------------|
|                                         |  |                                        |                                        |                                       |
| Components of Net Periodic Benefit Cost |  |                                        |                                        |                                       |
| Service cost                            |  | $                                      |        0 |                                       | $ |    347,056 |
| Interest cost                           |  |   338,542                         |                                        |    376,844                  |
| Expected return on plan assets          |  |   (263,347)                       |                                        |    (164,586)                |
| Amortization of net (gain)/loss         |  |   62,649                          |                                        |     88,498             |
| Amortization of transition obligation   |  |        0 |                                        |       14,000 |
| Net periodic benefit cost               |  | $                                      |   137,844                         |                                       | $ |   661,812 |
|                                         |  |                                        |                                        |                                       |
|                                         |  |                                        |                                        |                                       |

####       Employer Contributions

The Company previously disclosed in its financial statements for the year ended December 31, 2003, that it expects to fully fund the plan to effect the expected termination of the plan during the second half of 2004 and estimates the requirement to fully fund thePlan, prior to termination, to be $2 million.  As of February 18, 2004 the plan was closed to new entrants, accrual of any future benefits terminated and the plan was “frozen”.  As of June 30, 2004, $ 4.33 million of contributions have beenmade.

****

**     **

****

****

**                                  **

****

****

****

****

****

****

16.

****

****

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**7.    INCOME TAXES**

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, (b) operating loss carry forwards and (c) avaluation allowance.

The valuation allowance relates principally to investment write downs recorded for financial reporting purposes, which have not been recognized for income tax purposes, due to the uncertainty associated with their realizability for income tax purposes.  TheCompany's effective tax rate for each of the six months ended June 30, 2004 and 2003 was 34.6% and 30.2%, respectively.  The increase in the effective rate was due to the Company’s utilization of loss carry-backs during 2003.

                             

                                        

17.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Presidential Life Corporation

Nyack, New York 10960

We have reviewed the accompanying consolidated balance sheet of Presidential Life Corporation and subsidiaries ("the Company") as of June 30, 2004, and the related consolidated statements of income, for the three-month and six-month periods ended June 30, 2004 and2003 and the consolidated statement of stockholders' equity and cash flows for the six month period ended June 30, 2004 and 2003. These financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the Public Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of personsresponsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinionregarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of Presidential Life Corporation and subsidiaries as of December 31, 2003, and the related consolidated statementsof income, shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated March 12, 2004, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth inthe accompanying consolidated balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Deloitte & Touche LLP

New York, New York

August 10, 2004

           

18.

**Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations**

##### General

The Company is engaged in the sale of insurance products with two primary lines of business: individual annuities and individual life insurance.  Our revenues are derived primarily from premiums received from the sale of annuity contracts and universal lifeinsurance policies, from premiums received for whole life and term life insurance products and gains (or losses) from our investment portfolio.

For financial statement purposes, our revenues from the sale of whole life and term life insurance products and annuity contracts with life contingencies are treated differently from our revenues from the sale of annuity contracts without life contingencies,deferred annuities and universal life insurance products.  Premiums from the sale of whole or term life insurance products and life contingency annuities are reported as premium income on our financial statements.  Premiums from the sale of deferredannuities, universal life insurance products and annuities without life contingencies are not reported as premium revenues, but rather are reported as additions to policyholders’ account balances.  From these products, revenues are recognized over time inthe form of policy fee income, surrender charges and mortality and other charges deducted from policyholders’ account balances.

Profitability in the Company’s individual annuities and individual life insurance depends largely on the size of its inforce block, the adequacy of product pricing and underwriting discipline, the efficiency of its claims and expense management, and theperformance of the investment portfolio.

When we use the term “We,” “Us” and “Our” we mean Presidential Life Corporation, a Delaware Corporation, and its consolidated subsidiaries.

In this discussion we have included statements that may constitute “forward-looking statements” within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are nothistorical facts but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control.  These statements may relate to our future plans and objectives.  By identifying thesestatements for you in this manner, we are alerting you to the possibility that our actual results may differ, possibly materially, from the results indicated in these forward-looking statements.  Important factors, among others, that could cause our results todiffer from those indicated in the forward-looking statements are discussed under “Certain Factors That May Affect Our Business.”

****

**      Executive Overview**

****

Our earnings per share were $1.20 at June 30, 2004, as compared to earnings of $.54 per share at June 30, 2003.  Our results in the second quarter reflected a continuation of our year-to-year increase in investment income and a reversal in net realizedinvestment losses from the prior years to a net realized gain.  Our total revenues at June 30, 2004 were $203.5 million, as compared to $169.0 million at June 30, 2003.

The Company’s improved performance in the first half of 2004 results primarily from the improved investment yield of our investment portfolio and our continuing efforts to reduce expenses and to reduce credit risk in our portfolio.  The results for thesecond quarter benefited from exceptional returns from investments in certain limited partnerships.  Under prescribed accounting rules, such returns are deemed to be investment income as opposed to investment gains even though the recurrence of such returns isnot predictable.

The New York State Insurance Department is currently conducting a routine triennial examination of the Insurance Company’s statutory financial statements for years 2001 through 2003.  To date, there have been no significant issues or concernsraised.

19.

##### 

##### Pricing

Management believes that the Company is able to offer its products at competitive prices to its targeted markets as a result of: (i) maintaining relatively low issuance costs by selling through the independent general agency system; (ii) minimizing home officeadministrative costs; and (iii) utilizing appropriate underwriting guidelines.

The long‐term profitability of sales of life and most annuity products depends on the degree of margin of the actuarial assumptions that underlie the pricing of such products.  Actuarial calculations for such products, and the ultimate profitability ofsales of such products, are based on four major factors: (i) persistency; (ii) rate of return on cash invested during the life of the policy or contract; (iii) expenses of acquiring and administering the policy or contract; and (iv) mortality.

Persistency is the rate at which insurance policies remain in force, expressed as a percentage of the number of policies remaining in force over the previous year. Policyholders sometimes do not pay premiums, thus, causing their policies to lapse.

****

The assumed rate of return on invested cash and desired spreads during the period that insurance policies or annuity contracts are in force also affects pricing of products and currently includes an assumption by the Company of a specified rate of return and/orspread on its investments for each year that such insurance or annuity product is in force.

# Investments

     The Company¢s principal investments are in fixed maturities, all of which are exposed to at least one of three primary sources of investment risk: credit, interest rate and market valuation.  The financial statement risks arethose associated with the recognition of impairments and income, as well as the determination of fair values. Management evaluates whether impairments have occurred case-by-case. Management considers a wide range of factors about the security issuer and uses its bestjudgment in evaluating the cause and decline in the estimated fair value of the security and in assessing the prospects for near-term recovery.   Inherent in management¢s evaluation of the security are assumptions and estimates about the operations ofthe issuer and its future earnings potential.  Considerations used by the Company in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the market value has been below amortized cost; (ii) thepotential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographiclocations; (v) the potential for impairments of securities where the issuer, series of issuers or industry  has a catastrophic type of loss or has exhausted natural resources; and (vi) other subjective factors, including concentrations and information obtainedfrom regulators and rating agencies. In addition, the earnings on certain investments are dependent upon market conditions, which could result in prepayments and changes in amounts to be earned due to changing interest rates or equity markets.  The determinationof fair values in the absence of quoted market values is based on valuation methodologies, securities the Company deems to be comparable and assumptions deemed appropriate given the circumstances.  The use of different methodologies and assumptions may have amaterial effect on the estimated fair value amounts.

The Company derives a substantial portion of its total revenues from investment income. The Company manages most of its investments internally.  All investments made on behalf of the Company are governed by the general requirements and guidelines establishedand approved by the Company's investment committee (the “Investment Committee”) and by qualitative and quantitative limits prescribed by applicable insurance laws and regulations.  The Investment Committee meets regularly to set and review investmentpolicy and to approve current investment plans.  The actions of the Investment Committee are subject to review and approval by the Board of Directors of the Insurance Company.  The Company's investment policy must comply with NYSID regulations and theregulations of other applicable regulatory bodies.

20.

The Company's investment philosophy generally focuses on purchasing investment grade securities with the intention of holding such securities to maturity.  The Company's investment philosophy is focused on the intermediate to longer‐term horizon and isnot oriented towards trading.  However, as market opportunities, liquidity, or regulatory considerations may dictate, securities may be sold prior to maturity.  The Company has categorized all fixed maturity securities as available for sale and carries suchinvestments at market value.

The Company manages its investment portfolio to meet the diversification, yield and liquidity requirements of its insurance policy and annuity contract obligations. The Company's liquidity requirements are monitored regularly so that cash flow needs aresufficiently satisfied.  Adjustments periodically are made to the Company's investment policies to reflect changes in the Company's short-and long-term cash needs, as well as changing business and economic conditions.

The Company seeks to manage its investment portfolio in part to reduce its exposure to interest rate fluctuations.  In general, the market value of the Company's fixed maturity portfolio increases or decreases in an inverse relationship with fluctuations ininterest rates, and the Company's net investment income increases or decreases in direct relationship with interest rate changes.  For example, if interest rates decline, the Company's fixed maturity investments generally will increase in market value, while netinvestment income will decrease as fixed income investments mature or are sold and proceeds are reinvested at the declining rates, and viceversa. Management is aware that prevailing market interest rates frequently shift and, accordingly, the Companyhas adopted strategies that are designed to address either an increase or decrease in prevailing rates.

The primary market risk in the Company’s investment portfolio is interest rate risk and to a lesser degree, equity price risk.  The Company's exposure to foreign exchange risk is not significant.  The Company has no direct commodity risk. Changes in interest rates can potentially impact the Company’s profitability.  In certain scenarios where interest rates are volatile, the Company could be exposed to disintermediation risk and reduction in net interest rate spread or profit margin.

 

##### Risk‐Based Capital

Under the NAIC's risk‐based capital formula, insurance companies must calculate and report information under a risk‐based capital formula.  The standards require the computation of a risk‐based capital amount, which then is compared to acompany's actual total adjusted capital.  The computation involves applying factors to various financial data to address four primary risks: asset default, adverse insurance experience, disintermediation and external events.  This information is intended topermit insurance regulators to identify and require remedial action for inadequately capitalized insurance companies, but is not designed to rank adequately capitalized companies.  The NAIC formula provides for four levels of potential involvement by stateregulators for inadequately capitalized insurance companies, ranging from a requirement for the Insurance Company to submit a plan to improve its capital (Company Action Level) to regulatory control of the insurance company (Mandatory Control Level).  AtDecember 31, 2003, the Insurance Company’s Company Action Level was $117.3 million and the Mandatory Control Level was $41.0 million. The Insurance Company’s adjusted capital at December 31, 2003 was $260.2 million or 222% of the Company Action Level,which exceeds all four-action levels.

##### 

##### Agency Ratings

Ratings are an important factor in establishing the competitive position in the insurance and financial services marketplace.  There can be no assurance that the Company’s ratings will continue for any given period of time or that they will not bechanged.  In the event the Company’s ratings are downgraded, the level of revenues or the persistency of the Company’s business may be adversely impacted.

21.

  During 2002, the Insurance Company's rating was lowered to “B+” (Very Good) from an “A-” (Excellent) by A.M. Best Company ("A.M. Best").  Publications of A.M. Best indicate that the “B+” rating is assigned to thosecompanies that, in A.M. Best's opinion, have achieved a very good overall performance when compared to the norms of the insurance industry and that generally have demonstrated a good ability to meet their respective policyholder and other contractual obligations overa long period of time. In 2003, the “B+” rating was affirmed by A.M. Best.

In evaluating a company's statutory financial and operating performance, A.M. Best reviews the company's profitability, leverage and liquidity, as well as the company's book of business, the adequacy and soundness of its reinsurance, the quality and estimatedmarket value of its assets, the adequacy of its reserves and the experience and competency of its management.

A.M. Best's rating is based on factors which primarily are relevant to policyholders, agents and intermediaries and is not directed towards the protection of investors, nor is it intended to allow investors to rely on such a rating in evaluating the financialcondition of the Insurance Company.

During 2002, Moody's Investor Services (“Moody's”) lowered the Insurance Company's insurance financial strength rating from Baa1 to Ba1.  In May 2004, the rating was further lowered to Ba2 (“Questionable financial security”) and therating outlook was raised to negative to stable.  Standard & Poor's Corporation (“Standard & Poor's”) lowered its rating of the Insurance Company's financial strength from A- to BB+, which is defined as “Less vulnerable in the near-termbut faces major ongoing uncertainties to adverse business, financial and economic conditions”.  Standard and Poors affirmed this rating on March 30, 2004.  The credit rating of the Company's Senior Notes, due February 15, 2009 (the “SeniorNotes”), was lowered to a B+ (More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial requirements) from a BBB- by Standard & Poor's and to a B1 (“Poor financial security”) from Ba1by Moody's.  In May 2004, Moody’s lowered this rating to B2 and raised the outlook on the rating from negative to stable.

For the first half of 2004, the impact of the downgrades did not have a material impact on the financial statements of the Company.  The reduction in sales was primarily attributable to management’s intention to preserve and build the InsuranceCompany’s capital and surplus ratios.  Surrenders of the Company’s annuity products continue to remain below 5% of the surrenderable annuities and have not had a material impact on the Company’s consolidated financial statements.

**      Results of Operations**

##### Comparison of six months ended June 30, 2004 compared to the same period in 2003.

# Revenues

Annuity Considerations and Life Insurance Premiums

Total annuity considerations and life insurance premiums decreased to approximately $22.6 million for the six months ended June 30, 2004 from approximately $23.0 million for the six months ended June 30, 2003, a decrease of approximately $400 thousand.  Ofthis amount, annuity considerations decreased to approximately $17.7 million for the six months ended June 30, 2004 from approximately $18.5 million for the six months ended June 30, 2003 a decrease of approximately $800 thousand.  In accordance with GAAP, salesof single premium deferred annuities are not reported as insurance revenues, but rather as additions to policyholder account balances. Based on statutory accounting, revenue from sales of single premium annuities were approximately $119.9 million and approximately$148.4 million during the six months ended June 30, 2004 and June 30, 2003, respectively.  The decrease is in line with management’s intent to preserve and build the Insurance Company’s capital and surplus ratios.

**Policy Fee Income**

Universal life and investment type policy fee income was approximately $1.6 million for the six months ended June 30, 2004, as compared to approximately $552 thousand for the six months ended June 30, 2003.  This represents approximately a $1.0 millionincrease. 

22.

##### 

##### 

##### Net Investment Income

Net investment income totaled approximately $166.1 million during the first six months of 2004, as compared to approximately $135.6 million during the first six months of 2003.  This represents an increase of approximately $30.5 million.  This increaseis due principally to the increase in income from other invested assets of approximately $31.5 million during the first six months of 2004, as compared to approximately $11.4 million during the first six months of 2003 and from an increase in income on fixedmaturities from June 30, 2003 of approximately $11.6 million.  The Company's ratio of net investment income to average cash and invested assets less net investment income for the periods ended June 30, 2004 and June 30, 2003 was approximately 7.87% and 6.69%,respectively.

**Net Realized Investment Gains and Losses**

Realized investment gains amount to approximately $12.7 million during the first six months of 2004, as compared to approximately $8.5 million of losses during the first six months of 2003.  Realized investment gains and losses for the six months ended June30, 2004 and 2003 respectively, include realized investment losses or writedowns of approximately $2.8 million and $22.5 million, respectively, attributable to other than temporary impairments in the value of certain securities contained in the Company's investmentportfolio.  Investment securities with unrealized losses are placed on an internal watch list and are carefully evaluated to determine whether such losses are other than temporary.  Evaluations of watch list securities are monitored on an ongoingbasis.  Various criteria are utilized in the evaluation of the financial performance of the issuer, including capital structure, debt maturities, earnings trends, asset quality, industry trends, regional and economic trends and specific events including: a)company specific event, such as missed interest payments, accounting issues, gain or loss of major revenue generating contract(s), significant change in availability and cost of raw material or labor; and, b) specific market-driven events such as dramatic changes ininterest rates or geo-political events. The result of this analysis is then evaluated in the context of the Company’s intent to hold investments to maturity barring any significant adverse change in credit conditions, as well as the Company’s need forliquidity.

When impairments are determined to be other than temporary, the Company adjusts the book value to reflect the fair value, as appropriate, on a quarterly basis and are recorded in the income statement.  Realized investment gains (losses) also result from salesof certain equities and convertible securities, and calls and sales of fixed maturity investments in the Company's investment portfolio.

The following table presents the amortized cost and gross unrealized losses for securities where the estimated fair value had declined and remained below amortized cost at June 30, 2004:
|                                                                          | Less Than 12 Months |  |    12 Months or More |  | Total          |
|--------------------------------------------------------------------------|---------------------|--|--------------------------------|--|----------------|
|                                                                          | Fair Value          |  | Unrealized Losses              |  | Fair Value     |  | Unrealized Losses |  | Fair Value |  | Unrealized Losses |
| Description of Securities                                                |                     |  |                                |  | (in thousands) |  |  |  |  |
|                                                                          |                     |  |                                |  |                |  |  |  |  |  |  |
| US Treasury obligations and direct obligations of US Government Agencies | 315,842             |  | 14,158                         |  | 96,028         |  | 11,422 |  | 411,870 |  | 25,580 |
| Corporate Bonds                                                          | 728,474             |  | 33,235                         |  | 498,172        |  | 108,481 |  | 1,226,646 |  | 141,716 |
| Preferred Stocks                                                         | 39,912              |  | 2,666                          |  | 9,322          |  | 1,507 |  | 49,,234 |  | 4,173 |
| Subtotal Fixed Maturities                                                | 1,084,228           |  | 50,059                         |  | 603,522        |  | 121,410 |  | 1,687,750 |  | 171,469 |
| Common Stock                                                             | 14,979              |  | 437                            |  | 0              |  | 0 |  | 14,979 |  | 437 |
| Total Temporarily Impaired Securities                                    | 1,099,207           |  | 50,496                         |  | 603,522        |  | 121,410 |  | 1,702,729 |  | 171,906 |

23.

The following table presents the total gross unrealized losses for fixed maturities where the estimated fair value had declined and remained below amortized cost by June 30, 2004.
|                         |   

Gross                     Unrealized

Losses |   

% Of

Total                     | Gross Unrealized Losses For Principal Protected Notes | % Of

Total                                                            | Gross Unrealized

Losses Net of  Principal Protected Notes | % Of Total |   |
|-------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|-------------------------------------------------------|------------------------------------------------------------------------|-----------------------------------------------------------------|------------|--------|
|                         |                                                                                                                                                                |       (in thousands) |      (in thousands)               |      (in thousands)                                |
| Less than twelve months |                                                                                                                                                                | 50,059                                        | 29.19                                                 |             563 | .78                                                             | 49,496     | 49.89  |   |
| Twelve months or more   |                                                                                                                                                                | 121,410                                       | 70.81                                                 | 71,693                                                                 | 99.22                                                           | 49,717     | 50.11  |   |
|                         |                                                                                                                                                                |                                               |                                                       |                                                                        |                                                                 |            |        |   |
| Total                   |                                                                                                                                                                | 171,469                                       | 100.00                                                | 72,256                                                                 | 100.00                                                          | 99,213     | 100.00 |   |
|                         |                                                                                                                                                                |                                               |                                                       |                                                                        |                                                                 |            |        |   |

Approximately 59% of the securities with an unrealized loss of a period equal to or greater than twelve months are Principal Protected Notes.  This structure utilizes AAA collateral such as U.S Treasury Strips, in conjunction with a variable ratecoupon.  The AAA rated collateral accretes to par at maturity, defeasing the security and thereby insulating the holder from any negative credit events, which might interfere with the repayment of principal.

  

     As of June 30, 2004, the Company had approximately $204 million of gross unrealized gains in fixed maturities.

**Total Benefits and Expenses**

Total benefits and expenses for the six months ended June 30, 2004 aggregated approximately $149.6 million, as compared to approximately $146.3 million for the six months ended June 30, 2003.  This represents an increase of $3.3 million from the first sixmonths of 2004.  The reasons for this increase will be discussed below.

****

**Interest Credited and Benefits to Policyholders**

Interest credited and other benefits to policyholders amounted to approximately $130.5 million for the six months ended June 30, 2004, as compared to approximately $132.7 million for the six months ended June 30, 2003.  This represents a decrease of $2.2million.

         

     The Insurance Company's average credited rate for reserves and account balances for the six months ended June 30, 2004 and 2003 were less than the Company's ratio of net investment income to mean assets for the same period as noted aboveunder "Net Investment Income". Although management does not currently expect material declines in the spread between the Company's average credited rate for reserves and account balances and the Company's ratio of net investment income to mean assets (the "Spread"),there can be no assurance that the Spread will not decline in future periods or that such decline will not have a material adverse effect on the Company's financial condition and results of operations.  Depending, in part, upon competitive factors affecting theindustry in general, and the Company, in particular, the Company may, from time to time, change the average credited rates on certain of its products.  There can be no assurance that the Company will reduce such rates or that any such reductions will broaden theSpread.    

**Interest Expense on Notes Payable**

The interest expense on the Company's notes payable amounted to approximately $4.8 million for the six months ended June 30, 2004, and approximately $4.9 million for the six months ended June 30, 2003. 

 

24.

****

****

**General Expenses, Taxes and Commissions**

     General expenses, taxes and commissions to agents totaled approximately $15.6 million for the six months ended June 30, 2004, as compared to approximately $14.1 million for the six months ended June 30, 2003.  This represents anincrease of approximately $1.5 million.  The increase principally is attributable to an additional $2 million pension plan contribution the Company made in the second quarter of 2004 and the termination of the Company’s key-man policy which caused asavings of approximately $600 thousand in the first quarter of 2003.

**Deferred Policy Acquisition Costs**

The change in deferred policy acquisition costs for the six months ended June 30, 2004 resulted in a credit of approximately $1.4 million, as compared to a credit of approximately $5.4 million for the six months ended June 30, 2003.  The change is due to thedecrease in costs associated with lower level of commissions, which have been deferred and are amortized in proportion to the recognition of earned revenue.

**Income Before Income Taxes**

For the reasons discussed above, income before income taxes amounted to approximately $53.9 million for the six months ended June 30, 2004, as compared to an income of approximately $22.8 million for the six months ended June 30, 2003.

**Income Taxes**

Income tax expense was $18.6 million for the first six months of 2004 as compared to an income tax expense of approximately $6.9 million for the first six months of 2003.  This increase is primarily attributable to higher income before income taxes.

 

**Net Income**

For the reasons discussed above, the Company had net income of approximately $35.3 million during the six months ended June 30, 2004 and a net income of approximately $15.9 million during the six months ended June 30, 2003.

       

**Liquidity and Capital Resources**

The Company is an insurance holding company and its primary uses of cash are debt service obligations, operating expenses and dividend payments.  The Company's principal source of cash is rent from its real estate, interest on its investments and dividendsfrom the Insurance Company.  During the second quarter of 2004, the Company's Board of Directors declared a quarterly cash dividend of $.10 per share payable on July 1, 2004.  During the first six months of 2004 the Company did not purchase or retire anyshares of common stock.

              

     The Insurance Company is subject to various regulatory restrictions on the maximum amount of payments, including loans or cash advances that it may make to the Company without obtaining prior regulatory approval. Under the New YorkInsurance Law, the Insurance Company is permitted without prior insurance regulatory clearance to pay a stockholder dividend to the Company as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of (i) 10% of its surplusas of the immediately preceding calendar year and (ii) its net gain from operations for the immediately preceding calendar year (excluding realized capital gains and losses).  The Insurance Company will be permitted to pay a stockholder dividend to the Companyin excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the distribution.  Under the New York Insurance Law, theSuperintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders.  The NYSID has established informal guidelines for suchdeterminations. 

25.

The guidelines, among other things, focus on the insurer's overall financial condition and profitability under statutory accounting practices.  Management of the Company cannot provide assurance that the Insurance Company will have statutory earnings tosupport payment of dividends to the Company in an amount sufficient to fund its cash requirements and pay cash dividends or that the Superintendent will not disapprove any dividends that the Insurance Company must submit for the Superintendent's consideration. TheCompany's other insurance subsidiary is also subject to restrictions on the payment of dividends to its parent company. During the first six months of 2004 and 2003, the Insurance Company paid no dividends to the Company.

Principal sources of funds at the Insurance Company are premiums and other considerations paid, contract charges earned, net investment income received and proceeds from investments called, redeemed or sold.  The principal uses of these funds are the paymentof benefits on life insurance policies and annuity contracts, operating expenses and the purchase of investments.  Net cash provided by the Company's operating activities (reflecting principally: (i) premiums and contract charges collected less (ii) benefitspaid on life insurance and annuity products plus (iii) income collected on invested assets less (iv) commissions and other general expenses paid) was approximately $41.7 million and $19.9 million during the six months ended June 30, 2004 and 2003, respectively. Net cash (used in)/provided by the Company's investing activities (principally reflecting investments purchased less investments called, redeemed or sold) was approximately $(97.4) million, and $135.5 million during the six months ended June 30, 2004 and 2003,respectively.

For purposes of the Company's consolidated statements of cash flows, financing activities relate primarily to sales and surrenders of the Company's universal life insurance and annuity products.  The payment of dividends by the Company is also considered tobe a financing activity.  In addition, as previously discussed, the Company no longer participates in dollar roll repurchase agreements, which are considered to be a financing activity.  Net cash provided by (used in) the Company's financing activitiesamounted to approximately $51.1 million and $(137.3) million during the six months ended June 30, 2004 and 2003, respectively.   This fluctuation is primarily attributable to higher policyholder account balances and lower levels in deposits of policies to beissued at June 30, 2004.

The indenture governing the Senior Notes contains covenants relating to limitations on liens and sale or issuance of capital stock of the Insurance Company. In the event the Company violates such covenants as defined in the indenture, the Company may be obligatedto offer to repurchase the entire outstanding principal amount of such notes.  The Company believes that it is in compliance with all of the covenants. 

Given the Insurance Company's historic cash flow and current financial results, management believes that, for the next twelve months and for the reasonably foreseeable future, the Insurance Company's cash flow from operating activities will provide sufficientliquidity for the operations of the Insurance Company, as well as provide sufficient funds to the Company, so that the Company will be able to make dividend payments, satisfy its debt service obligations and pay its other operating expenses.

To meet its anticipated liquidity requirements, the Company purchases investments taking into account the anticipated future cash flow requirements of its underlying liabilities.  In managing the relationship between assets and liabilities, the Companyanalyzes the cash flows necessary to correspond with the expected cash needs on the underlying liabilities under various interest rate scenarios.  In addition, the Company invests a portion of its total assets in short-term investments (approximately .37% and..52% as of June 30, 2004 and December 31, 2003, respectively).  The effective duration of the Company's debt portfolio was approximately 8.98 years as of June 30, 2004.  The Company's fixed maturity investments are all classified as available for sale andincludes those securities available to be sold in response to, among other things, changes in market interest rates, changes in the security's prepayment risk, the Company's need for liquidity and other similar factors.  Fixed maturity investments available forsale represent investments, which may be sold in response to changes in various economic conditions. 

26.

These investments are carried at estimated market value and unrealized gains and losses, net of the effects of amortization of deferred policy acquisition costs and deferred federal income taxes, are charged directly to shareholders' equity, unless a decline inmarket value is considered to be other than temporary in which event the Company recognizes a loss.  Equity securities include common stocks and non‐redeemable preferred stocks and are carried at market, with the related unrealized gains and losses, net offederal income taxes, if any, charged directly to shareholders' equity, unless a decline in market value is considered to be other than temporary, in which event, the Company recognizes a loss.

The Insurance Company is subject to Regulation 130 adopted and promulgated by the New York State Insurance Department ("NYSID").   Under this Regulation, the Insurance Company's ownership of below investment grade debt securities is limited to 20.0% of totaladmitted assets, as calculated under statutory accounting practices.  As of June 30, 2004 and December 31, 2003, approximately 6.9% and 7.0%, respectively, of the Insurance Company's total admitted assets were invested in below investment grade debtsecurities.

The Company maintains a portfolio, which includes below investment grade fixed maturity debt securities, which were purchased to achieve a more favorable investment yield, all of which are classified as available for sale and reported at fair value. As of June 30,2004 and December 31, 2003, the carrying value of these securities was approximately $338.3 million and $328.8 million, respectively, (representing approximately 7.4% and 7.3% of the Company's total assets, respectively).

Investments in below investment grade securities have different risks than investments in corporate debt securities rated investment grade.  Risk of loss upon default by the borrower is significantly greater with respect to below investment grade securitiesthan with other corporate debt securities because below investment grade securities generally are unsecured and often are subordinated to other creditors of the issuer.  Also, issuers of below investment grade securities usually have high levels of indebtednessand often are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than are investment grade issuers.  Typically, there is only a thinly traded market for such securities and recent market quotations may not be availablefor some of these securities.  Market quotes generally are available only from a limited number of dealers and may not represent firm bids of such dealers or prices for actual sales.  The Company attempts to reduce the overall risk in its below investmentgrade portfolio, as in all of its investments, through careful credit analysis, investment policy limitations, and diversification by company and by industry.  Below investment grade debt investments, as well as other investments, are being monitored on anongoing basis.

As of June 30, 2004, approximately 7.8% of the Company's total invested assets were invested in limited partnerships.  Such investments are included in the Company's consolidated balance sheet under the heading "Other invested assets."  See "Note 2 tothe Notes to Consolidated Financial Statements."  The Company is committed, if called upon during a specified period, to contribute an aggregate of approximately $83.0 million of additional capital to certain of these limited partnerships.  However,management does not expect the entire amount to be drawn down as certain of these limited partnerships are nearing the end of the period during which investors are required to make contributions. $14.7 million in commitments will expire in 2004, $15.7 million in2005, $24.6 million in 2006, $28.0 million in 2007.  Pursuant to NYSID regulations, the Company's investments in equity securities, including limited partnership interests, may not exceed 20% of the Company's total invested assets.  The Company may makeselective investments in additional limited partnerships as opportunities arise.  In general, risks associated with such limited partnerships include those related to their underlying investments (i.e., equity securities, debt securities and real estate), plus alevel of illiquidity, which is mitigated by the ability of the Company to take annual distributions of partnership earnings.  There can be no assurance that the Company will continue to achieve the same level of returns on its investments in limited partnershipsas it has historically or that the Company will achieve any returns on such investments at all.  Further, there can be no assurance that the Company will receive a return of all or any portion of its current or future capital investments in limitedpartnerships.  The failure of the Company to receive the return of a material portion of its capital investments in limited partnerships, or to achieve historic levels of return on such investments, could have a material adverse effect on the Company's financialcondition and results of operations. 

27.

As previously discussed, the Company no longer participates in "dollar roll" repurchase agreements.  There were no outstanding repurchase agreements at June 30, 2004 and December 31, 2003, respectively. 

All 50 states of the United States, the District of Columbia and Puerto Rico have insurance guaranty fund laws requiring all life insurance companies doing business within the jurisdiction to participate in guaranty associations, which are organized to paycontractual obligations under insurance policies (and certificates issued under group insurance policies) issued by impaired or insolvent life insurance companies.  These associations levy assessments (up to prescribed limits) on all member insurers in aparticular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired or insolvent insurer is engaged.  Some states permit member insurers to recover assessments paid through full orpartial premium tax offsets.  These assessments may be deferred or forgiven under most guaranty laws if they would threaten an insurer's solvency.  The amount of these assessments in prior years has not been material, however, the amount and timing of anyfuture assessment on the Insurance Company under these laws cannot be reasonably estimated and are beyond the control of the Company and the Insurance Company.  Recent failures of substantially larger insurance companies could result in future assessments inmaterial amounts.

           

      **Market Risk**

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, and other relevant market rate or price changes.  Market risk is directly influenced by the volatility andliquidity in the markets in which the related underlying assets are traded.  The following is a discussion of the Company's primary market risk exposures and how those exposures are currently managed as of June 30, 2004.

We believe that our fixed-rate liabilities should be backed by a portfolio composed principally of fixed-rate investments that generate predictable rates of return.  We do not have a specific target rate of return.  Instead, our rates of return vary overtime depending on the current interest rate environment, the slope of the yield curve, the spread at which fixed-rate investments are priced over the yield curve, and general economic conditions. Our portfolio strategy is designed to achieve adequate risk-adjustedreturns consistent with our investment objectives of effective asset-liability matching, liquidity and safety.

The market value of the Company's fixed maturity portfolio changes as interest rates change.  In general, rate decreases cause asset prices to rise, while rate increases cause asset prices to fall. 

      There were no capital expenditures during the first six months of 2004 and no outstanding commitments as of June 30, 2004.

       

28.

##### 

##### Off-Balance Sheet Arrangements

****

The Company has not entered into any off-balance sheet financing arrangements and has made no financial commitments or guarantees with any unconsolidated subsidiary or special purpose entity.  All of the Company’s subsidiaries are wholly owned and theirresults are included in the accompanying consolidated financial statements.

****

##### Contractual Obligations

****

The accompanying Notes to Consolidated Financial Statements contain information regarding payments required under existing long-term borrowing arrangements.  The following presents a summary of the Company’s significant contractual obligations.
|                            | Payment Due By Period (in thousands) |
|----------------------------|--------------------------------------|
| Contractual Obligations    | Less than

1 year                    |  | 1-3 Years |  | 4-5 Years |  | After
5 Years |  | Total |
|                            |                                      |  |  |  |  |  |  |  |  |
| Long Term Debt Obligations |                                      |  |  |  |  |  | $100,000 |  | $100,000 |

****

****

Long-term debt obligations consist of $100 million, 7 7/8% senior notes due February 15, 2009.  See “Note 3 in Notes to the Consolidated Financials Statements” for additional discussion concerning both long-term and short-term obligations.

### Effects of Inflation and Interest Rate Changes

In a rising interest rate environment, the Company's average cost of funds would be expected to increase over time as it prices its new and renewing annuities to maintain a generally competitive market rate. In addition, the market value of the Company's fixedmaturity portfolio decreases resulting in a decline in shareholders' equity.  Concurrently, the Company would attempt to place new funds in investments that were matched in duration to, and higher yielding than, the liabilities associated with suchannuities.  Management believes that liquidity necessary in such an interest rate environment to fund withdrawals, including surrenders, would be available through income, cash flow, and the Company's cash reserves or from the sale of short-term investments.

In a declining interest rate environment, the Company's cost of funds would be expected to decrease over time, reflecting lower interest crediting rates on its fixed annuities.  Should increased liquidity be required for withdrawals in such an interest rateenvironment, management believes that the portion of the Company's investments which are designated as available for sale in the Company's consolidated balance sheet could be sold without materially adverse consequences in light of the general strengthening in marketprices which would be expected in the fixed maturity security market.

Interest rate changes also may have temporary effects on the sale and profitability of our universal life and annuity products.  For example, if interest rates rise, competing investments (such as annuity or life insurance products offered by the Company'scompetitors, certificates of deposit, mutual funds and similar instruments) may become more attractive to potential purchasers of the Company's products until the Company increases the rates credited to holders of its universal life and annuity products.  Incontrast, as interest rates fall, we would attempt to lower our credited rates to compensate for the corresponding decline in net investment income.  As a result, changes in interest rates could materially adversely effect the financial condition and results ofoperations of the Company depending on the attractiveness of alternative investments available to the Company's customers.  In that regard, in the current interest rate environment, the Company has attempted to maintain its credited rates at competitive levelsdesigned to discourage surrenders and also to be considered attractive to purchasers of new annuity products.  In addition, because the level of prevailing interest rates impacts the Company’s competitors in the same fashion, management does not believethat the current interest rate environment will materially affect the Company's competitive position visavis other life insurance companies that emphasize the sale of annuity products.        

                                   

29.

Notwithstanding the foregoing, if interest rates continue at current levels or decline, there can be no assurance that this segment of the life insurance industry would not experience increased levels of surrenders and reduced sales and thereby be materiallyadversely affected. Conversely, if interest rates rise, competing investments (such as annuity or life insurance products offered by the Company’s competitors, certificates of deposit, mutual funds and similar investments) may become more attractive topotential purchasers of the Company’s products until the Company increases its credited rates.

###### 

###### CRITICAL ACCOUNTING POLICIES ESTIMATES

****

**     ** The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (2GAAP2) requires management to adopt accounting policies and make estimates andassumptions that affect amounts reported in the consolidated financial statements.  The critical accounting policies, estimates and related judgments underlying the Company¢s consolidated financial statements are summarized below.  In applying theseaccounting policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain.  Many of these policies, estimates and related judgments are common in the insurance and financial servicesindustries; others are specific to the Company’s business operations.

# INVESTMENTS

     The Company¢s principal investments are in fixed maturities, all of which are exposed to at least one of three primary sources of investment risk: credit, interest rate and market valuation.  The financial statement risks arethose associated with the recognition of impairments and income, as well as the determination of fair values. Recognition of income ceases when a bond goes into default and management evaluates whether impairments have occurred case-by-case.  Managementconsiders a wide range of factors about the security issuer and uses its best judgment in evaluating the cause and decline in the estimated fair value of the security and in assessing the prospects for near-term recovery.   Inherent in management¢sevaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential.  Considerations used by the Company in the impairment evaluation process include, but are not limited to: (i) the length of time andthe extent to which the market value has been below amortized cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector;(iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry  has a catastrophic type of loss or has exhausted natural resources; and(vi) other subjective factors, including concentrations and information obtained from regulators and rating agencies. In addition, the earnings on certain investments are dependent upon market conditions, which could result in prepayments and changes in amounts to beearned due to changing interest rates or equity markets.  The determination of fair values in the absence of quoted market values is based on valuation methodologies, securities the Company deems to be comparable and assumptions deemed appropriate given thecircumstances.  The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts.

#### DEFERRED POLICY ACQUISITION COSTS

****

**     ** The ****Company incurs significant costs in connection with acquiring new business. These costs, which vary with and are primarily related to the production of new ****business, are deferred. ****The recovery of suchcosts is dependent upon the future profitability of the related product, which in turn is dependent mainly on investment returns in excess of interest credited, as well as, persistency and expenses.  These factors enter into management¢s estimate of futuregross profits, which generally are used to amortize such costs.  Changes in these estimates result in changes to the amounts expensed in the reporting period in which the revisions are made and could result in the impairment of the deferred acquisition asset anda charge to income if estimated future gross profits are less than amounts deferred.

30.

#### FUTURE POLICY BENEFITS

     The Company establishes liabilities for amounts payable under life and health insurance policies and annuity contracts.  Generally, these amounts are payable over a long period of time and the profitability of the products isdependent on the pricing. Principal assumptions used in pricing policies and in the establishment of liabilities for future policy benefits are investment returns, mortality, expenses and persistency. The following section discusses the Company’s policy andpractices regarding life insurance and annuity reserves.

##### Life Insurance and Annuity Reserves

In accordance with applicable insurance regulations, the Company has established and carries as liabilities in its statutory financial statements actuarially determined reserves that are calculated to satisfy its policy and contractual obligations.  Reserves,together with premiums to be received on outstanding policies and contracts and interest thereon at certain assumed rates, are calculated to be sufficient to satisfy policy and contractual obligations.  The actuarial factors used in determining such reserves arebased on statutorily prescribed mortality and morbidity tables and interest rates.  Reserves maintained also include unearned premiums, premium deposits, reserves for claims that have been reported but are not yet paid, reserves for claims that have beenincurred but have not yet been reported and claims in the process of settlement.  Generally, the Company maintains reserves on assumed reinsurance, but does not continue accumulating reserves with respect to that portion of policies or contracts that arereinsured with, or ceded to, other insurance companies.  Reserves for assumed reinsurance are computed on bases essentially comparable to direct insurance reserves.

     

The reserves reflected in the Company's consolidated financial statements included herein are calculated based on GAAP and differ from those specified by the laws of the various states in which the Insurance Company does business and those reflected in theInsurance Company's statutory financial statements.  These differences arise from the use of different mortality and morbidity tables and interest rate assumptions, the introduction of lapse assumptions into the reserve calculation and the use of the net levelpremium reserve method on all insurance business.  

The reserves reflected in the Company's consolidated financial statements are based upon the Company's best estimates of mortality, persistency, expenses and investment income, with appropriate provisions for adverse statistical deviation and the use of the netlevel premium method for all non‐interest‐sensitive products.  For all interest‐sensitive products the policy account value is equal to the accumulation of gross premiums plus interest credited less mortality and expense charges andwithdrawals.  In determining reserves for its insurance and annuity products, the Company performs periodic studies to compare current experience for mortality, interest and lapse rates with expected experience in the reserve assumptions. Differences arereflected currently in earnings for each period.  The Company historically has not experienced significant adverse deviations from its assumptions.

**EMPLOYEE BENEFIT PLANS**

****

**    ** The Insurance Company sponsors a defined benefit plan covering employees who meet specified eligibility requirements.  The reported expense and liability associated with these plans requires use of assumptions which include thediscount rate, expected return on plan assets and rate of future compensation increases as determined by the Insurance Company.  Management determines these assumptions based upon currently available market and industry data, historical performance of the plansand its assets. The actuarial assumptions used by the Insurance Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of the participants.  Thesedifferences may have a significant effect on the Company’s consolidated financial statements.

During 2003, the actuarial assumptions used in the calculation of the Company's projected benefit obligation include the expected rate of compensation increases of 3.00%, a discount rate of 6.00% and an expected return on assets of 5.50%.  The projectedbenefit obligation at June 30, 2004 is $10.5 million.

 

31.

In February 2004, in contemplation of a voluntary termination of the Presidential Life Insurance Company Employees’ Retirement Plan, the Company adopted a resolution, which "froze" the Plan as of February 18, 2004.  This closed the Plan to new entrantsand terminated the accrual of any future benefits under the Plan after such date.  In addition to freezing the Plan, the Company approved a resolution to utilize 1971 Group Mortality Tables and a seven percent (7%) investment yield for use in computing actuarialcalculations.  The Company anticipates that a final decision regarding the termination of the Plan will be made in or about the second half of 2004.   

      

CONTROLS AND PROCEDURES

****

       The Chairman and Chief Executive Officer and the Principal Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of a datewithin 90 days prior to the date of the filing of this Report, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports filed or submitted by it under the SecuritiesExchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in suchreports is accumulated and communicated to the Company’s management, including the Chairman and Chief Executive Officer and the Principal Financial Officer of the Company, as appropriate to allow timely decisions regarding required disclosure.

      There are no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of such evaluation.

## PART II ‐ OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of business.  As of June 30, 2004 the Company is not a party to any legal proceedings, the adverse outcome of which, in management'sopinion, individually or in the aggregate, would have a material adverse effect on the Company's financial condition or results of operations.

Item 2.  Changes in Securities

None

Item 3.  Defaults Upon Senior Securities

None

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

None

Item 5.  Other Information

None

Item 6.  Exhibits and Reports on Form 8‐K

a)  Exhibits

None

b)  Reports on Form 8‐K

During the quarter ended June 30, 2004, the Company did not file a current report on Form 8-K.

32.

PRESIDENTIAL LIFE CORPORATION

August 10, 2004

  SIGNATURES

Pursuant to the requirements 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.

   Presidential Life Corporation   

(Registrant)

Date:  August 10, 2004                /s/ Herbert Kurz                  

Herbert Kurz, President and Duly

Authorized Officer of the Registrant

Date:  August 10, 2004                /s/ Charles J. Snyder            

Charles J. Snyder, Principal

Accounting Officer of the Registrant

33.

PRESIDENTIAL LIFE CORPORATION

August 10, 2004

SIGNATURES

Pursuant to the requirements 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.

    Presidential Life Corporation  

(Registrant)

Date:  August 10, 2004              /s/Herbert Kurz 

                                   

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

Herbert Kurz, President and Duly

Authorized Officer of the Registrant

Date:  August 10, 2004              /s/ Charles Snyder

                                    

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

                                    Charles J. Snyder, Principal

Accounting Officer of the Registrant

          

33.

###                 Exhibit 99.01

### 

### Certification of Chief Executive Officer

###                         Pursuant to Exchange Act Rule 13a-14

****

I, Herbert Kurz, Chief Executive Officer of Presidential Life Corporation (the 2Company2) certify that:

I have reviewed this quarterly report on Form 10-Q of the Company.;

        2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances underwhich such statements were made, not misleading with respect to the period covered by this quarterly report;

         3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cashflows of the registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant¢s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrantand we have:

                    a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period, which this quarterly report is being prepared;

               b) evaluated the effectiveness of the registrant¢s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the2Evaluation Date2); and 

             c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

         5. The registrant¢s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant¢s auditors and audit committee of registrant¢s board of directors (or personsperforming the equivalent function):

             a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant¢s ability to record, process, summarize and report financialdata and have identified for the registrant¢s auditors any material weaknesses in internal controls; and  

           b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant¢s internal controls; and

        6. The registrant¢s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internalcontrols subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: August 10, 2004                                  /s/Herbert Kurz

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

                                 Herbert Kurz

                               Chief Executive Officer

          

34.

### 

### Exhibit 99.02

### 

### Certification of Principal Financial Officer

       Pursuant to Exchange Act Rule 13a-14

    

I, Charles Snyder, Principal Financial Officer and Treasurer of Presidential Life Corporation (the 2Company2) certify that:

I have reviewed this quarterly report on Form 10-Q of the Company.;

         2. Based on my knowledge, this quarterly report does not contain any untrue

statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

         3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cashflows of the registrant as of, and for, the periods presented in this quarterly report;

         4. The registrant¢s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrantand we have:

                   a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period, which this quarterly report is being prepared;

                b) evaluated the effectiveness of the registrant¢s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the2Evaluation Date2); and 

               c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

       5. The registrant¢s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant¢s auditors and the audit committee of registrant¢s board of directors (or persons performingthe equivalent function):

             a)  all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant¢s ability to record, process, summarize and reportfinancial data and have identified for the registrant¢s auditors any  material weaknesses in internal controls; and  

              b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant¢s internal controls; and

       6. The registrant¢s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internalcontrols subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:August 10, 2004                          /s/Charles Snyder

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

                 Charles Snyder                      

                                          Treasurer andPrincipal Accounting Officer

          

35.

                                                                                            Exhibit 99.03

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Presidential Life Corporation (the "Company") on Form 10-Q for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Herbert Kurz, Chief ExecutiveOfficer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

  

        (1)    Report fully complies with the requirements of section 13(a) or 15(d)                     of the Securities Exchange Act of 1934; and

 The information contained in the Report fairly presents, in all material   respects, the financial condition and result of operations of  the Company.

/s/Herbert Kurz

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

Herbert Kurz

Chief Executive Officer

August 10, 2004 

 

 

                                                                                                        

36.

Exhibit 99.04

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Presidential Life Corporation (the "Company") on Form 10-Q for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Charles Snyder, Treasurer andPrincipal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

  

        (1)    Report fully complies with the requirements of section 13(a) or 15(d)                     of theSecurities Exchange Act of 1934; and

(2)       The information contained in the Report fairly presents, in all       material respects, the financial condition and result of operations of  the Company.

/s/Charles Snyder

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

Charles Snyder

Treasurer and Principal Accounting Officer

August 10, 2004 

        37.