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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

OR



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

For the transition period from            
to

Commission file number 033-37576





UNION SECURITY INSURANCE COMPANY

(Exact name of registrant as
specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|IOWA                                                           |  | 81-0170040                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|6941 VISTA DRIVE WEST DES MOINES, IOWA                         |  | 50266                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code: (651) 361-4000





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

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of accelerated filer, large accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |  |  |                           |  |  
|----------------------- |  | - |  |  |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  |  |  | Accelerated filer         |  |  ̈
|                        |  |   |  | 
|Non-accelerated filer   |  | x |  |  |  | Smaller reporting company |  |  ̈

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

As of November 1, 2008, there were 1,000,000 shares of common stock of the registrant outstanding, all of which are owned by Assurant, Inc.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.









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UNION SECURITY INSURANCE COMPANY

QUARTERLY REPORT ON FORM 10-Q

FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

TABLE OF CONTENTS



|            |  |                                                                                                                                              |  |           
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------
|Item Number |  |                                                                                                                                              |  | PageNumber
|            |  | PART I FINANCIAL INFORMATION                                                                                                                 |  |           
|            |  |                                                                                                                                             
|1.          |  | Financial Statements of Union Security Insurance Company Consolidated Balance Sheets (Unaudited) at September 30, 2008 and December 31, 2007 |  | 2         
|            |  | Consolidated Statements of Operations (Unaudited) for the three and nine months ended September 
30, 2008 and 2007                           |  | 3         
|            |  | Consolidated Statement of Changes in Stockholders Equity (Unaudited) from December 
31, 2007 to September 30, 2008                          |  | 4         
|            |  | Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2008 and
2007                                      |  | 5         
|            |  | Notes to the Consolidated Financial Statements (Unaudited) for the three and nine months ended September 
30, 2008 and 2007                  |  | 6         
|            |  |                                                                                                                                             
|2.          |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                        |  | 16        
|            |  |                                                                                                                                             
|3.          |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK *                                                                                 |  | 20        
|            |  |                                                                                                                                             
|4T.         |  | CONTROLS AND PROCEDURES                                                                                                                      |  | 20        
|            |  |                                                                                                                                             
|            |  | PART II OTHER INFORMATION                                                                                                                    |  |           
|            |  |                                                                                                                                             
|1A.         |  | RISK FACTORS                                                                                                                                 |  | 21        
|            |  |                                                                                                                                             
|2.          |  | UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS*                                                                                  |  | 22        
|            |  |                                                                                                                                             
|3.          |  | DEFAULTS UPON SENIOR SECURITIES *                                                                                                            |  | 22        
|            |  |                                                                                                                                             
|4.          |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS *                                                                                        |  | 22        
|            |  |                                                                                                                                             
|5.          |  | OTHER INFORMATION                                                                                                                            |  | 23        
|            |  |                                                                                                                                             
|6.          |  | EXHIBITS                                                                                                                                     |  | 23        
|            | 
|SIGNATURES  |  | 24                                                                                                                                          



|* | Not required under reduced disclosure pursuant to General Instruction H(1) (a) and (b) of Form 10-Q.
|- | ----------------------------------------------------------------------------------------------------



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Union Security Insurance Company

Consolidated Balance Sheets (unaudited)

At September 30, 2008 and
December 31, 2007



|                                                                                                                         |  |                                                             |           |   |                  |   |          
|------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------- | --------- | - | ---------------- | - | ---------
|                                                                                                                         |  | September 30,2008                                           |           |   | December 31,2007
|                                                                                                                         |  | (in thousands except number of sharesand per share amounts)
|Assets                                                                                                                   |  |                                                             |           |   |                  |   |          
|Investments:                                                                                                             |  |                                                             |           |   |                  |   |          
|Fixed maturity securities available for sale, at fair value (amortized cost - $2,388,031 in 2008 and $2,611,076 in 2007) |  | $                                                           | 2,182,406 |   |                  | $ | 2,654,969
|Equity securities available for sale, at fair value (cost - $215,517 in 2008 and $303,785 in 2007)                       |  |                                                             | 169,893   |   |                  |   | 268,672  
|Commercial mortgage loans on real estate, at amortized cost                                                              |  |                                                             | 849,115   |   |                  |   | 822,184  
|Policy loans                                                                                                             |  |                                                             | 14,450    |   |                  |   | 12,346   
|Short-term investments                                                                                                   |  |                                                             | 157,722   |   |                  |   | 44,092   
|Collateral held under securities lending                                                                                 |  |                                                             | 127,833   |   |                  |   | 240,049  
|Other Investments                                                                                                        |  |                                                             | 84,235    |   |                  |   | 74,781   
|                                                                                                                         |  |                                                             |           |   |                  |   |          
|Total investments                                                                                                        |  |                                                             | 3,585,654 |   |                  |   | 4,117,093
|Cash and cash equivalents                                                                                                |  |                                                             | 15,637    |   |                  |   | 32,832   
|Premiums and accounts receivable, net                                                                                    |  |                                                             | 68,639    |   |                  |   | 106,229  
|Reinsurance recoverables                                                                                                 |  |                                                             | 1,347,330 |   |                  |   | 1,307,646
|Due from affiliates                                                                                                      |  |                                                             | 2,691     |   |                  |   | 6,381    
|Accrued investment income                                                                                                |  |                                                             | 45,174    |   |                  |   | 42,352   
|Deferred acquisition costs                                                                                               |  |                                                             | 46,395    |   |                  |   | 50,575   
|Deferred income taxes, net                                                                                               |  |                                                             | 185,811   |   |                  |   | 60,624   
|Goodwill                                                                                                                 |  |                                                             | 156,817   |   |                  |   | 156,817  
|Value of business acquired                                                                                               |  |                                                             | 22,324    |   |                  |   | 22,816   
|Other assets                                                                                                             |  |                                                             | 30,140    |   |                  |   | 36,676   
|Assets held in separate accounts                                                                                         |  |                                                             | 2,012,724 |   |                  |   | 2,867,617
|                                                                                                                         |  |                                                             |           |   |                  |   |          
|Total assets                                                                                                             |  | $                                                           | 7,519,336 |   |                  | $ | 8,807,658
|                                                                                                                         |  |                                                             |           |   |                  |   |          
|                                                                                                                         |  |                                                            
|Liabilities                                                                                                              |  |                                                             |           |   |                  |   |          
|Future policy benefits and expenses                                                                                      |  | $                                                           | 2,700,404 |   |                  | $ | 2,675,363
|Unearned premiums                                                                                                        |  |                                                             | 38,533    |   |                  |   | 40,147   
|Claims and benefits payable                                                                                              |  |                                                             | 1,786,898 |   |                  |   | 1,840,353
|Commissions payable                                                                                                      |  |                                                             | 12,235    |   |                  |   | 15,507   
|Reinsurance balances payable                                                                                             |  |                                                             | (112      | ) |                  |   | 2,706    
|Deferred gains on disposal of businesses                                                                                 |  |                                                             | 119,088   |   |                  |   | 134,607  
|Obligations under securities lending                                                                                     |  |                                                             | 132,539   |   |                  |   | 240,049  
|Accounts payable and other liabilities                                                                                   |  |                                                             | 198,393   |   |                  |   | 208,809  
|Income taxes payable                                                                                                     |  |                                                             | 16,033    |   |                  |   | 1,459    
|Liabilities related to separate accounts                                                                                 |  |                                                             | 2,012,724 |   |                  |   | 2,867,617
|                                                                                                                         |  |                                                             |           |   |                  |   |          
|Total liabilities                                                                                                        |  |                                                             | 7,016,735 |   |                  |   | 8,026,617
|                                                                                                                         |  |                                                             |           |   |                  |   |          
|Commitments and contingencies (Note 7)                                                                                   |  |                                                             |           |   |                  |   |          
|                                                                                                                         |  |                                                            
|Stockholders equity                                                                                                     |  |                                                             |           |   |                  |   |          
|Common stock, par value $5 per share, 1,000,000 shares authorized, issued and outstanding                                |  |                                                             | 5,000     |   |                  |   | 5,000    
|Additional paid-in capital                                                                                               |  |                                                             | 445,635   |   |                  |   | 545,635  
|Retained earnings                                                                                                        |  |                                                             | 217,510   |   |                  |   | 224,710  
|Accumulated other comprehensive (loss) income                                                                            |  |                                                             | (165,544  | ) |                  |   | 5,696    
|                                                                                                                         |  |                                                             |           |   |                  |   |          
|Total stockholders equity                                                                                               |  |                                                             | 502,601   |   |                  |   | 781,041  
|                                                                                                                         |  |                                                             |           |   |                  |   |          
|Total liabilities and stockholders equity                                                                               |  | $                                                           | 7,519,336 |   |                  | $ | 8,807,658
|                                                                                                                         |  |                                                             |           |   |                  |   |          

See the accompanying notes to the consolidated financial statements.



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Union Security Insurance Company

Consolidated Statements of Operations (unaudited)

Three and Nine
Months Ended September 30, 2008 and 2007



|                                                                          |  |                                  |         |   |                                 |   |         |      |  |   |          |   |  |   |           |  
|------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | -------- | - |  | - | --------- | -
|                                                                          |  | Three Months Ended September 30, |         |   | Nine Months Ended September 30, |  
|                                                                          |  | 2008                             |         |   | 2007                            |   |         | 2008 |  |   | 2007     |  
|                                                                          |  | (in thousands)                   |        
|Revenues                                                                  |  |                                  |         |   |                                 |   |         |      |  |   |          |   |  |   |           |  
|Net earned premiums and other considerations                              |  | $                                | 293,251 |   |                                 | $ | 306,148 |      |  | $ | 884,101  |   |  | $ | 941,041   |  
|Net investment income                                                     |  |                                  | 57,300  |   |                                 |   | 63,073  |      |  |   | 182,408  |   |  |   | 225,136   |  
|Net realized losses on investments                                        |  |                                  | (99,514 | ) |                                 |   | (6,305  | )    |  |   | (121,232 | ) |  |   | (5,959    | )
|Amortization of deferred gains on disposal of businesses                  |  |                                  | 5,180   |   |                                 |   | 5,892   |      |  |   | 15,519   |   |  |   | 17,675    |  
|Fees and other income                                                     |  |                                  | 762     |   |                                 |   | 2,571   |      |  |   | 6,511    |   |  |   | 14,114    |  
|                                                                          |  |                                  |         |   |                                 |   |         |      |  |   |          |   |  |   |           |  
|Total revenues                                                            |  |                                  | 256,979 |   |                                 |   | 371,379 |      |  |   | 967,307  |   |  |   | 1,192,007 |  
|                                                                          |  |                                  |         |   |                                 |   |         |      |  |   |          |   |  |   |           |  
|                                                                          |  |                                  |         |  
|Benefits, losses and expenses                                             |  |                                  |         |   |                                 |   |         |      |  |   |          |   |  |   |           |  
|Policyholder benefits                                                     |  |                                  | 213,313 |   |                                 |   | 223,915 |      |  |   | 670,511  |   |  |   | 702,455   |  
|Amortization of deferred acquisition costs and value of business acquired |  |                                  | 11,708  |   |                                 |   | 11,085  |      |  |   | 35,001   |   |  |   | 32,451    |  
|Underwriting, general and administrative expenses                         |  |                                  | 87,345  |   |                                 |   | 94,616  |      |  |   | 264,767  |   |  |   | 286,565   |  
|                                                                          |  |                                  |         |   |                                 |   |         |      |  |   |          |   |  |   |           |  
|Total benefits, losses and expenses                                       |  |                                  | 312,366 |   |                                 |   | 329,616 |      |  |   | 970,279  |   |  |   | 1,021,471 |  
|                                                                          |  |                                  |         |   |                                 |   |         |      |  |   |          |   |  |   |           |  
|(Loss) income before (benefit) provision for income taxes                 |  |                                  | (55,387 | ) |                                 |   | 41,763  |      |  |   | (2,972   | ) |  |   | 170,536   |  
|(Benefit) provision for income taxes                                      |  |                                  | (18,613 | ) |                                 |   | 13,946  |      |  |   | 1,498    |   |  |   | 47,841    |  
|                                                                          |  |                                  |         |   |                                 |   |         |      |  |   |          |   |  |   |           |  
|Net (loss) income                                                         |  | $                                | (36,774 | ) |                                 | $ | 27,817  |      |  | $ | (4,470   | ) |  | $ | 122,695   |  
|                                                                          |  |                                  |         |   |                                 |   |         |      |  |   |          |   |  |   |           |  

See the accompanying notes to the consolidated financial statements.



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Union Security Insurance Company

Consolidated Statement of Changes in Stockholders Equity (unaudited)

From December 31, 2007 to September 30, 2008



|                                                             |  |                |       |                          |   |          |                  |  |   |                                            |   |  |       |          |   |  |   |          |  
|------------------------------------------------------------ |  | -------------- | ----- | ------------------------ | - | -------- | ---------------- |  | - | ------------------------------------------ | - |  | ----- | -------- | - |  | - | -------- | -
|                                                             |  | CommonStock    |       | AdditionalPaid-inCapital |   |          | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | Total |         
|                                                             |  | (in thousands) |      
|Balance, December 31, 2007                                   |  | $              | 5,000 |                          | $ | 545,635  |                  |  | $ | 224,710                                    |   |  | $     | 5,696    |   |  | $ | 781,041  |  
|Return of capital (Note 9)                                   |  |                |      |                          |   | (100,000 | )                |  |   |                                           |   |  |       |         |   |  |   | (100,000 | )
|Cumulative effect of change in accounting principle (Note 3) |  |                |      |                          |   |         |                  |  |   | (2,730                                     | ) |  |       |         |   |  |   | (2,730   | )
|Comprehensive loss:                                          |  |                |       |                          |   |          |                  |  |   |                                            |   |  |       |          |   |  |   |          |  
|Net loss                                                     |  |                |      |                          |   |         |                  |  |   | (4,470                                     | ) |  |       |         |   |  |   | (4,470   | )
|Other comprehensive loss:                                    |  |                |       |                          |   |          |                  |  |   |                                            |   |  |       |          |   |  |   |          |  
|Net change in unrealized losses on securities, net of taxes  |  |                |      |                          |   |         |                  |  |   |                                           |   |  |       | (171,240 | ) |  |   | (171,240 | )
|                                                             |  |                |       |                          |   |          |                  |  |   |                                            |   |  |       |          |   |  |   |          |  
|Total other comprehensive loss                               |  |                |       |                          |   |          |                  |  |   |                                            |   |  |       |          |   |  |   | (171,240 | )
|                                                             |  |                |       |                          |   |          |                  |  |   |                                            |   |  |       |          |   |  |   |          |  
|Total comprehensive loss                                     |  |                |       |                          |   |          |                  |  |   |                                            |   |  |       |          |   |  |   | (175,710 | )
|                                                             |  |                |       |                          |   |          |                  |  |   |                                            |   |  |       |          |   |  |   |          |  
|Balance, September 30, 2008                                  |  | $              | 5,000 |                          | $ | 445,635  |                  |  | $ | 217,510                                    |   |  | $     | (165,544 | ) |  | $ | 502,601  |  
|                                                             |  |                |       |                          |   |          |                  |  |   |                                            |   |  |       |          |   |  |   |          |  

See the accompanying notes to the consolidated financial statements.



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Union Security Insurance Company

Consolidated Statements of Cash Flows (unaudited)

Nine Months
Ended September 30, 2008 and 2007



|                                                      |  |                                 |          |   |      |   |          |  
|----------------------------------------------------- |  | ------------------------------- | -------- | - | ---- | - | -------- | -
|                                                      |  | Nine Months Ended September 30, |         
|                                                      |  | 2008                            |          |   | 2007 |  
|                                                      |  | (in thousands)                  |         
|Net cash provided by (used in) operating activities   |  | $                               | 31,028   |   |      | $ | (12,955  | )
|                                                      |  |                                 |          |   |      |   |          |  
|                                                      |  |                                
|Investing activities                                  |  |                                 |          |   |      |   |          |  
|Sales of:                                             |  |                                 |          |   |      |   |          |  
|Fixed maturity securities available for sale          |  |                                 | 411,391  |   |      |   | 281,985  |  
|Equity securities available for sale                  |  |                                 | 95,860   |   |      |   | 87,102   |  
|Maturities, prepayments, and scheduled redemption of: |  |                                 |          |   |      |   |          |  
|Fixed maturity securities available for sale          |  |                                 | 65,048   |   |      |   | 182,553  |  
|Purchase of:                                          |  |                                 |          |   |      |   |          |  
|Fixed maturity securities available for sale          |  |                                 | (291,916 | ) |      |   | (313,156 | )
|Equity securities available for sale                  |  |                                 | (74,181  | ) |      |   | (95,305  | )
|Property and equipment                                |  |                                 | 25       |   |      |   |         |  
|Change in other investments                           |  |                                 | (9,454   | ) |      |   | 14,075   |  
|Change in commercial mortgage loans on real estate    |  |                                 | (26,931  | ) |      |   | (52,379  | )
|Change in short-term investments                      |  |                                 | (113,630 | ) |      |   | 22,997   |  
|Change in collateral held under securities lending    |  |                                 | 105,179  |   |      |   | (129,384 | )
|Change in policy loans                                |  |                                 | (2,104   | ) |      |   | 122      |  
|                                                      |  |                                 |          |   |      |   |          |  
|Net cash provided by (used in) investing activities   |  |                                 | 159,287  |   |      |   | (1,390   | )
|                                                      |  |                                 |          |   |      |   |          |  
|                                                      |  |                                
|Financing activities                                  |  |                                 |          |   |      |   |          |  
|Dividends paid                                        |  |                                 |         |   |      |   | (158,000 | )
|Change in obligation under securities lending         |  |                                 | (107,510 | ) |      |   | 129,384  |  
|Return of capital                                     |  |                                 | (100,000 | ) |      |   |         |  
|                                                      |  |                                 |          |   |      |   |          |  
|Net cash used in financing activities                 |  |                                 | (207,510 | ) |      |   | (28,616  | )
|                                                      |  |                                 |          |   |      |   |          |  
|                                                      |  |                                
|Change in cash and cash equivalents                   |  |                                 | (17,195  | ) |      |   | (42,961  | )
|Cash and cash equivalents at beginning of period      |  |                                 | 32,832   |   |      |   | 75,233   |  
|                                                      |  |                                 |          |   |      |   |          |  
|Cash and cash equivalents at end of period            |  | $                               | 15,637   |   |      | $ | 32,272   |  
|                                                      |  |                                 |          |   |      |   |          |  

See the accompanying notes to the consolidated financial statements.



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Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine
Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)

1. Nature of Operations

Union Security Insurance
Company (the Company) is a provider of life and health insurance products, including group disability insurance, group dental insurance, group life insurance, small employer group health insurance and pre-funded funeral insurance
(preneed). The Company is an indirect wholly-owned subsidiary of Assurant, Inc. (the Parent). The Parents common stock is traded on the New York Stock Exchange under the symbol AIZ. The Company distributes its products
in all states except New York.

2. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim
financial information. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for a fair statement of the consolidated
financial statements have been included. The unaudited interim consolidated financial statements include the accounts of the Company and all of its wholly-owned subsidiaries. All inter-company transactions and balances are eliminated in
consolidation. Certain prior period amounts have been reclassified to conform to the 2008 presentation.

The Company recorded an after-tax
cumulative effect of change in accounting principle of $(2,730) on January 1, 2008, related to the adoption of Statement of Financial Accounting Standards (FAS) No. 157, Fair Value Measurements (FAS 157). The
amount is reflected in the statement of changes in stockholders equity as required. See Notes 3 and 4 for further information regarding the adoption of FAS 157.

Operating results for the three and nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. The accompanying unaudited
interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Companys Annual Report on Form 10-K for the year ended December 31, 2007.

3. Recent Accounting Pronouncements

Recent
Accounting Pronouncements  Adopted

On January 1, 2008, the Company adopted FAS 157 which defines fair value, addresses
how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP, and expands disclosures about fair value



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Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)

measurements. FAS 157 is applied prospectively for financial assets and liabilities measured on a recurring basis as of January 1, 2008 except for certain financial assets that were measured at fair value using a transaction price. For
these financial instruments, which the Company has, FAS 157 requires limited retrospective adoption and thus the difference between the fair values using a transaction price and the fair values using an exit price of the relevant financial
instruments will be shown as a cumulative effect adjustment to January 1, 2008 retained earnings. At adoption, the Company recognized a $4,200 decrease to other assets, and a corresponding decrease of $2,730 (after-tax) to retained earnings.
Effective September 30, 2008, the Company adopted Financial Statement of Position (FSP) FAS 157-3, Determining the Fair Value of a Financial Asset in a Market That Is Not Active (FSP FAS 157-3). FSP FAS 157-3
clarifies the application of FAS 157 regarding the pricing of securities in an inactive market. The adoption of FSP FAS 157-3 did not have an impact on the Companys financial position or results of operations. See Note 4 for further
information regarding FAS 157.

On January 1, 2008, the Company adopted FAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities(FAS 159). FAS 159 provides a choice to measure many financial instruments and certain other items at fair value on specified election dates and requires disclosures about the election of the fair
value option. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The Company has chosen not to elect the fair value option for any financial or non-financial instruments as of the adoption
date, thus the adoption of FAS 159 did not have an impact on the Companys financial position or results of operations.

Recent Accounting
Pronouncements  Not Yet Adopted

In December 2007, the Financial Accounting Standards Board (FASB) issued FAS
No. 141R, Business Combinations(FAS 141R). FAS 141R replaces FAS No. 141, Business Combinations(FAS 141).FAS 141R retains the fundamental requirements in FAS 141 that the purchase method of
accounting be used for all business combinations, that an acquirer be identified for each business combination and for goodwill to be recognized and measured as a residual. FAS 141R expands the definition of transactions and events that qualify as
business combinations to all transactions and other events in which one entity obtains control over one or more other businesses. FAS 141R broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests
transferred as a result of business combinations. FAS 141R also increases the disclosure requirements for business combinations in the financial statements. FAS 141R is effective for fiscal periods beginning after December 15, 2008. Therefore,
the Company is required to adopt FAS 141R on January 1, 2009. The Company is currently evaluating the requirements of FAS 141R and the potential impact on the Companys financial position and results of operations.

In December 2007, the FASB issued FAS No. 160, Non-controlling Interest in Consolidated Financial Statementsan Amendment of ARB No. 51(FAS 160). FAS 160 requires that a non-controlling interest in a subsidiary be separately reported within equity and the amount of consolidated net income attributable to the non-controlling interest be presented in the statement of
operations. FAS 160 also calls for consistency in reporting changes in the parents ownership interest in a subsidiary and necessitates fair value measurement of any non-controlling



7



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##### Table of Contents

Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)

equity investment retained in a deconsolidation. FAS 160 is effective for fiscal periods beginning after December 15, 2008. Therefore, the Company is required to adopt FAS 160 on January 1, 2009. The Company is currently
evaluating the requirements of FAS 160 and the potential impact on the Companys financial position and results of operations.

In
February 2008, the FASB issued FSP FAS 157-2, Effective Date of FAS 157(FSP FAS 157-2). FSP FAS 157-2 defers the effective date of FAS 157 for all non-financial assets and non-financial liabilities measured or disclosed at fair
value in the financial statements on a non-recurring basis to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years, which for the Company is January 1, 2009. The Company is currently evaluating the
requirements of FAS 157 for its non-financial assets and non-financial liabilities measured on a non-recurring basis and the potential impact on the Companys financial position and results of operations.

4. Fair Value Measurements

FAS 157 defines fair
value, establishes a framework for measuring fair value, creates a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. FAS 157 defines fair value as the
price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with FAS 157, the Company has categorized its recurring basis financial
assets and liabilities based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The FASB has deferred the effective date of FAS 157 until January 1, 2009 for non-financial assets and liabilities
that are recognized or disclosed at fair value in the financial statements on a non-recurring basis in accordance with FSP FAS 157-2.

The
fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The inputs used to measure fair value may fall
into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is
significant to the fair value measurement in its entirety. The Companys assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the
asset or liability.

The levels of the fair value hierarchy and its application to the Companys financial assets and liabilities are
described below:



| |  |  | Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Financial assets
and liabilities utilizing Level 1 inputs include certain U.S. mutual funds, money market funds, common stock and certain foreign securities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)



| |  |  | Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly, for substantially the full
term of the asset. Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active and inputs other than quoted prices that are observable in the marketplace for
the asset. The observable inputs are used in valuation models to calculate the fair value for the asset. Financial assets utilizing Level 2 inputs include corporate, municipal, foreign government and public utilities bonds, private placement bonds,
U.S. government and agency securities, mortgage and asset backed securities, preferred stocks and certain U.S. and foreign mutual funds.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3 inputs are unobservable but are significant to the fair value measurement for the asset, and include situations where there is little, if any, market
activity for the asset. These inputs reflect managements own assumptions about the assumptions a market participant would use in pricing the asset. Financial assets utilizing Level 3 inputs include certain preferred stocks, corporate bonds and
mortgage backed securities that were quoted by brokers and could not be corroborated by Level 2 inputs and derivatives.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The following table presents the Companys fair value hierarchy for those recurring basis assets and liabilities as of
September 30, 2008:



|                                         |  |                    |           |         |   |           |         |  |         |           |  |   |       
|---------------------------------------- |  | ------------------ | --------- | ------- | - | --------- | ------- |  | ------- | --------- |  | - | ------
|                                         |  | September 30, 2008
|                                         |  | Total              |           | Level 1 |   |           | Level 2 |  | Level 3
|Financial Assets                         |  |                    |           |         |   |           |         |  |         |           |  |   |       
|                                         |  |                    |           |        
|Fixed maturity securities                |  | $                  | 2,182,406 |         | $ |          |         |  | $       | 2,148,621 |  | $ | 33,785
|Equity securities                        |  |                    | 169,893   |         |   |          |         |  |         | 161,391   |  |   | 8,502 
|Short-term investments                   |  |                    | 157,722   |         |   | 157,276   |         |  |         | 446       |  |   |      
|Collateral held under securities lending |  |                    | 86,875    |         |   | 8,197     |         |  |         | 78,678    |  |   |      
|Cash equivalents                         |  |                    | 9,049     |         |   | 9,049     |         |  |         |          |  |   |      
|Other assets                             |  |                    | 2,243     |         |   |          |         |  |         |          |  |   | 2,243 
|Assets held in separate accounts         |  |                    | 2,010,614 |         |   | 1,938,986 | (a)     |  |         | 71,628    |  |   |      
|                                         |  |                    |           |         |   |           |         |  |         |           |  |   |       
|Total financial assets                   |  | $                  | 4,618,802 |         | $ | 2,113,508 |         |  | $       | 2,460,764 |  | $ | 44,530
|                                         |  |                    |           |         |   |           |         |  |         |           |  |   |       



|a | Mainly includes mutual fund investments
|- | ---------------------------------------

The following table summarizes the change in balance sheet carrying value associated with Level 3 financial assets carried at fair value during the three months ended September 30, 2008:



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##### Table of Contents

Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)



|                                                            |  |                    |        |   |                         |   |        |                  |  |   |             |   |  |   |        |  
|----------------------------------------------------------- |  | ------------------ | ------ | - | ----------------------- | - | ------ | ---------------- |  | - | ----------- | - |  | - | ------ | -
|                                                            |  | TotalLevel 3Assets |        |   | FixedMaturitySecurities |   |        | EquitySecurities |  |   | OtherAssets |  
|Balance, beginning of quarter                               |  | $                  | 51,202 |   |                         | $ | 39,443 |                  |  | $ | 8,039       |   |  | $ | 3,720  |  
|Total net losses (realized/unrealized) included in earnings |  |                    | (4,336 | ) |                         |   | (2,859 | )                |  |   |            |   |  |   | (1,477 | )
|Net unrealized losses included in stockholders equity      |  |                    | (2,248 | ) |                         |   | (1,733 | )                |  |   | (515        | ) |  |   |       |  
|Purchases, issuances, (sales) and (settlements)             |  |                    | (1,180 | ) |                         |   | (1,180 | )                |  |   |            |   |  |   |       |  
|Net transfers in                                            |  |                    | 1,092  |   |                         |   | 114    |                  |  |   | 978         |   |  |   |       |  
|                                                            |  |                    |        |   |                         |   |        |                  |  |   |             |   |  |   |        |  
|Balance, end of period                                      |  | $                  | 44,530 |   |                         | $ | 33,785 |                  |  | $ | 8,502       |   |  | $ | 2,243  |  
|                                                            |  |                    |        |   |                         |   |        |                  |  |   |             |   |  |   |        |  

The following table summarizes the change in balance sheet carrying value associated with Level 3
financial assets carried at fair value during the nine months ended September 30, 2008:



|                                                            |  |                    |         |   |                         |   |         |                  |  |   |             |   |  |   |       |  
|----------------------------------------------------------- |  | ------------------ | ------- | - | ----------------------- | - | ------- | ---------------- |  | - | ----------- | - |  | - | ----- | -
|                                                            |  | TotalLevel 3Assets |         |   | FixedMaturitySecurities |   |         | EquitySecurities |  |   | OtherAssets |  
|Balance, beginning of year                                  |  | $                  | 67,436  |   |                         | $ | 57,416  |                  |  | $ | 7,585       |   |  | $ | 2,435 |  
|Total net losses (realized/unrealized) included in earnings |  |                    | (2,974  | ) |                         |   | (2,782  | )                |  |   |            |   |  |   | (192  | )
|Net unrealized losses included in stockholders equity      |  |                    | (6,438  | ) |                         |   | (5,532  | )                |  |   | (906        | ) |  |   |      |  
|Purchases, issuances, (sales) and (settlements)             |  |                    | 1,727 - |   |                         |   | 1,242   |                  |  |   | 485         |   |  |   |      |  
|Net transfers (out of) in                                   |  |                    | (15,221 | ) |                         |   | (16,559 | )                |  |   | 1,338       |   |  |   |      |  
|                                                            |  |                    |         |   |                         |   |         |                  |  |   |             |   |  |   |       |  
|Balance, end of period                                      |  | $                  | 44,530  |   |                         | $ | 33,785  |                  |  | $ | 8,502       |   |  | $ | 2,243 |  
|                                                            |  |                    |         |   |                         |   |         |                  |  |   |             |   |  |   |       |  

FAS 157 describes three different valuation techniques to be used in determining fair value for
financial assets and liabilities: the market, income or cost approaches. The three valuation techniques described within FAS 157 are consistent with generally accepted valuation methodologies. The market approach valuation techniques use prices and
other relevant information from market transactions involving identical or comparable assets or liabilities. When possible, quoted prices (unadjusted) in active markets are used as of the period-end date. Otherwise, valuation techniques consistent
with the market approach including matrix pricing and comparables are used. Matrix pricing is a mathematical technique employed to value certain securities without relying exclusively on quoted prices for those securities but comparing those
securities to benchmark or comparable securities. Comparables use market multiples, which might lie in ranges with a different multiple for each comparable.

Income approach valuation techniques convert future amounts, such as cash flows or earnings, to a single present amount, or a discounted amount. These techniques rely on current market expectations of future amounts
as of the period-end date. Examples of income approach valuation techniques include present value techniques, option-pricing models, binomial or lattice models that incorporate present value techniques, and the multi-period excess earnings method.

Cost approach valuation techniques are based upon the amount that would be required to replace the service capacity of an asset at the
period-end date, or the current replacement cost. That is, from the perspective of a market participant (seller), the price that would be received for the asset is determined based on the cost to a market participant (buyer) to acquire or construct
a substitute asset of comparable utility, adjusted for obsolescence.



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##### Table of Contents

Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)

While all three approaches are not applicable to all financial assets or liabilities, where appropriate, one or more valuation techniques may be used. For all the financial assets and liabilities included in the above
hierarchy, excluding derivatives and private placement bonds, the market valuation technique is generally used. For private placement bonds and derivatives, the income valuation technique is generally used. For the period ended September 30,
2008, the application of valuation technique applied to similar assets and liabilities has been consistent.

Level 1 and Level 2 securities
are valued using various observable market inputs obtained from a pricing service. The pricing service prepares estimates of fair value measurements for our Level 2 securities using proprietary valuation models based on techniques such as matrix
pricing which include observable market inputs. FAS 157 defines observable market inputs as the assumptions market participants would use in pricing the asset or liability developed on market data obtained from sources independent of the Company.
The extent of the use of each observable market input for a security depends on the type of security and the market conditions at the balance sheet date. Depending on the security, the priority of the use of observable market inputs may change as
some observable market inputs may not be relevant or additional inputs may be necessary. The following observable market inputs, listed in the approximate order of priority, are utilized in the pricing evaluation of Level 2 securities: benchmark
yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. The pricing service also evaluates each security based on relevant market information including: relevant credit
information, perceived market movements and sector news. Valuation models can change period to period, depending on the appropriate observable inputs that are available at the balance sheet date to price a security. When market observable inputs are
unavailable, the remaining unpriced securities are submitted to independent brokers who provide non-binding broker quotes or are priced by other qualified sources and are categorized as Level 3 securities.

Management uses the following criteria in order to determine whether the market for a financial asset is inactive:



| |  | The volume and level of trading activity in the asset have declined significantly from historical levels
|- |  | --------------------------------------------------------------------------------------------------------



| |  | The available prices vary significantly over time or among market participants,
|- |  | -------------------------------------------------------------------------------



| |  | The prices are stale (i.e., not current), and
|- |  | ---------------------------------------------



| |  | The magnitude of bid-ask spread.
|- |  | --------------------------------

Illiquidity did not have a material impact in the fair value determination of the Companys financial assets.



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##### Table of Contents

Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)

The Company generally obtains one price for each financial asset. The Company performs a monthly analysis to assess if the evaluated prices represent a reasonable estimate of their fair value. This process involves
quantitative and qualitative analysis and is overseen by investment and accounting professionals. Examples of procedures performed include, but are not limited to, initial and on-going review of pricing service methodologies, review of the prices
received from the pricing service, review of pricing statistics and trends, and comparison of prices for certain securities with two different appropriate price sources for reasonableness. As a result of this analysis, if the Company determines
there is a more appropriate fair value based upon available market data, which happens infrequently, the price of a security is adjusted accordingly. The pricing service provides information to indicate which securities were priced using market
observable inputs so that the Company can properly categorize our financial assets in the fair value hierarchy.

5. Investments

The following tables show the cost or amortized cost, gross unrealized gains and losses and fair value of our fixed maturity and equity securities as of
the dates indicated:



|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|---------------------------------------------------------------- |  | -------------------- | --------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | ---------
|                                                                 |  | September 30, 2008  
|                                                                 |  | Cost orAmortizedCost |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Fixed maturity securities:                                       |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|United States Government and government agencies and authorities |  | $                    | 3,388     |                      | $ | 107                   |  | $ | (10        | ) |  | $ | 3,485    
|States, municipalities and political subdivisions                |  |                      | 53,544    |                      |   | 941                   |  |   | (2,520     | ) |  |   | 51,965   
|Foreign governments                                              |  |                      | 44,630    |                      |   | 1,183                 |  |   | (1,362     | ) |  |   | 44,451   
|Public utilities                                                 |  |                      | 420,617   |                      |   | 1,671                 |  |   | (38,891    | ) |  |   | 383,397  
|Mortgage backed securities                                       |  |                      | 148,557   |                      |   | 1,057                 |  |   | (2,476     | ) |  |   | 147,138  
|All other corporate bonds                                        |  |                      | 1,717,295 |                      |   | 7,737                 |  |   | (173,062   | ) |  |   | 1,551,970
|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|Total fixed maturities                                           |  | $                    | 2,388,031 |                      | $ | 12,696                |  | $ | (218,321   | ) |  | $ | 2,182,406
|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|Equity securities:                                               |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|Non-sinking fund preferred stocks                                |  |                      | 215,517   |                      |   | 432                   |  |   | (46,056    | ) |  |   | 169,893  
|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|Total equity securities                                          |  | $                    | 215,517   |                      | $ | 432                   |  | $ | (46,056    | ) |  | $ | 169,893  
|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          



12



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##### Table of Contents

Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)



|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|---------------------------------------------------------------- |  | -------------------- | --------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | ---------
|                                                                 |  | December 31, 2007   
|                                                                 |  | Cost orAmortizedCost |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Fixed maturity securities:                                       |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|United States Government and government agencies and authorities |  | $                    | 13,039    |                      | $ | 2,342                 |  | $ | (1         | ) |  | $ | 15,380   
|States, municipalities and political subdivisions                |  |                      | 46,799    |                      |   | 1,271                 |  |   | (45        | ) |  |   | 48,025   
|Foreign governments                                              |  |                      | 82,810    |                      |   | 8,562                 |  |   | (243       | ) |  |   | 91,129   
|Public utilities                                                 |  |                      | 417,408   |                      |   | 12,700                |  |   | (4,554     | ) |  |   | 425,554  
|Mortgage backed securities                                       |  |                      | 174,815   |                      |   | 1,576                 |  |   | (1,071     | ) |  |   | 175,320  
|All other corporate bonds                                        |  |                      | 1,876,205 |                      |   | 62,729                |  |   | (39,373    | ) |  |   | 1,899,561
|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|Total fixed maturities                                           |  | $                    | 2,611,076 |                      | $ | 89,180                |  | $ | (45,287    | ) |  | $ | 2,654,969
|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|Equity securities:                                               |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|Non-sinking fund preferred stocks                                |  |                      | 303,785   |                      |   | 1,184                 |  |   | (36,297    | ) |  |   | 268,672  
|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          
|Total equity securities                                          |  | $                    | 303,785   |                      | $ | 1,184                 |  | $ | (36,297    | ) |  | $ | 268,672  
|                                                                 |  |                      |           |                      |   |                       |  |   |            |   |  |   |          

The net realized losses including other-than-temporary impairments recorded in the statement of
operations are summarized as follows:



|                                                                   |  |                                 |         |   |                                |   |        |      |  |   |          |   |  |   |        |  
|------------------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------ | - | ------ | ---- |  | - | -------- | - |  | - | ------ | -
|                                                                   |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                                   |  | 2008                            |         |   | 2007                           |   |        | 2008 |  |   | 2007     |  
|Net realized (losses) gains related to sales:                      |  |                                 |         |   |                                |   |        |      |  |   |          |   |  |   |        |  
|Fixed maturity securities                                          |  | $                               | (5,755  | ) |                                | $ | (2,315 | )    |  | $ | (3,543   | ) |  | $ | (1,578 | )
|Equity securities                                                  |  |                                 | (13,840 | ) |                                |   | (669   | )    |  |   | (16,502  | ) |  |   | (1,220 | )
|Other investments                                                  |  |                                 |        |   |                                |   | (7     | )    |  |   |         |   |  |   | 153    |  
|Collateral held under securities lending                           |  |                                 | (2,331  | ) |                                |   |       |      |  |   | (2,331   | ) |  |   |       |  
|                                                                   |  |                                 |         |   |                                |   |        |      |  |   |          |   |  |   |        |  
|Total related to sales                                             |  |                                 | (21,926 | ) |                                |   | (2,991 | )    |  |   | (22,376  | ) |  |   | (2,645 | )
|                                                                   |  |                                 |         |   |                                |   |        |      |  |   |          |   |  |   |        |  
|Net realized (losses) related to other-than-temporary impairments: |  |                                 |         |   |                                |   |        |      |  |   |          |   |  |   |        |  
|Fixed maturity securities                                          |  |                                 | (34,129 | ) |                                |   | (2,335 | )    |  |   | (48,889  | ) |  |   | (2,335 | )
|Equity securities                                                  |  |                                 | (43,459 | ) |                                |   | (979   | )    |  |   | (49,967  | ) |  |   | (979   | )
|                                                                   |  |                                 |         |   |                                |   |        |      |  |   |          |   |  |   |        |  
|Total other-than-temporary impairments                             |  |                                 | (77,588 | ) |                                |   | (3,314 | )    |  |   | (98,856  | ) |  |   | (3,314 | )
|                                                                   |  |                                 |         |   |                                |   |        |      |  |   |          |   |  |   |        |  
|Total                                                              |  | $                               | (99,514 | ) |                                | $ | (6,305 | )    |  | $ | (121,232 | ) |  | $ | (5,959 | )
|                                                                   |  |                                 |         |   |                                |   |        |      |  |   |          |   |  |   |        |  

The investment category of the Companys gross unrealized losses on fixed maturity securities
and equity securities at September 30, 2008 and the length of time the securities have been in an unrealized loss position were as follows:



13



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##### Table of Contents

Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)



|                                                                 |  |                     |           |                  |                   |          |           |       |                  |         |  |           |         |                  |  |   |           |  |   |          |  
|---------------------------------------------------------------- |  | ------------------- | --------- | ---------------- | ----------------- | -------- | --------- | ----- | ---------------- | ------- |  | --------- | ------- | ---------------- |  | - | --------- |  | - | -------- | -
|                                                                 |  | September 30, 2008  |          
|                                                                 |  | Less than 12 months |           |                  | 12 Months or More |          |           | Total |                 
|                                                                 |  | FairValue           |           | UnrealizedLosses |                   |          | FairValue |       | UnrealizedLosses |         |  | FairValue |         | UnrealizedLosses | 
|Fixed maturity securities:                                       |  |                     |           |                  |                   |          |           |       |                  |         |  |           |         |                  |  |   |           |  |   |          |  
|United States Government and government agencies and authorities |  | $                   | 1,475     |                  | $                 | (10      | )         |       | $                |        |  | $         |        |                  |  | $ | 1,475     |  | $ | (10      | )
|States, municipalities and political subdivisions                |  |                     | 18,490    |                  |                   | (2,024   | )         |       |                  | 4,695   |  |           | (496    | )                |  |   | 23,185    |  |   | (2,520   | )
|Foreign governments                                              |  |                     | 12,236    |                  |                   | (1,361   | )         |       |                  | 250     |  |           | (1      | )                |  |   | 12,486    |  |   | (1,362   | )
|Public utilities                                                 |  |                     | 268,198   |                  |                   | (28,520  | )         |       |                  | 55,936  |  |           | (10,371 | )                |  |   | 324,134   |  |   | (38,891  | )
|Mortgage backed securities                                       |  |                     | 63,513    |                  |                   | (1,636   | )         |       |                  | 14,436  |  |           | (840    | )                |  |   | 77,949    |  |   | (2,476   | )
|All other corporate bonds                                        |  |                     | 1,033,414 |                  |                   | (107,967 | )         |       |                  | 289,991 |  |           | (65,095 | )                |  |   | 1,323,405 |  |   | (173,062 | )
|                                                                 |  |                     |           |                  |                   |         
|                                                                 |  |                     |           |                  |                   |          |           |       |                  |         |  |           |         |                  |  |   |           |  |   |          |  
|Total fixed maturities                                           |  | $                   | 1,397,326 |                  | $                 | (141,518 | )         |       | $                | 365,308 |  | $         | (76,803 | )                |  | $ | 1,762,634 |  | $ | (218,321 | )
|                                                                 |  |                     |           |                  |                   |          |           |       |                  |         |  |           |         |                  |  |   |           |  |   |          |  
|Equity securities:                                               |  |                     |           |                  |                   |          |           |       |                  |         |  |           |         |                  |  |   |           |  |   |          |  
|Non-sinking fund preferred stocks                                |  |                     | 83,891    |                  |                   | (20,988  | )         |       |                  | 58,420  |  |           | (25,068 | )                |  |   | 142,311   |  |   | (46,056  | )
|                                                                 |  |                     |           |                  |                   |          |           |       |                  |         |  |           |         |                  |  |   |           |  |   |          |  
|Total equity securities                                          |  | $                   | 83,891    |                  | $                 | (20,988  | )         |       | $                | 58,420  |  | $         | (25,068 | )                |  | $ | 142,311   |  | $ | (46,056  | )
|                                                                 |  |                     |           |                  |                   |          |           |       |                  |         |  |           |         |                  |  |   |           |  |   |          |  

The total gross unrealized losses represent less than 14% of the aggregate fair value of the
related securities. Approximately 61% of these gross unrealized losses have been in a continuous loss position for less than twelve months. The gross total unrealized losses are comprised of 796 individual securities with 57% of the individual
securities having an unrealized loss of less than $200. The total gross unrealized losses on securities that were in a continuous unrealized loss position for greater than six months but less than 12 months were approximately $39,233.

We did not consider these securities in an unrealized loss position to be other-than-temporarily impaired at September 30, 2008, based on factors
noted above and also because management has the ability and intent to hold these assets until recovery in value occurs and we believe the securities will generally continue to perform in accordance with their contractual terms.

Securities Lending

The Company engages in
transactions in which fixed maturity securities, especially bonds issued by the United States government, government agencies and authorities, and U.S. corporations, are loaned to selected broker/dealers. Collateral, greater than or equal to 102% of
the fair value of the securities lent plus accrued interest, is received in the form of cash and cash equivalents held by a custodian bank for the benefit of the Company. The Company monitors the fair value of securities loaned and the collateral
received, with additional collateral obtained as necessary. The Company is subject to the risk of loss to the extent there is a loss in the investment of cash collateral.

Our liability to the borrower for collateral received was $132,539 and the fair value of the collateral reinvested was $127,833 at September 30, 2008. The difference between these amounts is recorded as an
unrealized loss and is included as part of accumulated other comprehensive income.



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Union Security Insurance Company

Notes to the Consolidated Financial Statements (unaudited)

Nine Months Ended September 30, 2008 and 2007

(In thousands, except per share and share amounts)

6. Retirement and Other Employee Benefits

The Parent sponsors a defined benefit pension plan and certain other post
retirement benefits covering employees and certain agents who meet eligibility requirements as to age and length of service. Pension costs allocated to the Company were $1,350 and $1,725 for the three months ended September 30, 2008 and 2007,
respectively, and $3,978 and $5,176 for the nine months ended September 30, 2008 and 2007, respectively.

The Company participates in
a contributory profit sharing plan, sponsored by the Parent, covering employees and certain agents who meet eligibility requirements as to age and length of service. The amounts expensed by the Company were $1,404 and $1,317 for the three months
ended September 30, 2008 and 2007, respectively, and $4,741 and $4,513 for the nine months ended September 30, 2008 and 2007, respectively.

7. Commitments and Contingencies

The Company is regularly involved in litigation in the ordinary course of business, both
as a defendant and as a plaintiff. The Company may from time to time be subject to a variety of legal and regulatory actions relating to the Companys current and past business operations. While the Company cannot predict the outcome of any
pending or future litigation, examination or investigation and although no assurances can be given, the Company does not believe that any pending matter will have a material adverse effect, individually or in the aggregate, on the Companys
consolidated financial condition, results of operations or cash flows.

8. Reinsurance Agreement

On April 1, 2008, the Company and an affiliate, United Family Life Insurance Company (UFLIC) amended an existing Agreement of Reinsurance
(theAgreement) between the two companies. Under the terms of the amendment, UFLIC will cede to the Company 100% of its remaining reinsured liabilities, as defined in the Agreement, on a coinsurance basis. No gain or loss was recognized
as a result of this amendment to the Agreement, and the Company paid a ceding fee of $8,159 to UFLIC.

9. Return of capital

Based on current operating lines of business, management determined the Company to be over capitalized. As a result, with the approval of the Iowa
Insurance Division, on June 27, 2008, the Company returned $100,000 of contributed capital to its parent company, Interfinancial Inc.



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##### Table of Contents

Item 2.Managements Discussion And Analysis Of Financial Condition And
Results Of Operations.

(dollar amounts in thousands)

This Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) addresses the financial condition
of Union Security Insurance Company and its subsidiaries (collectively, USIC or the Company) as of September 30, 2008, compared with December 31, 2007, and our results of operations for the three and nine months
ended September 30, 2008 and 2007. This discussion should be read in conjunction with our MD&A and annual audited financial statements as of December 31, 2007 included in our Annual Report on Form 10-K for the year ended
December 31, 2007 filed with the U.S. Securities and Exchange Commission (the SEC) and the September 30, 2008 unaudited consolidated financial statements and related notes included elsewhere in this Form 10-Q.

Some of the statements included in this MD&A and elsewhere in this report, particularly those anticipating future financial performance, business
prospects, growth and operating strategies and similar matters, are forward-looking statements that involve a number of risks and uncertainties. You can identify these statements by the fact that they may use words such as will,
may, anticipates, expects, estimates, projects, intends, plans, believes, targets, forecasts, potential,
approximately, or the negative version of those words and other words and terms with a similar meaning. Any forward looking statements contained in this report are based upon our historical performance and on current plans, estimates and
expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results might
differ materially from those projected in the forward-looking statements. The Company undertakes no obligation to update or review any forward-looking statement, whether as a result of new information, future events or other developments.

In addition to the factors described in the section below entitled Critical Factors Affecting Results, the following risk
factors could cause our actual results to differ materially from those currently estimated by management: (i) failure to maintain significant client relationships, distribution sources and contractual arrangements; (ii) failure to attract
and retain sales representatives; (iii) general global economic, financial market and political conditions (including difficult conditions in financial markets and the global economic slowdown, fluctuations in interest rates, mortgage rates,
monetary policies and inflationary pressure); (iv) inadequacy of reserves established for future claims losses; (v) failure to predict or manage benefits, claims and other costs; (vi) diminished value of invested assets in our
investment portfolio (due to, among other things, recent volatility in financial markets and the global economic slowdown, credit and liquidity risk, and inability to target an appropriate overall risk level); (vii) inability of reinsurers to
meet their obligations; (viii) insolvency of third parties to whom we have sold or may sell businesses through reinsurance or modified co-insurance; (ix) credit risk of some of our agents; (x) a decline in our credit or financial
strength ratings (including the currently heightened risk of ratings downgrades in the insurance industry); (xi) failure to protect client information and privacy; (xii) negative publicity and impact on our business due to unfavorable
outcomes in litigation and regulatory investigations (including the potential impact on our reputation and business of a negative outcome in the ongoing SEC investigation of the Parent); (xiii) significant competitive pressures in our
businesses and cyclicality of the insurance industry; (xiv) current or



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new laws and regulations that could increase our costs or limit our growth. These risk factors should not be construed as
exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. For a more detailed discussion of the risk factors that could affect our actual results, please refer to Item 1A -Risk
Factors in the 2007 Form 10-K.

Critical Factors Affecting Results

Our results depend on the adequacy of our product pricing, underwriting and the accuracy of our methodology for the establishment of reserves for future
policyholder benefits and claims, returns on and values of invested assets and our ability to manage our expenses. Therefore, factors affecting these items, including difficult conditions in financial markets and the global economic slowdown, may
have a material adverse effect on our results of operations or financial condition.

For information on how the current state of global
capital and credit markets may affect our results, refer to Item 1A-Risk Factors.

Critical Accounting Policies and Estimates

Our 2007 Form 10-K described the accounting policies and estimates that are critical to the understanding of our results of operations,
financial condition and liquidity. The accounting policies and estimates described in the 2007 Annual Report on Form 10-K were consistently applied to the unaudited interim consolidated financial statements for the nine months ended
September 30, 2008.

The tables below present information regarding our consolidated results of operations:



|                                                          |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |           |  
|--------------------------------------------------------- |  | --------------------------------------- | ------- | - | -------------------------------------- | - | ------- | ---- |  | - | -------- | - |  | - | --------- | -
|                                                          |  | For the Three Months EndedSeptember 30, |         |   | For the Nine Months EndedSeptember 30, |  
|                                                          |  | 2008                                    |         |   | 2007                                   |   |         | 2008 |  |   | 2007     |  
|                                                          |  | (in thousands)                          |        
|Revenues:                                                 |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |           |  
|Net earned premiums and other considerations (2)          |  | $                                       | 293,251 |   |                                        | $ | 306,148 |      |  | $ | 884,101  |   |  | $ | 941,041   |  
|Net investment income                                     |  |                                         | 57,300  |   |                                        |   | 63,073  |      |  |   | 182,408  |   |  |   | 225,136   |  
|Net realized losses on investments                        |  |                                         | (99,514 | ) |                                        |   | (6,305  | )    |  |   | (121,232 | ) |  |   | (5,959    | )
|Amortization of deferred gains on disposal of businesses  |  |                                         | 5,180   |   |                                        |   | 5,892   |      |  |   | 15,519   |   |  |   | 17,675    |  
|Fees and other income                                     |  |                                         | 762     |   |                                        |   | 2,571   |      |  |   | 6,511    |   |  |   | 14,114    |  
|                                                          |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |           |  
|Total revenues                                            |  |                                         | 256,979 |   |                                        |   | 371,379 |      |  |   | 967,307  |   |  |   | 1,192,007 |  
|                                                          |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |           |  
|Benefits, losses and expenses:                            |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |           |  
|Policyholder benefits (2)                                 |  |                                         | 213,313 |   |                                        |   | 223,915 |      |  |   | 670,511  |   |  |   | 702,455   |  
|Selling, underwriting and general expenses (1)            |  |                                         | 99,053  |   |                                        |   | 105,701 |      |  |   | 299,768  |   |  |   | 319,016   |  
|                                                          |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |           |  
|Total benefits, losses and expenses                       |  |                                         | 312,366 |   |                                        |   | 329,616 |      |  |   | 970,279  |   |  |   | 1,021,471 |  
|                                                          |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |           |  
|(Loss) income before (benefit) provision for income taxes |  |                                         | (55,387 | ) |                                        |   | 41,763  |      |  |   | (2,972   | ) |  |   | 170,536   |  
|(Benefit) provision for income taxes                      |  |                                         | (18,613 | ) |                                        |   | 13,946  |      |  |   | 1,498    |   |  |   | 47,841    |  
|                                                          |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |           |  
|Net (loss) income                                         |  | $                                       | (36,774 | ) |                                        | $ | 27,817  |      |  | $ | (4,470   | ) |  | $ | 122,695   |  
|                                                          |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |           |  



|(1) | Includes amortization of deferred acquisition costs and value of business acquired and underwriting, general and administrative expenses.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes single premium on closed blocks of group disability business. For closed blocks of business we receive a single, upfront premium and in turn we record a virtually equal
amount of claim reserves. We then manage the claims using our claim management practices.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following discussion provides a high level analysis of the consolidated results for three and nine
months ended September 30, 2008 (Third Quarter 2008 and Nine Months 2008, respectively) and three and nine months ended September 30, 2007 (Third Quarter 2007 and Nine Months 2007,
respectively). Please see the discussion that follows for a more detailed analysis of the fluctuations.

For The Three Months Ended
September 30, 2008 Compared to The Three Months Ended September 30, 2007.

Net Income

Net (loss) income decreased $64,591, or 232%, to $(36,774) for Third Quarter 2008 from $27,817 for Third Quarter 2007. The decrease in net (loss) income
was primarily due to an increase in net realized losses on investments of $60,586 (after tax) driven by the write-down of other-than-temporary impairments of $50,432 (after tax) in Third Quarter 2008 compared to $2,154 (after tax) in Third Quarter
2007. Net investment income decreased $3,752 (after tax) due to lower average invested assets and lower yields. Also contributing to the decrease was less favorable group dental experience. These decreases were partially offset by favorable
experience in our group disability and group life business.

Total Revenues

Total revenues decreased $114,400, or 31%, to $256,979 for Third Quarter 2008 from $371,379 for Third Quarter 2007. The decrease was primarily due to an
increase in net realized losses on investments of $93,209 driven by the write-down of other-than-temporary impairments of $77,588 in Third Quarter 2008 compared to $3,314 in Third Quarter 2007. Also contributing to the decrease was a reduction in
net earned premiums, mainly due to a decline in our small employer group health business, a reduction in disability net earned premiums due to the transfer of a closed block of business in the prior year and a reduction in net investment income due
to lower average invested assets and lower yields. These decreases were partially offset by an increase in group dental net earned premiums.

Total
Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $17,250, or 5%, to $312,366 for Third Quarter 2008 from
$329,616 for Third Quarter 2007. The decrease was primarily due to a decline in our small employer group health business, a reduction in disability policyholder benefits due to favorable experience and the transfer of a closed block of business in
the prior year, favorable experience in group life business and a decline in our prefunded funeral business due to run-off of closed blocks of business. These decreases were partially offset by less favorable experience in our group dental business.

Income Taxes

Income taxes decreased
$32,559, or 233%, to $(18,613) for Third Quarter 2008 from $13,946 for Third Quarter 2007. The change in income taxes was proportionate to the change in pretax income.



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For The Nine Months Ended September 30, 2008 Compared to The Nine Months Ended September 30, 2007.

Net Income

Net (loss) income
decreased $127,165, or 104%, to $(4,470) for Nine Months 2008 from $122,695 for Nine Months 2007. The decrease in net (loss) income was primarily due to an increase in net realized losses on investments of $74,927 (after tax) driven by the
write-down of other-than-temporary impairments of $64,256 (after tax) in Nine Months 2008 compared to $2,154 (after tax) in Nine Months 2007. Also contributing to the decrease was a reduction in net investment income of $27,773 (after tax) of which
$22,500 was due to lower distributions from real estate joint venture partnerships, a $10,696 favorable tax settlement in 2007 and less favorable group dental experience. The decrease in real estate joint venture partnership income is due to greater
sales of underlying properties in Nine Months 2007 compared with Nine Months 2008 given the more favorable real estate market conditions in 2007.

Total
Revenues

Total revenues decreased $224,700, or 19%, to $967,307 for Nine Months 2008 from $1,192,007 for Nine Months 2007. The
decrease was primarily due to an increase in net realized losses on investments of $115,273 driven by the write-down of other-than-temporary impairments of $98,856 in Nine Months 2008 compared to $3,314 in Nine Months 2007. Net investment income
decreased $42,728, of which $34,700 was due to lower distributions from real estate joint venture partnerships. Net earned premiums decreased $56,940, primarily due to a decline in our small employer group health business, a decrease in disability
net earned premium due to the transfer of a closed block of business in the prior year and a decrease in group life net earned premium. Also contributing to the decrease was a reduction in fees and other income due to contract settlement fee income
recorded in the prior year related to the sale of marketing rights for our Independent  U.S. channel in our prefunded funeral business. These decreases were partially offset by an increase in net earned premiums in our group dental
business.

Total Benefits, Losses and Expenses

Total benefits, losses and expenses decreased $51,192, or 5%, to $970,279 for Nine Months 2008 from $1,021,471 for Nine Months 2007. This decrease was primarily due to a decline in our small employer group health
business, a reduction in disability policyholder benefits due to the transfer of a closed block of business in the prior year, favorable experience in our group life business and a decline in our prefunded funeral business due to run-off of closed
blocks of business. These decreases were partially offset by less favorable group dental experience.

Income Taxes

Income taxes decreased $46,343, or 97%, to $1,498 for Nine Months 2008 from $47,841 for Nine Months 2007. The change in income taxes was not proportionate
to the change in pretax income, primarily due to a $10,696 favorable tax settlement in 2007 and an increase in 2008 income taxes due to the establishment of a tax valuation allowance of $1,900.



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Item 3.Quantitative And Qualitative Disclosures About Market
Risk.

Not required under the reduced disclosure format.

Item 4T.Controls And Procedures.

Evaluation of Disclosure
Controls and Procedures

Under the supervision and with the participation of our Interim Chief Executive Officer and Chief Financial
Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2008. Based on this evaluation, our Interim Chief Executive Officer and Chief Financial Officer have concluded that our disclosure
controls and procedures were effective as of that date in providing a reasonable level of assurance that information we are required to disclose in reports we file or furnish under the Exchange Act is recorded, processed, summarized and reported
within the time periods in SEC rules and forms. Further, our disclosure controls and procedures were effective in providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and
communicated to our management, including our Interim Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Controls over Financial Reporting

During the quarter ending September 30, 2008, we
have made no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II

OTHER INFORMATION

Item 1A.Risk
Factors.

Certain factors may have a material adverse effect on our business, financial condition and results of
operations and you should carefully consider them. It is not possible to predict or identify all such factors. For discussion of our potential risks or uncertainties, refer to Item 1A - Risk Factors included in our 2007 Annual
Report on Form 10-K. Except as set forth below, there have been no material changes to the risk factors disclosed in our 2007 Annual Report on Form 10-K.

A.M. Best, Moodys, and S&P rate the financial strength of the Company, and a decline in these ratings could affect our standing in the insurance industry and cause our sales and earnings to decrease.

Ratings are an increasingly important factor in establishing the competitive position of insurance companies. A.M. Best, Moodys and S&P ratings
reflect their opinions of our financial strength, operating performance, strategic position and ability to meet our obligations to policyholders. These ratings are subject to periodic review by A.M. Best, Moodys, and S&P, and we cannot
assure you that we will be able to retain these ratings. As a result of their concerns related to the Parents SEC investigation, A.M. Best, Moodys and S&P have placed a negative outlook on our ratings. Given recent economic
developments that have negatively affected the entire insurance industry, we believe that we are currently more susceptible to ratings downgrades.

If our ratings are lowered from their current levels by A.M. Best, Moodys, or S&P, our competitive position in the respective insurance industry segments could be negatively impacted and it could be more difficult for us to market
our products. Rating agencies may take action to lower our ratings in the future due to, among other things, perceived concerns about our liquidity or solvency, the competitive environment in the insurance industry, which may adversely affect our
revenues, the inherent uncertainty in determining reserves for future claims, which may cause us to increase our reserves for claims, the outcome of pending litigation and regulatory investigations, which may adversely affect our financial position
and reputation and possible changes in the methodology or criteria applied by the rating agencies. In addition, rating agencies have come under recent scrutiny over their ratings on various mortgage-backed products. As a result, they may have become
more conservative in their methodology and criteria, which could adversely affect our ratings. Finally, rating agencies or regulators could increase capital requirements for the Company or its subsidiaries which in turn, could negatively affect our
financial position as well.

As customers and their advisors place importance on our financial strength ratings, we may lose customers and
compete less successfully if we are downgraded. In addition, ratings impact our ability to attract investment capital on favorable terms. If our financial strength ratings are reduced from their current levels by A.M. Best, Moodys, or S&P,
our cost of borrowing would likely increase, our sales and earnings could decrease and our results of operations and financial condition could be materially adversely affected. Contracts representing approximately 3% of the Companys net earned
premiums for the year ended December 31, 2007 contain provisions requiring the Company to maintain minimum A.M. Best financial strength ratings of A- or better. The Companys clients may terminate the agreements and recapture
inforce business (generally after a recapture period) if the Companys ratings fall below A-.



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General economic, financial market and political conditions may adversely affect our results of operations and
financial conditions. Particularly, recent developments in financial markets and the global economy may negatively affect our results.

General economic, financial market and political conditions may have a material adverse effect on our results of operations and financial condition. The stress experienced by global capital markets that began in the second half of 2007
continued and substantially increased during the third quarter of 2008. Recently, concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the global mortgage market, a declining global real estate market, and
the loss of consumer confidence and a reduction in consumer spending have contributed to increased volatility and diminished expectations for the economy and the markets going forward. These factors, combined with volatile energy prices, declining
business and consumer confidence and increased unemployment, have precipitated an economic slowdown and fears of a possible global recession. This may affect our operational results and the performance of our investment portfolio.

In the third quarter of 2008, the Company recognized net realized losses on investments totaling $64,684, after tax. If the current economic downturn
continues to negatively affect companies, industry sectors or countries, the Company may have additional investment losses and further increases in other-than-temporary impairments. As part of the Parents process, our investment portfolio is
regularly monitored to ensure investments that may be other-than-temporarily impaired are identified in a timely fashion, properly valued, and any impairments are charged against earnings in the proper period. Assessment factors include, but are not
limited to, the length of time and the extent to which the market value has been less than cost, the financial condition and rating of the issuer, whether any collateral is held, and the intent and ability of the Company to retain the investment for
a period of time sufficient to allow for recovery. However, the determination that a security has incurred an other-than-temporary decline in value requires the judgment of management. Inherently, there are risks and uncertainties involved in making
these judgments. Therefore, changes in facts and circumstances and critical assumptions could also result in managements decision that further impairments have occurred.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Not required under the reduced disclosure format.

Item 3.Defaults Upon Senior Securities.

Not required under the reduced disclosure format.

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

Not required under the reduced disclosure format.



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Item 5.Other Information.



| | (a) | None.
| | --- | -----



| | (b) | Because all of the Companys outstanding common stock is held indirectly by Assurant, Inc., the Company does not file a Schedule 14A and has not adopted any procedures by which
security holders may recommend nominees to the registrants board of directors.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 6.Exhibits

The following exhibits are filed with this report. Exhibits are available upon request at the investor
relations section of our website, located at www.assurant.com.



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



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on November 7, 2008.



UNION SECURITY INSURANCE COMPANYBy:

/s/    John S. RobertsName:

John S. RobertsTitle:

Interim President and Chief Executive OfficerBy:

/s/    Stacia N. AlmquistName:

Stacia N. AlmquistTitle:

Treasurer and Chief Financial Officer




24