Marketing and Distribution

The Company, through the Insurance Company, is licensed to market its products in 49 states and in the District of Columbia. The Company sells its individual annuity and life insurance products through 1,062 independent general agents (321 of which are located in the State of New York), who are independent contractors. These independent general agents market the Company's products through 24,862 licensed insurance agents or brokers, most of whom also write products similar to those sold by the Company for other companies. Management believes that the Company offers competitive commission rates and seeks to provide innovative products and quality service to its independent general agents. Compensation of agents is strictly regulated by the New York State Department of Insurance (the “NYSID”).

The independent general agency system has been the Insurance Company's primary distribution system since the Insurance Company was founded. Management believes that the Company's consistent focus on the independent general agent distribution system provides a cost advantage, since the Company incurs no fixed costs associated with recruiting, training and maintaining employee agents. Accordingly, a substantial portion of the costs associated with generating new business for the Company are not fixed costs but vary directly with the level of business produced.

Since the Company utilizes independent general agents to market its products, it is not dependent on any one agency for any substantial amount of its business. On the other hand, the independent agents are not captive to the Company, and most write products similar to those sold by the Company for other companies.

Among other things, crediting rates, commissions, the perceived quality of the issuer, product features and services generally are significant factors that management believes influence an agent's willingness and ability to sell particular annuity products. The Company generally issues annuity contracts, together with the agent's commission check, within two business days of receiving the application and premium. The Company also seeks to provide ongoing service to the agent. Towards that end, the Company provides agents with access to the Company's senior executives. In addition, agents and contract owners can access information about their contracts via a toll-free telephone number.

The Company's top ten general agents accounted for approximately 23.4% of the Company's combined individual life insurance policies and annuity contracts sold, (measured by the combined premiums and considerations), during fiscal 2003. Of the Company's combined annuity contracts and individual life insurance policies sold, no single agent accounted for more than 1.58% and no single general agency accounted for more than 3.7% during 2003. The loss of any single sales source would not have a material adverse effect on the Company, but the loss of several could cause a decline in sales unless they are replaced by the appointment of other general agents. The Company's agency department actively recruits new general agents on a continuous basis.

Underwriting Procedures

Premiums charged on insurance products are based, in part, on assumptions about the expected mortality experience. In that regard, the Company has adopted and follows detailed, uniform underwriting procedures designed to assess and quantify insurance risks before issuing life insurance policies to individuals. To implement these procedures, the Company employs an experienced professional underwriting staff. The underwriting practice of the Company is to require attending physicians' statements and medical examinations for each applicant over age 55 or for policies in excess of certain prescribed policy amounts, ranging from $25,000 and up. These requirements are graduated according to the applicant's age and the face amount of the policy.

The Company also carefully reviews medical records and each applicant's written application for insurance, which generally is prepared under the supervision of one of the Company's independent general agents. The factors considered in evaluating an application for individual life insurance coverage include the applicant's age, occupation, avocations, driving record, finances, aviation activities, smoking habits, alcohol usage and general health and medical history. These factors are discovered through the application, attending physicians' statements, consumer investigation reports from investigative agencies, direct contact, motor vehicle reports and the Medical Information Bureau, an insurance industry information service. In accordance with industry practice, material misrepresentations on a policy application can result in the cancellation by the company of the policy under the two-year incontestability clause in the general provisions of the policy.

To the extent that an applicant does not meet the Company's underwriting standards for issuance of a policy at the standard risk classifications, the Company may offer to issue a classified, sub‑standard or impaired risk policy for a risk adjusted premium amount rather than declining the application. The amount of the Company's impaired risk insurance in force in proportion to the total amount of the Company's individual life insurance in force was approximately 6.3% at December 31, 2003.

Acquired Immune Deficiency Syndrome (“AIDS”), which has received wide publicity because of its serious public health implications, presents special concerns to the life insurance industry. Mortality risks are accepted by insurers based on methods of classification designed to appropriately relate premiums charged to such risks and, in this connection, steps have been taken toward strengthening the Company's underwriting and selection process. The Company considers AIDS information in underwriting and pricing decisions in accordance with applicable laws. A prospective policyholder must submit to a blood or urine test, which includes AIDS antibody screening, if the amount of coverage applied for equals or exceeds $100,000. The Company's own mortality experience reflects no significant adverse impact as a result of any acceleration of AIDS‑related claims. The Company is continuing to monitor developments in this area but is necessarily unable to predict the long-term impact of this problem on the life insurance industry, in general, or on the Company, in particular.

Policy Claims

Claims are received and reviewed by claims examiners at the Company's home office. The initial review of claims includes verification that coverage is in force and that the claim is not subject to an exclusion under the policy. Birth and death certificates are basic requirements. Medical records and investigative reports are ordered for contestable claims.

Reinsurance

The Company follows the usual industry practice of reinsuring (“ceding”) portions of its life insurance and accident and health, including medical stop loss, risks with other companies, a practice which permits the Company to write policies in amounts larger than the risk it is willing to retain on any one life or group of lives, and also to continue writing a larger volume of new business. The Company also reinsures a portion of its life insurance business and accident and health business in order to obtain commissions on the insurance ceded and thereby reduce its net commission expense. The maximum amount of individual life insurance normally retained by the Company on any one life is $50,000 per policy and $100,000 per life. The maximum retention with respect to impaired risk policies typically is the same. The Company cedes insurance primarily on an “automatic” basis, under which risks are ceded to a reinsurer on specific blocks of business where the underlying risks meet certain predetermined criteria, and on a “facultative” basis, under which the

reinsurer's prior approval is required on each risk reinsured. The maximum retention of the group medical stop loss business varies, but typically the Company cedes eighty five percent on a quota share basis.

In 2003, the Company learned that one of its independent stop loss underwriters issued certain stop loss policies in the Company¢s name without authorization and without applicable reinsurance in place. The Company’s exposure for claims under those policies was paid during 2003 and totaled approximately $2.2 million. The Company is pursuing collection of such amounts from the underwriter, based upon breach of contract and other claims.

Reinsurance assumed consists entirely of the Company's participation in Servicemen's Group Life Insurance and a quota share agreement with Transamerica Occidental Life Insurance Company.

Use of reinsurance does not discharge a insurer from liability on the insurance ceded. An insurer is required to pay the full amount of its insurance obligations regardless of whether it is entitled or able to receive payments from its reinsurer. No reinsurer of business ceded by the Company has failed to pay any policy claims with respect to such ceded business. At December 31, 2003, of the approximately $1,344 million of the Company's individual life insurance in force, the Company had ceded to reinsurers approximately $859 million of such insurance in force. The principal reinsuring companies of individual life policies with whom the Company does business at December 31, 2003 (and their corresponding A.M. Best ratings) were Life Reassurance Corporation of America (“A+ (Superior) “) and Swiss Re Life & Health America (“A+ (Superior)”). In 2002, one of the reinsurers for the Company¢s stop loss medical insurance business, Folksham International, filed for bankruptcy protection. The Company anticipates that it will have approximately $260,000 in unpaid reinsurance claims against Folksham. As of December 31, 2003, it is not clear how much, if any of such amount, the Company will collect in the bankruptcy proceeding.

Competition

The Company operates in a highly competitive environment. There are numerous insurance companies, banks, securities brokerage firms and other financial intermediaries marketing insurance products, annuities, and other investments that compete with the Company, many of which are more highly rated and have substantially greater resources than the Company.

The Company believes that the principal competitive factors in the sale of annuity and life insurance products are product features, commission structure, perceived stability of the insurer, claims paying ratings, name recognition, crediting rates, and service. Many other insurance and other companies are capable of competing for sales in the Company's target markets.

Management believes that the Company's ability to compete is dependent upon, among other things, its ability to retain and attract independent general agents to market its products, its ability to develop competitive products that also are profitable and its ability to provide quality service. Management believes that the Company has good relationships with its agents, has an adequate variety of products approved for issuance and generally is competitive within the industry.

Investments and Investment Policy

As of December 31, 2003, approximately 85.9% of the Company¢s investment portfolio consisted of corporate public bonds. These bonds include investments in public utilities, special revenue and special assessment obligations, political subdivisions of states, territories and possessions and corporate industrial and miscellaneous bonds. As of December 31, 2003, approximately 1.2% of the Company's investment portfolio consisted of bonds acquired in private placements. While private placement bonds are not usually registered with the Securities and Exchange Commission (the “SEC” or “Commission”), management believes that these bonds are marketable to other institutional investors. Approximately 83.5% of the investments acquired by the Company in private placements have been assigned a National Association Insurance Commissioners (“NAIC”) designation corresponding to one of the two highest quality rating categories. NAIC designations corresponding to the entire Investment Portfolio can be found on page 15.

10.

Included in the corporate bond porfolio at December 31, 2003 are non-performing assets total $10.4 million, or .2% of total invested assets. There are, however, an additional $209.6 million, or 4.9% of total invested assets of principal protected notes, which are currently not producing interest income. These investments contain cash flow notes (collateralized by high yield loans and bonds) and U.S. Treasury strips in an amount sufficient to defease the principal at maturity (“Defeasance Securities”). The underlying cash flow notes are variable rate instruments, which provide for the payment of interest only to the extent the underlying collateral generates sufficient monies for that purpose. While these notes have previously made interest payments, it is probable that no further interest payments will be made prior to maturity. The Defeasance Securities insure that these principal protected notes will be paid par at maturity. The Company has the ability and intent to hold these securities to maturity, consequently, book value has not been adjusted to reflect any impairment.

As of December 31, 2003, approximately 7.5% of the Company's investment portfolio was invested in mortgage-backed related securities most of which are commercial mortgage-backed obligations (“CMBS”). Mortgage‑backed securities are generally subject to prepayment risk due to the fact that, in periods of declining interest rates, mortgages may be repaid more rapidly than scheduled as borrowers refinance higher rate mortgages to take advantage of the lower current rates. As a result, holders of mortgage‑backed securities may receive prepayments on their investments, which cannot be reinvested at an interest rate comparable to the rate on the prepaid mortgages. Notwithstanding the foregoing, the Company’s investment portfolio has not been materially impacted as a result of such prepayments because the Company has invested primarily in mezzanine level CMBS which generally have limited prepayment risk. These securities are collateralized by commercial mortgages which have provisions which limit the ability of loan prepayments and a security structure which further directs principal payments to the senior most outstanding security before they make such distributions to the mezzanine debt owned by the Company.

As of December 31, 2003, approximately 7.5% of the Company's investment portfolio consisted of interests in over sixty limited partnerships, which are engaged in a variety of investment strategies, including real estate, debt restructurings, international opportunities and merchant banking. In general, risks associated with such limited partnerships include those related to their underlying investments (i.e., equity securities, debt securities and real estate), plus a level of illiquidity, which is mitigated by the ability of the Company to take annual distributions of partnership earnings.

The limited partnerships that are involved in real estate activities generally invest in real estate assets, real estate joint ventures and real estate operating companies. These partnerships seek to achieve significant rates of return by targeting investments that provide a strategic or competitive advantage and are priced at levels that the general partner believes to be attractive.

The limited partnerships that are involved in debt restructuring activities take positions in debt and equity securities, loans originated by banks and other liabilities of financially troubled companies. Investments in companies undergoing debt restructurings, which by their nature have a high degree of financial uncertainty, may be senior, unsecured or subordinated indebtedness and carry a high degree of risk of loss upon default by the borrower. The high level of indebtedness characteristic of merchant banking and debt restructuring transactions makes such underlying investments particularly sensitive to interest rate increases, which could affect the ability of the borrower to generate sufficient cash flow to meet its fixed charges.

The limited partnerships that are involved in international investments generally purchase sovereign debt, corporate debt, and/or equity in foreign companies that are developing a greater worldwide presence. A general partner who has demonstrated expertise in this area and the particular country involved operates such limited partnerships. Such investments involve risks related to the particular country including political instability, currency fluctuations, and repatriation restrictions. 11.

The limited partnerships that are involved in merchant banking activities generally seek to achieve significant rates of return (including capital gains) through a wide variety of investment strategies, including leveraged acquisitions, bridge financing, and other private equity investments in existing businesses.

The Company has been investing in limited partnerships for over fourteen years. During this time, the Company has had an opportunity to consider and evaluate a substantial number of limited partnerships and their managers. The Company makes limited partnership investments based on a number of considerations, including the reputation, investment philosophy (particularly with respect to risk), performance history and investment strategy of the manager of the limited partnership. Managers of the limited partnerships in which the Company is invested include, among others, Blackstone Investment Management, Starwood Capital, Goldman Sachs Partners, Trust Company of the West Asset Management, Clayton Dubilier & Rice Partners, Apollo Real Estate and Fortress Investment Group.

Limited partnership investments are selected through a careful, two-stage review process. The Investment Analyst staff reviews the offering documents and performance history of each investment manager. Separately, the Investment Committee interviews the manager to determine whether the investment philosophy (particularly with respect to risk) and strategies of the limited partnership are in the best interests of the Company. Only after both the Investment Analyst Staff and the Investment Committee make a positive recommendation does the Company invest in a limited partnership. In addition, the actions of the Investment Committee are subject to review and approval by the Board of Directors of the Company or the Insurance Company, as the case may be. To evaluate both the carrying value and the continuing appropriateness of the Company's investment in any limited partnership, management maintains ongoing discussions with the investment manager and considers the limited partnership's operations, its current and near term projected financial condition, earnings capacity and distributions received by the Company during the year.

Pursuant to the terms of certain limited partnership agreements to which the Company is a party, the Company is committed to contribute, if called upon, an aggregate of approximately $90.0 million of additional capital to certain of these limited partnerships. $14.2 million in commitments will expire in 2004, $20.3 million in 2005, $24.4 million in 2006 and $30.8 in 2007.

The book value of the Company's investments in limited partnerships as of December 31, 2003, 2002 and 2001 was approximately $323.1 million, $254.7 million and $240.1 million respectively. Net investment income derived from the Company's interests in limited partnership investments aggregated approximately $30.2 million, $21.9 million and $40.3 million in fiscal 2003, 2002 and 2001, respectively.

Management anticipates that in the future it will continue to make selective investments in limited partnerships as opportunities arise, subject to the approval of the Chief Investment Officer and the Investment Committee and the review and approval by the Board of Directors of the Insurance Company, as the case may be. There can be no assurance that the Company will continue to achieve the same level of returns on its investments in limited partnerships that it has received during the foregoing periods or that it will achieve any returns on such investments at all. In addition, there can be no assurance that the Company will receive a return of all or any portion of its current or future capital investments in limited partnerships. The failure of the Company to receive the return of a material portion of its capital investments in limited partnerships, or to achieve historic levels of returns on such investments, could have a material adverse effect on the Company's financial condition and results of operations.

12.

As of December 31, 2003 the Company's investment portfolio also consisted of approximately 3.2% invested in preferred stock, approximately 0.2% invested in mortgage loans, and approximately 0.9% invested in common stock. The Company's mortgage loan is collateralized by retail properties located in Pennsylvania. The Company's only direct real estate investments are two buildings that are used as the current home office of the Insurance Company and two acres of undeveloped land in Nyack, New York.

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

In fiscal 2003 and 2002, dollar roll transactions generated approximately $.6 million and $1.6 million, respectively, of net investment income for the Company. Amounts outstanding to repurchase securities under dollar roll repurchase agreements were approximately $0.00 and $262.5 million as of December 31, 2003 and December 31, 2002, respectively

The following table sets forth the scheduled maturities for the Company's investments in bonds and notes as of December 31, 2003.

Scheduled Maturities
		Percent of Total
	Estimated	Estimated
Maturity<F1>	Fair Value <F2>	Fair Value <F2>
	(Dollars in thousands)
Due in one year or less	$ 24,016	.64%
Due after one year through five years	40,837	1.09%
Due after five years through 10 years	499,880	13.33%
Due after 10 years through 20 years	2,864,773	76.38%
Total	3,429,506	91.44%
Mortgage-backed bonds (Various Maturities)	321,316	8.56%
Total bonds and notes	$3,750,822	100.00%

__________________________________________________________________________________________________

<F1> This table is based upon stated maturity dates and does not reflect the effect of prepayments, which would shorten the average life of these securities. All securities are classified as available for sale; accordingly total carrying value equals estimated fair value.

<F2> Independent pricing services provide market prices for most publicly traded securities. Where prices are unavailable from pricing services, prices are obtained from securities dealers and valuation methodologies.

13.

The following table sets forth the composition of the Company's bond and notes portfolio by rating as of December 31, 2003.

		Percent
		of Total
	Estimated	Estimated
	Fair	Fair
Rating<F1>	Value<F2>	Value<F2>
	(Dollars in thousands)

Aaa.........................	$ 738,265	19.7%
Aa .........................	192,845	5.1
A .........................	991,861	26.4
Baa.........................	1,499,058	40.0
Total investment grade<F3>.	3,422,029	91.2
Ba .........................	193,272	5.2
B .........................	92,376	2.5
C .........................	43,145	1.1
Total non-investment grade.	<F4> 328,793	8.8
Total......................	$3,750,822	100.0%

<F1> Ratings are those assigned primarily by Moody's when available, with remaining ratings as assigned by Standard & Poor's and converted to a generally comparable Moody's rating. Bonds not rated by any such organization (e.g., private placement securities) are included based on the rating prescribed by the Securities Valuation Office of the NAIC. NAIC class 1 is considered equivalent to an A or higher rating; class 2, Baa; class 3, Ba; and classes 4-6, B and below. All securities are classified as available for sale; accordingly total carrying value equals estimated fair value.

<F3> Approximately .04% consists of U.S. government and agency bonds.

<F4> Approximately 68% of the non-investment grade bonds represents bonds which, experienced credit migration from investment grade status.

The NAIC assigns securities quality ratings and uniform prices called “NAIC Designations”, which are used by insurers when preparing their statutory annual statements. The NAIC annually assigns designations at December 31 to publicly traded as well as privately placed securities. These designations range from class 1 to class 6, with a designation in class 1 being of the highest quality. Of the bonds and notes in the Company's investment portfolio, approximately 90.9% were in one of the highest two NAIC Designations at December 31, 2003.

14.

The following table sets forth the carrying value and estimated fair value of these securities according to NAIC Designations at December 31, 2003.

				Percent
				of Total
NAIC Designations	Estimated			Estimated
(generally comparable to	Fair			Fair
Moody's ratings)<F1>	Value <F2>			Value<F2>
	(Dollars in thousands)

1 (Aaa, Aa, A) .............	$1,700,589			45.4
2 (Baa) ....................	1,705,792			45.5
3 (Ba) .....................	188,139			5.0
4 (B) ......................	101,690			2.7
5 (Caa, Ca) ................	44,028			1.2
6 (C) ......................		10,584	.2
		$3,750,822			100.0%

<F1> Comparison between NAIC Designations and Moody's rating is as published by the NAIC. NAIC class 1 is considered equivalent to an A or higher rating by Moody's; class 2, Baa; class 3, Ba; class 4, B; class 5, Caa and Ca; and class 6, C. All securities are classified as available for sale; accordingly total carrying value equals estimated fair value.

<F2> Independent pricing services provide market prices for most publicly‑traded securities. Where prices are unavailable from pricing services, prices are obtained from securities dealers and valuation methodologies.

The Insurance Company is subject to Regulation 130 adopted and promulgated by the NYSID. Under this Regulation, the Insurance Company's ownership of below investment grade debt securities is limited to 20% of total admitted assets, as calculated under statutory accounting. As of December 31, 2003, approximately 7.0% of the Insurance Company's total admitted assets were invested in below investment grade debt securities. In addition, as of that date, there were eight bond holdings in the Insurance Company's investment portfolio, which were in default with an estimated fair value totaling $7.6 million. For a detailed discussion concerning below investment grade debt securities, including the risks inherent in such investments, see “Item 7 ‑ Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.” Also see “Note 2 to the Notes to Consolidated Financial Statements” for certain other information concerning the Company's investment portfolio.

Insurance Regulation

General Regulation

As an insurance holding company, the Company is subject to regulation by the State of New York, where the Insurance Company is domiciled, as well as all states in which the Insurance Company transacts business. Most states have enacted legislation that requires each insurance company in a holding company system to register with the insurance regulatory authority of its state of domicile and furnish to it financial and other information concerning the operations of companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system. The Company has registered as a holding company system in New York.

15.

The laws and regulations of New York applicable to insurance holding companies require, among other things, that all transactions within a holding company system be fair and equitable and that charges for services be reasonable. In addition, many transactions require either prior notification to or approval of the Superintendent of Insurance of the State of New York (the “Superintendent”). Prior written approval of the Superintendent is required for the direct or indirect acquisition of 10% or more of the insurance companies' voting securities. Applicable state insurance laws, rather than federal bankruptcy laws, also apply to the liquidation or reorganization of insurance companies.

The Insurance Company is subject to regulation and supervision by the insurance regulatory agencies of the states in which it is authorized to transact business. State insurance laws establish supervisory agencies with broad administrative and supervisory powers. Principal among these powers are granting and revoking licenses to transact business, regulating marketing and other trade practices, operating guaranty associations, licensing agents, approving policy forms, regulating certain premium rates, regulating insurance holding company systems, establishing reserve requirements, prescribing the form and content of required financial statements and reports, performing financial, market conduct and other examinations, determining the reasonableness and adequacy of statutory capital and surplus, defining acceptable accounting principles, regulating the type, valuation and amount of investments permitted, and limiting the amount of dividends that can be paid and the size of transactions that can be consummated without first obtaining regulatory approval.

During the last decade, the insurance regulatory framework has been placed under increased scrutiny by various states, the federal government and the NAIC. Various states have considered or enacted legislation that changes, and in many cases increases, the states' authority to regulate insurance companies. Legislation was passed in Congress that could result in the federal government assuming some role in the regulation of insurance companies and allowing combinations between insurance companies, banks and other entities. In recent years, the NAIC has approved and recommended to the states for adoption and implementation several regulatory initiatives designed to reduce the risk of insurance company insolvencies and market conduct violations. These initiatives include investment reserve requirements, risk-based capital standards, codification of insurance accounting principles, new investment standards and restrictions on an insurance company's ability to pay dividends to its stockholders.

The Insurance Company is required to file detailed periodic reports and financial statements with the state insurance regulators in each of the states in which it does business. In addition, insurance regulators periodically examine the Insurance Company's financial condition, adherence to statutory accounting practices and compliance with insurance department rules and regulations. As part of their routine regulatory oversight process, the NYSID generally conducts detailed examinations every three years of the books, records and accounts of the Insurance Company.

The Insurance Company's last examination occurred during 2001 for the four-year period ended December 31, 2000. The final report was dated on January 11, 2002 and it did not contain any significant issues or adjustments that impacted the financial statement. The NYSID is currently scheduled to commence an examination covering a review of three years ending December 31, 2003.

Regulation of Dividends and Other Payments from the Insurance Company

The Company is a legal entity separate and distinct from its subsidiaries. As a holding company with no other business operations, its primary sources of cash needed to meet its obligations, including principal and interest payments on its outstanding indebtedness and to pay dividends on its common stock, are rent from its real estate, interest on its investments and dividends from the Insurance Company.

16.

The Insurance Company is subject to various regulatory restrictions on the maximum amount of payments, including loans or cash advances that it may make to the Company without obtaining prior regulatory approval. Under the New York Insurance Law, the Insurance Company is permitted without prior insurance regulatory clearance to pay a stockholder dividend to the Company as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of (i) 10% of its surplus as of the immediately preceding calendar year-end and (ii) its net gain (after tax) from operations for the immediately preceding calendar year-end (excluding realized capital gains). The Insurance Company will be permitted to pay a stockholder dividend to the Company in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the distribution. Under the New York Insurance Law, the Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders. The NYSID has established informal guidelines for such determinations. The guidelines, among other things, focus on the insurer's overall financial condition and profitability under statutory accounting practices. Management of the Company cannot provide assurance that the Insurance Company will have statutory earnings to support payment of dividends to the Company in an amount sufficient to fund its cash requirements and pay cash dividends or that the Superintendent will not disapprove any dividends that the Insurance Company must submit for the Superintendent's consideration. The Insurance Company's insurance subsidiary is also subject to restrictions on the payment of dividends to its parent company. To preserve capital, the Insurance Company paid no dividends in fiscal 2003 and 2002. In 2001, the Insurance Company paid dividends of $27.7 million to the Company.

The dividend limitation is based on statutory financial results. Statutory accounting practices differ in certain respects from accounting principles used in financial statements prepared in conformity with GAAP. The significant differences relate to deferred policy acquisition costs, deferred income taxes, required investment reserves and reserve calculation assumptions.

Investment Reserves

Asset Valuation Reserve- Statutory accounting practices require a life insurance company to maintain an Asset Valuation Reserve (“AVR”) to absorb realized and unrealized capital gains and losses on a portion of an insurer's fixed income securities and equity securities.

The AVR is required to stabilize statutory surplus from fluctuations in the market value of bonds, stocks, mortgage loans, real estate and other invested assets. The maximum AVR is calculated based on the application of various factors that are applied to the assets in an insurer's portfolio. The AVR generally captures credit-related realized and unrealized capital gains or losses on such assets. Each year the amount of an insurer's AVR will fluctuate as the investment portfolio changes and capital gains or losses are absorbed by the reserve. To adjust for such changes over time, contributions must be made to the AVR in an aggregate annual amount equal to 20% of the difference between the maximum AVR as calculated and the actual AVR. These contributions may result in a slower rate of growth in or a reduction of the Insurance Company's Unassigned Surplus. The extent of the impact of the AVR on the Insurance Company's surplus depends in part on the future composition of the Insurance Company's investment portfolio.

Interest Maintenance Reserve -The Interest Maintenance Reserve (the “IMR”) captures capital gains and losses (net of taxes) on fixed income investments (primarily bonds and mortgage loans) resulting from interest rate changes, which are amortized into net income over the estimated remaining periods to maturity of the investments sold. The extent of the impact of the IMR depends on the amount of future capital gains and losses on fixed maturity investments resulting from interest rate changes.

17.

NAIC-IRIS Ratios

The NAIC's Insurance Regulatory Information System (“IRIS”) was developed by a committee of state insurance regulators and primarily is intended to assist state insurance departments in executing their statutory mandates to oversee the financial condition of insurance companies operating in their respective states. IRIS identifies 12 industry ratios and specifies “normal ranges” for each ratio. The IRIS ratios were designed to advise state insurance regulators of significant changes in the operations of an insurance company, such as changes in its product mix, large reinsurance transactions, increases or decreases in premiums received and certain other changes in operations. These changes need not result from any problems with an insurance company but merely indicate changes in certain ratios outside ranges defined as normal by the NAIC. When an insurance company has four or more ratios falling outside “normal ranges,” such state regulators may, but are not obligated to, inquire of the company regarding the nature of the company's business to determine the reasons for the ratios being outside the “normal range.” No regulatory significance results from being out of the normal range on fewer than four of the ratios. The Company anticipates that it may from time to time fall outside the “normal range” on some of these ratios. For the year ended December 31, 2003, one ratio fell outside the normal range. This ratio, Change in Premium, decreased 67%. This decline was attributable to many factors, including recent rating agency actions and management’s intent to preserve and build the Insurance Company’s statutory Capital and Surplus ratios. If four or more of the Company's ratios fall outside the “normal range,” the Company is likely to experience regulatory inquiry and a higher level of scrutiny.

Assessments Against Insurers

Most applicable jurisdictions require insurance companies to participate in guaranty funds, which are designed to indemnify policyholders of insolvent insurance companies. Insurers authorized to transact business in these jurisdictions generally are subject to assessments based on annual direct premiums written in that jurisdiction. These assessments may be deferred or forgiven under most guaranty laws if they would threaten an insurer's solvency and, in certain instances, may be offset against future state premium taxes. The amount of these assessments in prior years has not been material, however, the amount and timing of any future assessment on the Insurance Company under these laws cannot be reasonably estimated and are beyond the control of the Company and the Insurance Company. Any failures of substantially larger insurance companies could result in future assessments in material amounts.

Regulation at Federal Level

Although the federal government generally does not directly regulate the insurance business, federal initiatives often have an impact on the business in a variety of ways. Current and any future federal measures that may significantly affect the insurance business include limitations on antitrust immunity, minimum solvency requirements and the removal of barriers restricting banks from engaging in the insurance and mutual fund business. It is not possible to predict the outcome of any such congressional activity nor the potential effects thereof on the Company.

Affiliates

In addition to the Insurance Company, the Company has four subsidiaries, Presidential Securities Corporation, P.L. Assigned Services Corporation, Presidential Asset Management Company, Inc. and The Central National Life Insurance Company of Omaha (“Central National”).

18.

On December 29, 2000, the Company purchased Central National from the Household Insurance Group Holding Company, a subsidiary of Household International, Inc. Central National which has assets of $15.2 million and capital and surplus of $14.9 million as of December 31, 2003, is licensed to market insurance products in 49 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. In June 2002, the ownership of Central National was transferred to the Insurance Company as a capital contribution.

Item 2. Properties

The Company owns, and leases to the Insurance Company, it’s sole occupant, two adjacent office buildings located at 69 Lydecker Street and 10 North Broadway in Nyack, New York. These buildings contain an aggregate of approximately 45,000 square feet of useable floor space.

The Insurance Company also owns two acres of unimproved land in Nyack, New York.

Management believes that the Company's present facilities are adequate for its anticipated needs.

Item 3. Legal Proceedings

From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of business. As of March 12, 2003, the Company is not a party to any legal proceedings, the adverse outcome of which, in management's opinion, individually or in the aggregate, would have a material adverse effect on the Company's financial condition or results of operations.

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

No matters were submitted by the Company to its shareholders for vote during the fiscal quarter ended December 31, 2003.

19.
PART II

Item 5. Market for the Registrant's Common Equity and RelatedShareholder Matters

The Company's common stock trades on The NASDAQ Stock Market^SM under the symbol “PLFE.” The following table sets forth, for the indicated periods, the high and low bid quotations for the common stock as of the close of business each day, as reported by the National Association of Securities Dealers, Inc., and the per share cash dividends declared on the common stock.

			Cash Dividends
	High	Low	Declared Per Share
Fiscal 2002
First Quarter	$ 23.01	$ 19.40	$.10
Second Quarter	26.20	19.85	.10
Third Quarter	20.70	14.25	.10
Fourth Quarter	14.99	6.98	.10

Fiscal 2003
First Quarter	$ 10.32	$ 6.18	.10
Second Quarter	14.94	6.35	.10
Third Quarter	17.46	14.60	.10
Fourth Quarter	16.66	12.94	.10

Fiscal 2004
First Quarter	$ 15.74	$ 12.80	.10
(through March 12, 2004)

The Company regularly has paid cash dividends since 1980. During the first quarter of 2004, the Company declared a quarterly cash dividend of $.10 per share payable April 2, 2004. The Company expects to continue its policy of paying regular cash dividends, although there is no assurance as to future dividends because they are dependent on future earnings, capital requirements, financial condition, and dividends from the Insurance Company. Any determination to pay dividends would be at the discretion of the Company's Board of Directors and is subject to regulatory and contractual restrictions as described in “Part I ‑‑ Business ‑‑ Insurance Regulation” and Part II ‑‑ Management's Discussion and Analysis of Financial Condition and Results of Operations ‑‑ Liquidity and Capital Resources.” On March 12, 2004 there were approximately 676 holders of record of the Company's common stock.

Item 6. Selected Financial Data

Selected consolidated financial data for the Company are presented below for each of the five years in the period ended December 31, 2003. This data should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto and Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition.

Income Statement Data:
	Year Ended December 31,
	2003	2002	2001	2000	1999
(in thousands, except per share data)

Total Revenue	$ 344,294	$ 204,740	$ 284,408	$ 284,458	$ 278,060
Benefits	258,148	276,769	267,350	197,765	181,126
Interest Expense
On Notes payable	9,643	10,633	8,836	9,773	8,960
Selling, General and Administrative
Expenses and DAC Amortization	27,026	16,579	26,823	18,931	18,482
Total Benefits and Expenses	294,817	303,981	303,009	226,469	208,568
Provision (benefit) for Income Taxes	18,192	(29,972)	(10,896)	17,127	21,261
Net Income	31,285	$ (69,269)	$ (7,705)	$ 40,862	$ 47,717<F1>
Income Per Share	$ 1.07	$ (2.36)	$ (.26)	$ 1.36	$ 1.53<F1>
Dividends Per Share	$ .40	$ .40	$ .40	$ .39	$ .345

<F1> Includes extraordinary loss of $514 thousand or $.02 per share.

20.

Balance Sheet Data:
	At December 31,
	2003		2002		2001		2000		1999
(in thousands)

Assets		$ 4,529,022		$ 4,472,184	$ 3,790,431	$ 2,982,425		$ 2,653,665
Total Capitalization
Notes Payable		150,000		$ 150,000	$ 150,000	$ 100,000		$ 100,000
Shareholders' Equity		488,765		398,691	427,094	465,527		406,468

Total		$ 638,765		$ 548,691	$ 577,094	$ 565,527		$ 506,468
Book Value Per Share		$ 16.66		$ 13.60	$ 14.57	$ 15.61		$ 13.19
Net Investment Return on Assets		7.11%		7.56%	8.19%	9.21%		9.06%

As shown in the Selected Financial Data above, during recent years the Company has achieved a substantial year-to-year growth in the sales of its annuity and insurance product, the proceeds of which have been placed in the investment portfolio. This portfolio has been managed by the Company with the objective of seeking the highest possible returns while investing primarily in investment grade debt securities.

In 2001 and 2002 the general economic recession caused a severe deterioration in many investment grade companies such as Owens Corning, MCI Worldcom, Pacific Gas and Electric, Southern California Edison, US Airways and Sunbeam. While some actually went bankrupt, many others lost their investment grade debt ratings with resulting market declines. The Company’s investment portfolio realized losses or required substantial write-downs with the result that net net losses were encountered in 2001 and 2002. In 2001, these losses were $65.1 million with an increase to a loss of $146.7 million in 2002. A corollary impact of these was that capital ratios were adversely affected in both years.

2003 recoveries in the market values were experienced which resulted in the Company achieving record high levels of capital and improved capital ratios. As described under “Ratings” and “Regulation” the Company’s business is substantially affected by such capital ratios and their impact on its rating. Consequently, the Company’s management established a policy of reducing the level of sales increases until capital and surplus ratios are further improved. Sales will also be made with a greater selectivity based on a profit review. Recently, as a result of such a review, the Company has taken a planned emphasis on annuity products and a de-emphasis, and in some cases, a discontinuance, of sales of the traditional life insurance of term and whole life.

Earnings have been and may expected to be affected by the decline in interest rates, as described herein under “Market Risk”. This is shown above in the impact of the decline on the “net investment return on assets”.

21.

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

of Operations

General

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

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

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

Unless specifically stated otherwise, all references to 2003, 2002 and 2001 refer to our fiscal years ended, or the dates, as the contacts requires, December 31, 2003, December 31, 2002 and December 31, 2001, respectively.

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

In this discussion we have included statements that may constitute “forward-looking statements” within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our control. These statements may relate to our future plans and objectives. By identifying these statements for you in this manner, we are alerting you to the possibility that our actual results may differ, possibly materially, from the results indicated in these forward-looking statements. Important factors, among others, that could cause our results to differ from those indicated in the forward-looking statements are discussed under “Certain Factors That May Affect Our Business.”

Executive Overview

Our earnings per share were $1.07 for 2003, as compared to losses of ($2.36) per share in 2002 and ($.26) per share in 2001. Our results in 2003 reflected a continuing of our year-to-year increase in investment income and a reversal in net realized investment losses from the prior years to a net realized gain in 2003. Our total revenues in 2003 were $344 Million, as compared to $205 million in 2002 and $284 million in 2001.

The Company’s performance in 2003 results primarily from the improved performance of our investment portfolio and our continuing efforts to reduce expenses and to reduce risk and exposure in our portfolio. The improvement of global capital and equity markets in 2003 also contributed significantly to our financial performance.

22.

Certain Factors That May Affect Our Business

There are numerous factors, some of which are outside our control, which could have a material impact on our business. These factors include market conditions, legal and regulatory changes and operational risks. A summary of these factors is set forth below:

Market Conditions: We, like all companies, are affected by the general state of financial markets and economic conditions in the U.S. and elsewhere. Despite certain recent improvements in business conditions, the business environment in recent years has been difficult. In this difficult environment, our ability to obtain desired returns on investment portfolio without exposing the Company to excess risk has been very challenging. This, in turn, has had an impact on our willingness to expand the sale of our single premium deferred annuity and universal life products. Since we rely substantially on the availability of reinsurance for portions of our life insurance and accident and health insurance, any material change in the reinsurance market could also have an impact on our business.

Legal and Regulatory Risk: As an insurance company, we are subject to substantial regulatory control. Any material change in the regulatory framework in which we operate could have a material impact on our business. For further discussion on how we deal with our regulatory requirements, see “Business – Insurance Regulation.”

Operational Risk: Our business is dependent on our ability to process on a daily basis our payment obligations under our outstanding policies and the condition of our investment portfolio. Any failures in our internal processes, people or systems could lead to adverse consequences to the Company. In addition, despite the contingency plans we have in place, our ability to conduct business may be adversely impacted by the disruption in the infrastructure that supports our business and the community in which we are located.

The following sections discuss specific factors that affect the Company.

Pricing

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

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

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

	2003	2002	2001	2000	1999
Ratio of annualized
voluntary terminations
(surrenders and lapses)
to mean insurance
in force	8.5%	8.6%	10.0%	12.1%	16.5%

23.

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

The following table summarizes the Company's investment results for the periods indicated, as determined in accordance with GAAP.

INVESTMENT RESULTS
	Year Ended December 31,
	2003	2002	2001	2000	1999
(Dollars in thousands)
Cash and total invested
Assets<F1>	$ 4,280,488	$3,889,681	$ 3,187,299	$2,669,458	$2,506,250
Net investment income<F2>	$ 288,382	$ 267,561	$ 234,125	$ 225,224	$ 208,126
Effective yield<F3>	7.11%	7.56%	8.19%	9.21%	9.06%
Net realized investment
Gains (Losses)<F4>	$ 10,328	$(146,743)	$ (65,132)	$ (8,449)	$ 2,775

<F1> Average of cash and aggregate invested amounts at the beginning and end of period.

<F2> Net investment income is net of investment expenses and excludes capital gains and losses and provision for income taxes.

<F3> Net investment income divided by average cash and total invested assets minus net investment income.

<F4> Net realized investment gains (losses) include provisions for impairment in value that are considered other than temporary and exclude provisions for income taxes.

The reduction in the net investment income ratios is attributable to the low interest rate environment and other economic conditions. During periods of declining interest rates, paydowns on mortgage–backed securities with higher interest rates and callable debt securities increase. During such periods the Company, for the most part, will not be able to reinvest the proceeds at comparable yields.

Another major factor affecting profitability is the level of expenses. Management believes that one of the Company's strengths is its concentration on minimizing expenses through periodic review and adjustment of general and administrative costs.

Mortality is the rate of death experienced by life insurance policyholders and certain annuitants taken as a group. For calculating premiums, the Company uses actuarial assumptions with margins added to allow for adverse statistical variations. Actual mortality experience in a particular period may be different than actuarially expected mortality experience and, consequently, may adversely affect the Company's operating results for such period.

24.

Investments

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

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

The Company's investment philosophy generally focuses on purchasing investment grade securities with the intention of holding such securities to maturity. The Company's investment philosophy is focused on the intermediate to longer‑term horizon and is not oriented towards trading. However, as market opportunities, liquidity, or regulatory considerations may dictate, securities may be sold prior to maturity. The Company has categorized all fixed maturity securities as available for sale and carries such investments at market value.

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

25.

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

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

Risk‑Based Capital

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

Agency Ratings

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

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

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

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

26.

During 2002, Moody's Investor Services (“Moody's”) lowered the Insurance Company's insurance financial strength rating from Baa1 to Ba1 (“Questionable financial security”). Standard & Poor's Corporation (“Standard & Poor's”) lowered the Insurance Company's insurance financial strength from A- to BB+ and is defined as “Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions”. The credit rating of the Company's Senior Notes, due February 15, 2009 (the “Senior Notes”), was lowered to a B+ (More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial requirements) from a BBB- by Standard & Poor's and to a B1 (“Poor financial security”) from Ba1 by Moody's.

For 2003, the impact of the downgrades did not have a material impact on the financial statements of the Company. The reduction in sales was primarily attributable to management’s intention to preserve and build the Insurance Company’s capital and surplus ratios. Surrenders of the Company’s annuity products continue to remain below 5% of the surrenderable annuities and have not had a material impact on the Company’s consolidated financial sttements.

Results of Operations

Comparison of Fiscal Year 2003 to Fiscal Year 2002 and Fiscal Year 2002 to Fiscal Year 2001.

Revenues

Annuity Considerations and Life Insurance Premiums

Total annuity considerations and life insurance premiums decreased to approximately $43.6 million in fiscal 2003 from approximately $81.0 million in fiscal 2002, a decrease of approximately 46.2%. This decrease is attributable to a decrease in sales of the Insurance Company¢s Single Premium immediate annuities with life contingencies. Annuity considerations decreased to approximately $32.6 million in fiscal 2003 from approximately $69.4 million in fiscal 2002, a decrease of approximately $36.8 million. In accordance with GAAP, sales of single premium deferred annuities are not reported as annuity considerations, but rather as additions to policyholder account balances. Based on statutory accounting, revenue from sales of single premium annuities were approximately $243.1 million, $815.8 million and $700.1 million in fiscal 2003, 2002 and 2001, respectively. The decrease is attributable to many factors, including management’s intent to preserve and build the Insurance Company’s capital and surplus ratios.

Policy Fee Income

Universal life and investment type policy fee income was approximately $1.0 million in fiscal 2003, as compared to approximately $.7 million in fiscal 2002 and approximately $.8 million in fiscal 2001. The increase in 2003 is attributed to an increased number of life policies surrendered during 2003 that were within the surrender charge period. Policy fee income consists principally of amounts assessed during the period against policyholders' account balances for mortality charges and surrender charges.

27.

Net Investment Income

Net investment income totaled approximately $288.4 million in fiscal 2003, as compared to approximately $267.6 million in fiscal 2002 and approximately $234.1 million in fiscal 2001. This represents approximately a 7.8% increase comparing fiscal 2003 to fiscal 2002 and approximately 14.3% increase comparing fiscal 2002 to fiscal 2001. The full impact of the increase in sales for 2002 was reflected in the increase in fixed maturity income for 2003. Income from fixed maturities totaled $259.6 million in 2003 compared to $234.3 million in 2002 and $177.5 in 2001. Investment income from ”other invested assets” totaled approximately $30.2 million in fiscal 2003, $21.9 million in fiscal 2002 and $40.3 million in fiscal 2001. The Company's ratio of net investment income to average cash and invested assets less net investment income for the years ended December 31, 2003, 2002 and 2001 was approximately 7.11%, 7.56% and 8.19%, respectively. For additional information, please refer to “Note 2 of the Notes to Consolidated Financial Statements.”

Net Realized Investment Gains and Losses

Net realized investment gains (pre-tax) amounted to approximately $10.3 million in fiscal 2003, as compared to approximately $146.7 million of losses in fiscal 2002 and losses of approximately $65.1 million in fiscal 2001. Realized investment losses for years ended December 31, 2003, 2002 and 2001 include realized investment losses of approximately $31.8 million, $147.3 million and $50.7 million, respectively, attributable to writedowns of certain securities contained in the Company's investment portfolio. Investment securities with unrealized losses are placed on an internal watch list and are carefully evaluated to determine whether such losses are other than temporary. Evaluations of watch list securities are monitored on an ongoing basis. Various criteria are utilized in the evaluation of the financial performance of the issuer, including capital structure, debt maturities, earnings trends, asset quality, Industry trends, regional and economic trends and specific events including: a) company specific event, such as missed interest payments, accounting issues, gain or loss of major revenue generating contract(s), significant change in availability and cost of raw material or labor; and, b) specific market-driven events such as dramatic changes in interest rates or geo-political events. We then evaluate these results in the context of our general intent to hold the investments to maturity barring any significant adverse change in credit conditions, as well as our need for liquidity. When we determine that such conditions are not simply temporary, we adjust the book value to reflect the net realizable value or fair value, as appropriate, on a quarterly basis. Realized investment gains (losses) also result from sales of certain equities and convertible securities, and calls and sales of fixed maturity investments in the Company's investment portfolio.

28.

Net Unrealized Losses

The following table presents the amortized cost and gross unrealized losses for fixed maturities where the estimated fair value had declined and remained below amortized cost by less than 20%, or 20% or more for December 31, 2003:

	Less Than 12 Months		12 Months or More		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Description of Securities			(in thousands)

US Treasury obligations and direct obligations of US Government Agencies	210,108	8,581	57,257	5,119	267,365	13,700
Corporate Bonds	492,064	30,149	332,632	86,724	824,696	116,873

Total	702,172	38,730	389,889	91,843	1,092,061	130,573

The following table presents the total gross unrealized losses for fixed maturities where the estimated fair value had declined and remained below amortized cost by December 31, 2003.

	Gross Unrealized Losses			% Of Total	Gross Unrealized Losses Net of Principal Protected Notes		% Of Total
		(in thousands)			(in thousands)
Less than 20%		52,262	40.0		49,765	88.9
20% or more for less than six months		13,729	10.5		1,707	3.0
20% or more for six months or greater		64,581	49.5		4,531	8.1

Total		130,572	100.0		56,003	100.0

Approximately 93% of the securities with an unrealized loss of 20% or more for a period equal to or greater than twelve months are Principal Protected Notes. This structure utilizes AAA collateral such as U.S Treasury Strips, in conjunction with a variable rate coupon. The AAA rated collateral accretes to par at maturity, defeasing the security and thereby insulating the holder from any negative credit events which might interfere with the repayment of principal.

Total Benefits and Expenses

Interest Credited and Benefits to Policyholders

Interest credited and benefits to policyholders amounted to approximately $258.1 million in fiscal 2003 as compared to approximately $276.8 million in fiscal 2002 and approximately $267.4 million in fiscal 2001. This represents a decrease of approximately 6.8% comparing fiscal 2003 to fiscal 2002 and approximately a 3.5% increase comparing fiscal 2002 to fiscal 2001. This decrease in 2003 and increase in 2002 was principally attributable to varying levels of policyholder account balances as a result of variations in annuity considerations received during the respective years.

29.

The Insurance Company’s average credited rates for reserves and account balances for the 12 months ended December 31, 2003, 2002 and 2001 were less than the Company’s ratio of net investment income to mean assets for the same periods as noted above under “Net Investment Income.” Although management does not currently expect material declines in the spread between the Company’s average credited rate for reserves and account balances and the Company’s ratio of net investment income to mean assets (the “Spread”), there can be no assurance that the spread will not decline in future periods or that such decline will not have a material adverse effect on the Company’s financial condition and results of operations. Depending, in part, upon competitive factors affecting the industry in general, and the Company in particular, the Company may, from time to time, adjust the average credited rates on certain of its products. There can be no assurance that the Company will reduce such rates or that any such reductions will broaden the Spread.

Interest Expense on Notes Payable

The interest expense on the Company's notes payable amounted to approximately $9.64 million in fiscal 2003, approximately $10.63 million in fiscal 2002 and approximately $8.84 million in fiscal 2001.

The decrease in interest expense in fiscal 2003 is attributable to lower interest rates on the Company’s $50 million line of credit with the Bank of New York.

General Expenses, Taxes and Commissions

General expenses, taxes and commissions to agents totaled approximately $29.6 million in fiscal 2003 as compared to approximately $47.2 million in fiscal 2002 and approximately $50.3 million in fiscal 2001. This represents a decrease of approximately 37.3% comparing fiscal 2003 to fiscal 2002 and a decrease of approximately 6.2% comparing fiscal 2002 to fiscal 2001. The decrease in fiscal 2003 compared to 2002, is principally attributable to lower costs associated with lower commissions and selling expenses incurred associated with the lower level of sales of single premium annuities offset by the company¢s general expenses and taxes. The decrease in fiscal 2002 compared to fiscal 2001 is attributable to a reduction in the Company’s general expenses due to expense controls initiated in 2002.

Deferred Policy Acquisition Costs

The change in the net DAC for fiscal 2003 resulted in a credit of approximately $2.5 million, as compared to a credit of approximately $30.6 million in fiscal 2002 and a credit of approximately $23.5 million in fiscal 2001. Such changes are due (i) to the decrease in costs associated with product sales which have been deferred and are amortized in proportion to the recognition of earned revenue and (ii) to the effect of revisions to estimated gross profits on unamortized deferred acquisition costs which are reflected in the year such estimated gross profits are revised.

Income Before Income Taxes

For the reasons discussed above, income (loss) before income taxes amounted to approximately $49.5 million in fiscal 2003, as compared to approximately $(99.2) million in fiscal 2002 and approximately $(18.6) million in fiscal 2001.

Income Taxes

Income tax expense was approximately $18.2 million for fiscal 2003, as compared to a benefit of approximately $(30.0) million in fiscal 2002 and a benefit of approximately $(10.9) million in fiscal 2001. The increase in income taxes in fiscal 2003 was primarily attributable to realized capital gains in fiscal 2003 as compared to realized capital losses during fiscal 2002. In 2003, the Company's strategy was to utilize a carryback of its net capital losses reported in the Company's consolidated tax return in 2002.

30.

Net Income

For the reasons discussed above, the Company had net income of approximately $31.3 million in fiscal 2003, net loss of approximately $(69.3) million in fiscal 2002 and net loss of approximately $(7.7) million in fiscal 2001.

Liquidity and Capital Resources

The Insurance Company is subject to various regulatory restrictions on the maximum amount of payments, including loans or cash advances, that it may make to us without obtaining prior regulatory approval. Under the New York Insurance Law, the Insurance Company is permitted without prior insurance regulatory clearance to pay a stockholder dividend to the Company as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of (i) 10% of its surplus as of the immediately preceding calendar year and (ii) its net gain from operations for the immediately preceding calendar year (excluding realized capital gains and losses). The Insurance Company will be permitted to pay a stockholder dividend to the Company in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the distribution. Under the New York Insurance Law, the Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders. The NYSID has established informal guidelines for such determinations. The guidelines, among other things, focus on the insurer's overall financial condition and profitability under statutory accounting practices. Management of the Company cannot provide assurance that the Insurance Company will have statutory earnings to support payment of dividends to the Company in an amount sufficient to fund its cash requirements and pay cash dividends or that the Superintendent will not disapprove any dividends that the Insurance Company must submit for the Superintendent's consideration. To preserve capital, the Insurance Company paid no dividends in fiscal 2003 or 2002. In 2001, the Insurance Company paid dividends of $27.7 million. The Company’s other insurance subsidiary is also subject to restrictions on the payment of dividends to their respective parent companies.

Principal sources of funds at the Insurance Company are premiums and other considerations paid, net investment income received and proceeds from investments called, redeemed or sold. The principal uses of these funds are the payment of benefits on annuity contracts and life insurance policies (including withdrawals and surrender payments), the payment of policy acquisition costs, operating expenses and the purchase of investments.

Given the Insurance Company's historic cash flow and current financial results, management believes that, for the next twelve months and for the reasonably foreseeable future, the Insurance Company's cash flow from operating activities will provide sufficient liquidity for the operations of the Insurance Company.

The Company is an insurance holding company and its primary uses of cash are debt service obligations, operating expenses and dividend payments. The Company's principal sources of cash are dividends from the Insurance Company, sales of and interest on the Company's investments and rent from its real estate. During 2003, the Company's Board of Directors maintained the quarterly dividend rate of $.10 per share. During 2003 and 2002, the Company purchased and retired 0 and 0 shares of common stock, respectively. At December 31, 2003, the Company was authorized to purchase approximately 385,000 shares of common stock.

31.

Net cash provided by the Company's operating activities was approximately $15.7 million, $26.8 million and $104.1 million in fiscal 2003, 2002 and 2001, respectively. The decrease from 2001 is largely attributable to the reduction in annuity considerations. Net cash provided by /(used) in the Company's investing activities (principally reflecting investments purchased less investments called, redeemed or sold) was approximately $76.9 million, $(684.6) million and $(815.4) million in fiscal 2003, 2002 and 2001, respectively.

For purposes of the Company's consolidated statements of cash flows, financing activities relate primarily to “dollar roll” repurchase transactions, and to sales and surrenders of the Company's annuity and universal life insurance products. The payment of dividends by the Company to its stockholders also is considered to be a financing activity. Net cash (used)/ provided by the Company's financing activities amounted to approximately $(92.8) million, $668.9 million and $711.9 million in fiscal 2003, 2002 and 2001, respectively. These fluctuations primarily are attributable to higher policyholder account balances (as a result of sales), the new line of credit established in 2001, partially offset by the payment of dividends to the Company's shareholders during fiscal year 2003.

The indenture governing the Senior Notes contains covenants relating to limitations on liens and sale or issuance of capital stock of the Insurance Company. In the event the Company violates such covenants as defined in the indenture, the Company may be obligated to offer to repurchase all of the outstanding principal amount of such notes. As of December 31, 2003, the Company believes that it is in compliance with all of the covenants.

Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, and other relevant market rate or price changes. Market risk is directly influenced by the volatility and liquidity in the markets in which the related underlying assets are traded. The following is a discussion of the Company's primary market risk exposures and how those exposures are currently managed as of December 31, 2003.

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

In order to maintain consistency in our portfolio, our deferred annuity products incorporate surrender charges to discourage surrenders or withdrawals. An annuitant may not terminate or withdraw funds from their annuity contracts for a significant initial period (generally seven years) without incurring substantial penalties in the form of surrender charges. These surrender charges generally range from 1% to 7% of the investment. Approximately 25.1%, 24.9% and 30.5% of the Company's deferred annuity contracts in force (measured by reserves) as of December 31, 2003, 2002, and 2001 are surrenderable without charge. The decrease since December 31, 2001 is attributable to the increase in deferred annuity contracts inforce as a result of the increase in annuity considerations.

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

32.

Based on market values and prevailing interest rates as of December 31, 2003, a hypothetical instantaneous increase in interest rates of 100 basis points would produce a loss in fair value of our fixed maturity assets of approximately $202.4 million. Since the Company is able to hold its fixed maturity securities to maturity, however, we would not in reality expect to realize significant losses under such a hypothetical scenario.

To meet its anticipated liquidity requirements, the Company purchases investments taking into account the anticipated future cash flow requirements of its underlying liabilities. In managing the relationship between assets and liabilities, the Company analyzes the cash flows necessary to correspond with the expected cash needs on the underlying liabilities under various interest rate scenarios. In addition, the Company invests a portion of its total assets in short-term investments (approximately .52%, 6.46% and 8.13% as of December 31, 2003, 2002 and 2001, respectively). The decrease in short term investments is attributable to the Company’s decision to no longer participate in “dollar roll” repurchase agreement transactions. The weighted average duration of the Company's bond portfolio was approximately 6.97 years (modified duration to call) as of December 31, 2003. The Company's fixed maturity investments are all classified as available for sale and include those securities available to be sold in response to, among other things, changes in market interest rates, changes in the security's prepayment risk, the Company's need for liquidity and other similar factors. These investments are carried at market value, and unrealized gains (losses), net of federal income taxes and deferred policy acquisition costs, if any, are charged directly to shareholders' equity. If a decline in market value is considered to be other than temporary, the Company recognizes a loss through the income statement. Equity securities including, common stocks and non‑redeemable preferred stocks, are treated the same way.

There were no capital expenditures during fiscal 2003 and no outstanding commitments as of December 31, 2003.

The Company maintains a portfolio, which includes below investment grade securities, which were purchased to achieve a more favorable investment yield, all of which are classified as available for sale and reported at estimated market value. As of December 31, 2003 and 2002, the carrying value of these securities was approximately $328.8 million and $271.3 million, respectively (representing approximately 7.3% and 6.1%, respectively, of the Company's total assets).

Investments in below investment grade debt securities have different risks than investments in corporate debt securities rated investment grade. Risk of loss upon default by the borrower is significantly greater with respect to below investment grade debt securities than with respect to other corporate debt securities because below investment grade debt securities generally are unsecured and often are subordinated to other creditors of the issuer. Also, issuers of below investment grade debt securities usually have high levels of indebtedness and often are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than are investment grade issuers. Typically, there is only a thinly traded market for such securities and recent market quotations may not be available for some of these securities. Market quotes generally are available only from a limited number of dealers and may not represent firm bids of such dealers or prices for actual sales. The Company attempts to reduce the overall risk in its below investment grade portfolio, as in all of its investments, through detailed credit analysis, investment policy limitations, and diversification by company and by industry. Below investment grade debt investments, as well as other investments, are being monitored on an ongoing basis. 33.

As of December 31, 2003, approximately 8.0% of the Insurance Company's total invested assets were invested in limited partnerships and equity securities. Pursuant to NYSID regulations, the Company's investments in equity securities, including limited partnership interests, as well as below investment grade bonds may not exceed 20% of the Insurance Company's invested assets. Investments in limited partnerships are included in the Company's consolidated balance sheet under the heading “Other invested assets.” See “Note 2 to the Notes to Consolidated Financial Statements.” The Company is committed, if called upon during a specified period, to contribute an aggregate of approximately $90.0 million of additional capital to certain of these limited partnerships. $14.2 million in 2004, $20.3 million in 2005, $24.4 million in 2006 and $30.8 in 2007. The Company may make selective investments in additional limited partnerships as opportunities arise. In general, risks associated with such limited partnerships include those related to their underlying investments (i.e., equity securities, debt securities and real estate), plus a level of illiquidity, which is mitigated by the ability of the Company to take annual distributions of partnership earnings. There can be no assurance that the Company will continue to achieve the same level of returns on its investments in limited partnerships as it has historically. Further, there can be no assurance that the Company will receive a return of all or any portion of its current or future capital investments in limited partnerships. The failure of the Company to receive the return of a material portion of its capital investments in limited partnerships, or to achieve historic levels of return on such investments, could have a material adverse effect on the Company's financial condition and results of operations.

As previously discussed, in fiscal 2003 and 2002 the Company participated in “dollar roll” repurchase agreement transactions. Amounts outstanding to repurchase securities under such agreements were approximately $0 and $262.5 million at December 31, 2003 and 2002, respectively. The Company may engage in selected “dollar roll” transactions as market opportunities arise.

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

See “Item 1 ‑ Business ‑ Insurance Regulation” for a description of certain NAIC initiatives that also may impact the Company's financial condition and results of operations.

Off-Balance Sheet Arrangements

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

34.

Contractual Obligations

The accompanying Notes to Consolidated Financial Statements contain information regarding payments required under existing long-term borrowing arrangements. The following presents a summary of the Company’s significant contractual obligations.

	Payment Due By Period (in thousands)
Contractual Obligations	Less than 1 year	1-3 Years	4-5 Years	After 5 Years	Total

Long Term Debt Obligations				$100,000	$100,000

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

Effects of Inflation and Interest Rate Changes

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

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

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

35.

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

CRITICAL ACCOUNTING POLICIES ESTIMATES

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

INVESTMENTS

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

36.

The following table summarizes the Company's investment portfolio at

December 31, 2003. This table consists primarily of fixed maturity investments available for sale, which are carried at fair value.

Investment Portfolio

	Total Carrying Value<F1>
	(dollars in thousands)
Fixed Maturities
Bonds and Notes:
U.S. Government, government agencies
and authorities<F2>	$ 462,225
Investment grade corporate<F3>	2,339,133
Public utilities	396,218
Below investment grade corporate<F3>	231,930
Mortgage backed	321,316
Preferred stocks		139,585

Total Fixed Maturities<F4>	3,890,407

Equity Securities
Common stock	39,652

Other Investments:
Policy loans	18,262
Real Estate	415
Mortgage loans	9,142
Other long‑term investments<F5>	323,139
Cash and short‑term investments		36,571

Total cash and investments			4,317,588

_______________________________________________________________________________

<F1> All fixed maturity and equity securities are classified as available for sale; accordingly total carrying value equals estimated fair value. Independent pricing services provide market prices for over 98% of the publicly traded securities. Where prices are unavailable from pricing services, prices are obtained from securities dealers and valuation methodologies. For other long-term investments, estimated market value either approximates estimated carrying value or was not readily ascertainable. See “Note 1(c) to the Notes to the Consolidated Financial Statements for an explanation of the methodology used to value "Other Investments."”

<F2> Approximately $1.3 million of such securities represent beneficial ownership interests in mortgage-backed securities of FDIC, FHLMC, FNMA, GNMA or the RTC.

<F3> Ratings are based primarily upon those assigned by the NAIC.

<F4> Includes approximately $1.3 million of convertible preferred stock.

<F5> Consist principally of investments in limited partnerships, which are accounted for under the equity method.

37.

DEFERRED POLICY ACQUISITION COSTS

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

FUTURE POLICY BENEFITS

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

Life Insurance and Annuity Reserves

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

The reserves reflected in the Company's consolidated financial statements included herein are calculated based on GAAP and differ from those specified by the laws of the various states in which the Insurance Company does business and those reflected in the Insurance Company's statutory financial statements. These differences arise from the use of different mortality and morbidity tables and interest rate assumptions, the introduction of lapse assumptions into the reserve calculation and the use of the net level premium reserve method on all insurance business. See “Notes 1G, 1H and 8 to the Notes to the Consolidated Financial Statements.”

The reserves reflected in the Company's consolidated financial statements are based upon the Company's best estimates of mortality, persistency, expenses and investment income, with appropriate provisions for adverse statistical deviation and the use of the net level premium method for all non‑interest‑sensitive products. For all interest‑sensitive products the policy account value is equal to the accumulation of gross premiums plus interest credited less mortality and expense charges and withdrawals. In determining reserves for its insurance and annuity products, the

Company performs periodic studies to compare current experience for mortality, interest and lapse rates with expected experience in the reserve assumptions. Differences are reflected currently in earnings for each period. The Company historically has not experienced significant adverse deviations from its assumptions.

38.

EMPLOYEE BENEFIT PLANS

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

During 2003, the actuarial assumptions used in the calculation of the Company's projected benefit obligation include the expected rate of compensation increases of 3.00%, a discount rate of 6.00% and an expected return on assets of 5.50%. The projected benefit obligation at December 31, 2003 is $13.6 million.

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is contained in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Item 8. Financial Statements and Supplementary Data

See the accompanying Table of Contents to Consolidated Financial Statements and Schedules on Page F-1.

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

None

39.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information relating to the Company's directors, nominees for election as directors and executive officers will be included in the Company's definitive Proxy Statement for its 2003 Annual Meeting of Shareholders (the “Proxy Statement”), which the Company intends to file pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, under the heading "Directors and Executive Officers" and is incorporated herein by reference.

Item 11. Executive Compensation

The information relating to compensation paid to executive officers and directors of the Company will be included in the Proxy Statement under the heading “Compensation of Directors and Executive Officers” and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information relating to the security ownership of certain beneficial owners and management of the Company will be included in the Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

None

Item 14. Controls and Procedures

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

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

Item 15. Principal Accounting Fees and Services

The information relating to Principal Accounting Fees and Services will be included in the Proxy Statement under the heading “Selection of Independent Auditors” and is incorporated herein by reference.

40.

PART IV

Item 16. Exhibits, Financial Statement Schedules, and Reports on Form 8‑K

(a). The Independent Auditors' Report, Consolidated Financial Statements and Consolidated Financial Statement Schedules listed in the Table of Contents on page F‑1 are being filed as part of this Form 10‑K.

(b). During the last quarter of the fiscal year ended December 31, 2003 the Company did not file a current report on Form 8‑K.

(c). Exhibit Index

Exhibit

Number Description of Document

Certificate of Ownership and Merger, as filed with the Secretary of State of Delaware on July 27, 1993 (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1993)

2.02 Certificate of Merger, as filed with the Secretary of State of State of New York on July 27, 1993 (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1993)

3.01 Certificate of Amendment of the Certificate of Incorporation of the Company, as filed with the Secretary of State of State of New York on June 8, 1993 (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1993)

3.02 Certificate of Correction of the Certificate of Amendment to the Certificate of Incorporation of the Company, as filed with the Secretary of State of State of New York on June 29, 1993 (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1993)

3.03 Certificate of Incorporation of Presidential Life Corporation, a Delaware corporation (now the Company) (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992)

3.04 By-Laws of Presidential Life Corporation, a Delaware corporation (now the Company) (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992)

4.01 Form of Indenture dated as of December 15, 1993 between the Registrant and M&T Bank relating to the 9 1/2% Senior Notes due 2001 (Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 of the Company filed on September 2, 1993)

Form of Indenture dated as of February 23, 1999 between the Registrant and Bankers Trust Company relating to the 7 7/8% Senior Notes due 2009 (Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-3 of the Company filed on November 3, 1998)

41.

10.01 Reinsurance Agreements, dated January 1, 1969, March 1, 1979 and November 15, 1980, in each case together with all amendments thereto, Between the Registrant and Life Reassurance Corporation of America (formerly known as General Reassurance Corporation) (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992)

10.02 Reinsurance Agreements, dated September 25, 1969 and November 21, 1980, in each case together with all amendments thereto, by and between Presidential Life Insurance Company and Security Benefit Life Insurance Company (now known as Swiss Re Life & Health America) (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992)

10.03 Form of Indemnification Agreement (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992)

10.04 Presidential Life Corporation 1984 Stock Option Plan (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992)

10.05 Presidential Life Corporation 1996 Stock Incentive Plan (Incorporated by reference to Exhibit 28.1 to the Registration Statement on Form S-8 of the Company filed on July 16, 1996)

11.01 Statement Re Computation of Per Share Earnings is clearly determinable from the information contained in this Form 10‑K

Subsidiaries of the Registrant (Incorporated by reference to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992)

Consent of Deloitte & Touche, LLP

99.01 Certification of Chief Executive Officer Pursuant

to Exchange Act Rule 13a-14

99.02 Certification of Principal Financial Officer Pursuant

to Exchange Act Rule 13a-14.

Certification of Chief Executive Officer Pursuant to

Section 906 of the Sarbanes Oxley Act of 2003

99.04 Certification of Principal Financial Officer Pursuant to

Section 906 of the Sarbanes Oxley Act of 2003

42.

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.

PRESIDENTIAL LIFE CORPORATION

By /s/ Herbert Kurz

Herbert Kurz

Principal Executive Officer

and Director

Date: March 12, 2004

43.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Date: March 12, 2004 /s/ Herbert Kurz

Herbert Kurz

Principal Executive Officer

and Director

Date: March 12, 2004 /s/ Charles J. Snyder

Charles J. Snyder, Treasurer

and Principal Accounting Officer

Date: March 12, 2004 /s/ Paul F. Pape

Paul Frederick Pape Director

Date: March 12, 2004 /s/ Richard Giesser

Richard Giesser Director

Date: March 12, 2004 /s/ Lawrence Rivkin

Lawrence Rivkin Director

Date: March 12, 2004 /s/ Donald Barnes

Donald Barnes Director

44. A.-F.

INDEPENDENT AUDITORS¢CONSENT

We consent to the incorporation by reference in Registration Statement Nos. 333-63831 on Form S-3 and 333-08217 on Form S-8, of Presidential Life Corporation, of our report dated March 12, 2004, appearing in this Annual Report on Form 10-K of Presidential Life Corporation for the year ended December 31 2003.

DELOITTE & TOUCHE LLP

New York, New York

March 12, 2004

45.

TABLE OF CONTENTS TO

CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

Page

Independent Auditors' Report...................................... F‑2

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2003 and 2002 ... F-3

Consolidated Statements of Income ‑ Years Ended December 31,2003,

2002 and 2001................................................... F‑4

Consolidated Statements of Shareholders' Equity ‑ Years Ended

December 31, 2002, 2002 and 2001............................. F‑5

Consolidated Statements of Cash Flows ‑ Years Ended December 31,

2003, 2002 and 2001.......................................... F‑6

Notes to Consolidated Financial Statements........................ F‑7

Consolidated Financial Statement Schedules:

II Condensed Balance Sheets (Parent Company Only) as of

December 31, 2003 and 2002................................. S‑1

II Condensed Statements of Income (Parent Company

Only)- Years Ended December 31, 2003, 2002 and 2001........ S‑2

II Condensed Statements of Cash Flows (Parent

Company Only) - Years Ended December 31, 2003, 2002

and 2001................................................... S‑3

III Supplemental Insurance Information - Years Ended

December 31, 2003, 2002 and 2001........................... S‑4

IV Reinsurance - Years Ended December 31, 2003, 2002 and 2001... S‑5

Certification for Chief Executive Officer ................... S-6

Certification for Treasurer and Principal Accounting Officer. S-7

All schedules not included are omitted because they are either not applicable or because the information required therein is included in the Notes to Consolidated Financial Statements.

F‑1.

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders

Presidential Life Corporation

Nyack, New York 10960

We have audited the accompanying consolidated balance sheets of Presidential Life Corporation and subsidiaries (the “Company”) as of December 31, 2003 and 2002 and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the consolidated financial statement schedules listed in the foregoing Table of Contents. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2003 and 2002 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

New York, New York

March 12, 2004

F-2.

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

		December 31,
ASSETS:		2003		2002
Investments:
Fixed maturities available for sale		$	3,890,407		$			3,642,582
Common stocks		39,652		16,886
Mortgage loans		9,142		9,289
Real estate		415		415
Policy loans		18,262		17,633
Short‑term investments		23,664		288,822
Other invested assets		323,139		254,659
Total investments		4,304,681		4,230,286

Cash and cash equivalents		12,907		13,101
Accrued investment income		50,956		48,589
Amounts due from security transactions		1,196		1,033
Deferred federal income taxes, Net		0		9,319
Federal income tax recoverable		27,137		30,245
Deferred policy acquisition costs		108,713		113,039
Furniture and equipment, net		200		309
Amounts due from reinsurers		15,688		18,617
Other assets		5,094		5,450
Assets held in separate account		2,450		2,196
TOTAL ASSETS	$	4,529,022		$		4,472,184

LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Policy liabilities:
Policyholders' account balances	$	3,092,872		$ 2,911,554
Future policy benefits:
Annuity		646,958		636,789
Life and accident and health		65,425		68,812
Other policy liabilities		6,193		5,284
Total policy liabilities		3,811,448		3,622,439
Dollar repurchase agreements		0		262,518
Notes payable		100,000		100,000
Short-term note payable		50,000		50,000
Deposits on policies to be issued		11,795		6,375
General expenses and taxes accrued		7,610		6,380
Deferred federal income taxes, Net		38,127		0
Other liabilities		18,827		23,585
Liabilities related to separate account		2,450		2,196
Total liabilities		4,040,257		4,073,493

Shareholders' Equity:
Capital stock ($.01 par value; authorized
100,000,000 shares; issued and outstanding
29,334,668 shares in 2003 and 29,334,668
Shares in 2002)		293		293
Accumulated other comprehensive income		88,343		17,820
Retained earnings		400,129		380,578
Total Shareholders' Equity		488,765		398,691

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	4,529,022		$		4,472,184

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

F-3.

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)

	Years Ended December 31

	2003		2002	2001
REVENUES:
Insurance revenues:
Premiums	$	10,992	$ 11,605	$ 14,137
Annuity considerations	32,622		69,422	97,380
Universal life and investment type
policy fee income	1,004		679	777
Net investment income	288,382		267,561	234,125
Net realized investment gains(losses)	10,328		(146,743)	(65,132)
Other income	966		2,216	3,121
TOTAL REVENUES	344,294		204,740	284,408

BENEFITS AND EXPENSES:
Death and other life insurance benefits	16,140		13,566	14,330
Annuity benefits	71,694		64,310	57,937
Interest credited to policyholders'
account balances	161,379		146,502	108,422
Interest expense on notes payable	9,643		10,633	8,836
Other interest and other charges	700		79	980
Increase in liability for
future policy benefits	8,235		52,312	85,681
Commissions to agents, net	12,496		32,323	32,066
General expenses and taxes	17,072		14,888	18,280
Increase in deferred policy
acquisition costs	(2,542)		(30,632)	(23,523)
TOTAL BENEFITS AND EXPENSES	294,817		303,981	303,009

Income (loss) before income taxes	49,477		(99,241)	(18,601)

Provision (benefit) for income taxes:
Current	8,358		(8,370)	(13,363)
Deferred	9,834		(21,602)	2,467
	18,192		(29,972)	(10,896)

NET INCOME (LOSS)	$	31,285	$ (69,269)	$ (7,705)

Weighted average number of shares
outstanding during the year	29,334,668		29,332,120	29,315,505

Earnings (Loss) per common share	$ 1.07		$ (2.36)	$ (.26)

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

F-4.

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(in thousands, except share data)
				Accumulated
		Additional		Other
	Capital	Paid-in-	Retained	Comprehensive
	Stock	Capital	Earnings	Income (loss)	Total
Balance at
January 1, 2001	293	0	480,897	(15,663)	465,527

Comprehensive Income:

Net Loss			(7,705)		(7,705)

Loss on Rate Lock Hedge				(5,485)	(5,485)

Net Unrealized Investment
Losses				(13,404)	(13,404)

Comprehensive Income					(26,594)

Purchase and Retirement
of Stock			(122)		(122)

Dividends Paid to
Shareholders ($.39 per
share)			(11,717)		(11,717)

Balance at
December 31, 2001	293	0	461,353	(34,552)	427,094

Comprehensive Income:

Net Loss			(69,269)		(69,269)

Loss on Rate Lock Hedge				(4,142)	(4,142)

Net Unrealized Investment
Gains				56,514	56,514

Comprehensive Loss					(16,897)

Purchase and Retirement
of Stock			225		225

Dividends Paid to
Shareholders ($.40 per
Share)			(11,731)		(11,731)

Balance at
December 31, 2002	293	0	380,578	17,820	398,691

Comprehensive Income:

Net Income			31,285		31,285

Loss on Rate Lock Hedge				(3,471)	(3,471)

Net Unrealized Investment
Gains				73,994	73,994

Comprehensive Gain					101,808

Dividends Paid to
Shareholders ($.40 per
Share)			(11,734)		(11,734)

Balance at
December 31, 2003	293	0	400,129	88,343	488,765

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

F-5.

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Years Ended December 31
	2003			2002	2001

OPERATING ACTIVITIES:
Net income (loss)	$	31,285		$ (69,269)	$	(7,705)
Adjustments to reconcile net income to
net cash provided by operating activities:
Benefit(provision) for deferred income taxes	9,834			(21,602)	2,467
Depreciation and amortization	1,044			1,783	711
Net accrual of discount on fixed maturities	(26,770)			(20,357)	(11,166)
Realized investment losses (gains)	(10,328)			146,743	65,132
Changes in:
Accrued investment income	(2,367)			(7,832)	(9,325)
Deferred policy acquisition costs	(2,542)			(30,632)	(28,820)
Federal income tax recoverable	3,108			(3,321)	(21,278)
Liability for future policy benefits	6,782			53,112	91,894
Other items	5,701			(21,779)	22,224

Net Cash Provided by
Operating Activities	15,747			26,846	104,134

INVESTING ACTIVITIES:
Fixed Maturities:
Available for Sale:
Acquisitions	(1,136,259)			(1,089,449)	(1,048,366)
Sales	420,635			119,038	99,240
Maturities, calls and repayments	602,244			272,482	143,487
Common Stocks:
Acquisitions	(31,351)			(10,292)	(8,038)
Sales	18,652			17,405	11,274
Decrease (increase) in short-term
investments and policy loans	264,529			16,990	(45,810)
Other Invested Assets:
Additions to other invested assets	(131,294)			(85,187)	(43,819)
Distributions from other invested assets	69,744			70,581	63,507
Purchase of property and equipment	0			0	167
Mortgage loan on real estate	147			4,109	1,495
Amounts due from security transactions	(163)			(249)	11,466

Net Cash Provided by (Used in)
Investing Activities	76,884			(684,572)	(815,397)

FINANCING ACTIVITIES:
Proceeds from Dollar Repurchase Agreements	1,057,901			3,117,054	2,805,155
Repayment of Dollar Repurchase Agreements	(1,320,419)			(3,115,092)	(2,777,809)
Proceeds from (repayment of) line of credit	0			0	50,000
Increase in policyholders' account balances	181,318			744,222	571,289
Repurchase of common stock	0			225	(135)
Bank overdrafts	(5,313)			(3,127)	14,979
Deposits on policies to be issued	5,420			(62,644)	60,134
Dividends paid to shareholders	(11,732)			(11,732)	(11,717)

Net Cash (Used in) Provided by
Financing Activities	(92,825)			668,906	711,896

(Decrease) increase in Cash and Cash
Equivalents	(194)			11,180	633

Cash and Cash Equivalents at Beginning of Year	13,101			1,921	1,288

Cash and Cash Equivalents at End of Year	$	12,907		$ 13,101	$	1,921
Supplemental Cash Flow Disclosure:

Income Taxes Paid	$		5,250	$ 5,641	$	7,857

Interest Paid	$		8,864	$ 8,976	$	8,577

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

F-6.

G. Future Policy Benefits

Future policy benefits for traditional life insurance policies are computed using a net level premium method on the basis of actuarial assumptions as to mortality, persistency and interest established at policy issue. Assumptions established at policy issue as to mortality and persistency are based on anticipated experience, which, together with interest and expense assumptions, provide a margin for adverse deviation. Benefit liabilities for deferred annuities during the accumulation period are equal to accumulated contract holders' fund balances and after annuitization are equal to the present value of expected future payments. During the three years in the period ended December 31, 2003, interest rates used in establishing such liabilities range from 3.0% to 11% for life insurance liabilities and from 5.6% to 11.05% for annuity liabilities.

H. Policyholders' Account Balances

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

These account balances are summarized as follows:

	2003	2002
	(in thousands)
Account balances at beginning of year	$ 2,911,554	$ 2,167,332
Additions to account balances	422,418	947,239
Total	3,333,972	3,114,571
Deductions from account balances	241,100	203,017

Account balances at end of year	$ 3,092,872	$ 2,911,554

Interest rates credited to account balances ranged from 3% to 11.87% in 2003 and 2002.

I. Federal Income Taxes

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

J. Separate Accounts

Separate Accounts are established in conformity with New York State Insurance Law and represent funds for which investment income and investment gains and losses accrue to the policyholders. Assets and liabilities (stated at market value) of the Separate Account, representing net deposits and accumulated net investment earnings less fees, held primarily for the benefit of contractholders, are shown as separate captions in the consolidated balance sheets.

Deposits to the Separate Account are reported as increases in Separate Account liabilities and are not reported in revenues. Mortality, policy administration and surrender charges to the Separate Account are included in revenues.

F-10.

K. Earnings Per Common Share

The Company has calculated earnings per share (EPS) in accordance with SFAS No.128, Earnings Per Share. Basic EPS is computed based upon the weighted average number of common shares outstanding during the year. Diluted EPS is computed based upon the weighted average number of common shares including contingently issuable shares and other dilutive items. The weighted average number of common shares used to compute diluted EPS for the year ended December 31, 2003, 2002 and 2001 was 29,367,925, 29,374,401 and 29,340,215 respectively. The dilution from the potential exercise of stock options outstanding did not change basic EPS.

L. Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand and amounts due from banks with an original maturity of three months or less.

M. New Accounting Pronouncements

In December 2003, the FASB issued Statement of Financial Accounting Standards ("SOFAS") No. 132 (revised 2003), "Employers' Disclosures about Pensions and Other Postretirement Benefits". This standard requires additional detailed disclosures regarding pension plan assets, benefit obligations, cash flows, benefit costs and related information. With the exception of disclosures related to foreign plans, the new disclosures are required to be provided in annual statements of public entities with fiscal years ending after December 15, 2003. The Company adopted the new disclosure requirements for all plans as of December 31, 2003. See Note 5.

Effective December 31, 2003, the Company adopted the disclosure requirements of Emerging Issues Task Force ("EITF") Issue No. 03-01, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments". Under the consensus, disclosures are required for unrealized losses on fixed maturity and equity securities accounted for under SFAS No. 115, "Accounting for Certain Investment in Debt and Equity Securities", and SFAS No. 124, "Accounting for Certain Investments Held by Not-for-Profit Organizations", that are classified as either available-for-sale or held-to-maturity. The disclosure requirements include quantitative information regarding the aggregate amount of unrealized losses and the associated fair value of the investments in an unrealized loss position, segregated into time periods for which the investments have been in an unrealized loss position. The consensus also requires certain qualitative disclosures about the unrealized holdings in order to provide additional information that the Company considered in concluding that the unrealized losses were not other-than-temporary. See Note 2.

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

F-11.

In July 2003, AcSEC issued a final Statement of Position 03-1, "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts" (the "SOP"). The major provisions of the SOP require: recognizing expenses for a variety of contracts and contract features, including guaranteed minimum death benefits ("GMDB"), certain death benefits on universal-life type contracts and annuitization options, on an accrual basis versus the previous method of recognition upon payment; reporting and measuring assets and liabilities of certain separate account products as general account assets and liabilities when specified criteria are not met; reporting and measuring the Company's interest in its separate accounts as general account assets based on the insurer's proportionate beneficial interest in the separate account's underlying assets; and Capitalizing sales inducements that meet specified criteria and amortizing such amounts over the life of the contracts using the same methodology as used for amortizing deferred acquisition costs ("DAC"). The SOP is effective for financial statements for fiscal years beginning after December 15, 2003. Management is in the process of assessing the impact of adopting SOP 03-1, but believes it will not have a material impact on financial statements.

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

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

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (²FIN 46²). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities entered into prior to February 1, 2003, FIN 46 is effective for the first interim or annual period beginning after June 15, 2003. In October 2003, the FASB issued FASB Staff Position (“FSP”) FIN 46-6, Effective Date of FASB Interpretation, No. 46 Consolidation of Variable Interest Entities.

F-12.

This FSP provides a deferral of interests held by public entities in a variable interest entity or potential variable interest entity until the end of the first interim or annual period after December 15, 2003, if (a) the variable interest entity was created before February 1, 2003 and (b) the public entity has not issued financial statements reporting the variable interest entity that was created before February 1, 2003, in accordance with FIN 46, other than in the disclosure required by FIN 46. The FSP is effective for financial statements issued after October 9, 2003. The adoption of FIN 46 for variable entities created after February 1, 2003 did not have an impact on the consolidated financial statement of the company as of December 31, 2003. Management does not expect the adoption of the provision of FSP FIN 46-6, which is effective for the Company on March 31, 2004, to have a material impact on the Company’s consolidated financial statements.

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

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

In August 2002, the FASB issued SFAS No.146, Accounting for Costs Associated with Exit or Disposal Activities (²SFAS 146²). The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Previous accounting guidance was provided by EITF 94-3, ²Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)². SFAS 146 replaces EITF 94-3. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002.

The adoption of SFAS 146 did not have an impact on the Company¢s consolidated financial statements.

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

F-13.

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

In March 1999, the National Association of Insurance Commissioners (“NAIC”) adopted the Codification of Statutory Accounting Principles (the “Codification”). The Codification, which is intended to standardize regulatory accounting and reporting to state insurance departments, was effective January 1, 2002. However, statutory accounting principles will continue to be established by individual state laws and permitted practices. The New York State Insurance Department ("NYSID") required adoption of the Codification with certain modifications, for the preparation of statutory financial statements, effective January 1, 2001. On October 1, 2002 NYSID modified its original adoption of Codification to allow for the recognition of Deferred Tax Assets (²DTA²) and Deferred Tax Liabilities (²DTL²), with certain restrictions. This change allowed the Insurance Company to recognize a net DTA of approximately $16.5 and $22.4 million at December 31, 2003 and December 31, 2002 respectively for statutory reporting purposes. The adoption of Codification by the NAIC and the Codification as modified by the NYSID, as currently interpreted, did not adversely affect statutory capital and surplus as of December 31, 2003.

INVESTMENTS

The following information summarizes the components of net investment income and realized investment losses:

Net Investment Income:
Year Ended December 31
		2003		2002			2001
(in thousands)
Fixed maturities	$		259,581		$	234,256		$	177,531
Common stocks	659				332			240
Short‑term investments	1,840				6,294			13,723
Other investment income	32,576				31,754			47,961
	294,656				272,636			239,455

Less investment expenses	6,274				5,075			5,330

Net investment income	$		288,382		$	267,561		$	234,125

As of December 31, 2003, 2002 and 2001 there were forty fixed maturity investments with a carrying value of $220.1 million and thirty-two fixed maturity investments with a carrying value of $215.7 and sixteen fixed maturity investments with a carrying value of $134.9 million respectively, in the accompanying balance sheet which were non-income producing. Nineteen of these fixed maturity investments in 2003, nineteen in 2002 and twelve in 2001 with a carrying value of $209.6, and $203.5 and $113.4 respectively, are defeased with U.S Treasuries in an amount sufficient to insure full payment of principal.

F-14.

The following table presents the amortized cost and gross unrealized losses for fixed maturities where the estimated fair value had declined and remained below amortized cost at December 31, 2003:

	Less Than 12 Months		12 Months or More		Total
	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Description of Securities			(in thousands)

US Treasury obligations and direct obligations of US Government Agencies	210,108	8,581	57,257	5,119	267,365	13,700
Corporate Bonds	492,064	30,149	332,632	86,724	824,696	116,873

Total	702,172	38,730	389,889	91,843	1,092,061	130,573

The following table presents the total gross unrealized losses for fixed maturities where the estimated fair value had declined and remained below amortized cost by December 31, 2003.

	Gross Unrealized Losses			% Of Total	Gross Unrealized Losses Net of Principal Protected Notes		% Of Total
		(in thousands)			(in thousands)
Less than 20%		52,262	40.0		49,765	88.9
20% or more for less than six months		13,729	10.5		1,707	3.0
20% or more for six months or greater		64,582	49.5		4,531	8.1

Total		130,573	100.0		56,003	100.0

Approximately 93% of the securities with an unrealized loss of 20% or more for a period equal to or greater than twelve months are principal protected notes. This structure utilizes AAA collateral such as U.S Treasury Strips, in conjunction with a variable rate coupon. The AAA rated collateral accretes to par at maturity, defeasing the security and thereby insulating the holder from any negative credit events which might interfere with the repayment of principal.

F-15.

Realized Investment Gains (Losses):

	Year Ended December 31,
	2003			2002		2001
(in thousands)
Fixed maturities	$	9,703		$	(145,290)	$	(56,826)
Common stocks	625			(1,453)		(8,306)
Total realized gains (losses)
on investments	$	10,328		$	(146,743)	$	(65,132)

Unrealized Investment Gains (Losses):

Year Ended December 31,
	2003			2002		2001
(in thousands)
Fixed maturities	$		145,103	$ 45,807		$ (60,330)
Common stocks			8,381	129		6,672
Other Assets	6,928
Unrealized investment
gains (losses)	$		160,412	$	45,936	$ (53,658)
Amortization (benefit) of
deferred acquisition costs	(19,160)			(12,148)		8,935
Deferred federal income
taxes (benefit)	(49,438)			(11,826)		15,656
Transition Adjustment	(3,471)			(4,142)		(5,485)
Net unrealized investment
gains (losses)	88,343			17,820		(34,552)
Change in net unrealized
investment gains (losses)	$		70,523	$ 52,372		$ (18,889)

The change in unrealized investment gains (losses) shown above resulted primarily from changes in general economic conditions which directly influenced investment security markets. These changes were also impacted by writedowns of investment securities for declines in market values deemed to be other than temporary.

2. INVESTMENTS

The following tables provide additional information relating to investments held by the company:

December 31,2003:

AVAILABLE FOR SALE:
		Cost or Amortized			Gross Unrealized		Market
Type of Investment		Cost			Gains	(Losses)	Value
(in thousands)
Fixed Maturities:
Bonds and Notes:
United States government
and government agencies
and authorities	$			463,175	$ 7,537	$ (14,487)	$ 456,225
States, municipalities and
political subdivisions	9,215				3,293	0	12,508
Foreign governments	7,759				0	(1,759)	6,000
Public utilities	373,095				32,018	(8,895)	396,218
All other corporate bonds	2,761,858				223,443	(105,430)	2,879,871
Preferred stocks, primarily
corporate	130,202				9,804	(421)	139,585
Total Fixed Maturities:	$ 3,745,304				$ 276,095	$(130,992)	$3,890,407

Common Stocks	$		31,271		$ 8,649	$ (268)	$ 39,652

F-16.

December 31,2002:

AVAILABLE FOR SALE:
	Cost or Amortized	Gross Unrealized		Market
Type of Investment	Cost	Gains	(Losses)	Value
(in thousands)
Fixed Maturities:
Bonds and Notes:
United States government
and government agencies
and authorities	$ 527,587	$ 33,978	$ (1,045)	$ 560,250
States, municipalities and
political subdivisions	9,200	3,276	0	12,476
Foreign governments	13,887	1,437	(1,669)	13,655
Public utilities	408,182	18,337	(23,622)	402,897
All other corporate bonds	2,461,829	153,557	(142,849)	2,472,537
Preferred stocks, primarily
corporate	176,089	5,759	(1,351)	180,497
Total Fixed Maturities:	$3,596,774	$216,344	$(170,536)	$3,642,582

Common Stocks	$ 16,757	$ 1,594	$ (1,465)	$ 16,886

The estimated fair value of fixed maturities available for sale at December 31, 2003, by contractual maturity, are as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

	Market Value
	(in thousands)

Due in one year or less	$ 24,016
Due after one year through five years	40,837
Due after five years through ten years	499,880
Due after ten years	2,864,773
Total debt securities	3,429,506
Mortgage-Backed Bonds	321,316
Preferred Stock	139,585

Total	$ 3,890,407

Proceeds from sales and maturities of fixed maturities during 2003, 2002 and 2001 were $1,024.8 million, $396.8 million and $251.6 million, respectively. During 2003, 2002 and 2001, respectively, gross gains of $40.3 million, $18.0 million and $14.1 million and gross losses of $18.8 million, $90.3 million and $80.6 million were realized on those sales.

As of December 31, 2003, retail properties in Pennsylvania collateralized the Company’s mortgage loan.

There were no investments owned in any one issuer that aggregate 10% or more of shareholders' equity as of December 31, 2003.

As of December 31, 2003 securities with a carrying value of approximately $12.7 million were on deposit with various state insurance departments to comply with applicable insurance laws.

F-17.

3. NOTES PAYABLE

Notes payable at December 31, 2003 and 2002 consist of $100 million, 7 7/8% Senior Notes (“Senior Notes”) due February 15, 2009. Interest is payable February 15 and August 15. Debt issue costs are being amortized on the interest method over the term of the notes. As of December 31, 2003, unamortized costs were $1.1 million. The total principal is due on February 15, 2009. In addition, the Company had deferred losses of approximately $3.5 million recorded in accumulated other comprehensive income as of December 31, 2003, related to an interest rate lock agreement used to hedge the issuance of the Senior Notes. The Company reclassifies the deferred loss from a liability to accummulated other comprehensive income over the term of the notes. The Company expects to reclassify approximately $672,000 into earnings within the next 12 months.

The indenture governing the Senior Notes contains covenants relating to limitations on liens and sale or issuance of capital stock of the Insurance Company. In the event the Company violates such covenants as defined in the indenture, the Company may be obligated to offer to repurchase the entire outstanding principal amount of such notes. As of December 31, 2003, the Company believes that it is in compliance with all of the covenants.

The short-term note payable relates to a bank line of credit in the amount of $50,000,000 and provides for interest on borrowings based on market indices. At December 31, 2003 and 2002 the Company had $50,000,000 and $50,000,000 outstanding, respectively. The line of credit is up for renewal on April 22, 2004 with The Bank of New York.

Preliminary discussions with the bank have indicated a willingness to renew the line of credit. However, if the bank chooses not to renew the line of credit, the Company would be forced to paydown the $50 million in April 2004 or seek alternative financing options. For the year ended December 31, 2003 and 2002 the short-term note payable had a weighted average interest rate of 1.75% and 2.39%, respectively.

4. SHAREHOLDERS' EQUITY

During 2003, the Company's Board of Directors maintained the quarterly dividend rate of $.10 per share. During 2003, 2002 and 2001, the Company purchased and retired 0, 0 and 26,000 shares of common stock, respectively. The Company is authorized pursuant to a resolution of the Board of Directors to purchase 385,000 shares of common stock.

The Insurance Company is subject to various regulatory restrictions on the maximum amount of payments, including loans or cash advances that it may make to the Company without obtaining prior regulatory approval. Under the New York Insurance Law, the Insurance Company is permitted without prior insurance regulatory clearance to pay a stockholder dividend to the Company as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of (i) 10% of its surplus as of the immediately preceding calendar year and (ii) its net gain from operations for the immediately preceding calendar year (excluding realized capital gains). The Insurance Company will be permitted to pay a stockholder dividend to the Company in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the distribution. Under the New York Insurance Law, the Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders. The New York Insurance NYSID has established informal guidelines for such determinations. The guidelines, among other things, focus on the insurer's overall financial condition and profitability under statutory accounting practices. Management of the Company cannot provide assurance that the Insurance Company will have statutory earnings to support payment of dividends to the Company in an amount sufficient to fund its cash requirements and pay cash dividends or that the Superintendent will not disapprove any dividends that the Insurance Company must submit for the Superintendent's consideration. The Insurance Company's insurance subsidiary is also subject to restrictions on the payment of dividends to their respective parent companies. To preserve capital, the Insurance Company paid no dividends in fiscal years 2003 and 2002 and in 2001, the Insurance Company paid dividends of $27.7 million to the Company. F-18.

Other Comprehensive Income (loss)
For the years ended				Tax		After-
December 31,		Pre-Tax		Expense/		Tax
		Amount		(Benefit)		Amount
(in thousands)
2003
Unrealized gains(losses)on	$		88,367	$	26,510	$	61,857
investment securities:
Unrealized holding gains arising during year
Less: reclassification adjustment for losses
realized in net income	(10,328)			(3,099)		(7,229)
Change related to deferred acquisition costs	(7,011)			(2,103)		(4,908)

Net unrealized investment gains	105,706			31,712		73,994

2002
Unrealized gains(losses) on
investment securities:
Unrealized holding losses arising during year	$ 206,394			$ 61,918		$ 144,476
Less: reclassification adjustment for gains
realized in net income	146,743			44,023		102,720
Change related to deferred acquisition costs	(21,083)			(6,325)		(14,758)

Net unrealized investment losses	80,734			24,220		56,514

2001
Unrealized gains(losses) on
investment securities:
Unrealized holding losses arising during year	$ (89,213)			$ (26,763)		$ (62,450)
Less: reclassification adjustment for gains
realized in net income	65,132			19,540		45,592
Change related to deferred acquisition costs	4,935			1,481		3,454

Net unrealized investment losses	(19,146)			(5,742)		(13,404)

F-19.

5. EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS

(a) Employee Retirement Plan

The Company has a noncontributory defined benefit pension plan covering all eligible employees. The Company is both sponsor and administrator of this plan. The plan provides for pension benefits based on average pay and years of service. The Company uses a December 31 measurement date for this plan.


	Year Ended December 31,
	2003			2002
(in thousands)

Change in benefit obligation
Benefit obligation at beginning of year	$		8,736	$		7,371
Service cost	694			495
Interest cost	754			499
Actuarial loss	4,049			607
Benefits paid	(621)			(236)
Benefit obligation at end of year	13,612			8,736


Change in plan assets
Fair value of assets at beginning of year	5,643			5,454
Actual return on plan assets	356			(2)
Employer contribution	1,594			427
Benefits paid	(621)			(236)
Fair value of assets at end of year	6,972			5,643


Funded status	(6,640)			(3,093)
Unrecognized net actuarial loss (gain)	4,904			1,062
Unrecognized prior service cost (benefit)	0			0
Unrecognized Net Transition Obligation	0			28
Net amount recognized	(1,736)				(2,003)


Amounts recognized in the statement of financial position consist of:

Prepaid benefit cost	0			0
Accrued benefit cost	(4,241)			(2,003)
Intangible assets	0			0
Accumulated other comprehensive income	2,505			0
Net amount recognized	(1,736)			(2,003)

Information for pension plans with an accumulated benefit obligation in excess of plan assets

Projected benefit obligation	13,612			8,736
Accumulated benefit obligation	11,213			7,035
Fair value of plan assets	6,972			5,643

Components of Net Periodic Benefit Cost
Service cost	$	694		$	495
Interest cost	754			499
Expected return on plan assets	(329)			(404)
Amortization of net transition obligation	28			28
Amortization of (gain) loss	180			-
Net periodic benefit cost	$	1,327		$	618

F-20.

		Year Ended December 31,	Year Ended December 31,
		2003	2002
(in thousands)
Assumptions

Weighted-average assumptions used to determine benefit obligations December 31

Discount rate		6.0%	7.0%
Rate of compensation increase		3.0%	3.0%


Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31

Discount rate		7.0%	7.0%
Expected long-term return on plan assets		5.5%	7.5%
Rate of compensation increase		3.0%	3.0%


Plan Assets

The Company’s pension plan weighted-average asset allocations at December 31, 2003 and 2002, by asset category are as follows:

Asset Category

Flexible Annuity Contract		100%	100%
Total		100%	100%

Employer Contributions

The Company expects to fully fund the plan to effect the expected termination of the plan during the second half of 2004 and estimates the requirement to fully fund the Plan, prior to termination, to be $2,000,000. As of February 18,2004 the plan was closed to new entrants, accrual of any future benefits terminated and the plan was “frozen”.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

2004	$	310,900
2005		359,700
2006		427,300
2007		552,800
2008		686,400
Years 2009-2013	$	4,847,800

(b) Employee Savings Plan

The Company adopted an Internal Revenue Code (IRC) Section 401(k) plan for its employees effective January 1, 1992. Under the plan, participants may contribute up to the dollar limit as prescribed by IRC Section 415(d). The Company may match a portion of participants’ pre-tax earnings. For the years ended December 31, 2003, 2002 and 2001, the Company's contribution was approximately $0, $53,000 and $49,000, respectively.

F-21.

5. EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS - CONTINUED

The Company has adopted an incentive stock option plan recommended by the Board of Directors and approved by the shareholders. This plan grants options to purchase up to 1,000,000 shares of common stock of the Company to officers and key employees. Option prices are 100% of the fair market value at date of grant. The following schedule shows all options granted, exercised, expired and exchanged under the Company's Incentive Stock Option Plan as of December 31, 2003.

Information relating to the options is as follows:

Option Price
	Number	Amount	Total
	of Shares	Per Share	Price

Outstanding, January 1, 1999	242,422	$ 16.51	$4,001,342
Granted	113,700	14.93	1,697,882
Exercised	(9,368)	9.69	(90,753)
Cancelled	(31,500)	13.45	(423,783)

Outstanding, December 31, 2000	315,254	$ 16.45	$5,184,688
Granted	168,950	19.20	3,243,840
Exercised	(36,454)	9.73	(354,552)
Cancelled	(5,650)	17.44	(98,542)

Outstanding, December 31, 2001	442,100	18.04	$7,975,484
Granted	179,750	15.60	2,804,100
Exercised	(13,977)	15.125	(211,402)
Cancelled	(50,574)	22.46	(1,135,892)

Outstanding, December 31, 2002	557,299	$ 16.92	$9,432,290
Granted	616,650	16.49	8,249,386
Repriced	(516,650)	16.933	(8,748,691)
Cancelled	(40,849)	16.826	(687,350)

Outstanding, December 31, 2003	616,450	$ 13.376	$8,245,635

At December 31, 2003, there were no options for shares of common stock exercisable.

The Company applies Accounting Principles Board Opinion No. 25 and related Interpretations in accounting for its stock option plan. Accordingly, no compensation cost has been recognized for its fixed stock option plan. Had compensation cost for the Company's stock option plan been determined based on the fair value at the grant dates for awards under the plan consistent with the method of FASB Statement 123, the Company's net income and earnings per common share for the years ended December 31, 2003, 2002 and 2001 would have been reduced to the pro forma amounts indicated below:

Net income (in thousands)	Year Ended December 31,
	2003		2002			2001

As reported	$	31,285	$	(69,269)	$	(7,705)
Pro forma	31,179		(69,448)			(7,920)

Earnings per common share

As reported	$	1.07	$	(2.36)	$	(.26)
Pro forma	$	1.06	$	(2.37)	$	(.27)

The fair value of options granted under the Company's fixed stock option plan during 2003 was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used: dividend yield of 2.43%, expected volatility of 46.0%, risk free interest rate of 6.0%, and expected lives of 4 years.

F-22.

6. INCOME TAXES

The provision for income taxes differs from the amount of income tax expense determined by applying the 35% U.S. statutory federal income tax rate to pre-tax net income from continuing operations as follows:

	2003		2002		2001
(in thousands)

Pre-Tax Net Income	$ 49,477	$(99,241)		$ (18,601)

Provision for income taxes computed
At Federal statutory rate	17,317	(34,734)		(6,510)
Increase (decrease) in income taxes
resulting from:
Other	875	4,762		(4,386)

Provision (benefit) for Federal
income taxes	$ 18,192	$(29,972)		$		(10,896)

Deferred Federal Income Tax Expense/(Benefit)

The Company provides for deferred income taxes resulting from temporary differences, which arise from recording certain transactions in different years for income tax reporting purposes than for financial reporting purposes. The sources of these differences and the tax effect of each were as follows:

	2003		2002	2001
	(in thousands)
Deferred policy acquisition costs	$	1,562	$ 8,196	$ 6,215
Policyholders' account balances	(109)		21	(8)
Investment adjustments	9,940		(23,425)	3,105
Insurance policy liabilities	(7,143)		(2,315)	(1,548)
Other	5,584		(4,079)	(5,297)
Deferred Federal income tax
expense/(benefit)	$	9,834	$ (21,602)	$ 2,467

Net Deferred Tax Liability (Asset)

The significant components of the Company’s net deferred tax liability (“DTL”) and (asset) (“DTA”) as of December 21, 2003, and 2002 are as follows:

	2003	2002
	(in thousands)
Deferred federal income tax asset:
Investments	$ (28,406)	$ (38,190)
Insurance policy liabilities	(19,539)	(12,396)
Other	(6,079)	(11,664)
Net deferred federal income tax asset	(54,024)	(62,250)

Valuation Allowance	4,520	4,520
Net deferred federal income tax	$ (49,504)	$ (57,730)

Deferred federal income tax liability:
Deferred policy acquisition costs	$ 37,277	$ 35,715
Unrealized Gains (Losses)	49,438	11,670
Policyholder account balances	310	420
Other	606	606
Deferred federal income tax liability	$ 87,631	$ 48,411

Net deferred federal income tax liability (asset)	$ 38,127	$ (9,319)

F-23.

6. INCOME TAXES - CONTINUED

The valuation allowance relates principally to investment writedowns recorded for financial reporting purposes, which have not been recognized for income tax purposes, due to the uncertainty associated with their realizability for income tax purposes.

Prior to 1984, Federal income tax law allowed life insurance companies to exclude from taxable income and set aside certain amounts in a tax memorandum account known as the Policyholder Surplus Account (“PSA”). Under the tax law, the PSA has been frozen at its December 31, 1983 balance of $2,900,000, which may under certain circumstances become taxable in the future. The Insurance Company does not believe that any significant portion of the amount in this account will be taxed in the foreseeable future. Accordingly, no provision for income taxes has been made thereon. If the amount in the PSA were to become taxable, the resulting liability using current rates would be approximately $1,015,000.

7. REINSURANCE

Reinsurance allows life insurance companies to share risks on a case by case or aggregate basis with other insurance and reinsurance companies. The Insurance Company cedes insurance to the reinsurer and compensates the reinsurer for its assumption of risk. The maximum amount of individual life insurance normally retained by the Company on any one life is $50,000 per policy and $100,000 per life. The maximum retention with respect to impaired risk policies typically is the same. The Insurance Company cedes insurance primarily on an “automatic” basis, under which risks are ceded to a reinsurer on specific blocks of business where the underlying risks meet certain predetermined criteria, and on a “facultative” basis, under which the reinsurer's prior approval is required on each risk reinsured.

The reinsurance of a risk does not discharge the primary liability of the insurance company ceding that risk, but the reinsured portion of the claim is recoverable from the reinsurer. The major reinsurance treaties into which the Insurance Company has entered can be characterized as follows:

Reinsurance ceded from the Insurance Company to Swiss Re Life & Health America Inc. at December 31, 2003 and 2002 consists of coinsurance agreements aggregating face amounts of $278.6 million and $310.1 million, respectively, representing the amount of individual life insurance contracts that were ceded to the reinsurers. The term “coinsurance” refers to an arrangement under which the Insurance Company pays the reinsurers the gross premiums on the portion of the policy to be reinsured and the reinsurers grant a ceding commission to the Insurance Company to cover its acquisition costs plus a margin for profit.

Premiums ceded for 2003, 2002 and 2001 amounted to approximately $5.3 million, $6.5 million, and $6.1 million, respectively.

F-24.

8. STATUTORY FINANCIAL STATEMENTS

Accounting practices used to prepare statutory financial statements for regulatory filings of stock life insurance companies differ from GAAP. Material differences resulting from these accounting practices include: deferred policy acquisition costs, deferred Federal income taxes and statutory non‑admitted assets are recognized under GAAP accounting while statutory investment valuation and interest maintenance reserves are not; premiums for universal life and investment‑type products are recognized as revenues for statutory purposes and as deposits to policyholders' accounts under GAAP; different assumptions are used in calculating future policyholders' benefits; and different methods are used for calculating valuation allowances for statutory and GAAP purposes; fixed maturities are recorded at market value under GAAP while under statutory accounting practices they are recorded principally at amortized cost.

In March 1999, the NAIC adopted the Codification, which is intended to standardize regulatory accounting and reporting to state insurance departments, is effective January 1, 2002. However, statutory accounting principles will continue to be established by individual state laws and permitted practices. The NYSID required adoption of the Codification with certain modifications, for the preparation of statutory financial statements effective January 1, 2002. On October 1, 2003, the NYSID modified its original adoption of Codification to allow for the recognition of DTA¢s and DTL¢s, with certain restrictions. DTA’s are equal to the sum of the lesser of: The amount of gross DTA expected to be realized within one year of the balance sheet date; or ten percent of statutory capital and surplus as reported on it’s most recently filed statutory statement; and the amount of gross DTA’s that can be offset against deferred existing gross DTL’s. This change allowed the Insurance Company to realize a DTA of approximately $16.5 million in 2003 and 22.4 million in 2002. The adoption of Codification by the NAIC and the Codification as modified by the NYSID, as currently interpreted, did not adversely affect statutory capital and surplus as of December 31, 2003.

For the years ended December 31,

	2003	2002		2001
(in thousands)

Statutory surplus	$ 209,804	$	200,352	$	245,403
Statutory net income (loss)	$ 18,701	$	(88,192)	$	(59,026)

9. LITIGATION

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

10. FAIR VALUE INFORMATION

The following estimated fair value disclosures of financial instruments have been determined using available market information, current pricing information and appropriate valuation methodologies. If quoted market prices were not readily available for a financial instrument, management determined an estimated fair value. Accordingly, the estimates may not be indicative of the amounts the Company could have realized in a market transaction.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value.

For fixed maturities and common stocks, estimated fair values were based primarily upon independent pricing services. For a limited number of privately placed securities, where prices are not available from independent pricing services, the Company estimates market values using a matrix pricing model, based on the issuer's credit standing and the security's interest rate spread over U.S. Treasury bonds.

F-25.

10. FAIR VALUE INFORMATION- CONTINUED

Because it is not practicable to obtain an independent valuation for each limited partnership interest for purposes of disclosure, the market value of a limited partnership interest is estimated to approximate the carrying value. As of December 31, 2003, the Company was committed to contribute, if called upon, an aggregate of approximately $90.0 million of additional capital to certain of these limited partnerships. The market value of short-term investments, mortgage loans and policy loans is estimated to approximate the carrying value.

Estimated fair values of policyholders' account balances for investment type products (i.e., deferred annuities, immediate annuities without life contingencies and universal life contracts) are calculated by projecting the contract cash flows and then discounting them back to the valuation date at an appropriate discount rate. For immediate annuities without life contingencies, the cash flows are defined contractually. For all other products, projected cash flows are based on an assumed lapse rate and crediting rate (based on the current treasury yield curve), adjusted for any anticipated surrender charges. The discount rate is based on the current duration‑matched treasury curve, plus an adjustment to reflect the anticipated spread above treasuries on investment grade fixed maturity securities, less an expense and profit spread.

December 31, 2003		Carrying Value		Estimated Fair Value
Assets		(in thousands)
Fixed Maturities:
Available for Sale	$	3,890,407	$	3,890,407
Common Stock		39,652		39,652
Mortgage Loans		9,142		9,142
Policy Loans		18,262		18,262
Cash and Short-Term Investments		36,571		36,571
Other Invested Assets		323,139		323,139

Liabilities
Policyholders' Account Balances	$	3,092,872	$	3,162,689
Note Payable		100,000		96,250
Short-Term Note Payable		50,000		50,000

December 31, 2002		Carrying Value		Estimated Fair Value
Assets
Fixed Maturities:
Available for Sale	$	3,642,582	$	3,642,582
Common Stock		16,886		16,886
Mortgage Loans		9,289		9,289
Policy Loans		17,633		17,633
Cash and Short-Term Investments		301,923		301,923
Other Invested Assets		254,659		254,659

Liabilities
Policyholders' Account Balances	$	2,911,554	$	3,081,367
Note Payable		100,000		70,536
Short-Term Note payable		50,000		50,000

F-26.

11. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data is presented below. Certain amounts have been reclassified to conform to the current year's presentation.

Three Months Ended
2003			March 31 June 30			September 30			December 31
(in thousands, except per share)
Premiums and other
Insurance revenues	$	12,978		$	11,897		$	9,491		$	11,217
Net investment income	66,846			68,803			71,734			80,999
Realized investment
gains (losses)	(5,043)			13,566			(2,194)			3,999
Total revenues	74,781			94,266			79,031			96,215
Benefits and expenses	72,299			73,976			69,625			78,916
Net income	1,715			14,178			6,555			8,837

Earnings per share	$	.06		$	.48		$	.22		$	.30

Three Months Ended
2002		March 31 June 30		September 30		December 31
(in thousands, except per share)
Premiums and other
Insurance revenues	$ 19,594		18,279		$ 25,456		$ 20,594
Net investment income	63,968		67,186		70,041		66,365
Realized investment
gains (losses)	(2,681)		(27,326)		(88,339)		(28,397)
Total revenues	80,881		58,139		7,158		58,562
Benefits and expenses	70,619		73,967		77,374		82,021
Net income (loss)	7,179		(11,075)		(49,220)		(16,153)

Earnings per share	$ .25		$ (.38)		$ (1.68)		$ (.55)

12. Subsequent Events

Curtailment of Presidential Life Insurance Company Employees’ Retirement Plan

In February 2004, in contemplation of a voluntary termination of the Presidential Life Insurance Company Employees’ Retirement Plan (the “Plan”), the Company adopted a resolution, which “froze” the Plan as of February 18, 2004. This action closed the Plan to new entrants and terminated the accrual of any future benefits under the Plan after such date. The Company anticipates that the Plan will be terminated in the second half of 2004 and estimates the requirement to fully fund the Plan, prior to termination, to be $2 million.

Exit from the Traditional and Universal Life Insurance Market

Due to the competitive nature of the term and whole life business and the lack of access of reasonable allowances in the reinsurance market, as well as marginal profits and weak sales, management has decided to exit the traditional and universal life markets as of March 1, 2004. The Company will continue to service the inforce business and continue to issue our more profitable graded benefit life product. Management believes this decision will not have a material impact on the Company’s consolidated financial statements.

F-27.

ANNUITIES IN FORCE

Year Ended December 31,
	2003	2002	2001	2000	1999
(Dollars in thousands
Single premium immediate
Annuities	$ 700,727	$ 701,024	$ 605,214	$ 464,794	$ 384,194
Single premium immediate
Structured settlement annuities	163,003	167,466	167,766	169,927	168,087

Total immediate annuities	863,730	868,490	772,980	634,721	552,281
Single premium deferred
Annuities	2,423,796	2,256,448	1,592,890	1,095,860	914,460
Flexible premium annuities	168,496	157,035	146,805	143,809	153,460
Group terminal funding
annuities	103,224	104,727	106,014	103,881	104,142

Total annuities	$ 3,559,246	$ 3,386,700	$ 2,618,689	$ 1,978,271	$ 1,724,343

For the year ended December 31,

	2003	2002	2001	2000	1999

Number of annuity
contracts in
force	75,217	72,089	56,104	45,056	43,337

Average size of annuity contract
in force	47,320	$46,979	$46,676	$43,907	$39,789

For the fiscal year ended December 31,
	2003	2002	2001	2000	1999
(dollars in thousands)
Annuity
Considerations	$ 214,133	$ 738,467	$ 615,736	$ 356,144	$ 191,815

Whole Life and
Term Life	13,068	13,911	12,100	8,626	8,589

Universal Life	16,819	24,385	9,939	7,363	5,550

Accident & Health	6,217	10,894	3,987	9,907	1,158

Total Premiums and
Considerations	$ 250,237	$ 787,657	$ 641,762	$ 382,040	$ 207,112

Number of life insurance policies
in force	21,717	20,626	19,200	18,896	18,605

Average size of life insurance
policy in force	$ 61,810	$ 55,833	$ 48,879	$ 44,170	$ 40,441

LIFE INSURANCE IN FORCE

	2003	2002	2001	2000	1999
(dollars in thousands)

In force beginning of year
Universal	444,200	$ 385,857	$ 370,393	$ 368,424	$ 377,470
Whole<F1>	146,359	151,596	167,214	192,803	218,461
Term	562,363	402,443	297,037	191,185	176,875

Total	1,152,922	939,896	834,644	752,412	772,806

Sales and additions:
Universal	54,665	26,718	33,878	30,119	24,435
Whole<F1>	25,803	72,217	20,784	22,102	41,612
Term	233,362	216,116	150,869	139,920	49,887

Total	313,830	315,051	205,531	192,141	115,934

Terminations:
Death	10,401	8,289	7,467	8,129	7,233
Surrenders and
conversions	32,196	16,898	19,299	28,159	30,525
Lapses	75,039	73,237	70,192	68,237	98,541
Other	5,605	3,601	3,321	5,384	30

Total	123,241	102,025	100,279	109,909	136,329
In force end of year:
Universal	474,888	444,200	385,857	370,393	368,424
Whole<F1>	136,744	146,359	151,596	167,214	192,803
Term	731,879	562,363	402,443	297,037	191,185

Total	$1,343,511	$ 1,152,922	$ 939,896	$ 834,644	$ 752,412

Total reinsurance
ceded	$ 859,249	$ 706,667	$ 550,194	$ 478,976	$ 410,955

Total insurance in
Force at end of year
Net of reinsurance	$ 484,262	$ 446,255	$ 389,702	$ 355,668	$ 341,457

	2003		2002
(in thousands)
Balance at the beginning of year	$	113,039	$		103,082
Current year's costs deferred	10,689		31,306
Total	123,728		134,388
Less, amortization for the year	8,003		266
Total	115,725		134,122
Change in amortization related to
Unrealized(loss)gain in investments	(7,012)		(21,083)
Balance at the end of the year	$	108,713	$	113,039

PRESIDENTIAL LIFE CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(in thousands)

December 31,
	2003		2002

ASSETS:
Investment in subsidiaries at equity	$	497,498	$ 412,489
Cash in bank	2,080		36
Real estate, net	35		35
Fixed maturities, available for sale	117,388		103,914
Investments, common stocks	12,355		2,745
Short-term investments	4,695		13,750
Other invested assets	1,112		8,600
Deferred debt issue costs	1,143		1,364
Other assets	9,419		19,798

TOTAL ASSETS	$	645,725	562,731

LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Notes payable, long term	100,000		100,000
Short-term note payable	50,000		50,000
Other liabilities	6,960		14,040

TOTAL LIABILITIES	156,960		164,040

Total Shareholders' Equity	488,765		398,691

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	645,725	$ 562,731

PRESIDENTIAL LIFE CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
(in thousands)
Year Ended December 31,
	2003		2002		2001
REVENUES:
Income form rents	$	757	742		$		701
Investment income	11,986		8,980		6,578
Realized investment gains (losses)	3,089		(21,924)		(12,798)

Total Revenues	15,832		(12,202)		(5,519)

EXPENSES:
Operating and administrative	919		647		1,864
Interest	9,643		10,633		8,836

Total Expenses	10,562		11,280		10,700


Income (Loss) before federal income taxes
And equity in income of subsidiaries	5,270		(23,482)		(16,219)

Federal income tax benefit	(1,452)		(10,738)		(6,802)
Income (Loss) before equity in income of subsidiaries	6,722		(12,744)		(9,417)

Equity in income of subsidiaries
before deducting dividends received	24,563		(56,525)		1,712

Net income (loss)	$ 31,285		$	(69,269)	$	(7,705)

PRESIDENTIAL LIFE CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(in thousands)

Year Ended December 31,
	2003	2002	2001
Operating Activities:
Net (loss) income	$31,285	$(69,269)	$ (7,705)
Adjustments to reconcile net income to
net cash provided by operating activities:
Realized investment losses (gains)	(3,089)	21,924	12,798
Depreciation and amortization	893	1,565	219
Equity in income of subsidiary companies	(24,563)	56,525	(1,712)
Deferred Federal income taxes	10,147	(7,827)	(5,116)
Dividends from subsidiaries	0	0	27,660
Changes in:
Accrued investment income	327	230	(1,757)
Accounts payable and accrued expenses	(91)	83	587
Other assets and liabilities	(12,348)	7,944	3,953

Net Cash Provided By
Operating Activities	2,561	11,175	28,927

Investing Activities:
Purchase of fixed maturities	(29,414)	(9,174)	(109,195)
Sale of fixed maturities	30,758	13,921	29,947
Common stock acquisitions	(9,237)	0	(93)
Common stock sales	2,565	1,646	1,161
Other invested asset additions	(2)	(4,946)	0
Other invested asset distributions	7,490	7,587	4,808
Decrease (increase) in short-term investments	9,055	(9,105)	6,450

Net Cash Provided by (Used In)
Investing Activities	11,215	(71)	(66,922)

Financing Activities:
Dividends to shareholders	(11,732)	(11,732)	(11,717)
Proceeds from (repayment of) line of credit	0	0	50,000
Repurchase of common stock	0	225	(122)

Net Cash (Used In) Provided By
Financing Activities	(11,732)	(11,507)	38,161

Increase (Decrease) in Cash	2,044	(403)	166

Cash at Beginning of Year	36	439	273

Cash at End of Year	$ 2,080	$ 36	$ 439

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES										Schedule III
SUPPLEMENTAL INSURANCE INFORMATION
(in thousands)

Column A	Column B	Column C	Column D	Column E	Column F	Column F‑1		Column G		Column H	Column I	Column J	Column K
										Benefits,
										Claims, Losses,
		Future Policy								Interest
		Benefits,		Other						Credited to
		Losses, Claims,		Policy		Mortality,				Account	Amortization
	Deferred	Loss Expenses,		Claims		Surrender				Balances	of Deferred
	Policy	and Policy‑		and		and Other		Net		and	Policy	Other
	Acquisition	holder Account	Unearned	Benefits	Premium	Charges to		Investment		Settlement	Acquisition	Operating	Premiums
Segment	Costs	Balances	Premiums	Payable	Revenue	Policyholders		Income		Expenses	Costs	Expenses	Written

Year Ended December 31, 2003
Life Insurance	$ 13,671	$ 212,784	$ 0	$ 421	$ 6,870	$ 51		$ 14,837		$ 12,747	$ 1,044	$ 6,784
Annuity	95,042	3,595,936	0	0	32,622	1,012		273,445		240,051	6,959	12,130
Accident and Health		2,308	0	0	4,122	0		100		4,650	0	809	$ 4,122
Total	$ 108,713	$ 3,811,028	$ 0	$ 421	$ 43,614	$ 1,063		$ 288,382		$ 257,448	$ 8,003	$ 19,723

Year Ended December 31, 2002
Life Insurance	$ 12,268	$ 194,843	$ 0	$ 271	$ 7,146	$	18	$ 14,606		$ 10,879	$ 911	$ 3,898
Annuity	100,771	3,423,132	0	0	69,422	628		252,838		262,159	(645)	12,176
Accident and Health		4,193	0	0	4,459	0		117		3,652	0	318	$ 4,459
Total	$ 113,039	$ 3,622,168	$ 0	$ 271	$ 81,027	$	646	$ 267,561		$ 276,690	$ 266	$ 16,392

Year Ended December 31, 2001
Life Insurance	$ 9,617	$ 166,592	$ 0	$ 657	$ 10,150	$	61	$ 13,234		$ 19,161	$ 790	$ 3,736
Annuity	93,465	2,650,714	0 0 0 0 0	0	97,380	652		220,828		243,688	9,141	13,706
Accident and Health	0	6,205	0	0	3,987	0		63		3,521	0	430	$ 3,987
Total	$ 103,082	$ 2,823,511	$ 0	$ 657	$111,517	$	713	$	234,125	$ 266,370	$ 9,931	$ 17,872

PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES Schedule IV
REINSURANCE (in thousands)


Column A	Column B	Column C	Column D	Column E	Column F
			Assumed		Percentage
		Ceded to	From		of Amount
	Gross	Other	Other	Net	Assumed
	Amount	Companies	Companies	Amount	to Net

Year Ended December 31, 2003
Life Insurance in Force	$1,342,324	$ 859,249	$ 782,938	$ 1,266,013	61.84

Premiums:
Life Insurance	9,139	6,048	3,779	6,870	55.01
Annuity	32,622			32,622	0
Accident and Health Insurance	6,217	2,095		4,122	0

Total	$ 47,978	$ 8,143	$ 3,779	$ 43,614

Year Ended December 31, 2002
Life Insurance in Force	$1,151,819	$ 706,667	$ 761,893	$ 1,206,845	63.13

Premiums:
Life Insurance	9,852	6,396	3,690	7,146	51.64
Annuity	69,422			69,422	0
Accident and Health Insurance	10,894	6,435		4,459	0

Total	$ 90,168	$ 12,831	$ 3,690	$ 81,027

Year Ended December 31, 2001
Life Insurance in Force	$ 982,879	$ 590,029	$ 728,379	$ 1,121,229	64.96

Premiums:
Life Insurance	$ 9,589	6,006	6,567	10,150	64.70
Annuity	97,380			97,380	0
Accident and Health Insurance	11,313	7,326		3,987	0

Total	$ 118,282	$ 13,332	$ 6,567	$ 111,517

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

Item 6. Selected Financial Data

Certain Factors That May Affect Our Business

Pricing

Investments

Risk‑Based Capital

Agency Ratings

Contractual Obligations

5 Years

Total

Effects of Inflation and Interest Rate Changes

CRITICAL ACCOUNTING POLICIES ESTIMATES

INVESTMENTS

DEFERRED POLICY ACQUISITION COSTS

FUTURE POLICY BENEFITS

Item 8. Financial Statements and Supplementary Data

PART III

Change in benefit obligation

Change in plan assets

Funded status

Information for pension plans with an accumulated benefit obligation in excess of plan assets

Projected benefit obligation

Accumulated benefit obligation

Fair value of plan assets

Components of Net Periodic Benefit Cost

Net deferred federal income tax asset

Net deferred federal income tax

Deferred federal income tax liability

Net deferred federal income tax liability (asset)

Curtailment of Presidential Life Insurance Company Employees’ Retirement Plan

Exit from the Traditional and Universal Life Insurance Market

Column A

Column B

Column C

Column D

Column E

Column F

Amount

Companies

Companies

Amount

Exhibit 99.01

Certification of Chief Executive Officer

Pursuant to Exchange Act Rule 13a-14

Exhibit 99.02

Certification of Principal Financial Officer