UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended March 31, 2005

or

For the transition period from                to               

Commission File Number 33-81474

FIRST SUNAMERICA LIFE INSURANCE COMPANY

733 Third Avenue, 4th Floor, New York, New York 10017
Registrant’s telephone number, including area code: (800) 996-9786

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

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes   o    No   þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 13, 2005: 300

FIRST SUNAMERICA LIFE INSURANCE COMPANY

INDEX

1

FIRST SUNAMERICA LIFE INSURANCE COMPANY

See accompanying notes to financial statements.

2

FIRST SUNAMERICA LIFE INSURANCE COMPANY

See accompanying notes to financial statements.

3

FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF INCOME AND COMPREHENSIVE INCOME (Continued)
For the three months ended March 31, 2005 and 2004
(Unaudited)

See accompanying notes to financial statements.

4

FIRST SUNAMERICA LIFE INSURANCE COMPANY

See accompanying notes to financial statements.

5

FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS (Continued)
For the three months ended March 31, 2005 and 2004
(Unaudited)

See accompanying notes to financial statements.

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FIRST SUNAMERICA LIFE INSURANCE COMPANY

1.	BASIS OF PRESENTATION
	These statements are unaudited. In the opinion of management, all adjustments, consisting only of normal recurring accruals, have been made for a fair statement of the results presented herein. Certain accounts have been reclassified in the 2004 financial statements to conform to their 2005 presentation. For further information, refer to the Annual Report on Form 10-K of First SunAmerica Life Insurance Company (the “Company”) for the year ended December 31, 2004.
2.	COMMITMENTS AND CONTINGENT LIABILITIES
	Various lawsuits against the Company have arisen in the ordinary course of business. Contingent liabilities arising from litigation, income taxes and regulatory and other matters are not considered material in relation to the financial position, results of operations or cash flows of the Company.
3.	RELATED PARTY TRANSACTION
	On May 1, 2005, American International Group, Inc. (“AIG”), the Company’s ultimate parent, publicly expressed its intent to include in its restated financial statements for 2000 through 2003 and its financial statements for 2004 to be included in AIG’s Annual Report on Form 10-K for the year ended December 31, 2004 when filed, adjustments attributable to compensation expense related to the SICO Deferred Compensation Profit Participation Plan (the “SICO Plan”). As a result of AIG’s expressed intent to record such compensation expense, the Company has determined that, as a subsidiary of AIG, it is appropriate to record the compensation expense related to its employees’ participation in the SICO Plan.
	As total SICO compensation expense for each prior year would not have been material to any such prior year, in the first quarter of 2005, the Company has recorded the total amount of compensation expense related to the SICO Plan that would have been recorded in all prior periods through December 31, 2004 as a reduction of retained earnings on the balance sheet of $134,000, with a corresponding increase to additional paid-in capital, and with no effect on total shareholder’s equity or cash flows. Compensation expense related to the SICO Plan for the first quarter of 2005 was $41,000 and included in general and administrative expenses in the statement of income and comprehensive income. The Company will record compensation expense related to the SICO Plan for all future periods.
	In making this determination, the Company has evaluated the impact that expense recognition would have had on all prior years to which SICO Plan compensation would have applied. In addition, these amounts have been calculated as variable stock awards, which consider the fair market value of AIG common stock at each measurement date, and would include any distributions made under the SICO Plan.
	In 1975, the voting shareholders and Board of Directors of Starr International Company (“SICO”), a private holding company whose principal asset consists of approximately 12% of AIG’s outstanding common stock as of January 31, 2005, decided that a portion of the capital value of SICO (AIG shares or their cash equivalent) should be used to provide an incentive plan for the current and succeeding managements of all AIG companies, including the Company. None of the costs of the various benefits provided under the SICO Plan were paid by the Company.
4.	SUBSEQUENT EVENT
	AIG has announced that it has delayed filing its Annual Report on Form 10-K for the year ended December 31, 2004 to allow AIG’s Board of Directors and new management adequate time to complete an extensive review of AIG’s books and records. The review includes issues arising from pending investigations into non-traditional insurance products and certain assumed reinsurance transactions by the Office of the Attorney General for the State of New York and the Securities and Exchange Commission (the “SEC”) and from AIG’s decision to review the accounting treatment of certain additional items. AIG has announced that the findings of that review have resulted in AIG’s

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FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)

decision to restate its financial statements for the years ended December 31, 2003, 2002, 2001 and 2000, the quarters ended March 31, June 30 and September 30, 2004 and 2003 and the quarter ended December 31, 2003. Circumstances affecting AIG can have an impact on the Company. For example, beginning in March 2005, the major rating agencies downgraded the ratings of AIG in a series of actions which resulted in downgrades and ratings actions being taken with respect to the Company’s financial strength ratings. Accordingly, management can give no assurance that any further changes in circumstances for AIG will not impact the Company.

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FIRST SUNAMERICA LIFE INSURANCE COMPANY

     Management’s discussion and analysis of financial condition and results of operations of First SunAmerica Life Insurance Company (the “Company”) for the three months ended March 31, 2005 (“2005”) and 2004 (“2004”) follows. Certain prior period amounts have been reclassified to conform to the current period’s presentation.

     In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions readers regarding certain forward-looking statements contained in this report and in any other statements made by, or on behalf of, the Company, whether or not in future filings with the Securities and Exchange Commission (the “SEC”). Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Statements using verbs such as “expect,” “anticipate,” “believe” or words of similar import generally involve forward-looking statements. Without limiting the foregoing, forward-looking statements include statements which represent the Company’s beliefs concerning future levels of sales and redemptions of the Company’s products, investment spreads and yields, or the earnings and profitability of the Company’s activities.

     Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control and many of which are subject to change. These uncertainties and contingencies could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable developments. Some may be national in scope, such as general economic conditions, changes in tax law and changes in interest rates. Some may be related to the life insurance industry generally, such as pricing, competition, regulatory developments and industry consolidation. Others may relate to the Company specifically, such as credit, volatility and other risks associated with the Company’s investment portfolio. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the SEC. The Company disclaims any obligation to update forward-looking information.

     The Company has one business segment, annuity operations, which consist of the sale and administration of deposit-type insurance contracts, such as fixed and variable annuity contracts and universal life insurance contracts. The Company focuses primarily on the marketing of fixed annuity contracts. The Company’s variable annuity products offer investors a broad spectrum of fund alternatives, with a choice of investment managers, as well as guaranteed fixed-rate options (“Fixed Options”).

     On February 1, 2004, the Company entered into an administrative services agreement with its affiliate AIG SunAmerica Asset Management Corp. (“SAAMCo”), whereby SAAMCo pays to the Company a fee based on a percentage of all assets invested through the Company’s variable annuity products in exchange for services performed. SAAMCo is the investment advisor for certain trusts that serve as investment options for the Company’s variable annuity products. Amounts paid or accrued to the Company under this agreement totaled $0.4 million and $0.3 million in 2005 and 2004, respectively, and are included in variable annuity policy fees in the statement of income and comprehensive income. A fee of $0.15 million in 2004 was paid under a different agreement that expired in early 2004.

     On November 1, 2004 the Company entered a contract to reinsure credit life and health insurance policies. The Company receives a share of premium for the reinsured policies and will indemnify the reinsured for a proportionate share of these liabilities while the reinsured retains the assets and corresponding reserve liabilities. The contract is considered modified coinsurance and as such the reinsurance claims payable is offset against reinsurance premiums receivable and included in other assets on the balance sheet. The treaty is for one year with the option to renew annually and may be terminated by either party with 180 days advance notice.

OVERVIEW

     The Company is a life insurance company principally engaged in the business of issuing fixed and variable annuity contracts for retirement savings. The Company believes that demographic trends have produced strong consumer demand for long-term, investment-oriented products. According to U.S. Census Bureau projections, the

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number of individuals between the ages of 45 to 64 grew from 51 million to 69 million from 1994 to 2003, making this age group the fastest-growing segment of the U.S. population. Between 1994 and 2003, annual industry premiums from fixed and variable annuity contracts increased from $155 billion to $267 billion.

     Benefiting from continued strong growth of the retirement services market, industry sales of tax-deferred savings products have represented, for a number of years, a significantly larger source of new premiums for the U.S. life insurance industry than have traditional life insurance products. Recognizing the growth potential of this market, the Company focuses its operations on the sale of annuity contracts.

RECENT DEVELOPMENTS

     The Company’s ultimate parent, American International Group, Inc. (“AIG”), has announced that it has delayed filing its Annual Report on Form 10-K for the year ended December 31, 2004 to allow AIG’s Board of Directors and new management adequate time to complete an extensive review of AIG’s books and records. The review includes issues arising from pending investigations into non-traditional insurance products and certain assumed reinsurance transactions by the Office of the Attorney General for the State of New York and the Securities and Exchange Commission (the “SEC”) and from AIG’s decision to review the accounting treatment of certain additional items. AIG has announced that the findings of that review have resulted in AIG’s decision to restate its financial statements for the years ended December 31, 2003, 2002, 2001 and 2000, the quarters ended March 31, June 30 and September 30, 2004 and 2003 and the quarter ended December 31, 2003. Circumstances affecting AIG can have an impact on the Company. For example, beginning in March 2005, the major rating agencies downgraded the ratings of AIG in a series of actions which resulted in downgrades and ratings actions being taken with respect to the Company’s financial strength ratings. Accordingly, management can give no assurance that any further changes in circumstances for AIG will not impact the Company.

CRITICAL ACCOUNTING ESTIMATES

     The Company considers its most critical accounting estimates those used with respect to valuation of certain financial instruments, amortization of deferred acquisition costs (“DAC”) and other deferred expenses and valuation of the reserve for guaranteed benefits. In the implementation of each of the aforementioned policies, management is required to exercise its judgment on both a quantitative and qualitative basis. Further explanation of how management exercises that judgment follows.

     VALUATION OF CERTAIN FINANCIAL INSTRUMENTS: Gross unrealized losses on debt and equity securities available for sale amounted to $33.1 million at March 31, 2005. In determining if and when a decline in fair value below amortized cost is other than temporary, the Company evaluates at each reporting period the market conditions, offering prices, trends of earnings, price multiples, and other key measures for investments in debt and equity securities. In particular, for debt securities, the Company assesses the probability that all amounts due are collectible according to the contractual terms of the obligation. When such a decline in value is deemed to be other than temporary, the Company recognizes an impairment loss in the current period operating results to the extent of the decline (See also discussion within “Capital Resources and Liquidity” herein).

     Securities in the Company’s bond portfolio with a carrying value of approximately $449.9 million at March 31, 2005 do not have readily determinable market prices. For these securities, the Company estimates the fair value with internally prepared valuations (including those based on estimates of future profitability). Otherwise, the Company uses its most recent purchases and sales of similar unquoted securities, independent broker quotes or comparison to similar securities with quoted prices when possible to estimate the fair value of those securities. All such securities are classified as available for sale. The Company’s ability to liquidate its positions in these securities will be impacted to a significant degree by the lack of an actively traded market, and the Company may not be able to dispose of these investments in a timely manner. Although the Company believes its estimates reasonably reflect the fair value of those securities, the key assumptions about the risk-free interest rates, risk premiums, performance of underlying collateral, if any, and other factors may not reflect those of an active market.

     AMORTIZATION OF DEFERRED ACQUISITION COSTS AND OTHER DEFERRED EXPENSES: Policy acquisition costs include commissions and other costs that vary with, and are primarily related to, the production or acquisition of new business. Such costs are deferred and amortized over the estimated lives of the annuity contracts. The Company amortizes DAC and other deferred expenses based on a percentage of expected

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gross profits (“EGPs”) over the life of the underlying policies. EGPs are computed based on assumptions related to the underlying policies written, including their anticipated duration, net spreads earned during the life of the contracts, costs of providing policy guarantees, assumed future growth rates of variable annuity assets and the level of expenses necessary to maintain the policies. The Company adjusts amortization of DAC and other deferred expenses (a “DAC unlocking”) when estimates of future gross profits to be realized on its annuity policies are revised. Increases in future EGPs may result from higher interest spread and/or lower surrender rate assumptions, while decreases in future EGPs may result from lower interest spread and/or higher surrender rate assumptions. DAC amortization for the current period is reduced when future EGPs are increased and amortization is increased when future EGPs are decreased. Approximately 74% of the Company’s DAC balance at March 31, 2005 related to fixed annuity contracts and universal life insurance contracts and 26% related to variable annuity contracts.

     RESERVE FOR GUARANTEED BENEFITS: Pursuant to the adoption of AICPA Statement of Position 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts” (“SOP 03-1”) which was adopted on January 1, 2004, the Company is required to recognize a liability for guaranteed minimum death benefits and other guaranteed benefits. In calculating the projected liability, five thousand stochastically generated investment performance scenarios were developed using the Company’s best estimates. These assumptions included, among others, mean equity return and volatility, mortality rates and lapse rates. The estimation of cash flow and the determination of the assumptions used require judgment, which can, at times, be subjective.

RESULTS OF OPERATIONS

     NET INCOME totaled $8.5 million in 2005, compared with $1.2 million in 2004.

     PRETAX INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE totaled $13.0 million in the 2005, compared with $5.5 million in 2004. The increase in 2005 compared to 2004 was primarily due to additional investment income resulting from higher interest rates, the effective management of interest credited rates and favorable underwriting results on the reinsurance contract.

     INCOME TAX EXPENSE totaled $4.5 million in 2005 and $2.3 million in 2004, representing effective tax rates of 34% and 41%, respectively. The decrease in the effective tax rate results from a reduction in state taxes, net of federal income tax, due to a change in the mix of business.

     CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX reflected the adoption of SOP 03-1 on January 1, 2004. The Company recorded a loss of $2.0 million, net of tax, which is recognized in the statement of income and comprehensive income as a cumulative effect of accounting change for the quarter ended March 31, 2004.

     NET INVESTMENT SPREAD, a non-GAAP measure, represents investment income less interest credited to fixed annuity contracts, universal life insurance contracts issued in prior years and Fixed Options (collectively “Fixed-Rate Products”) is a key measurement used by the Company in evaluating the profitability of its annuity business. Accordingly, the Company presents an analysis of net investment spread because the Company has determined this measure to be useful and meaningful.

     In evaluating its investment yield and net investment spread, the Company calculates average invested assets using the amortized cost of bonds, notes and redeemable preferred stocks. This basis does not include unrealized gains and losses, which are reflected in the carrying value (i.e., fair value) of those investments pursuant to Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities”. In the calculation of average invested assets, the Company excludes collateral received from a securities lending program, which is offset by a securities lending payable in the same amount. The Company participates in a securities lending program with an affiliated agent, pursuant to which it lends its securities and primarily takes cash as collateral with respect to the securities lent. Participation in securities lending agreements provides additional net investment income for the Company, resulting from investment income earned on the collateral, less interest paid on the securities lending agreements and the related management fees paid to an affiliate to administer the program.

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     An analysis of net investment spread and reconciliation to pretax income before cumulative effect of accounting change is presented in the following table:

     Net investment spread totaled $20.0 million in 2005 and $15.4 million in 2004. These amounts equal 2.37% on average invested assets (computed on a daily basis) of $3.37 billion in 2005 and 2.04% on average invested assets of $3.03 billion in 2004. The increase in the net investment spread rate was due both to increases in investment income as interest rates have risen and to the decline in overall rates paid in 2005 compared to 2004, as the Company issued new fixed annuity contracts at rates below the prior year average rates.

     The components of net investment spread were as follows:

     Growth in average invested assets resulted primarily from sales of Fixed-Rate Products since the latter half of 2003. Sales of fixed annuity contracts and Fixed Options totaled $265.3 million in 2005 and $175.6 million in 2004 and are primarily deposits on fixed annuity contracts. On an annualized basis, these deposits represent 34% and 27%, respectively, of the related reserve balances at the beginning of the respective periods. The fixed annuity

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market in New York is very competitive and the Company’s sales will vary depending upon factors such as the relative attractiveness of its new deposit interest crediting rates and long term guarantees. The Company’s sales of fixed annuity contracts increased in the first quarter of 2005 as its new money rates were more competitive with other products in the market.

     Net investment spread includes the effect of income earned or interest paid on the difference between average invested assets and average interest-bearing liabilities. Average invested assets exceeded average interest-bearing liabilities by $180.9 million in 2005, compared with $187.6 million in 2004. The difference between the Company’s yield on average invested assets and the rate paid on average interest-bearing liabilities was 2.19% in 2005 and 1.82% in 2004.

     Investment income (and the related yields on average invested assets) totaled $45.9 million (5.45%) in 2005, compared with $39.8 million (5.25%) in 2004. Expenses incurred to manage the investment portfolio amounted to $0.5 million in 2005 and 2004. These expenses are included as a reduction of investment income in the statement of income and comprehensive income.

     Interest expense (and the related rate paid on average interest-bearing liabilities) totaled $25.9 million (3.26%) in 2005 and $24.4 million (3.43%) in 2004. Interest-bearing liabilities averaged $3.19 billion during 2005 and $2.84 billion during 2004. The decline in overall rates paid in 2005 compared to 2004 resulted primarily from the Company issuing and renewing new fixed annuity contracts at rates somewhat below the prior year average rates.

     NET REALIZED INVESTMENT LOSSES totaled $5.0 million in 2005 and $1.0 million in 2004 and include impairment writedowns of $4.6 million in 2005 and $0.4 million in 2004. Thus, net realized losses from sales and redemptions of investments totaled $0.4 million in 2005 and $0.6 million in 2004.

     The Company sold or redeemed invested assets, principally bonds and notes, aggregating $273.2 million in 2005 and $230.5 million in 2004. Sales of investments result from the active management of the Company’s investment portfolio. Because redemptions of investments are generally involuntary and sales of investments are made in both rising and falling interest rate environments, net gains and losses from sales and redemptions of investments fluctuate from period to period, and represent 0.05% and 0.07% of average invested assets for 2005 and 2004, respectively. Active portfolio management involves the ongoing evaluation of asset sectors, individual securities within the investment portfolio and the reallocation of investments from sectors that are perceived to be relatively overvalued to sectors that are perceived to be relatively undervalued. The intent of the Company’s active portfolio management is to maximize total returns on the investment portfolio, taking into account credit, option, liquidity and interest-rate risk.

     Impairment writedowns include $4.6 million and $0.4 million of provisions principally applied to bonds in 2005 and 2004, respectively. Impairment writedowns represent 0.55% and 0.06% of average invested assets in the respective periods. For the twenty quarters ended March 31, 2005, impairment writedowns as a percentage of average invested assets have ranged from 0.00% to 3.99% and have averaged 0.64%. Such writedowns are based upon estimates of the fair value of invested assets and recorded when declines in the value of such assets are considered to be other than temporary. Actual realization will be dependent upon future events.

     VARIABLE ANNUITY POLICY FEES are generally based on the market value of assets in the separate accounts supporting variable annuity contracts. Such fees totaled $2.4 million in 2005 and $2.2 million in 2004. The increased fees in 2005 compared to 2004 primarily reflect the improved equity market conditions in the latter part of 2004, and the resulting favorable impact on market values of assets in the separate accounts. Variable annuity policy fees represent 2.0% of average variable annuity assets both in 2005 and 2004. Variable annuity assets averaged $484.2 million and $448.3 million during the respective periods. Variable annuity deposits which include the Fixed Options, totaled $20.0 million and $28.1 million in 2005 and 2004, respectively.

     The Company has encountered increased competition in the variable annuity marketplace during recent years and anticipates that the market will remain highly competitive for the foreseeable future. Also, from time to time, federal initiatives are proposed that could affect the taxation of annuities (see “Regulation”).

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     UNIVERSAL LIFE INSURANCE POLICY FEES, NET OF REINSURANCE amounted to $1.5 million in 2005 and 2004 and are net of reinsurance premiums of $1.7 million and $1.6 million, respectively. Universal life insurance policy fees consist of mortality charges, up-front fees earned on deposits received and administrative fees, net of reinsurance premiums. The administrative fees are assessed based on the number of policies in force as of the end of each month. The Company acquired its universal life insurance contracts as part of the acquisition of business from MBL Life Assurance Corporation on July 1, 1999 and does not actively market such contracts. Such fees represent annualized 2.6% of average reserves for universal life insurance contracts in 2005 and 2004.

     PREMIUMS, COMMISSIONS AND CLAIMS ON REINSURANCE CONTRACT totaled $18.9 million of premiums, $8.7 million of commissions and $6.9 million of claims in 2005. This activity resulted from the Company entering into a reinsurance contract effective November 1, 2004.

     SURRENDER CHARGES on fixed annuity, variable annuity and universal life insurance contracts totaled $1.0 million in 2005 and $0.5 million in 2004. Surrender charge periods range up to nine years primarily from the date a deposit is received. Surrender charges generally are assessed on withdrawals at declining rates. The increase in 2005 was due to the increase in the volume of surrenders due to the surrendering of products that still fall within their surrender charge period.

     GENERAL AND ADMINISTRATIVE EXPENSES totaled $2.3 million in 2005 and $3.0 million in 2004. General and administrative expenses remain closely controlled through a company-wide cost containment program and continue to represent less than 0.5% of average total assets.

     AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $6.0 million in 2005, compared with $7.4 million in 2004. The decrease in amortization in 2005 was primarily due to the increase in impairment writedowns.

     CLAIMS ON UNIVERSAL LIFE INSURANCE CONTRACTS, NET OF REINSURANCE RECOVERIES totaled $0.6 million in 2005, compared with $1.3 million in 2004 (net of reinsurance recoveries of $1.5 million in 2005 and $1.4 million in 2004). The change in such claims resulted principally from changes in mortality experience and the reinsurance recoveries thereon.

     With respect to its reinsurance agreements, the Company could become liable for all obligations of the reinsured policies if the reinsurers were to become unable to meet the obligations assumed under the respective reinsurance agreements. The Company monitors its credit exposure with respect to these agreements. Due to the high credit ratings and periodic monitoring of these ratings of the reinsurers, such risks are considered to be minimal.

     GUARANTEED BENEFITS on variable annuity contracts totaled $0.1 million in 2005 compared with $0.5 million in 2004. These guaranteed benefits consist primarily of guaranteed minimum death benefits. Downturns in the equity markets could increase these expenses.

     Guaranteed minimum death benefits (“GMDB”) are issued on a majority of the Company’s variable annuity products. GMDB provides that, upon the death of a contract holder, the contract holder’s beneficiary will receive the greater of the contract holder’s account value, or a guaranteed minimum death benefit that varies by product and election by the contract holder. The Company bears the risk that death claims following a decline in the debt and equity markets may exceed contract holder account balances and that the fees collected under the contract are insufficient to cover the costs of the benefit to be provided.

     Guaranteed minimum account value (“GMAV”) is a feature the Company began offering on certain variable annuity products in June of 2004. If available and elected by the contract holder at the time of contract issuance, this feature guarantees that the account value under the contract will at least equal the amount of the deposits invested during the first ninety days of the contract, adjusted for subsequent withdrawals, at the end of a ten-year waiting period. The Company bears the risk that protracted under-performance of the financial markets could result in GMAV benefits being higher than the underlying contract holder account balance and that the fees collected under the contract are insufficient to cover the costs of the benefit to be provided. In 2005, variable annuity deposits with the GMAV option were approximately $21.4 million compared to no deposits in the first quarter of 2004.

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CAPITAL RESOURCES AND LIQUIDITY

     SHAREHOLDER’S EQUITY decreased to $364.5 million at March 31, 2005 from $376.5 million at December 31, 2004, due to a $20.5 million decrease in unrealized gains, net of the effect on taxes and DAC and other deferred expenses partially offset by $8.5 million of net income.

     INVESTMENTS AND CASH at March 31, 2005 totaled $4.18 billion, compared with $3.82 billion at December 31, 2004. The Company’s invested assets are managed by an affiliate. The following table summarizes the Company’s portfolio of bonds, notes and redeemable preferred stocks (the “Bond Portfolio”) and other investments and cash at March 31, 2005 and December 31, 2004:

     The Company’s general investment philosophy is to hold fixed-rate assets for long-term investment. However, the Company has determined that all of the Bond Portfolio is available to be sold in response to changes in market interest rates, changes in relative value of asset sectors and individual securities, changes in prepayment risk, changes in the credit quality outlook for certain securities, the Company’s need for liquidity and other similar factors.

     THE BOND PORTFOLIO, which constituted 75% of the Company’s total investment portfolio at March 31, 2005, had an aggregate fair value that was $3.7 million greater than its amortized cost at March 31, 2005, compared with $52.1 million at December 31, 2004. The decrease in net unrealized gains on the Bond Portfolio during 2005 principally reflects the recent increase in prevailing interest rates and the corresponding effect on the fair value of the Bond Portfolio at March 31, 2005.

     At March 31, 2005, the Bond Portfolio had an aggregate fair value of $3.14 billion and an aggregate amortized cost of $3.13 billion. At March 31, 2005, the Bond Portfolio included $2.71 billion of bonds rated by Standard & Poor’s (“S&P”), Moody’s Investors Services (“Moody’s”) or Fitch (“Fitch”) and $428.0 million of bonds rated by the National Association of Insurance Commissioners (“NAIC”) or the Company pursuant to statutory ratings guidelines established by the NAIC. At March 31, 2005, approximately $3.05 billion of the Bond Portfolio was investment grade, including $1.02 billion of mortgage-backed securities (“MBS”) and U.S. government/agency securities.

     At March 31, 2005, the Bond Portfolio included $86.4 million of bonds that were not investment grade. These non-investment-grade bonds accounted for approximately 1.8% of the Company’s total assets and approximately 2.1% of its invested assets. Non-investment-grade securities generally provide higher yields and

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involve greater risks than investment-grade securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment-grade issuers. In addition, the trading market for these securities is usually more limited than for investment-grade securities. An economic downturn could produce higher than average issuer defaults on the non-investment-grade securities, which could cause the Company’s investment returns and net income to decline. At March 31, 2005, the Company’s non-investment-grade portfolio consisted of 40 issues, with three issuers each representing more than 10% of the total non-investment-grade bond portfolio. These non-investment-grade securities are comprised of bonds spanning 10 industries with 34%, 23%, 11% and 10% concentrated in telecommunications, cyclical consumer products, noncyclical consumer products, and financial service industries, respectively. No other industry concentration constituted more than 10% of these assets.

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     The following summarizes the Company’s rated bonds by rating classification as of March 31, 2005.

RATED BONDS BY RATING CLASSIFICATION
(dollars in thousands)

Footnotes to the table of Rated Bonds by Rating Classification

(1)		S&P and Fitch rate debt securities in rating categories ranging from AAA (the highest) to D (in payment default). A plus (+) or minus (-) indicates the debt’s relative standing within the rating category. A security rated BBB- or higher is considered investment grade. Moody’s rates debt securities in rating categories ranging from Aaa (the highest) to C (extremely poor prospects of ever attaining any real investment standing). The number 1,2 or 3 (with 1 the highest and 3 the lowest) indicates the debt’s relative standing within the rating category. A security rated Baa3 or higher is considered investment grade. Issues are categorized based on the highest of the S&P, Moody’s, and Fitch ratings if rated by multiple agencies.
(2)		Bonds and short-term promissory instruments are divided into six quality categories for NAIC rating purposes, ranging from 1 (highest) to 5 (lowest) for non-defaulted bonds plus one category 6, for bonds in or near default. These six categories correspond with the S&P/Moody’s/Fitch rating groups listed above, with categories 1 and 2 considered investment grade. The NAIC categories include $23.8 million of assets that were rated by the Company pursuant to applicable NAIC rating guidelines.

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     The valuation of invested assets involves obtaining a fair value for each security. The source for the fair value is generally from market exchanges, with the exception of non-traded securities.

     Another aspect of valuation pertains to impairment. As a matter of policy, the determination that a security has incurred an other-than-temporary decline in value and the amount of any loss recognition requires the judgment of the Company’s management and a continual review of its investments. In general, a security is considered a candidate for impairment if it meets any of the following criteria:

	•	Trading at a significant discount to par, amortized cost (if lower) or cost for an extended period of time;
	•	The occurrence of a discrete credit event resulting in: (i) the issuer defaulting on a material outstanding obligation; (ii) the issuer seeking protection from creditors under the bankruptcy laws or similar laws intended for the court supervised reorganization of insolvent enterprises; or (iii) the issuer proposing a voluntary reorganization pursuant to which creditors are asked to exchange their claims for cash or securities having a fair value substantially lower than the par value of their claims; or
	•	In the opinion of the Company’s management, it is unlikely the Company will realize a full recovery on its investment, irrespective of the occurrence of one of the foregoing events.

     Once a security has been identified as potentially impaired, the amount of such impairment is determined by reference to that security’s contemporaneous market price.

     The Company has the ability to hold any security to its stated maturity. Therefore, the decision to sell reflects the judgment of the Company’s management that the security sold is unlikely to provide, on a relative value basis, as attractive a return in the future as alternative securities entailing comparable risks. With respect to distressed securities, the sale decision reflects management’s judgment that the risk-discounted anticipated ultimate recovery is less than the value achieved on sale.

     As a result of these policies, the Company recorded pretax impairment writedowns of $4.6 million and $0.4 million in 2005 and 2004, respectively. One individual impairment loss, net of DAC and taxes, exceeded 10% of the Company’s net income for the three months ended March 31, 2005.

     Excluding the impairments noted above, the changes in fair value for the Company’s Bond Portfolio, which constitutes the vast majority of the Company’s investments, were recorded as a component of other comprehensive income in shareholder’s equity as unrealized gains or losses.

     At March 31, 2005, the fair value of the Company’s Bond Portfolio aggregated $3.14 billion. Of this aggregate fair value, approximately 0.00% represented securities trading at or below 75% of amortized cost. The impact of unrealized losses on net income will be further mitigated upon realization, because realization will result in current decreases in the amortization of DAC and decreases in income taxes.

     At March 31, 2005, approximately $1.38 billion, at amortized cost, of the Bond Portfolio had a fair value of $1.42 billion resulting in an aggregate unrealized gain of $36.8 million. At March 31, 2005, approximately $1.75 billion, at amortized cost, of the Bond Portfolio had a fair value of $1.71 billion resulting in an aggregate unrealized loss of $33.1 million. No single issuer accounted for more than 10% of unrealized losses. Approximately 47%, 15%, and 10% of unrealized losses were in the financial services, telecommunications, and transportation industries, respectively. No other industry accounted for more than 10% of unrealized losses.

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     The amortized cost of the Bond Portfolio in an unrealized loss position at March 31, 2005, by contractual maturity, is shown below.

     The aging of the Bond Portfolio in an unrealized loss position at March 31, 2005 is shown below:

     In 2005, the pretax realized loss incurred with respect to the sale of fixed-rate securities in the Bond Portfolio was $5.4 million. The aggregate fair value of securities sold was $125.1 million, which was approximately 99% of amortized cost. The average period of time that securities sold at a loss during 2005 were trading continuously at a price below amortized cost was approximately 10 months.

     The valuation for the Company’s Bond Portfolio comes from market exchanges or dealer quotations, with the exception of non-traded securities. The Company considers non-traded securities to mean certain fixed income investments and certain structured securities. The aggregate fair value of these securities at March 31, 2005 was approximately $449.9 million. The Company estimates the fair value with internally prepared valuations (including those based on estimates of future profitability). Otherwise, the Company uses its most recent purchases and sales of similar unquoted securities, independent broker quotes or comparison to similar securities with quoted prices when possible to estimate the fair value of those securities. All such securities are classified as available for sale.

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     For certain structured securities, the carrying value is based on an estimate of the security’s future cash flows pursuant to the requirements of Emerging Issues Task Force Issue No. 99-20 “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets”. The change in carrying value is recognized in income.

     Each of these investment categories is regularly tested to determine if impairment in value exists. Various valuation techniques are used with respect to each category in this determination.

     Senior secured loans (“Secured Loans”) are included in the Bond Portfolio and aggregated $99.1 million at March 31, 2005. Secured Loans are senior to subordinated debt and equity and are secured by assets of the issuer. At March 31, 2005, Secured Loans consisted of $51.6 million of privately traded securities and $47.5 million of publicly traded securities. These Secured Loans are composed of loans to borrowers spanning 8 industries, with 71% of these assets concentrated in the utilities industry, including two single issuers comprising 15% and 11%, respectively and 11% concentrated in the basic industrial industry. No other industry concentration or single issuer constituted more than 10% of these assets.

     While the trading market for the Company’s privately traded Secured Loans is more limited than for publicly traded issues, participation in these transactions has enabled the Company to improve its investment yield. As a result of restrictive financial covenants, these Secured Loans involve greater risk of technical default than do publicly traded investment-grade securities. However, management believes that the risk of loss upon default for these Secured Loans is mitigated by such financial covenants and the collateral values underlying the Secured Loans.

     MORTGAGE LOANS aggregated $290.5 million at March 31, 2005 and consisted of 80 commercial first mortgage loans with an average loan balance of approximately $3.6 million, collateralized by properties located in 30 states. Approximately 34% of this portfolio was office, 25% was multifamily residential, 15% was industrial, 14% was retail and 12% was other types. At March 31, 2005, approximately 24% and 12% of this portfolio was secured by properties located in California and New York, respectively. No more than 10% of this portfolio was secured by properties located in any other single state. At March 31, 2005, six mortgage loans had an outstanding balance of $10 million or more, which collectively aggregated approximately 31% of this portfolio. At March 31, 2005, approximately 26% of the mortgage loan portfolio consisted of loans with balloon payments due before April 1, 2008. During 2005 and 2004, loans delinquent by more than 90 days, foreclosed loans and restructured loans have not been significant in relation to the total mortgage loan portfolio.

     At March 31, 2005, approximately 11% of the mortgage loans were seasoned loans underwritten to the Company’s standards and purchased at or near par from other financial institutions. Such loans generally have higher average interest rates than loans that could be originated today. The balance of the mortgage loan portfolio has been originated by the Company under strict underwriting standards. Commercial mortgage loans on properties such as offices, hotels and shopping centers generally represent a higher level of risk than do mortgage loans secured by multifamily residences. This greater risk is due to several factors, including the larger size of such loans and the more immediate effects of general economic conditions on these commercial property types. However, due to the seasoned nature of the Company’s mortgage loan portfolio and its strict underwriting standards, the Company believes that it has prudently managed the risk attributable to its mortgage loan portfolio while maintaining attractive yields.

     POLICY LOANS totaled $32.6 million at March 31, 2005, compared to $32.9 million at December 31, 2004, and primarily represent loans taken against universal life insurance policies.

     SECURITIES LENDING COLLATERAL totaled $556.1 million at March 31, 2005, compared to $517.6 million at December 31, 2004, and consisted of cash collateral invested in highly rated short-term securities received in connection with the Company’s securities lending program. The increase in securities lending collateral in 2005 resulted from increased demand for securities in the Company’s portfolio. Although the cash collateral is currently invested in highly rated short-term securities, the applicable collateral agreements permit the cash collateral to be invested in highly liquid short and long-term investment portfolios. At least 75% of the portfolio’s short-term investments must have external issue ratings of A-1/P-1, one of the highest ratings for short-term credit quality. Long-term investments include corporate notes with maturities of five years or less and a credit rating by at least two

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nationally recognized statistical rating organizations (“NRSRO”), with no less than a S&P rating of A or equivalent by any other NRSRO.

     ASSET-LIABILITY MATCHING is utilized by the Company in an effort to minimize the risks of interest rate fluctuations and disintermediation (i.e. the risk of being forced to sell investments during unfavorable market conditions). The Company believes that its liabilities for Fixed-Rate Products should be backed by a portfolio principally composed of fixed-rate investments that generate predictable rates of return. The Company does not have a specific target rate of return. Instead, its 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, default rates, and general economic conditions. Its portfolio strategy is constructed with a view to achieve adequate risk-adjusted returns consistent with its investment objectives of effective asset-liability matching, liquidity and safety. The Company’s Fixed-Rate Products incorporate incentives, surrender charges and/or other restrictions in order to encourage persistency. Approximately 76% of the Company’s reserves for Fixed-Rate Products had surrender penalties or other restrictions at March 31, 2005.

     As part of its asset-liability matching discipline, the Company conducts detailed computer simulations that model its fixed-rate assets and liabilities under commonly used interest rate scenarios. With the results of these computer simulations, the Company can measure the potential gain or loss in fair value of its interest-rate sensitive instruments and seek to protect its economic value and achieve a predictable spread between what it earns on its invested assets and what it pays on its liabilities by designing its Fixed-Rate Products and conducting its investment operations to closely match the duration and cash flows of the fixed-rate assets to that of its fixed-rate liabilities. The fixed-rate assets in the Company’s asset-liability modeling include: cash and short-term investments, bonds, notes and redeemable preferred stocks, mortgage loans and policy loans. At March 31, 2005, these assets had an aggregate fair value of $3.61 billion with an option-adjusted duration of 4.7 years. The Company’s fixed-rate liabilities include the Fixed-Rate Products. At March 31, 2005, these liabilities had an aggregate fair value (determined by discounting future contractual cash flows by related market rates of interest) of $3.07 billion with an option-adjusted duration of 5.7 years. The Company’s potential exposure due to a relative 10% decrease in prevailing interest rates from its March 31, 2005 levels is a loss of approximately $1.2 million, representing an increase in fair value of its fixed-rate liabilities that is not offset by an increase in fair value of its fixed-rate assets. Because the Company actively manages its assets and liabilities and has strategies in place to minimize its exposure to loss as interest rate changes occur, it expects that actual losses would be less than the estimated potential loss.

     Option-adjusted duration is a common measure for the price sensitivity of a fixed-maturity portfolio to changes in interest rates. For example, if interest rates increase 1%, the fair value of an asset with a duration of 5.0 years is expected to decrease in value by approximately 5%. The Company estimates the option-adjusted duration of its assets and liabilities using a number of different interest rate scenarios, assuming continuation of existing investment and interest crediting strategies, including maintaining an appropriate level of liquidity. Actual company and contract holder behaviors may be different than was assumed in the estimate of option-adjusted duration and these differences may be material.

     The Company has had the ability, limited by minimum interest rate guarantees, to respond to the generally declining interest rate environment in the last five years by lowering crediting rates in response to lower investment returns. See the earlier discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information on the calculation of investment yield and net investment spread used by the Company’s management as a key component in evaluating the profitability of its annuity business. The trends experienced during 2005 and 2004 in the Company’s yield on average invested assets and rate of interest credited on average interest-bearing liabilities, compared to the market trend in long-term interest rates as illustrated by the average ten-year U.S. Treasury bond rate, are presented in the following table:

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     Since the Company’s investing strategy is to hold fixed-rate assets for long-term investment, the Company’s average yield tends to trail movements in the, average U.S treasury yield. For further discussion on average yield on the bond portfolio and the rate paid on average interest-bearing liabilities, see discussion on “Investment Spread.”

     The Company seeks to provide liquidity by investing in MBS. MBS are generally investment-grade securities collateralized by large pools of mortgage loans. MBS generally pay principal and interest monthly. The amount of principal and interest payments may fluctuate as a result of prepayments of the underlying mortgage loans.

     There are risks associated with some of the techniques the Company uses to provide liquidity, enhance its spread income and match its assets and liabilities. The primary risk associated with MBS is that a changing interest rate environment might cause prepayment of the underlying obligations at speeds slower or faster than anticipated at the time of their purchase. As part of its decision to purchase such a security, the Company assesses the risk of prepayment by analyzing the security’s projected performance over an array of interest-rate scenarios. Once such a security is purchased, the Company monitors its actual prepayment experience monthly to reassess the relative attractiveness of the security with the intent to maximize total return.

     INVESTED ASSETS EVALUATION is routinely conducted by the Company. Management identifies monthly those investments that require additional monitoring and carefully reviews the carrying values of such investments at least quarterly to determine whether specific investments should be placed on a nonaccrual basis and to determine declines in value that may be other than temporary. In conducting these reviews for bonds, management principally considers the adequacy of any collateral, compliance with contractual covenants, the borrower’s recent financial performance, news reports and other externally generated information concerning the creditor’s affairs. In the case of publicly traded bonds, management also considers market value quotations, if available. For mortgage loans, management generally considers information concerning the mortgaged property and, among other things, factors impacting the current and expected payment status of the loan and, if available, the current fair value of the underlying collateral.

     The carrying values of investments that are determined to have declines in value that are other than temporary are reduced to net realizable value and, in the case of bonds, no further accruals of interest are made. The provisions for impairment on mortgage loans are based on losses expected by management to be realized on transfers of mortgage loans to real estate, on the disposition and settlement of mortgage loans and on mortgage loans that management believes may not be collectible in full. Accrual of interest is suspended when principal and interest payments on mortgage loans are past due more than 90 days. Impairment losses on securitized assets are recognized if the fair value of the security is less than its book value, and the net present value of expected future cash flows is less than the net present value of expected future cash flows at the most recent (prior) estimation date.

     DEFAULTED INVESTMENTS, comprising all investments that are in default as to the payment of principal or interest, totaled $1.7 million of bonds at March 31, 2005, and constituted approximately 0.04% of total invested assets. At December 31, 2004, defaulted investments totaled $1.7 million of bonds, which constituted less than 0.04% of total invested assets.

     SOURCES OF LIQUIDITY are readily available to the Company in the form of the Company’s existing portfolio of cash and short-term investments, reverse repurchase agreement capacity on invested assets and if required, proceeds from invested asset sales. The Company’s liquidity is primarily derived from operating cash flows from annuity operations. At March 31, 2005, approximately $1.42 billion of the Bond Portfolio had an aggregate unrealized gain of $36.7 million, while approximately $1.72 billion of the Bond Portfolio had an aggregate

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unrealized loss of $37.1 million. In addition, the Company’s investment portfolio currently provides approximately $27.3 million of monthly cash flow from scheduled principal and interest payments. Historically, cash flows from operations and from the sale of the Company’s annuity products have been more than sufficient in amount to satisfy the Company’s liquidity needs.

     Management is aware that prevailing market interest rates may shift significantly and has strategies in place to manage either an increase or decrease in prevailing rates. In a rising interest rate environment, the Company’s average cost of funds would increase over time as it prices its new and renewing Fixed-Rate Products to maintain a generally competitive market rate. Management would seek to place new funds in investments that were matched in duration to, and higher yielding than, the liabilities assumed. The Company believes that liquidity to fund withdrawals would be available through incoming cash flow, the sale of short-term or floating-rate instruments, thereby avoiding the sale of fixed-rate assets in an unfavorable bond market.

     In a declining interest rate environment, the Company’s cost of funds would decrease over time, reflecting lower interest crediting rates on its Fixed-Rate Products. Should increased liquidity be required for withdrawals, the Company believes that a significant portion of its investments could be sold without adverse consequences in light of the general strengthening that would be expected in the bond market.

     If a substantial portion of the Company’s Bond Portfolio diminished significantly in value and/or defaulted, the Company would need to liquidate other portions of its investment portfolio and/or arrange financing. Such events that may cause such a liquidity strain could be the result of economic collapse or terrorist acts.

     Management believes that the Company’s liquid assets and its net cash provided by operations will enable the Company to meet any foreseeable cash requirements for at least the next twelve months.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In July 2003, the American Institute of Certified Public Accountants issued SOP 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts” (“SOP 03-1”). This statement was effective as of January 1, 2004, and requires the Company to recognize a liability for GMDB and certain living benefits related to its variable annuity contracts, account for enhanced crediting rates or bonus payments to contract holders and modifies certain disclosures and financial statement presentations for these products. In addition, SOP 03-1 addresses the presentation and reporting of separate accounts and the capitalization and amortization of certain other expenses. The Company reported for the first quarter of 2004 a one-time cumulative accounting charge of $2,013,000 ($3,098,000 pre-tax) to reflect the liability and the related impact of DAC as of January 1, 2004.

REGULATION

     The Company, in common with other insurers, is subject to regulation and supervision by the states and jurisdictions in which it does business. Within the United States, the method of such regulation varies but generally has its source in statutes that delegate regulatory and supervisory powers to an insurance official. The regulation and supervision relate primarily to approval of policy forms and rates, the standards of solvency that must be met and maintained, including risk-based capital measurements, the licensing of insurers and their agents, the nature of and limitations on investments, restrictions on the size of risks which may be insured under a single contract, deposits of securities for the benefit of contract holders, methods of accounting, periodic examinations of the affairs of insurance companies, the form and content of reports of financial condition required to be filed, and reserves for unearned premiums, losses and other purposes. In general, such regulation is for the protection of contract holders rather than security holders.

     Risk based capital (“RBC”) standards are designed to measure the adequacy of an insurer’s statutory capital and surplus in relation to the risks inherent in its business. The standards are intended to help identify inadequately capitalized companies and require specific regulatory actions in the event an insurer’s RBC is deficient. The RBC formula develops a risk-adjusted target level of adjusted statutory capital and surplus by applying certain factors to various asset, premium and reserve items. Higher factors are applied to more risky items and lower factors are applied to less risky items. Thus, the target level of statutory surplus varies not only as a result of the insurer’s size, but also on the risk profile of the insurer’s operations. The RBC Model Law provides four incremental levels of

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regulatory attention for insurers whose surplus is below the calculated RBC target. These levels of attention range in severity from requiring the insurer to submit a plan for corrective action to actually placing the insurer under regulatory control. The adjusted statutory capital and surplus of the Company as of March 31, 2005 exceeded the RBC requirements that would require state regulatory action.

     The federal government does not directly regulate the business of insurance, however, the Company and its products are governed by federal agencies, including the Securities and Exchange Commission (“SEC”), the Internal Revenue Service and the self-regulatory organization, the National Association of Securities Dealers, Inc. (“NASD”). Federal legislation and administrative policies in several areas, including financial services regulation, pension regulation and federal taxation, can significantly and adversely affect the life insurance industry. The federal government has from time to time considered legislation relating to the deferral of taxation on the accretion of value within certain annuities and life insurance products, changes in the Employee Retirement Income Security Act regulations, the alteration of the federal income tax structure and the availability of Section 401(k) and individual retirement accounts. Although the ultimate effect of any such changes, if implemented, is uncertain, both the persistency of our existing products and our ability to sell products may be materially impacted in the future.

     Recently there has been a significant increase in federal and state regulatory activity relating to financial services companies, particularly mutual fund companies and life insurers issuing variable annuity products. These inquiries have focused on a number of issues including, among other items, after-hours trading, short-term trading (sometimes referred to as market timing), suitability, revenue sharing arrangements and greater transparency regarding compensation arrangements. There are several rule proposals pending at the SEC, the NASD and on a federal level, which if adopted could have an impact on the business of the Company.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

     The quantitative and qualitative disclosures about market risk are contained in the Asset-Liability Matching section of Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 21 to 22 herein.

Item 4. Controls and Procedures

     The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”). Disclosure controls and procedures include controls and procedures reasonably designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that the information required to be disclosed in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. In addition, there has been no change in the Company’s internal control over financial reporting that occurred during the first fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II- OTHER INFORMATION

Item 1. Legal Proceedings

Various lawsuits against the Company have arisen in the ordinary course of business. Contingent liabilities arising from litigation, income taxes and other matters are not considered material in relation to the financial position, results of operations or cash flows of the Company.

See also Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview for a discussion of circumstances affecting AIG that could impact the Company.

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

     The Company had no unregistered sales of equity securities.

Item 3. Defaults Upon Senior Securities

     The Company had no defaults upon senior securities.

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

     No matters were submitted during the quarter ending March 31, 2005 to a vote of security holders through solicitation of proxies or otherwise.

Item 5. Other Information

Pursuant to a Form 12b-25 filed with the SEC on March 31, 2005, the Company’s filing deadline for its Form 10-K for the fiscal year ended December 31, 2004 was extended to April 15, 2005. The Company filed timely with the SEC its Form 10-K on April 15, 2005.

Item 6. Exhibits

     See accompanying Exhibit Index.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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Exhibit Index

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