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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2003.

Commission file number: 1-9972

HOOPER HOLMES, INC.

(Exact name of Registrant as specified in its charter)

Area Code (908) 766-5000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Securities Exchange Act Rule #12b-2). Yes x No ¨

As of February 13, 2004, there were 64,886,823 shares of Common Stock outstanding. The aggregate market value of the shares of Common Stock held by non-affiliates of the Registrant, based on the closing price of these shares on February 13, 2004 on the American Stock Exchange, was $381,367,538 based on 61,018,806 shares. For the purposes of the foregoing calculation only, all directors and executive officers of the Registrant have been deemed affiliates.

Certain information contained in the Company’s 2003 Annual Report to Shareholders and its Proxy Statement in connection with its 2004 Annual Meeting of Shareholders is incorporated by reference into Parts I, II and III of this Form 10-K.

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HOOPER HOLMES, INC. — FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2003

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FORM 10K

PART 1

General

Hooper Holmes (the Company) is one of the nation’s leading providers of outsourced risk assessment services to the life and health insurance industry and medical evaluation and claims management services to the automobile insurance industry and the workers’ compensation industry. Our services include arranging and providing mobile paramedical and medical examinations, independent medical examinations, personal health interviews, record collection and laboratory testing which help life insurance companies evaluate the risks associated with underwriting insurance policies and property and casualty insurers evaluate physical injuries. We serve our customers through our network of approximately 10,000 field personnel, including 8,540 registered nurses, licensed practical nurses, physicians, phlebotomists and medical and EKG technicians, of which approximately 1,140 are employees and over 8,000 are active independent contractors. Hooper Holmes has a total employee count of 2,800. We operate through approximately 217 branch offices and 62 contractor affiliate offices located in 50 states, the United Kingdom (U.K.), Guam and Puerto Rico. We have over 700 life insurance company customers, and most of the top 100 in the United States.

Growth Strategy

Our growth strategy is to further enhance our industry leadership position through the vertical integration of value added services, and through the expansion of our core competencies into adjacent core businesses and markets. We will pursue this strategy by:

Providing a complete one-stop source for risk assessment services. With the reorganization of the Company in late 2002 into two distinct business units, we are able to focus on clearly defined segments of the markets we serve. The Health Information Business Unit (HIBU) provides a one-source order and delivery system of services to fully underwrite an application for life, health and disability insurance customers. These insurance company customers are better able to meet their cost containment and cycle time objectives by outsourcing their requirements to a single supplier such as Hooper Holmes. Our entry into the United Kingdom insurance market in August 2002, and the success of our U.K. subsidiary Medicals Direct Group validates the U.K. market as well. The Diversified Business Unit (DBU) provides high quality, cost efficient outsourced claims management services to automobile and workers’ compensation insurance carriers, helping them increase internal productivity and profit. The DBU provides independent medical examinations and related claim management services primarily to automobile (no-fault) insurers, workers’ compensation carriers, and third-party administrators. By providing high quality, timely, and cost efficient services, we help our customers improve productivity and reduce costs.

Expanding core competencies. The DBU provides independent medical examinations (IME’s) and related claim services throughout most of the United States for customers located primarily in the Metropolitan New York/Tri-State Region. We are expanding our national panel of physicians by way of targeted geographical recruitment and through acquisition. The expansion strategy should enable the DBU to develop one the most comprehensive panels of IME specialists in the industry. In addition, the DBU plans to leverage Portamedic’s long-standing relationships with most national insurance carriers.

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Bundling of complementary services. A growing number of life insurance customers are contracting for services through corporate procurement departments. We believe that these purchasing agents are more inclined to contract with full service companies such as Hooper Holmes that provide complete underwriting products, including: examinations, laboratory analysis, attending physician statements, personal history interviews, and tele-underwriting. These services are often priced as bundled services, offering the customer cost efficiencies.

Continuing to pursue strategic acquisitions and marketing agreements. The DBU intends to continue pursuing strategic initiatives that complement existing services and leverage our existing capabilities. The DBU will continue to pursue strategic acquisitions that will provide geographic and market diversification. The IME industry is highly fragmented and is dominated by local and regional firms that provide services to specific market segments. The DBU closed two acquisitions in 2003: one was a Pennsylvania based IME company servicing New Jersey and Pennsylvania, and the other was a Buffalo, NY based provider of IME’s for both the automobile no-fault and workers’ compensation markets. These acquisitions put the DBU squarely into the workers’ compensation (WC) market. WC is a state-mandated insurance program that requires employers to fund medical expenses and other costs resulting from work-related injuries and illnesses. With healthcare costs increasing and employers’ desire to keep costs to a minimum, it is management’s opinion that the demand for outsourced claims management- including IME’s- is increasing. We plan to continue to expand into additional states through acquisitions in the DBU. The Company’s Chief Marketing Officer is focused on adding and expanding strategic alliances and other agreements. Part of our strategy over the last several years included the acquisition of attractive smaller regional paramedical companies. These opportunities will not be aggressively pursued in the future.

Continuing our commitment to technological initiatives and the promotion and implementation of industry standards. Over 3,700 underwriters and field producers registered for Portamedic F.A.S.T., making it the most popular on-line document management retrieval system in the industry. Our e-forms library is now host to 39,000 electronic forms, serves 500 customers, and assures the use of the most current and proper state specific application forms. We have been very active in supporting the initiatives led by the Association for Cooperative Operation in Research and Development (ACORD), whose purpose is to establish electronic message standards for the life and health insurance industries. A Hooper Holmes employee is a co-chair of the ACORD Working Group Subcommittee on Underwriting Requirements. During the 2003 ACORD National Convention, Hooper Holmes was the recipient of the prestigious Early Adopter and Business Integration Awards. The Early Adopter Award recognized Hooper Holmes for completing the ACORD Certification process for four transactions using ACORD’s TXLife transaction specification. The Business Integration Award recognized Hooper Holmes for completing a client implementation that documented project management and operational efficiencies and cost reductions. We intend to invest in the latest technologies to further enhance our operating efficiencies and to provide more Internet-based services to our customers.

DBU management has observed that insurers are increasingly moving toward a paperless environment and want to be able to determine the status of an order in real time. From electronic ordering, to an automated tracking system, to imaging and automated data transfer, our IT integration team is developing comprehensive solutions that may result in national agreements with new and current customers.

Leveraging our national branch network. Our national branch network provides us with broad geographical coverage capable of providing local service for insurance companies, agents and brokers across the entire United States. This company-owned national branch network positions us to become the preferred provider of health information services in an industry otherwise comprised primarily of contractor and affiliate-owned competitors. We believe that our branch network and technological infrastructure enables us to significantly increase the volume of our services with only a marginal increase in our branch operating costs.

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Expanding our Business Process Outsourcing Services. As carriers continue to consolidate and demutualize in the increasingly competitive insurance environment, we believe that business process outsourcing (BPO) will be the fastest growing supplier-side segment of the financial services and insurance industries. Hooper Holmes is expanding its technology-based call center solutions to meet these customer challenges. We are developing point-of-sale tele-interviewing and underwriting requirements management services to reduce policy issue time and new business acquisition costs. We are also developing outsourced underwriting and policy administration services that will decrease policy maintenance costs, and shift costs from a fixed to a variable model. Our newly built Infolink Center has been equipped with the latest call center telephony and workforce management tools to complement our experienced and customer-focused BPO management team.

Services

Health Information Business Unit (HIBU)

Portamedic — Paramedical and Medical Examinations

We perform paramedical and medical examinations of insurance policy applicants under the Portamedic trade name and provide the results to insurance companies, agents and non-traditional insurance marketers primarily in connection with the issuance of life insurance policies. We are the leading paramedical and medical examination company in the U.S., having performed approximately 2.7 million exams for the year ended December 31, 2003 compared to approximately 2.9 million exams performed for the year ended December 31, 2002.

Since an insurance applicant may reconsider his or her purchase in the time it takes to deliver examination results, our system is designed to timely deliver applicant information to the insurance company. We strive to schedule an appointment within 24 to 30 hours of receiving the request and to complete the entire examination process in three to five days, unless the applicant desires a later appointment. Our examiners perform examinations at times and locations convenient to applicants, primarily at the applicant’s home or place of business.

In 2003, the market for life insurance applications declined. The Medical Information Bureau Group, Inc. (MIB), a provider of information and database management services, reported a 4.1% decline in insurance applications in 2003. With business declining and insurance companies trying to offset the loss in investment income with an increased focus on costs, paramedical pricing has come under increased pressure. To combat this pressure, Portamedic has focused on providing more efficient and faster service. For the life insurance industry, the speed of issuing cases is of paramount importance. Portamedic is constantly offering methodologies to secure underwriting information in a faster manner. The first step in doing this is F.A.S.T. (Fax and Scan Today). This service indexes and images underwriting documents for immediate retrieval on our web site or through a securely encrypted File Transfer Protocol (FTP) site. Using the combined simplicity of fax processing with the latest in document management technology, clients now have the ability to case manage the workflow of pending applications and access imaged documents from a single, convenient source.

Images delivered through F.A.S.T. are password protected, making them available only to authorized personnel as designated by client companies. Password protection makes F.A.S.T. documents simultaneously available to authorized agents, brokers and home office employees.

Because almost all of our examiners are nurses and other medically trained professionals, we are able to provide our customers with a full range of paramedical and medical examinations. In addition, examiners perform ancillary services including helping applicants understand and complete forms, and obtaining consent signatures. We also have dedicated customer service employees in Chicago, who help complete applications based on telephone interviews with applicants, and additional customer service employees located in service

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centers in Minneapolis, MN; Dallas, TX; Kansas City, KS; Santa Ana, CA; and Basking Ridge, NJ who provide general customer service support. Each insurance company has separate guidelines for determining whether an examination is required and the type of services required. The age of the applicant and the amount of life insurance applied for are the primary determinants. A policy application of a thirty-five year old male for a $100,000 policy may only require a blood draw and an exam while an applicant that is sixty years old seeking a $500,000 policy may need to submit to a medical exam by a physician, and urine, blood and stress EKG tests. For most clients, the medical underwriting requirements increase as the age of the applicant increases and the amount of insurance applied for increases. Our computer system contains more than 2,000 of these matrixes for various insurance companies. Also, our system tracks required examination forms, and our new Online Forms Library makes every state form of every client in our library available to be printed from our branch system.

Infolink Services Group — Personal Health Interviews and Medical Record Collection

Under the Infolink name, we offer personal health interviews and medical record collection, including attending physician statements, to our customers. Infolink reports are completed through highly automated, centrally located offices. In 2003, we provided approximately 474,000 Infolink reports, up from 438,000 reports in 2002. We invested heavily into our new Kansas City based Infolink center in both technology and personnel. This new center resulted from the consolidation of five offices into one (Louisville, Austin, Philadelphia, Chicago APS and Chicago Teledex). At the Center we now have employee groups handling telephone inspections (gathering information about an applicant’s financial and employment history), Attending Physician Statements (APS) (securing copies of medical records from physicians) and Teledex (gathering medical information on the phone from applicants.) The consolidation enables us to move staff from one group to another as the work volumes change in each group. This state-of-the-art call center has the capability to record each telephone conversation, store them for two years and speed up the underwriting process. For example, if we complete a Teledex interview and we learn of a heath history problem, we can immediately order an APS, saving between 3-10 days for an insurance company.

Because we have voice print capacity, electrical generators, uninterrupted power sources, and the computer capacity, insurance companies look to outsource their call centers to Infolink. In 2003, a large life insurance company utilized us for all its new business, and we expect success in enlisting other insurance companies for these services. Infolink reports can be ordered electronically, by fax or by phone. Approximately 125 full-time employees prepare all of the Infolink reports ordered by our customers from the new Kansas City call center. These employees interview the applicant, his or her employer, and his or her business and personal associates. The report is then electronically transmitted or faxed to the insurance underwriter at his request. Our information systems allow us to tailor reports for each client’s needs and reduce paperwork and turnaround time for our clients. We strive to deliver our Infolink reports back to the insurance company within two to three days from the time of request.

In addition, life insurance companies may also require an APS. In such cases, either a branch office or our central attending physician statement offices in Kansas City and San Jose will contact the applicant’s physician, clinic or hospital to request medical records, send a written request with payment and follow-up to confirm delivery of the information.

We believe there is a large potential to increase this business by devoting increased resources and the Company will focus on this in 2004. In 2003, we appointed a senior manager with over 25 years experience with the Company to head this operation. We reviewed every facet of this operation and revamped it in 2003 to organize it centrally, upgrade it technologically, and link it more directly with our other services. Another benefit of consolidating the centers is the ease for prospective customers to see all of our operations. If a customer is interested in lab services, they may visit Heritage Labs in Kansas City. While there, we can quickly show them our capability in inspections, Teledex and APS’s.

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Heritage Labs

In December 1998, we acquired a 55% interest in Heritage Labs, a laboratory which provides testing services primarily for the life insurance industry. We bought out the remaining 45% ownership in 2003. Heritage Labs processes specimens for our customers and third-party health information service providers. This acquisition has enabled us to internalize the laboratory testing process and to offer our life insurance customers a one-stop source for their health information service needs. Combined with our existing automation, we believe Heritage Labs allows us to provide a seamless service of processing, gathering and testing of health information for our life insurance customers.

Insurance companies and public health entities determine which laboratory will process the samples collected from their respective applicants. In 2003, we increased our customer list to over 327 companies. The number of samples tested in 2003 was approximately 724,000 compared to approximately 490,000 in 2002, an increase of 48%.

Portamedic Select^™

Portamedic Select is another example of speeding up the underwriting process with all paramedical examination information coming to our lab in Kansas City. The examination form is imaged and sent to the Special Services Customer Service Center. The images are reviewed to make sure all required information is present. The images are then electronically matched with the applications and the entire package is sent electronically to the insurance company. We averaged about 6,000 units per month in 2003.

Diversified Business Unit (DBU)

The Diversified Business Unit (DBU) was formed after the acquisition of D&D Associates (DD) on October 31, 2002. Medimax (MX) and Allegiance Health (AH) became part of the DBU in October 2003 and January 2004 respectively. DD is a leading provider of independent medical examinations and peer reviews to the automobile no-fault insurance market in New York; AH is a leading provider of IME’s for workers’ compensation in NY; and MX provides IME’s for workers’ compensation and no-fault customers in most states across the country, primarily in Pennsylvania and New Jersey.

Collectively, our physician panel includes more than 2,400 physicians in 46 states, primarily in the northern region of the United States. Mostly board certified, the physician panel provides accurate, professional and impartial medical evaluations for most of the largest automobile and workers’ compensation insurers in New York. Our success is attributable to a rigid quality control process, a comprehensive review for credentialing and qualifying physicians, and fast turnaround time. By providing service that meets or exceeds our customers’ expectations and maintaining our commitment to “Keeping the Independence in I.M.E.”, we expect to be able to continue to increase our market share with existing customers and by adding new customers.

The DBU markets IME and related claim management services primarily to four insurance related market segments: 1) automobile no-fault (12 states have a no-fault system of auto insurance including New York, Pennsylvania, and New Jersey); 2) workers’ compensation; 3) disability; and 4) general liability.

Claim management services generally include: 1) independent medical exam - an objective opinion regarding the nature, origin, treatment, and causal relationship of an injury to determine if the claimant requires further treatment and/or to determine what expenses are eligible for payment or reimbursement; 2) peer review - an analysis of a prior treatment performed by a doctor in the same specialty to determine the appropriateness and necessity of the treatment; 3) radiology review - a review of imaging studies such as x-rays and MRI’s to

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confirm previous readings and interpretations of diagnostic studies; and 4) functional capacity evaluations - an extensive set of tests done by a licensed therapist designed to assess the ability to perform specific job tasks and activities of daily living.

These services require strict compliance to protocols that includes coordinating the insurance company’s claim review requirements with qualified, independent doctors. We review and proofread all orders and records, schedule required services, and contact claimants to coordinate medical visits and exams. Multiple quality assurance checkpoints allow us to monitor the progress through completion. These checkpoints insure that a finished report has been done as quickly as possible and is free of errors and omissions. Timeliness is critically important because under many state laws, insurers generally have a limited number of days to pay, partially pay, or deny a claim.

Our Network

We believe our network of branch offices and contract affiliate offices is the most extensive in our industry. We can provide an examination of any applicant in any location in the United States.

Our branch managers are responsible for the supervision of the local health information operations. A support staff coordinates examinations and reporting procedures and performs quality assurance functions. Branch sales personnel perform marketing and sales activities. Each branch office is automated with direct electronic connections to our home office in Basking Ridge, New Jersey. Orders are received by both branch offices and our corporate home office. Those orders received by our home office are electronically processed and routed to the appropriate branch. The branch office is responsible for scheduling the examination and assigning an examiner. The status of the examination is entered into the branch office system, is then retrieved and processed by the home office and made available to the customer. Once examination results are complete, they are faxed or mailed directly to the customer.

We have 62 independent contract affiliate offices. Contract affiliates perform many of the same functions as our branch offices, but are independently owned and operated. Our contract affiliates provide Portamedic services in assigned geographical areas throughout the United States and receive orders directly from our customers. Each contract affiliate is responsible for compensating, training, hiring and supervising all of its personnel and must meet the same quality assurance standards as our branches, including necessary credentialing of its examiners. Our contract affiliates use a version of our system software that allows them to process customer billing information and obtain examination status reports.

Our Automation Systems

Our technology group is working on enhancements to our current IT infrastructure and applications by strengthening our imaging capabilities in our two major processes — Internet processing and Fax and Scan Today (F.A.S.T.).

Internet Processing

We have utilized Internet processing to help insurance companies, Alternative Distribution Channel (ADC) clients, and brokers to order their exams faster and anytime of the day or night. Customers can inquire as to the status of their cases 24/7 and they appreciate the ease and convenience of doing this. Our Internet orders increased from 446,000 in 2002 to 596,000 in 2003 during a downturn in the life insurance industry.

Our next step will be to utilize the Internet to both distribute orders and receive status directly to and from our examiners. Currently, we fax an order to an examiner and the examiner calls in status every day to the branch

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office. The branch then enters the status into our system. During 2004 we expect that examiners with access to the Internet will enter the status directly into our system. Additionally, after examiners receive an order, they can download the correct form to use from e-forms (our electronic library of forms) and download the application or Teledex information if either needs to be signed. This will again speed up the underwriting process and will save clerical costs at our branch level.

F.A.S.T. Imaging

Fax and Scan Today is our technologically advanced system of imaging medical underwriting information and transmitting those images electronically to our clients’ underwriting systems, thereby eliminating the traditional bottleneck of paper reports.

Our imaging capabilities are expanding to cover all facets of our business. We can gather any paper or electronic document, bundle these documents and pass them on to the carrier, thus shortening time and service and “product to customer” cycle times. Our association with Heritage Labs also enables us to bring laboratory electronic results together with medical and personal histories.

Portamedic has also become ACORD certified as both a sender and a receiver of the TXLife XML standards which are emerging as life insurance industry standards. As working members of the ACORD’s Standards Group, we are assisting the industry in setting standards for communication of electronic transactions.

Direct Electronic Links with Our Customers

Management believes our ability to image and electronically transmit all services to the insurance carrier has set us apart from the competition. We can send all the components of the underwriting process to the insurance client as an image. These images can be reviewed for quality by any of our Customer Service Centers in advance of transmission to the client.

We provide additional automation services to our customers through our Teledex service. Teledex is an automated service providing applicant information to our insurance customers on an expedited basis. When an insurance customer transmits an order through Teledex, a staff member pulls up a customer-specific underwriting questionnaire on his or her computer terminal and begins collecting applicant information, which includes a telephone interview with the applicant. Teledex has over 2,000 customer-specific underwriting questions in its system, which enables us to provide customized reports for each customer in a matter of hours. This process is valuable to our customers because it allows them to begin the underwriting process upon receipt of our Teledex report, rather than waiting for an examiner to perform the examination, collect the data and then return the report and examination results. Teledex additionally receives and handles orders for attending physician statements.

These customer links are designed to reduce paperwork, turnaround time and the chance that the insurance applicant will reconsider his or her buying decision by the time results are gathered.

Examiner Qualification Program

We hire and contract with properly trained, experienced examiners. In addition, we have developed a database of over 1,000 credentialed physicians who are approved to perform medical examinations for our customers.

During 2003, we tightened security precautions on all examiners. We complete criminal background checks on all of our examiners. Additionally, we conduct background checks on all examiners working for our contractor affiliates. We have always verified physicians’ licenses, but now we are doing criminal background checks

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on all physicians as well. We recognize that it is important for us to do as much as possible to insure that each examiner conducts himself in a professional manner.

Sales and Marketing

In 2003, Hooper Holmes formed a Corporate Marketing Group. Under the direction of the Chief Marketing Officer, the Group is responsible for defining, pricing, and implementing new products and services; identifying and pursuing strategic alliances; and managing corporate advertising. The direct supervision of our sales executives was reorganized to effect a renewed sales approach. Our thirteen sales executives are working more closely with insurance companies to illustrate the benefit of using our company for all their underwriting services. Our four ADC sales executives are coordinating their efforts with the appropriate insurance company sales executives to show the benefits of working with Portamedic Select, the Infolink Call Center and Heritage Labs. By offering all services on an outsourced basis, we believe we can help insurance companies process their work faster and be more cost effective.

At the local level, branch managers, and in certain offices, additional marketing personnel, market our services directly to local insurance agents and managers, who have the authority to select examination providers from the list approved by insurance companies’ home offices. These local marketing efforts highlight the quality of our examiners and the speed and accuracy of our services, including the ability of each branch to quickly ascertain the status of each service request through our automated branch management information system.

The DBU markets IME and related claim management services through fourteen full-time sales managers who solicit potential customers for new business opportunities and attempt to increase market share from existing customers. Their responsibilities include: 1) developing and maintaining customer contact via telephone, mail, and e-mail; 2) attending industry related conventions and conferences; 3) making face-to-face sales presentations to new and existing customers; and 4) completing assigned sales training education. Our sales executives and operations managers have developed many close relationships with industry professionals throughout the years, leading to referrals and additional business. In addition, the DBU is a member of and/or participates in various industry associations and trade groups and also participates in national, regional, and local industry trade shows and conferences.

Competition

In the HIBU market, management believes that we are the largest of the four national firms that focus primarily on providing examinations, specimen analysis, personal interviews, and medical record collection to the life insurance industry. Our largest competitors are Examination Management Services, Inc., American Para Professional Systems and LabOne, Inc. A significant number of regional and local firms also compete in our industry. Although we have exclusive relationships with a growing number of our customers, companies traditionally use two or more health information services providers. This means we face direct competition from our competitors who have existing relationships with many of our customers. Our ability to retain customers will depend on our continued ability to serve their needs and distinguish ourselves from our competitors. In management’s opinion, the principal competitive factors in our market are:

More recently, technological capabilities have become more important to meeting our customers’ needs. We are continually enhancing and expanding our technology and network infrastructure to accommodate our customers’

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changing needs, including the electronic ordering and delivery of our services and online status checks. We are also adapting to the technological needs of insurance companies that are beginning to rely more on industry standards for electronic data interchange, such as the initiatives led by ACORD.

There are over 100 registered IME vendors in New York State alone, but many provide services to only a few customers in a specific market segment. Management believes the DBU may be the leading provider of IME’s in our current primary geographic market of New York, New Jersey, and Pennsylvania. Our principle competitors include local and national companies- Concentra, MES, Countrywide, and MMS.

Service Marks and Trademarks

We have registered several service marks, including “Portamedic^®,” “Healthdex^®,” “Teledex^®,” “Infolink^®” and the Hooper Holmes logo with the United States Patent and Trademark Office. Our rights to these marks will continue as long as we comply with the usage, renewal filing and other legal requirements relating to the renewal of service marks.

Personnel

We employ approximately 1,400 full-time and 1,170 part-time employees, including approximately 1,140 examiners, none of whom is represented by a collective bargaining agreement. We also contract with approximately 7,400 medically trained examiners, and utilize the services of 62 contract affiliates. We hire and contract with properly trained, experienced and, when required, licensed or certified examiners. Our ability to recruit skilled personnel is essential to our continued growth and success. Management attributes our success in recruiting skilled personnel in our health information services business to the flexible work schedules and varied work assignments we offer our examiners. Management believes that these factors will enable us to continue to attract and retain qualified personnel.

Government Regulation

Certain aspects of our business are regulated by the states in which we operate and, to a lesser extent, by the federal government. In addition to licensing and certification requirements for our examiners, we are subject to regulations governing various aspects of our services, including the drawing of blood, needle disposal and specimen handling. Certain aspects of our business and that of our Heritage Labs, Allegiance Health, Medimax and D&D Associates subsidiaries may be subject to certain provisions of the Health Insurance Portability and Accountability Act (“HIPAA”) relating to the privacy of protected health information. The Food and Drug Administration governs certain aspects of the business of Heritage Labs, including the manufacturing of specimen collection kits. Management is not aware of any pending federal or state environmental laws or regulations that would have a material adverse effect upon our business or competitive position or that would require material capital expenditures on our part to effect compliance.

On June 20, 2002, the Company, and subsequently its three principal competitors, were notified by the California Department of Health Services (DHS) that they were in violation of the California Business and Professions Code, with respect to the drawing of blood by phlebotomists on a mobile basis. The Company disagreed with the Department’s interpretation of the law, retained legal counsel and worked with the Department to develop a reasonable interpretation of the law and a plan that allowed the Company to continue using phlebotomists to draw blood. The paramedical industry, working with a lobbyist, was successful in enacting legislation exempting the paramedical industry from licensure by the DHS. The Governor signed the bill into law in February 2004. The Company continues to service its customers in the State of California without interruption.

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Insurance and Legal Proceedings

Claims made against us arising in the course of providing health information services have not resulted in any material liability to date. We carry liability insurance in coverage amounts that we believe is customary in our business. There can be no assurance, however, that such coverage will be sufficient to cover claims made against us, that adequate insurance coverage will continue to be available to us, or that insurance coverage will be available on favorable terms. Our insurance coverage includes claims-made medical professional liability insurance with a $50,000 self insured retention per claim, claims-made non-medical professional liability insurance, a property insurance policy, a general liability policy and an umbrella insurance policy.

In the past, some state agencies have claimed that we improperly classified our examiners as independent contractors for purposes of state unemployment tax laws and that we were therefore liable for arrears of taxes, or for penalties for failure to comply with their interpretation of the laws. We received an adverse determination in the State of California, and as a result, converted our independent contractors to employees. Other similar state claims are also pending. There can be no assurance that we will prevail in these cases, or that we will not be subject to similar claims in other states in the future.

Web Availability

We make available free of charge on or through our web-site, www.hooperholmes.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, periodic reports on Form 8-K and all amendments to these reports as soon as reasonably practical after such reports are filed with the SEC.

We own a five-building complex located at 170 Mt. Airy Road, Basking Ridge, New Jersey. Of approximately 53,000 total square feet of office space, we maintain our operations in approximately 43,000 square feet and the balance is leased or available for lease to several tenants. Management believes that this arrangement provides for our foreseeable expansion needs.

We lease our field offices under a number of operating leases with varying terms and expirations.

None

No matters were submitted to a vote of securities holders during the fourth quarter of the fiscal year covered by this report.

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PART II

The common equity and related shareholder information presented under the caption “Quarterly Common Stock Price Range and Dividends” and “Investor Information — Common Stock Information” is incorporated by reference from the Company’s 2003 Annual Report to Shareholders which is Exhibit 13 to this report. As of February 13, 2004, there were 1,089 shareholders of record.

The financial data included under the caption “Selected Financial Data” contained in the Company’s 2003 Annual Report to Shareholders which is Exhibit 13 to this report is incorporated by reference herein.

The discussion included under the caption “Management’s Discussion and Analysis” contained in the Company’s 2003 Annual Report to Shareholders which is Exhibit 13 to this report is incorporated by reference herein.

The discussion included under the caption “Management’s Discussion and Analysis” contained in the Company’s 2003 Annual Report to Shareholders which is Exhibit 13 to this report is incorporated by reference herein.

Financial statements and supplementary data are included in the Company’s 2003 Annual Report to Shareholders which is Exhibit 13 to this report and are incorporated by reference herein.

None

As of December 31, 2003, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.

There have been no significant changes in the Company’s internal controls or in other factors which could significantly affect internal controls subsequent to the date the Company carried out its evaluation or that would likely materially affect the Company’s internal control over financial reporting.

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PART III

Information contained under the captions “Nominees for Directors,” “Directors Continuing in Office,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 25, 2004 is incorporated herein by reference.

Information contained under the captions “Compensation of Executive Officers,” “Compensation of Directors,” “Option Grants in Last Fiscal Year,” “Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values,” “Equity Compensation Plan Information,” “Report of the Executive Compensation Committee” and “Employment Contracts and Change-in-Control Arrangements” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 25, 2004 is incorporated herein by reference.

Information contained under the caption “Stock Ownership of Certain Beneficial Owners and Management” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 25,2004 is incorporated herein by reference.

Information contained under the caption “Certain Relationships and Related Transactions” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 25, 2004 is incorporated herein by reference.

The information appearing under the caption “Ratification of Selection of Auditors” in the Company’s Proxy Statement for the Annual Meeting of Shareholders to be held on May 25, 2004, is incorporated herein by reference.

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PART IV

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Schedule II

Hooper Holmes, Inc and Subsidiaries

Valuation and Qualifying Accounts

For the Three Years Ended December 31, 2003

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SIGNATURES

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

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:

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Independent Auditors Report on Schedule

The Board of Directors

Hooper Holmes, Inc.

Under date of February 25, 2004, we reported on the consolidated balance sheets of Hooper Holmes, Inc. as of December 31, 2003 and 2002, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2003, which are included in the annual report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule in the Form 10-K. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

Our report refers to the Company’s adoption of Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets,” effective January 1, 2002.

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Management’s Discussion and Analysis

Forward Looking Statements

Statements in this Annual Report on Form 10-K about our anticipated financial results and growth, as well as about the development of our services and markets, are forward looking statements that are based on our current plans and assumptions. Important information about the basis for these plans and assumptions and certain factors that may cause our actual results to differ materially from these statements is contained below and in “Forward Looking Statements” beginning on page 23.

Unless otherwise indicated, all references to a year reflect our fiscal year that ends December 31.

Business Overview

Hooper Holmes, Inc. is one of the nation’s leading providers of outsourced risk assessment services to the life and health insurance industry and medical evaluation and claims management services to the automobile insurance and workers’ compensation industries. Our services include arranging and providing mobile paramedical and medical examinations, independent medical examinations, personal health interviews, record collection and laboratory testing which help life insurance companies evaluate the risks associated with underwriting insurance policies and property and casualty insurers evaluate physical injuries. We provide our risk assessment services nationwide through our network of approximately 8,540 registered and licensed practical nurses, physicians, phlebotomists and medical and EKG technicians. Our evaluation and claims management services are provided primarily in the states of New York, New Jersey and Pennsylvania but on occasion in other states in the U.S. through three regional offices, one of which was acquired in late 2003 and one in January 2004. Our services are provided to most of the insurance companies in the United States and Puerto Rico as well as those in the United Kingdom.

Historically, our business focus has been to provide mobile paramedical and medical examinations in every state, in efficient time frames, with a high degree of reliability and accuracy and with experienced qualified examiners. Our philosophy of utilizing over 200 company-owned branch facilities to recruit, monitor and manage the examiners and therefore produce high quality services differentiated the Company for years. The advent of the Internet and the electronic delivery of orders directly to our home office affords us the opportunity to re-examine how we deliver these services. In 2002 we embarked on a successful program to expand into ancillary services and/or markets that we were familiar with and utilize these new services to supplement our core business. We entered the independent medical examination (IME) market with the acquisition of D&D Associates in late 2002 and added to that presence with one additional acquisition in 2003, and subsequently another in January 2004. We expect to continue to supplement organic growth with acquisitions in other states. We bill these services generally on a unit pricing basis and recognize the revenue when the service is performed. We invoice directly to insurance companies on a monthly basis.

During 2003, the Company acquired specific assets and liabilities of seven health information services companies, purchased Medimax, Inc., an independent medical exam company in October 2003, and in April 2003, purchased the 45% minority interest in Heritage Labs that it did not previously own, to bring the Company’s ownership interest to 100%, and our U.K. subsidiary, Medicals Direct Group (MDG) acquired three complimentary companies. The aggregate purchase of these acquisitions was $23.8 million. These acquisitions strengthened the Company’s position and market share as a leader in providing outsourced risk assessment services to the life and health insurance industries and claims management services to the automobile and workers’ compensation industries.

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In evaluating the Company’s operating performance and financial condition, management is focused on:

Management operates and views the business through two distinct business units. The Health Information Business Unit (HIBU) consists of the Company’s Portamedic, Infolink and Heritage Labs divisions and the August 2002 acquisition of the Medicals Direct Group (MDG), our U.K. subsidiary. It provides paramedical, laboratory, Attending Physician Statement (APS), inspection report and underwriting services used to underwrite life, health and disability insurance. The Diversified Business Unit (DBU) consists of D&D Associates, acquired in the fourth quarter of 2002, and Medimax Inc., acquired in the fourth quarter of 2003. The DBU provides outsourced claims management services to automobile and workers’ compensation insurance carriers.

The following provides a summary of the results of our operations for 2003 and a detailed discussion regarding these results follows.

Results of Operations

2003 Compared to 2002

Revenues:

Comparative revenues are set forth below:

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Total consolidated revenues for 2003 increased 15.3% to $300.2 million, compared to $260.3 million for 2002.

Revenues for the HIBU segment increased $11.4 million to $266.6 million for 2003, compared to $255.2 million for 2002. Within this segment, revenues of the Portamedic business decreased $13.4 million to $207.1 million for 2003, compared to $220.5 million for the year 2002, and revenues of the Infolink business increased 10.9% to $21.8 million for 2003, compared to $19.7 million for 2002. This Portamedic revenue decline results from:

The number of Infolink reports increased to 474,000 for 2003, from 440,000 for 2002. Management believes that the increase is due to incremental units produced as a result of the opening of our new state-of-the-art call center in Kansas City, KS, which is part of the Infolink business.

Also, within this segment, Heritage Labs revenues grew 36% for 2003 to $15.1 million, from $11.1 million for 2002. This increase is due to:

Revenues in 2003 for Medicals Direct Group (MDG) were $22.6 million, and were $3.9 million for 2002 representing the four months they were in our consolidated results in 2002. Approximately $6.2 million of the growth is attributed to the three acquisitions completed by Medicals Direct in 2003. The services offered by MDG are “Screenings”, the equivalent of Hooper Holmes’ paramedical examination service; “Underwriting,” which is underwriting life insurance policies on an outsourced basis; “General Medicals,” which provides independent medical reports for legal, corporate, and insurance industries; and “Clinics,” which offer physical examination screening services for public transportation and corporate agencies. These service lines experienced significant revenue growth in 2003, with Screenings totaling $12.5 million, Underwriting totaling $4.1 million, Clinics totaling $3.1 million, and General Medicals totaling $2.9 million.

Our future revenue stream is dependent upon the stability and growth of the life and other segments of the insurance industry and the number of new policies being written which require medical underwriting information. Management is hopeful that insurance application activity will resume to more traditional levels throughout 2004. Pricing of our services has become a significant business factor but we remain confident that we will hold our

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market share and that our Company owned branch structure, and automation efficiencies, will allow us to continue to be successful in this challenging competitive environment.

Revenues for the Diversified Business Unit (DBU) segment totaled $33.6 million in 2003, and were $5.1 million in 2002, which includes the two months that D&D was in our consolidated results in 2002. Revenues for 2003 includes D&D Associates for the full year 2003 of $32.9 million and the October 2003 acquisition of Medimax Inc. of $.7 million.

The DBU experienced a decline in revenue during the second half of 2003 of approximately $1.1 million or 6.6% from the first half of 2003. The decrease is primarily due to the following:

The Company intends to counter this revenue decline by expanding its market share through:

Cost of Operations

The Company’s consolidated cost of operations for 2003 totaled $213.7 million compared to $185.8 million for 2002. As a percentage of revenues, cost of operations decreased slightly to 71.2% for 2003 compared to 71.4% for 2002.

Cost of operations for the HIBU segment totaled $192.3 million for 2003, compared to $182.4 for 2002, an increase of $9.9 million, and as a percentage of revenues, totaled 72.1% for 2003, compared to 71.4% for 2002. Within the HIBU segment, cost of operations for the Portamedic and Infolink businesses totaled $166.0 million for 2003, compared to $173.0 million for 2002. This dollar decrease is due to lower revenue levels for 2003. As a percentage of Portamedic and Infolink revenues, cost of operations totaled 72.4% for 2003 and 72.0% for 2002. As a percentage of revenues, the increase is due to lower revenue levels for 2003, higher specimen collection kit prices, and increased branch operating expenses.

Cost of operations for Heritage Labs increased to $9.8 million for 2003, compared to $7.2 million for 2002, and as a percentage of revenues totaled 64.9% for 2003, compared to 65.0% for 2002. The dollar increase is due to higher revenue levels for 2003. Despite a 7% decrease in the average revenue per sample tested, Heritage Labs has maintained this cost of sales percentage by negotiating improved shipping rate discounts, obtaining volume discounts on material costs and by using contractor versus employee labor.

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Cost of operations for Medicals Direct Group, our U.K. subsidiary acquired in August 2002, totaled $16.5 million for 2003 and $2.2 million for 2002. As a percentage of revenues, cost of sales totaled 73.1% for 2003 compared to 55.8% for 2002. The dollar increase in cost of sales is the result of:

Cost of operations for the DBU segment totaled $21.4 million in 2003, compared to $3.4 million in 2002. In 2002, the DBU consisted of D&D Associates acquired on October 31, 2002. As a percentage of revenues, cost of sales totaled 63.9% for 2003, compared to 65.4% for 2002. The cost of sales component of the DBU is largely composed of the fees paid to physicians for the services they provide. While fees are negotiated as new physicians are added to the approved panel, the rates paid are relatively stable. Management does not expect any changes to the cost structure in the near future.

Selling, General and Administrative Expenses:

Consolidated selling, general and administrative (SG&A) expenses totaled $59.7 million for 2003, compared to $45.9 million for 2002, and as a percentage of revenues totaled 19.9% compared to 17.7% respectively.

SG&A for the HIBU segment increased $8.4 million to $53.7 million for 2003, compared to $45.2 million for 2002. As a percentage of HIBU revenues, SG&A totaled 20.1% compared to 17.7% for 2003 and 2002, respectively. The dollar increase within the HIBU is due to:

SG&A for the DBU, comprised of D&D Associates and the October 2003 acquisition of Medimax, Inc., totaled $6.0 million for 2003, compared to $.7 million for 2002. The increase is the result of the consolidation of a full year of D&D Associates, acquired in October 2002, and the costs associated with Medimax, Inc.

Operating Income:

As a result of the aforementioned, the Company’s consolidated operating income increased 22.5% to $26.8 million for 2003, from $21.9 million for 2002, and as a percentage of revenues, increased to 8.9% compared to 8.4%, respectively.

Operating income for the HIBU segment decreased slightly to $20.7 million for 2003 from $20.8 million for 2002, and as a percentage of revenues, decreased to 7.8% compared to 8.2%, respectively.

Operating income for the DBU segment increased $5.0 million to $6.1 million for 2003 compared to $1.1 million for 2002. As a percentage of revenues, operating income was 18.2% and 21.1% for the years 2003 and 2002, respectively.

Consolidated operating income was impacted during 2002 by a pre-tax charge of $6.7 million ($4.1 million net of taxes) related to the Company’s write down of the carrying value of its investment in e-Nable Corporation (e-Nable).

During the second quarter of 2002, the Company recorded a 25% write down of the carrying value of its investment in, and advances to, e-Nable, which resulted in a pre-tax charge of $1.6 million, or $1.0 million after tax. The

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adjustment was estimated based on an assessment of the fair value of the investment and was mainly the result of the difficulty e-Nable has had in securing additional financing in the capital markets. During the third quarter of 2002, the Company wrote off the remaining carrying value of its investment in, and advances to, e-Nable which resulted in a pre-tax charge of $5.1 million, or $3.1 million after tax. The Company continues to pursue the strategic benefits offered by e-Nable. The adjustment was based on the continuing assessment of the carrying value of the investment, given that e-Nable has been unsuccessful in its attempt to secure additional capital. The Company has no future obligation or intent to fund the operations of e-Nable.

Other:

Interest income for 2003 decreased to $0.8 million from $2.3 million for 2002 due to lower interest rates and lower levels of invested funds. The reduced levels of invested funds is due to cash used to fund the 2003 acquisitions. Interest expense increased to $0.4 million for 2003, compared to $0.1 million for 2002. This increase is due to interest accruing on the portion of the purchase price due in 2005 and 2006 for the Heritage Labs acquisition completed in the second quarter of 2003, and interest on the financing of Medicals Direct accounts receivable.

The effective tax rate was 40% and 39% for 2003 and 2002, respectively. The 2003 year end tax rate of 40% increased over 2002 due to lower levels of tax free interest income, partially offset by a lower tax rate relating to the profits of Medicals Direct Group, which operates in the United Kingdom.

Net income for 2003 was $15.8 million or $.24 per diluted share versus $14.3 million or $.21 per diluted share for 2002.

Inflation did not have a significant effect on the Company’s operations in 2003.

2002 Compared to 2001

Total revenues for 2002 increased 6% to $260.3 million from $245.2 million for 2001. The number of paramedical examinations performed decreased from 2,981,000 to 2,921,000, a decrease of 2%. The decrease in the number of paramedical examinations performed is the result of reduced life insurance application activity, particularly in the second half of 2002. The decrease in the number of examinations was offset by an increase in the average revenue per examination of approximately 4%. Management believes the percentage increase in the average revenue per examination is due to higher prices per examination based on selling value added services such as Portamedic Select and Portamedic F.A.S.T. The number of Infolink reports increased 7% to 438,000 for the year 2002, from 410,000 for the year 2001. The increase in the number of Infolink reports is due to increased volume from existing clients brought on by the Company’s Portamedic F.A.S.T. technology, which provides clients with a quicker turnaround for Attending Physician Statements (APS).

Additionally, during the third and fourth quarters of 2002, the Company completed the acquisitions of Medicals Direct Group, located in the United Kingdom, and D&D Associates, located in New York. (See Note 2 to the consolidated financial statements.) The Medicals Direct Group acquisition and the D&D Associates acquisition contributed aggregate revenues of $9.0 million in 2002 from the dates of their respective acquisitions.

Our future revenue stream is dependent upon the life insurance industry and the number of new policies being written which require medical underwriting information. The MIB Group, Inc., a provider of information and database management services, reported that life insurance applications were down 4.2% in the fourth quarter of 2002 compared to the fourth quarter of 2001, contributing to the Company’s paramedical revenue decreasing by 8.2% for the fourth quarter of 2002 compared to the fourth quarter of 2001.

Management expects insurance application activity to resume more traditional levels in 2003. We are confident we will hold our market share. Pricing of our services has become a significant factor in our competitive environment but we are confident that our Company owned branch structure and branch and automation efficiencies will allow us to continue reporting improved results. The Infolink portion of our business is targeted for a major reorganization and sales and marketing emphasis for 2003. We expect to increase market share from both internal growth and through selected acquisitions.

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The ADC market, while not growing explosively as it has in prior years, remains strong and we are optimistic in its prospects for further growth.

The Company’s majority owned subsidiary, Heritage Labs, provides laboratory testing services for specimens collected during paramedical examinations. Heritage Labs revenues grew 37% in 2002 versus 2001, and the number of samples tested increased 36% to 490,000 for 2002, versus 360,000 for 2001. The Company believes that Heritage Labs’ growth is the result of aggressive competitive pricing, coupled with offering insurance companies the convenience of a one-stop shop for their health information needs. Offering combined laboratory and paramedical pricing and services is increasingly more common in this competitive landscape.

Cost of Operations:

The Company’s cost of operations in 2002 totaled $185.8 million compared to $175.3 million for 2001, and as a percentage of revenues, remained relatively flat, decreasing slightly to 71.4% for 2002, from 71.5% for 2001. Cost of operations for the paramedical examination business increased from 71.7% in 2001 to 72.2% in 2002. The increase is the result of additional blood kit costs in 2002 of approximately $0.7 million and a sales tax issue related to the purchase of blood kits of approximately $0.5 million. Both issues were resolved in the latter part of 2002. The above cost increases in the paramedical examination business were offset by lower cost of sales percentages associated with the acquired Medicals Direct Group and D&D Associates companies, completed in the third and fourth quarters of 2002, respectively. Cost of sales associated with Heritage Labs remained relatively unchanged.

Selling, General and Administrative:

Selling, general and administrative (SG&A) expenses totaled $45.9 million for 2002, compared to $45.8 million for 2001, and as a percentage of revenues totaled 17.6% compared to 18.7%, respectively. The decrease, as a percentage of revenues, is due to higher revenues and no dollar increase in SG&A costs in 2002. In addition, amortization of intangible assets was $2.9 million for 2002, compared to amortization of goodwill and intangible assets of $6.9 million for 2001. The decrease is attributable to the adoption of Financial Accounting Standards Board (“FASB”) Statement No. 142 “Goodwill and Other Intangible Assets,” which the Company adopted January 1, 2002. Statement of Financial Accounting Standards (“SFAS 142”), requires that goodwill and intangible assets with indefinite useful lives no longer be amortized. The favorable effect of SFAS 142 was offset by increased SG&A costs primarily in the area of general insurance, corporate legal, employee insurance programs and the SG&A associated with the Medicals Direct Group and D&D Associates acquisitions completed in the latter part of 2002.

During the second quarter of 2002, the Company recorded a 25% write down of the carrying value of its investment in and advances to e-Nable, which resulted in a pre-tax charge of $1.6 million, or $1.0 million after tax. The adjustment was estimated based on an assessment of the fair value of the investment and was mainly the result of the difficulty e-Nable has had in securing additional financing in the capital markets. During the third quarter of 2002, the Company wrote off the remaining carrying value of its investment in and advances to e-Nable which resulted in a pre-tax charge of $5.1 million, or $3.1 million after tax. The Company continues to pursue the strategic benefits offered by e-Nable. The adjustment was based on the continuing assessment of the carrying value of the investment, given that e-Nable has been unsuccessful in its attempt to secure additional capital. The Company has no future obligation or intent to fund the operations of e-Nable.

Operating Income:

Accordingly, the Company’s operating income decreased 9.3% to $21.9 million for 2002 from $24.1 million for 2001, and as a percentage of revenues, decreased to 8.4% compared to 9.8%, respectively.

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Other:

Interest expense decreased to $0.1 million for 2002, compared to $0.2 million for 2001 as a result of lower interest rates. Interest income in 2002 consisted of interest earned on invested funds, the average balance of which was $70.8 million in 2002, compared to $72.7 million in 2001. Interest income decreased to $2.3 million in 2002, compared to $3.3 million in 2001 and is due to lower average invested funds and lower interest rates. Other income (expense) for 2002 is primarily the minority interest expense associated with the Company’s investment in Heritage Labs, and for 2001, includes a provision for legal matters of $1.2 million.

The effective tax rate was 39% and 41% in 2002 and 2001, respectively. The rate was lower in 2002 due to the elimination of certain non-deductible goodwill amortization as a result of the adoption of SFAS 142.

Net income for 2002 was $14.3 million or $.21 per diluted share versus $15.2 million or $.23 per diluted share for 2001.

Inflation did not have a significant effect on the Company’s operations in 2002.

Liquidity and Capital Resources

The Company’s primary sources of cash are internally generated funds, cash equivalents, marketable securities and the Company’s $35 million credit facility. Our current ratio as of December 31, 2003 was 3.0 to 1, compared to 3.3 to 1 at December 31, 2002. As of December 31, 2003 and 2002, working capital was $53.0 million and $56.2 million, respectively.

For the year ended December 31, 2003, the net cash provided by operating activities was $23.1 million as compared to $27.8 million for 2002. The significant sources were net income of $15.8 million, $7.0 million of depreciation and amortization, and an increase in accounts payable and accrued expenses of $2.5 million, which were offset by an increase in accounts receivable of $3.9 million. Consolidated days sales outstanding, measured on a rolling 90 day basis, was 42.3 days at December 31, 2003, compared to 32.1 days at December 31, 2002. The increase in accounts receivable at December 31, 2003 compared to December 31, 2002 is partially the result of unusually strong collections in December 2002. Also, certain customers have recently indicated they will be paying within Hooper’s net 30 day terms, due to the consolidation of payment processing centers and the limitation of resources to process payments. Previously these customers paid in less than 30 days. The Medicals Direct Group accounts receivable increased $5.4 million due to increased revenues, and from acquisitions completed in the second quarter 2003.

On January 28, 2003, a Board resolution was passed to award non-employee directors of the Company up to a maximum of 15,000 shares of the Company’s common stock as compensation. Each director was awarded 5,000 shares on January 31, 2003 and 2004, which vested immediately, and will be awarded 5,000 shares on January 31, 2005, subject to certain conditions. All shares awarded will be restricted under SEC Rule 144, and may not be sold or transferred by the outside director until four years from the date of issue. During the first quarter of 2003, the Company expensed the fair value of the 30,000 shares awarded on January 31, 2003 and such amount is included in SG&A expenses in the consolidated Statement of Income. The total charge was $164,100.

On May 30, 2000, the Board of Directors authorized the repurchase in any calendar year of up to 2.5 million shares of the Company’s common stock for an aggregate purchase price not to exceed $25 million per year. For the year 2003, the Company purchased 89,800 shares at a total cost of $0.4 million.

On October 29, 1999, the Company entered into a $100 million Amended and Restated Revolving Credit and Term Loan Agreement with three banks. This senior credit facility consists of a $65 million six-year term loan and a $35 million three-year revolving loan, both unsecured. During 2001, the three year revolving loan expiration date was extended for one year to October 31, 2003. During 2003, the revolving loan expiration date was extended for three years to October 31, 2006. There are no borrowings outstanding against the revolving loan at December 31, 2003

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and 2002. There are no additional borrowings available under the original $65 million term loan due to previous borrowings which have been repaid. As of December 31, 2003 and 2002, $3.0 million is outstanding against the term loan. Principal payments of $1.0 million are due to be repaid on January 31, 2004, 2005 and 2006. The Company has not borrowed under the $35 million revolving loan.

Both the term loan and the revolving loan bear interest at either the prime rate minus ½% to plus ¼% or LIBOR plus ¾% to 1¾%, depending on the ratio of our consolidated funded debt, as defined, to earnings before interest, taxes, depreciation and amortization, or “EBITDA.” As of December 31, 2003, interest was payable at an effective average annual interest rate of 1.96%. Either loan can be prepaid without penalty at any time. Also, commitment fees of up to 0.3% of the unused revolving loan are charged, and the agreement contains certain financial covenants related to dividends, fixed charge coverage, funded debt to "EBITDA" ratio and stock re-purchases.

Inflation has not had, nor is it expected to have, a material impact on our consolidated financial results. Quarterly dividends paid in 2003 were $.0125 per share and totaled $3.2 million.

We have no material commitments for capital expenditures. Future payments due under contractual obligations as of December 31, 2003 are as follows:

Management believes that the combination of current cash, cash equivalents, marketable securities and available borrowings under our senior credit facility, along with anticipated cash flows from operations, will provide sufficient capital resources to satisfy both our short-term and foreseeable long-term needs.

On July 11, 2003, the Company received a determination from the Internal Revenue Service that one individual the Company contracted with as an independent contractor, should have been classified as an employee in 2002. This ruling also applies to any other individuals engaged by the Company under similar circumstances. The ruling also states that the Company may not be subject to adverse consequences as the Company may be entitled to relief under applicable tax laws (Section 530 of the Revenue Act of 1978). The Company and its advisors are continuing to review this determination. Management believes that the Company qualifies for relief under Section 530, and based on this, expects the outcome of this matter will not have a material effect on the Company’s consolidated financial position, results of operations and liquidity.

The Company is aware of allegations that an independent examiner, who billed work through an independent contractor, which in turn billed work through the Company, assaulted certain insurance applicants whom were examined. The examiner did not work for the Company nor was the Company aware that the examiner was performing insurance examinations. The Company has agreed to reimburse one of its insurance company clients, which it billed for examinations performed by this examiner, for certain legal, consulting and other costs incurred by the client. The Company and the client have also agreed upon an apportionment of any liability that may stem from examinations performed by the independent examiner and the Company has accrued a liability for this exposure. To date, the Company is aware of one claim arising from the conduct of the independent examiner which has been settled. The Company expensed $1.2 million relative to this matter in 2003 and based on the information currently available, management believes that the final outcome will not have any additional material effect on the Company’s consolidated financial position, results of operations or liquidity.

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In the past, some state agencies have claimed that we improperly classified our examiners as independent contractors for purposes of state unemployment tax laws and that we were therefore liable for taxes in arrears, or for penalties for failure to comply with their interpretation of the laws. We received an adverse determination in the State of California, and as a result, converted our independent contractors to employees. Other similar state claims are also pending. There are no assurances that we will prevail in these cases, or that we will not be subject to similar claims in other states in the future.

In January 2004, the Company completed the acquisition of the stock of Allegiance Health Inc., a privately held provider of independent medical examinations, for approximately $10 million. Allegiance Health Inc.’s revenues for the year ended December 31, 2003, its most recent fiscal year end, was approximately $12 million. The Company used its existing cash to fund the acquisition and anticipates recording intangible assets and goodwill from the acquisition. Allegiance Health Inc. is a provider of independent medical examinations and related services to the healthcare and insurance industries and self-insured companies.

Critical Accounting Policies

The SEC defines critical accounting policies as those that require application of management’s most difficult, subjective or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The following is not intended to be a comprehensive list of our accounting policies. Our significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America, with no need for management’s judgement in their application. There are also areas in which management’s judgement in selecting an available alternative would not produce a materially different result.

We have identified the following accounting policies as critical to us:

Revenue recognition — The Company recognizes revenues for paramedical and medical examinations when the examination of the insurance policy applicant is completed. Revenues generated from medical record collection, laboratory testing and other services are recognized when the related service is completed. The Company does not enter into any multi-element revenue arrangements.

Allowance for doubtful accounts — The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Management continuously assesses the financial condition of our customers and the markets in which these customers participate and adjusts or the allowance for doubtful accounts based on this periodic review. If the financial condition of our customers were to deteriorate, resulting in their inability to make payments, our ability to collect on accounts could be negatively impacted, in which case additional allowances may be required.

Valuation of goodwill and identifiable intangible assets — We assess the impairment of identifiable intangibles and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:

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When we determine that the carrying value of intangibles and related goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, impairments are recognized when the expected future undiscounted cash flows derived from such assets are less than their carrying value. We generally measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Net identifiable intangible assets and goodwill amounted to $164.7 million as of December 31, 2003. Intangible assets are being amortized over the following weighted average useful lives: non-competition agreements: 4.6 years, referral base: 12.4 years, contractor network: 7.3 years and trademarks and tradenames: 18.6 years.

On January 1, 2002, the Company adopted Financial Accounting Standards Board (“FASB”), Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” As a result, the Company ceased amortizing goodwill. In lieu of amortization, we are required to perform an annual impairment review of goodwill. The Company completed its annual impairment test as of December 31, 2003, and did not have an impairment loss.

Accounting for income taxes — As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. If the Company were to establish a valuation allowance or increase this allowance in a period, the Company must include an expense within the tax provision in the consolidated statement of income. Significant management judgement is required in determining our provision for income taxes and our deferred tax assets and liabilities.

Recently Issued Accounting Standards

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations (“SFAS No. 143”). SFAS No. 143 requires companies to record the fair value of an asset retirement obligation as a liability in the period in which they incur a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. Companies also record a corresponding asset which is depreciated over the life of the asset. The Company adopted SFAS No. 143 on January 1, 2003. This statement did not 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 to Others.” The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. This Interpretation is applicable to guarantees issued or modified after December 31, 2002. The adoption of this pronouncement did not have a material effect on the Company’s consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123.” This statement amends FASB Statement No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. The Company expects to continue to account for stock options under APB No. 25. In addition, this Statement amends the disclosure requirements of

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Statement No. 123 to require prominent disclosures in both annual and interim financial statements. Certain of the disclosure modifications are required for fiscal years ending after December 15, 2002 and are included in the notes to these consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement requires that an issuer classify a free standing financial instrument that is within its scope as a liability or as an asset in some circumstances. The provisions of this statement are effective starting July 1, 2003 for the Company. The adoption of SFAS No. 150 did not have a material impact on the Company’s consolidated financial statements.

In May 2003, the Emerging Issues Task Force (EITF) issued EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. Issue No. 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. The adoption of EITF No. 00-21 did not have a material impact on the Company’s consolidated financial statements.

In December 2003, the FASB issued FASB Interpretation No. 46R (revised December 2003), Consolidation of Variable Interest Entities, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. As of December 31, 2003, we have not identified any VIE’s that would require consolidation or any significant exposure to VIE’s that would require disclosure.

Quantitative and Qualitative Disclosures About Market Risk

The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s investment portfolio. The Company places its investments with high quality issuers and, by policy, limits the amount of credit exposure to any one issuer. The Company does not invest in equity securities or commodities or use financial derivatives for trading purposes. The Company’s debt security portfolio represents funds held temporarily pending use in our business and operations. The Company mitigates this risk by investing in only high credit quality securities that it believes to be low risk and by positioning its portfolio to respond to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity.

The table below presents the principal amounts and related weighted average interest rates by year of maturity for our investment portfolio as of December 31, 2003.

The Company is also exposed to interest rate risk primarily through its borrowing activities, which are described in Note 7 to the Consolidated Financial Statements. The Company’s borrowings are under variable rate instruments. Future payments due under borrowings are $1,028,363 in 2004, $1,000,000 in 2005 and $1,000,000 in 2006, at an average interest rate of 1.96%.

Based on the Company’s market risk sensitive instruments (including investments and variable rate debt) outstanding at December 31, 2003, the Company has determined that there was no material market risk exposure to the Company’s consolidated financial position, results of operations or cash flows as of such date.

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Forward Looking Statements

Certain written and oral statements made by our Company or with the approval of an authorized executive officer of our Company may constitute “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995, including statements made in this report and other filings with the Securities and Exchange Commission. These statements generally are not historical in nature and can be identified by words such as “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” “may,” “should,” “could” and similar expressions. These statements involve risks and uncertainties that could cause actual results to differ materially from our Company’s historical experience and our present expectations or projections. These statements are not guarantees of future performance or results.

The following are some of the factors that could cause our Company’s actual results to differ materially from those described in forward-looking statements:

Trends and other developments affecting the life and other segments of the insurance industry—We currently derive nearly all of our revenues from life insurance companies. The demand for our services is largely dependent on the demand for life insurance policies, policy amounts, the type of health information services requested, general economic conditions and other factors beyond our control. Any decreases in demand for health information services by life insurance companies could substantially harm our business.

Loss of customers—Our relationships with most insurance company customers are not covered by formal written agreements, and we have exclusive relationships with only a small number of customers. Our ability to retain these customers will depend on our continued ability to serve their needs and distinguish us from our competitors. The loss of one or more customers could materially impact our business.

Changes in the health information services business environment—These include changes in the types of products demanded by insurance companies, competitive product and pricing pressures, including technological advancements by competitors, and our ability to gain or maintain market share notwithstanding the actions of our competitors. Factors such as these could impact our earnings and growth.

Continued growth of alternative distribution channels—Our continued growth will depend in part on increased use of the Internet and other alternative distribution channels by our customers to sell their life insurance products. Rapid growth in the use of these distribution channels may not continue. Reduction or replacement of these channels could limit any growth in the number of applications for life insurance policies, which could substantially harm our business.

Need to enhance and expand our technology and infrastructure—We need to continually adapt to the technological needs of our insurance company customers by enhancing and expanding our technology and network infrastructure to accommodate our customers’ changing needs. Our failure to do so could substantially harm our business.

Loss of key management—Our continued success is materially dependent upon our key management team, including James M. McNamee, our Chairman, President and Chief Executive Officer, none of whom, except for Mr. McNamee, has an employment agreement. If we lose one or more of our executive officers, an inability to successfully recruit and retain additional highly skilled and experienced management, or to successfully train and promote existing personnel to serve in a managerial capacity, could substantially harm our business.

Acquisitions and other strategic investments—Our growth strategy has included acquiring other businesses and making strategic investments. There is no guarantee that these activities will be profitable, or that we will continue growing through these types of activities or otherwise.

Changes in laws and regulations, including changes in accounting standards, taxation requirements and environmental laws.

The effectiveness of our sales, advertising and marketing programs.

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Our ability to achieve earnings forecasts, which are primarily based on projected numbers of examinations to be performed.

Economic and political conditions in the United States.

The uncertainties of litigation, as well as other risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings.

Other factors not identified could also cause actual results to materially differ from those described in forward-looking statements. Caution should be taken not to place undue reliance on any forward-looking statements made in this report or otherwise since such statements speak only as of the date when made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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C onsolidated Balance Sheets

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Income

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Stockholders’ Equity