COVA VARIABLE ANNUITY ACCOUNT ONE
497, 1997-05-27
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                       STATEMENT OF ADDITIONAL INFORMATION

             INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT

                                    issued by

                        COVA VARIABLE ANNUITY ACCOUNT ONE
                                    
                                       AND

                 COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY
                                    


THIS  IS NOT A PROSPECTUS.  THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 1, 1997,  FOR THE INDIVIDUAL
FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT WHICH IS DESCRIBED HEREIN.

THE  PROSPECTUS  CONCISELY  SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT  TO  KNOW  BEFORE INVESTING.  FOR A COPY OF THE PROSPECTUS CALL OR WRITE
THE  COMPANY  AT:    One  Tower  Lane,  Suite 3000, Oakbrook Terrace, Illinois
60181-4644, (800) 831-5433.

     THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 1, 1997.


                              TABLE OF CONTENTS



Page

COMPANY

EXPERTS

LEGAL OPINIONS

DISTRIBUTION
Reduction or Elimination of the Withdrawal Charge

PERFORMANCE INFORMATION
Total Return
Historical Unit Values
Reporting Agencies
Hypothetical Information - General American Capital Company 
    Money Market Fund

TAX STATUS
General
Diversification
Multiple Contracts
Contracts Owned by Other than Natural Persons
Tax Treatment of Assignments
Income Tax Withholding
Tax Treatment of Withdrawals - Non-Qualified Contracts
Qualified Plans
Tax Treatment of Withdrawals - Qualified Contracts
Tax-Sheltered Annuities - Withdrawal Limitations

ANNUITY PROVISIONS
Variable Annuity
Fixed Annuity
Annuity Unit
Net Investment Factor
Mortality and Expense Guarantee

FINANCIAL STATEMENTS




                                   COMPANY

Cova  Financial Services Life Insurance Company (the "Company") was originally
incorporated  on  August  17,  1981  as  Assurance  Life  Company, a Missouri 
corporation  and  changed  its name to Xerox Financial Services Life Insurance
Company    in  1985.   On June 1, 1995 a wholly-owned subsidiary of General 
American  Life  Insurance  Company ("General American") purchased the Company 
from   Xerox Financial Services, Inc.     The Company changed  its  name 
to  Cova  Financial  Services Life Insurance Company.  The Company  presently 
is licensed to do business in the District of Columbia and all states except 
California, Maine, New Hampshire,  New York and Vermont.

General  American  is  a  St.  Louis-based  mutual company with more than $250
billion   of life insurance in force and approximately $19 billion in assets. 
It provides life and health insurance, retirement plans, and related financial
services to individuals and groups.

On  April  1,  1996,  the  Company  contributed  initial capital to the Large
Cap Stock and Quality Bond Sub-Accounts of the Separate Account. As of 
December 31, 1996, the capital contributed to the Large Cap Stock Sub-Account
represented approximately 75% of the total assets of such Sub-Account and the
capital contributed to the Quality Bond Sub-Account represented approximately 
36% of the total assets of such Sub-Account. The Company currently intends to
remove these assets from the Sub-Accounts on a pro rata basis in proportion to
money invested in the Sub-Accounts by Contract Owners.

                                   EXPERTS

The consolidated balance sheets of the Company as of December 31, 1996 and
1995 and the related consolidated statements of income, shareholder's equity and
cash flows for the year ended December 31, 1996 and the periods from June 1, 
1995 through December 31, 1995 and January 1, 1995 through May 31, 1995 and for
the year ended December 31, 1994 and the combined statement of assets and
liabilities and contract owners' equity of the Separate Account as of December
31, 1996 and the related combined statement of operations for the year then
ended and the statement of change in contract owners' equity for the years
ended December 31, 1996 and 1995, included herein, have been included herein
in reliance upon the reports of KPMG Peat Marwick  LLP,  independent certified 
public  accountants,  appearing elsewhere  herein,  and upon the authority of
said firm as experts in accounting and auditing.

                                LEGAL OPINIONS

Legal  matters  in  connection  with  the Contracts described herein are being
passed  upon  by  the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.

                                 DISTRIBUTION

Cova Life Sales Company ("Life Sales") acts as the distributor.  Prior to June
1,  1995,  Cova Life Sales Company was known as Xerox Life Sales Company. Life
Sales is an affiliate of the Company.  The offering is on a continuous basis.

REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE

The  amount  of  the  Withdrawal  Charge  on  the  Contracts may be reduced or
eliminated  when  sales of the Contracts are made to individuals or to a group
of  individuals  in  a  manner that results in savings of sales expenses.  The
entitlement  to  reduction  of the Withdrawal Charge will be determined by the
Company after examination of all the relevant factors such as:

     1.  The size and type of group to which sales are to be made will be
considered.    Generally,  the sales expenses for a larger group are less than
for  a  smaller  group  because  of  the ability to implement large numbers of
Contracts with fewer sales contacts.

     2.    The  total  amount of purchase payments to be received will be
considered.    Per  Contract  sales  expenses  are likely to be less on larger
purchase payments than on smaller ones.

     3.    Any  prior  or  existing relationship with the Company will be
considered.  Per Contract sales expenses are likely to be less when there is a
prior  existing  relationship  because  of  the likelihood of implementing the
Contract with fewer sales contacts.

     4.    There  may be other circumstances, of which the Company is not
presently aware, which could result in reduced sales expenses.

If,  after consideration of the foregoing factors, the Company determines that
there  will  be  a  reduction in sales expenses, the Company may provide for a
reduction or elimination of the Withdrawal Charge.

The  Withdrawal  Charge  may be eliminated when the Contracts are issued to an
officer,  director or employee of the Company or any of its affiliates.  In no
event will any reduction or  elimination of the Withdrawal Charge be permitted
where the reduction or elimination will be unfairly discriminatory to any
person.

                           PERFORMANCE INFORMATION

Total Return

From time to time, the Company may advertise performance data.  Such data will
show  the  percentage change in the value of an Accumulation Unit based on the
performance  of  an investment portfolio  over  a  period of time, usually a
calendar  year,  determined  by  dividing the increase (decrease) in value for
that unit by the Accumulation Unit value at the beginning of the period.

Any  such advertisement will include total return figures for the time periods
indicated  in  the  advertisement.  Such total return figures will reflect the
deduction of a 1.25% Mortality and Expense Risk Premium, a .15% Administrative
Expense  Charge,  the expenses for the underlying investment portfolio being 
advertised and any applicable Contract Maintenance Charges and Withdrawal 
Charges.

The  hypothetical value of a Contract purchased for the time periods described
in  the advertisement will be determined by using the actual Accumulation Unit
values  for  an  initial $1,000 purchase payment, and deducting any applicable
Contract Maintenance Charges and any applicable Withdrawal Charges to arrive at
the  ending  hypothetical  value.    The  average  annual total return is then
determined by computing the fixed interest rate that a $1,000 purchase payment
would  have to earn annually, compounded annually, to grow to the hypothetical
value  at  the  end  of the time periods described.  The formula used in these
calculations is:

                                         n
                               P (1  + T)  =  ERV

Where:

P    =  a hypothetical initial payment of $1,000
T    =  average annual total return
n    =  number of years
ERV  =  ending redeemable value at the end of the time periods
        used (or fractional portion thereof) of a hypothetical
        $1,000 payment made at the beginning of the time
        periods used.



The  Company  may  also advertise performance data which will be calculated in
the same manner as described above but which will not reflect the deduction of
any  Withdrawal  Charge. The  deduction  of any Withdrawal Charge would reduce
any percentage increase or make greater any percentage decrease.

Owners  should  note  that the investment results of each investment portfolio
will  fluctuate  over time, and any presentation of the investment portfolio's
total  return  for  any period should not be considered as a representation of
what  an  investment  may  earn  or what an Owner's total return may be in any
future period.

Historical Unit Values

The  Company  may  also  show  historical  Accumulation Unit values in certain
advertisements  containing illustrations. These illustrations will be based on
actual Accumulation Unit values.

In  addition,  the  Company may distribute sales literature which compares the
percentage  change  in  Accumulation  Unit  values  for  any of the investment
portfolios  against  established  market indices such as the Standard & Poor's
500  Composite  Stock Price Index, the Dow Jones Industrial Average or other
management  investment  companies  which have investment objectives similar to
the investment portfolio    being    compared.    The  Standard & Poor's 500
Composite Stock Price Index is an unmanaged, unweighted average of 500 stocks,
the  majority   of  which  are  listed on the New York Stock Exchange. The Dow
Jones Industrial Average is an unmanaged, weighted average of thirty blue chip
industrial  corporations  listed  on  the  New  York  Stock Exchange. Both the
Standard    &    Poor's    500   Composite Stock Price Index and the Dow Jones
Industrial Average assume quarterly reinvestment of dividends.

Reporting Agencies

The Company  may  also distribute sales literature which compares the 
performance  of    the    Accumulation Unit values of the Contracts with the 
unit values of variable  annuities issued by other insurance companies. Such 
information will be  derived  from  the Lipper Variable Insurance Products 
Performance Analysis Service, the VARDS Report or from Morningstar.

The  Lipper  Variable  Insurance  Products  Performance  Analysis  Service  is
published by Lipper Analytical Services, Inc., a publisher of statistical data
which    currently    tracks  the  performance  of  almost  4,000  investment
companies. The rankings compiled by Lipper may or may not reflect the deduction
of  asset-based    insurance charges. The Company's sales literature utilizing
these rankings  will  indicate whether or not such charges have been deducted.
Where  the  charges have not been deducted, the sales literature will indicate
that if the charges had been deducted, the ranking might have been lower.

The  VARDS  Report is a monthly variable annuity industry analysis compiled by
Variable Annuity Research & Data Service of Roswell, Georgia and published  by
Financial  Planning  Resources, Inc. The VARDS rankings may or may not reflect
the  deduction  of asset-based insurance charges.  In addition, VARDS prepares
risk  adjusted  rankings,  which  consider the effects of market risk on total
return performance.  This type of ranking may address the question as to which
funds  provide  the highest total return with the least amount of risk.  Other
ranking  services  may  be  used as sources of performance comparison, such as
CDA/Weisenberger.

Morningstar rates a variable annuity against its peers with similar investment
objectives. Morningstar does not rate any variable annuity that has less than
three years of performance data.

Performance Information - General American Capital Company Money Market Fund

Even though the Money Market Fund of General American Capital Company was not 
available under the Contract until May 1, 1996, the General American Capital 
Company Money Market Fund has been in existence for some time and consequently 
has an investment performance history. In order to demonstrate how investment 
experience of the General American Capital Company Money Market Fund affects 
Accumulation Unit values, performance information was developed. The 
information is based upon the historical experience of the General American 
Capital Company Money Market Fund and is for the periods shown. The prospectus
contains a chart of performance information.

Future  performance  of  the General American Capital Company Money Market
Fund will vary and the hypothetical results  shown  are  not  necessarily  
representative  of  future  results.   Performance  for  periods ending after
those shown may vary substantially from the examples shown. The performance 
of the General American Capital Company Money Market Fund is calculated  for 
a  specified  period  of time by assuming an initial Purchase Payment  of  
$1,000  allocated  to  the  Portfolio.  There are performance  figures  for  
the  Accumulation Units which reflect the insurance charges  as  well  as  
the  portfolio  expenses.  There are also performance  figures  for  the  
Accumulation Units which reflect the insurance charges,  the contract 
maintenance charge, the portfolio expenses, and assume that  you  make  a  
withdrawal  at  the  end  of  the period and therefore the withdrawal  
charge  is  reflected.  The  percentage  increases (decreases) are 
determined  by  subtracting the initial Purchase Payment from the ending value
and  dividing  the  remainder  by  the  beginning  value. The performance may 
also show figures when no withdrawal is assumed.

                                  TAX STATUS

GENERAL

NOTE:  THE  FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING OF
CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE COMPANY
CANNOT  PREDICT  THE  PROBABILITY  THAT ANY CHANGES IN SUCH LAWS WILL BE MADE.
PURCHASERS  ARE  CAUTIONED  TO  SEEK  COMPETENT  TAX  ADVICE  REGARDING  THE
POSSIBILITY  OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF
THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE
TREATED  AS  "ANNUITY  CONTRACTS"  UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE
FURTHER  UNDERSTOOD  THAT  THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT
SPECIAL  RULES  NOT  DESCRIBED HEREIN MAY BE APPLICABLE IN CERTAIN SITUATIONS.
MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE OR OTHER
TAX LAWS.

Section  72  of the Code governs taxation of annuities in general. An Owner is
not  taxed  on increases in the value of a Contract until distribution occurs,
either  in  the  form  of  a lump sum payment or as annuity payments under the
Annuity Option selected. For a lump sum payment received as a total withdrawal
(total  surrender),  the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost
basis  is generally the purchase payments, while for Qualified Contracts there
may  be no cost basis. The taxable portion of the lump sum payment is taxed at
ordinary income tax rates.

For  annuity  payments,  a  portion  of each payment in excess of an exclusion
amount  is  includible  in  taxable  income. The exclusion amount for payments
based  on  a  fixed annuity option is determined by multiplying the payment by
the  ratio  that  the  cost  basis of the Contract (adjusted for any period or
refund feature) bears to the expected return under the Contract. The exclusion
amount  for  payments  based  on  a  variable  annuity option is determined by
dividing  the  cost  basis of the Contract (adjusted for any period certain or
refund guarantee) by the number of years over which the annuity is expected to
be  paid.  Payments  received  after  the  investment in the Contract has been
recovered    (i.e.    when  the  total  of  the  excludable  amount equals the
investment  in  the  Contract) are fully taxable. The taxable portion is taxed
at  ordinary  income   tax  rates.  For certain types of Qualified Plans there
may  be  no  cost basis  in  the  Contract within the meaning of Section 72 of
the Code. Owners, Annuitants and Beneficiaries under the Contracts should seek
competent financial advice about the tax consequences of any distributions.

The  Company  is taxed as a life insurance company under the Code. For federal
income  tax  purposes,  the Separate Account is not a separate entity from the
Company, and its operations form a part of the Company.

DIVERSIFICATION

Section  817(h)  of  the Code imposes certain diversification standards on the
underlying  assets  of  variable  annuity  contracts. The Code provides that a
variable  annuity  contract will not be treated as an annuity contract for any
period  (and  any  subsequent  period)  for  which the investments are not, in
accordance  with  regulations  prescribed  by  the  United  States  Treasury
Department  ("Treasury  Department"), adequately diversified. Disqualification
of    the   Contract as an annuity contract would result in the imposition of 
federal    income  tax  to the Owner with respect to earnings allocable to the
Contract  prior  to  the  receipt  of  payments  under  the Contract. The Code
contains a safe harbor provision which provides that annuity contracts such as
the  Contract  meet the diversification requirements if, as of the end of each
quarter,  the  underlying  assets  meet  the  diversification  standards for a
regulated  investment company and no more than fifty-five percent (55%) of the
total  assets  consist  of  cash,  cash  items, U.S. Government securities and
securities of other regulated investment companies.

On  March  2,  1989,  the  Treasury  Department  issued  Regulations  (Treas.
Reg.1.817-5),    which    established    diversification  requirements for the
investment  portfolios underlying variable contracts such as the Contract. The
Regulations  amplify  the  diversification requirements for variable contracts
set  forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately  diversified  if:  (1)  no  more than 55% of the value of the total
assets of the portfolio is represented by any one investment; (2) no more than
70%  of  the  value of the total assets of the portfolio is represented by any
two  investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the  value  of  the  total  assets of the portfolio is represented by any four
investments.

The  Code  provides  that,  for  purposes  of  determining  whether or not the
diversification  standards  imposed  on  the  underlying  assets  of  variable
contracts  by  Section  817(h)  of the Code have been met, "each United States
government agency or instrumentality shall be treated as a separate issuer."

The   Company  intends that all investment portfolios underlying the Contracts
will  be  managed  in  such  a  manner as to comply with these diversification
requirements.

The  Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments  of the Separate Account will cause the Owner to be treated as the
owner  of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether  additional  guidance  will  be  provided  and  what  standards may be
contained in such guidance.

The  amount  of  Owner  control  which  may be exercised under the Contract is
different  in some respects from the situations addressed in published rulings
issued  by  the  Internal Revenue Service in which it was held that the policy
owner  was  not the owner of the assets of the separate account. It is unknown
whether  these  differences,  such  as  the  Owner's ability to transfer among
investment  choices  or  the  number and type of investment choices available,
would  cause  the  Owner  to  be  considered as the owner of the assets of the
Separate  Account  resulting  in  the  imposition of federal income tax to the
Owner  with  respect to earnings allocable to the Contract prior to receipt of
payments under the Contract.

In  the  event any forthcoming guidance or ruling is considered to set forth a
new  position,  such  guidance  or  ruling  will  generally  be  applied  only
prospectively.  However,  if such ruling or guidance was not considered to set
forth  a new position, it may be applied retroactively resulting in the Owners
being  retroactively determined to be the owners of the assets of the Separate
Account.

Due  to the uncertainty in this area, the Company reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.

MULTIPLE CONTRACTS

The  Code  provides  that  multiple  non-qualified annuity contracts which are
issued within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences  including  more  rapid  taxation of the distributed amounts from
such  combination  of  contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.

CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS

Under  Section 72(u) of the Code, the investment earnings on premiums for the 
Contracts  will  be taxed currently to the Owner if the Owner is a non-natural
person,  e.g.,  a  corporation    or  certain other entities.  Such Contracts 
generally  will  not be treated as annuities for federal income tax purposes. 
However,  this treatment is not applied to a Contract held by a trust or other
entity  as  an  agent  for a natural person nor to Contracts held by Qualified
Plans.    Purchasers should consult their own tax counsel or other tax adviser
before purchasing a Contract to be owned by a non-natural person.

TAX TREATMENT OF ASSIGNMENTS

An  assignment  or  pledge of a Contract may be a taxable event. Owners should
therefore  consult competent tax advisers should they wish to assign or pledge
their Contracts.

INCOME TAX WITHHOLDING

All  distributions  or  the  portion  thereof which is includible in the gross
income  of the Owner are subject to federal income tax withholding. Generally,
amounts  are  withheld from periodic payments at the same rate as wages and at
the rate of 10% from non-periodic payments. However, the Owner, in most cases,
may  elect  not  to  have  taxes  withheld  or  to  have withholding done at a
different rate.

Effective  January  1,  1993,  certain  distributions  from  retirement  plans
qualified  under  Section  401  or  Section  403(b) of the Code, which are not
directly  rolled  over  to  another  eligible  retirement  plan  or individual
retirement  account  or  individual  retirement  annuity,  are  subject  to  a
mandatory  20%  withholding  for  federal  income  tax.  The  20%  withholding
requirement  generally  does  not apply to: a) a series of substantially equal
payments  made  at  least  annually  for the life or life expectancy  of  the 
participant    or joint and last survivor expectancy of the participant  and a
designated  beneficiary  or for a specified period  of  10  years  or more; or
b)  distributions  which are required minimum distributions; or c) the portion
of the distributions not includible in gross income (i.e. returns of after-tax
contributions).    Participants  should consult their own tax counsel or other
tax adviser regarding withholding requirements.

TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS

Section  72  of  the  Code  governs  treatment  of  distributions from annuity
contracts.  It  provides  that  if  the  Contract  Value exceeds the aggregate
purchase  payments  made, any amount withdrawn will be treated as coming first
from  the  earnings  and  then, only after the income portion is exhausted, as
coming  from the principal. Withdrawn earnings are includible in gross income.
It  further provides that a ten percent (10%) penalty will apply to the income
portion  of any premature distribution. However, the penalty is not imposed on
amounts  received:  (a)  after  the  taxpayer reaches age 59 1/2; (b) after
the death  of the Owner; (c) if the taxpayer is totally disabled (for this 
purpose disability  is as defined in Section 72(m)(7) of the Code); (d) in a 
series of substantially  equal  periodic payments made not less frequently 
than annually for  the  life (or life expectancy) of the taxpayer or for the 
joint lives (or joint life expectancies) of the taxpayer and his or her 
Beneficiary; (e) under an  immediate  annuity;  or  (f) which are allocable to 
purchase payments made prior to August 14, 1982.

The above information does not apply to Qualified Contracts. However, separate
tax  withdrawal  penalties  and  restrictions  may  apply  to  such  Qualified
Contracts.  (See  "Tax Treatment of Withdrawals - Qualified Contracts" below.)

QUALIFIED PLANS

The  Contracts  offered herein are designed to be suitable for use under  
various  types  of  Qualified  Plans.  Taxation of participants in each
Qualified  Plan  varies with the type of plan and terms and conditions of each
specific  plan.  Owners,  Annuitants  and  Beneficiaries  are  cautioned  that
benefits  under a Qualified Plan may be subject to the terms and conditions of
the  plan  regardless  of  the  terms  and  conditions of the Contracts issued
pursuant  to  the  plan. Some retirement plans are subject to distribution and
other requirements that are not incorporated into the Company's administrative
procedures.    Owners,  participants  and Beneficiaries  are  responsible for
determining  that  contributions,  distributions  and  other transactions with
respect  to  the  Contracts comply with applicable law.  Following are general
descriptions  of  the types of Qualified Plans with which the Contracts may be
used.  Such  descriptions are not exhaustive and are for general informational
purposes  only.  The  tax rules regarding Qualified Plans are very complex and
will  have  differing  applications  depending  on  individual  facts  and
circumstances.  Each  purchaser  should  obtain  competent tax advice prior to
purchasing a Contract issued under a Qualified Plan.

Contracts  issued  pursuant  to  Qualified  Plans  include  special provisions
restricting  Contract  provisions that may otherwise be available as described
herein.  Generally, Contracts issued pursuant to Qualified Plans are  not
transferable except upon surrender or annuitization. Various penalty and 
excise taxes may apply to contributions or distributions made in violation
of  applicable  limitations.  Furthermore,  certain  withdrawal  penalties and
restrictions  may  apply  to  surrenders  from  Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts" below.)

On July  6, 1983, the Supreme Court decided in ARIZONA GOVERNING COMMITTEE V.
NORRIS that  optional  annuity benefits provided under an employer's deferred
compensation  plan could not, under Title VII of the Civil Rights Act of 1964,
vary  between  men  and women. The Contracts sold by the Company in connection
with Qualified Plans will utilize annuity tables which do not differentiate on
the  basis  of  sex.  Such  annuity  tables  will also be available for use in
connection with certain non-qualified deferred compensation plans.

a.     H.R. 10 Plans

Section  401  of  the  Code  permits  self-employed  individuals  to establish
Qualified  Plans  for  themselves and their employees, commonly referred to as
"H.R.  10" or "Keogh" plans. Contributions made to the Plan for the benefit of
the  employees will not be included in the gross income of the employees until
distributed  from  the  Plan.  The  tax  consequences to participants may vary
depending  upon  the  particular  plan  design.  However,  the  Code  places  
limitations  and  restrictions on all Plans including on such items as: amount
of  allowable  contributions;  form,  manner  and  timing  of   distributions;
transferability  of  benefits;  vesting  and  nonforfeitability  of interests;
nondiscrimination  in  eligibility and participation; and the tax treatment of
distributions,  withdrawals and surrenders. (See "Tax Treatment of Withdrawals
- - Qualified Contracts" below.) Purchasers of Contracts for use with an H.R. 10
Plan  should  obtain  competent  tax  advice  as  to  the  tax  treatment  and
suitability of such an investment.

b.     Tax-Sheltered Annuities

Section  403(b)  of the Code permits the purchase of "tax-sheltered annuities"
by  public  schools  and  certain  charitable,  educational  and  scientific
organizations  described  in  Section  501(c)(3) of the Code. These qualifying
employers  may  make  contributions  to the Contracts for the benefit of their
employees.  Such  contributions  are not includible in the gross income of the
employees  until  the  employees receive distributions from the Contracts. The
amount  of  contributions  to  the tax-sheltered annuity is limited to certain
maximums  imposed  by  the  Code.  Furthermore, the Code sets forth additional
restrictions  governing  such  items  as  transferability,  distributions,
nondiscrimination  and  withdrawals.  (See  "Tax  Treatment  of  Withdrawals -
Qualified  Contracts"  and  "Tax-Sheltered Annuities - Withdrawal Limitations"
below.)    Employee  loans are not allowable under the Contracts. Any employee
should  obtain competent tax advice as to the tax treatment and suitability of
such an investment.

c.     Individual Retirement Annuities

Section  408(b)  of  the Code permits eligible individuals to contribute to an
individual  retirement  program  known  as  an "Individual Retirement Annuity"
("IRA").  Under  applicable limitations, certain amounts may be contributed to
an IRA which will be deductible from the individual's gross income. These IRAs
are  subject to limitations on eligibility, contributions, transferability and
distributions.  (See  "Tax  Treatment  of  Withdrawals  - Qualified Contracts"
below.)  Under  certain  conditions,  distributions  from other IRAs and other
Qualified Plans may be rolled over or transferred on a tax-deferred basis into
an  IRA.  Sales  of  Contracts  for  use  with  IRAs  are  subject  to special
requirements  imposed  by  the  Code,  including  the requirement that certain
informational  disclosure  be  given  to persons desiring to establish an IRA.
Purchasers  of  Contracts  to  be qualified as Individual Retirement Annuities
should  obtain competent tax advice as to the tax treatment and suitability of
such an investment.

d.     Corporate Pension and Profit-Sharing Plans

Sections 401(a) and 401(k) of the Code permit corporate employers to establish
various  types  of  retirement plans for employees. These retirement plans may
permit  the  purchase  of  the  Contracts  to provide benefits under the Plan.
Contributions  to the Plan for the benefit of employees will not be includible
in  the gross income of the employees until distributed from the Plan. The tax
consequences  to  participants  may  vary  depending  upon the particular plan
design. However, the Code places limitations and restrictions on all
Plans  including   on  such items as: amount of allowable contributions; form,
manner  and  timing of distributions; transferability of benefits; vesting and
nonforfeitability  of  interests;  nondiscrimination  in  eligibility  and
participation;  and  the  tax  treatment  of  distributions,  withdrawals  and
surrenders.  (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Purchasers of Contracts for use with Corporate Pension or Profit Sharing Plans
should  obtain competent tax advice as to the tax treatment and suitability of
such an investment.

TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS

In  the  case of a withdrawal under a Qualified Contract, a ratable portion of
the  amount  received  is  taxable,  generally  based  on  the  ratio  of  the
individual's    cost   basis  to  the individual's total accrued benefit under
the  retirement  plan.    Special  tax  rules  may  be  available  for certain
distributions  from  a Qualified Contract. Section 72(t) of the Code imposes a
10%  penalty  tax on  the  taxable  portion of any distribution from qualified
retirement  plans,  including    Contracts  issued  and  qualified  under Code
Sections 401 (H.R. 10 and Corporate  Pension and Profit-Sharing Plans), 403(b)
(Tax-Sheltered  Annuities) and  408(b)  (Individual  Retirement Annuities). To
the  extent amounts are not includible  in gross income because they have been
rolled  over  to  an IRA or to another eligible Qualified Plan, no tax penalty
will  be  imposed.  The  tax  penalty    will  not  apply  to  the  following
distributions:  (a)  if distribution is made on or after the date on which the
Owner  or  Annuitant  (as  applicable)  reaches   age 59 1/2; (b) 
distributions following  the  death or disability of the Owner  or Annuitant 
(as applicable) (for  this  purpose disability is as defined in Section 72(m)
(7) of the Code); (c)  after  separation  from  service,  distributions that
are  part  of substantially equal periodic payments made not less  frequently
than annually for  the life (or life expectancy) of the Owner or  Annuitant  
(as applicable) or the joint lives (or joint life expectancies) of such Owner 
or Annuitant (as applicable)  and his or her designated Beneficiary;  (d)  
distributions  to an Owner or Annuitant (as applicable) who has  separated  
from  service  after he has  attained  age  55;  (e)  distributions made to 
the Owner or Annuitant (as applicable)  to  the  extent  such  distributions  
do  not  exceed  the amount allowable as a deduction under Code Section  213 
to the Owner or Annuitant (as applicable)  for  amounts  paid during the  
taxable year for medical care; (f) distributions made to an alternate payee
pursuant to a qualified domestic relations order; and (g) distributions from 
an Individual Retirement Annuity for the purchase of medical insurance (as 
described in Section 213(d)(1)(D) of the Code) for the Owner or Annuitant (as 
applicable) and his or her spouse and dependents if the Owner or Annuitant 
(as applicable) has received unemployment compensation for at least 12 weeks. 
This exception will no longer apply after the Owner or Annuitant (as 
applicable) has been re-employed for at least 60 days. The exceptions stated
in (d) and (f) above do not apply in  the  case of an Individual Retirement 
Annuity. The exception stated in (c) above applies to an Individual Retirement
Annuity  without the requirement that there be a separation from service.

Generally, distributions from a qualified plan must begin no later than April 
1st of the calendar  year  following the later of (a) the year in which the 
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires.  The date  set  forth  in (b) does not  apply  to an  Individual  
Retirement  Annuity.  Required  distributions  must be over a period not 
exceeding the life expectancy of the individual or the joint lives or life 
expectancies of the individual and his or her designated beneficiary. If the
required minimum distributions are not made, a 50% penalty tax is imposed as to
the amount not distributed.

TAX-SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS

The  Code  limits the withdrawal of amounts attributable to contributions made
pursuant  to a salary reduction agreement (as defined in Section 403(b)(11) of
the  Code)  to  circumstances  only when the Owner: (1) attains age 59 1/2; (2)
separates  from service; (3) dies; (4) becomes disabled (within the meaning of
Section  72(m)(7)  of  the  Code);  or  (5)  in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value  which  represents  contributions made by the Owner and does not include
any  investment  results.   The limitations on withdrawals became effective on
January  1,  1989  and apply only to salary reduction contributions made after
December  31, 1988, to income attributable to such contributions and to income
attributable  to  amounts  held  as  of  December 31, 1988. The limitations on
withdrawals do not affect rollovers and transfers between certain Qualified
Plans.  Owners should consult their own tax counsel or other tax adviser 
regarding any distributions.

                              ANNUITY PROVISIONS

VARIABLE ANNUITY

A  variable  annuity  is  an  annuity  with  payments  which:    (1)  are  not
predetermined  as  to  dollar amount; and (2) will vary in amount with the net
investment  results of the applicable  investment portfolio(s) of the Separate
Account.  At the Annuity Date, the Contract Value in each investment portfolio
will be applied to the applicable Annuity Tables.  The Annuity Table used will
depend  upon  the Annuity Option chosen.  If, as of the Annuity Date, the then
current  Annuity  Option rates applicable to this class of Contracts provide a
first  Annuity  Payment  greater than guaranteed under the same Annuity Option
under  this  Contract, the greater payment will be made.  The dollar amount of
Annuity Payments after the first is determined as follows:

<TABLE>
<CAPTION>
<S>  <C>
(1)  the dollar amount of the first Annuity Payment is divided by the
     value of an Annuity Unit as of the Annuity Date.  This
     establishes the number of Annuity Units for each monthly
     payment. The number of Annuity Units remains fixed during the
     Annuity Payment period.

(2)  the fixed number of Annuity Units is multiplied by the Annuity
     Unit value for the last Valuation Period of the month preceding
     the month for which the payment is due.  This result is the
     dollar amount of the payment.
</TABLE>



The  total  dollar  amount  of each Variable Annuity Payment is the sum of all
investment portfolios'  Variable  Annuity  Payments reduced by the applicable
Contract Maintenance Charge.

FIXED ANNUITY

A  fixed  annuity is a series of payments made during the Annuity Period which
are  guaranteed  as  to  dollar amount by the Company and do not vary with the
investment  experience  of the Separate Account.  The General Account Value on
the  day  immediately preceding the Annuity Date will be used to determine the
Fixed  Annuity  monthly  payment.    The first monthly Annuity Payment will be
based  upon  the  Annuity  Option  elected  and the appropriate Annuity Option
Table.

ANNUITY UNIT

The  value  of  an Annuity Unit for each investment portfolio  was arbitrarily
set initially at $10. This was done when the first investment portfolio shares
were purchased.  The investment portfolio Annuity Unit value at the end of any
subsequent  Valuation  Period  is  determined  by  multiplying  the investment
portfolio Annuity Unit value for the immediately preceding Valuation Period by
the product of (a) the Net Investment Factor for the day for which the Annuity
Unit value is being calculated, and (b) 0.999919.

NET INVESTMENT FACTOR

The  Net  Investment  Factor  for  any investment portfolio for any Valuation
Period is determined by dividing:

<TABLE>
<CAPTION>
<S>  <C>

(a)  the Accumulation Unit value as of the close of the current
     Valuation Period, by

(b)  the Accumulation Unit value as of the close of the immediately
     preceding Valuation Period.
</TABLE>



The Net Investment Factor may be greater or less than one, as the Annuity Unit
value may increase or decrease.

MORTALITY AND EXPENSE GUARANTEE

The  Company  guarantees  that the dollar amount of each Annuity Payment after
the  first  Annuity Payment will not be affected by variations in mortality or
expense experience.

                             FINANCIAL STATEMENTS

The consolidated financial statements of the Company included herein should be
considered  only  as  bearing  upon  the  ability  of  the Company to meet its
obligations under the Contracts.








COVA VARIABLE ANNUITY ACCOUNT ONE

Financial Statements

December 31, 1996

(With Independent Auditors' Report Thereon)






<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(In thousands of dollars)

ASSETS
INVESTMENTS:
<TABLE>

<CAPTION>

<S>                                                                                                          <C>
COVA SERIES TRUST:
  Quality Income Portfolio - 4,773,562 shares at a net asset value of $10.69 per share (cost $50,095)        $ 51,030
  High Yield Portfolio - 3,864,501 shares at a net asset value of $10.63 per share (cost $40,574)              41,065
  Growth and Income Portfolio - 2,212,069 shares at a net asset value of $13.99 per share (cost $26,737)       30,939
  Money Market Portfolio - 30,708,197 shares at a net asset value of $1.00 per share (cost $30,708)            30,708
  Stock Index Portfolio - 5,310,381 shares at a net asset value of $16.13 per share (cost $65,367)             85,638
  Bond Debenture Portfolio - 659,052 shares at a net asset value of $10.97 per share (cost $6,959)              7,230
  Quality Bond Portfolio - 510,720  shares at a net asset value of $10.08 per share (cost $5,119)               5,149
  Small Cap Stock Portfolio - 1,229,042 shares at a net asset value of $10.92 per share (cost 12,890)          13,424
  Large Cap Stock Portfolio - 1,383,680 shares at a net asset value of $11.11 per share (cost $13,844)         15,375
  Select Equity Portfolio - 2,034,176  shares at a net asset value of $10.74 per share (cost $20,641)          21,851
  International Equity Portfolio - 1,301,665 shares at a net asset value of $10.96 per share (cost $13,470)    14,265

LORD ABBETT SERIES FUND, INC:
  Growth and Income Portfolio - 17,288,936 shares at a net asset value of $17.03 per share (cost $247,869)    294,358
  Global Equity Portfolio - 220,660 shares at a net asset value of $10.80 per share (cost $2,382)               2,383

GENERAL AMERICAN CAPITAL COMPANY:
   Money Market Portfolio - 20,751 shares at a net asset value of $17.24 per share (cost $352)                    358

DIVIDENDS RECEIVABLE:

COVA SERIES TRUST
   Quality Income Portfolio                                                                                       796
   High Yield Portfolio                                                                                         1,806
   Growth and Income Portfolio                                                                                  1,477
   Stock Index Portfolio                                                                                        3,471
   Bond Debenture Portfolio                                                                                       221
   Quality Bond Portfolio                                                                                         127
   Small Cap Portfolio                                                                                            569
   Large Cap Portfolio                                                                                            376
   Select Equity Portfolio                                                                                        308
   International Equity Portfolio                                                                                  68
                                                                                                             --------
   TOTAL DIVIDENDS RECEIVABLE                                                                                   9,219

   TOTAL ASSETS                                                                                              $622,992
                                                                                                             ========

</TABLE>

See accompanying notes to financial statements.

<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(In thousands of dollars)

<TABLE>

<CAPTION>

<S>                                                                                           <C>
LIABILITIES AND CONTRACT OWNERS' EQUITY

CONTRACT OWNERS' EQUITY:
  Trust Quality Income - 3,334,960 accumulation units at $15.540273 per unit                  $ 51,826
  Trust High Yield - 2,001,184 accumulation units at $21.422784 per unit                        42,871
  Trust Growth and Income - 1,905,896 accumulation units at $17.008151 per unit                 32,416
  Trust Money Market - 2,584,926 accumulation units at $11.879722 per unit                      30,708
  Trust Stock Index - 4,680,855 accumulation units at $19.036956 per unit                       89,109
  Trust Bond Debenture Portfolio - 659,663 accumulation units at $11.294930 per unit             7,451
  Trust Quality Bond Portfolio - 508,830 accumulation units at $10.368764 per unit               5,276
  Trust Small Cap Stock Portfolio - 1,237,405 accumulation units at $11.308419 per unit         13,993
  Trust Large Cap Stock Portfolio - 1,389,606 accumulation units at $11.334979 per unit         15,751
  Trust Select Equity Portfolio - 2,044,523 accumulation units at $10.838053 per unit           22,159
  Trust International Equity Portfolio - 1,306,892 accumulation units at $10.967004 per unit    14,333
  Fund Growth and Income - 11,732,301 accumulation units at $25.089525 per unit                294,358
  Fund Global Equity - 154,609 accumulation units at $15.414356 per unit                         2,383
  GACC Money Market Portfolio - 34,964 accumulation units at $10.233546 per unit                   358

   TOTAL CONTRACT OWNERS' EQUITY                                                              $622,992
                                                                                              --------

   TOTAL LIABILITIES AND CONTRACT OWNERS' EQUITY                                              $622,992
</TABLE>

See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(In thousands of dollars)



              COVA                                                            
                                              LORD ABBETT


        SERIES TRUST                                                          
                                        SERIES FUND, INC.            GACC

<TABLE>

<CAPTION>

                                   QUALITY    HIGH    GROWTH &    MONEY    STOCK      BOND     QUALITY        SMALL
                                   INCOME     YIELD    INCOME    MARKET    INDEX   DEBENTURE     BOND    CAP STOCK STOCK
                                  ---------  -------  ---------  -------  -------  ----------  --------  ----------------

<S>                               <C>        <C>      <C>        <C>      <C>      <C>         <C>       <C>
INVESTMENT INCOME:
 INCOME:
    Dividends and Capital Gains
       Distributions              $  2,167   $3,473   $   1,684  $ 1,749  $ 4,267  $      236  $    195  $            583
      Total Income                   2,167    3,473       1,684    1,749    4,267         236       195               583

 EXPENSES:
    Mortality and Expense
       Risk Fee                        627      490         323      415    1,088          32        46                66
    Administrative Fee                  75       59          39       50      131           4         6                 8
      Total Expenses                   702      549         362      465    1,219          36        52                74

Net Investment Income                1,465    2,924       1,322    1,284    3,048         200       143               509

NET REALIZED GAIN/(LOSS)
  ON INVESTMENTS                        44     (169)        164       --    3,892          13        44                47

NET CHANGE IN UNREALIZED
  GAIN/(LOSS) ON INVESTMENTS          (534)     952       2,566       --    9,295         271        30               533

NET REALIZED AND UNREALIZED
  GAIN/(LOSS) ON INVESTMENTS          (490)     783       2,730       --   13,187         284        74               580

NET INCREASE IN CONTRACT
  OWNERS' EQUITY RESULTING
  FROM OPERATIONS                 $    975   $3,707   $   4,052  $ 1,284  $16,235  $      484  $    217  $          1,089

                                       LARGE         SELECT    INTL    GROWTH &    GLOBAL    Money
                                  CAP STOCK STOCK    EQUITY   EQUITY    INCOME     EQUITY    Market    Total
                                  ----------------  --------  -------  ---------  --------               

<S>                               <C>               <C>       <C>      <C>        <C>       <C>       <C>
INVESTMENT INCOME:
 INCOME:
    Dividends and Capital Gains
       Distributions              $            445  $   330   $   103  $  19,230  $   298        --   $34,760
      Total Income                             445      330       103     19,230      298        --    34,760

 EXPENSES:
    Mortality and Expense
       Risk Fee                                120       91        69      3,028       32         1     6,428
    Administrative Fee                          15       11         9        363        4        --       774
      Total Expenses                           135      102        78      3,391       36         1     7,202

Net Investment Income                          310      228        25     15,839      262        (1)   27,558

NET REALIZED GAIN/(LOSS)
  ON INVESTMENTS                                85      (17)       72        532       43        --     4,750

NET CHANGE IN UNREALIZED
  GAIN/(LOSS) ON INVESTMENTS                 1,531    1,210       796     24,020     (151)        6    40,525

NET REALIZED AND UNREALIZED
  GAIN/(LOSS) ON INVESTMENTS                 1,616    1,193       868     24,552     (108)        6    45,275

NET INCREASE IN CONTRACT
  OWNERS' EQUITY RESULTING
  FROM OPERATIONS                 $          1,926  $ 1,421   $   893  $  40,391  $   154   $     5   $72,833
</TABLE>

See accompanying notes to financial statements.
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF CHANGES IN CONTRACT OWNERS' EQUITY
For the Year Ended December 31, 1996
(In thousands of dollars)



                            COVA                                              

  LORD ABBETT


                     SERIES TRUST                                             

SERIES FUND, INC.             GACC

                        _________
<TABLE>

<CAPTION>

                               QUALITY     HIGH     GROWTH &     MONEY      STOCK       BOND       QUALITY    SMALL       LARGE
                               INCOME     YIELD      INCOME     MARKET      INDEX     DEBENTURE     BOND                CAP STOCK
                              ---------  --------  ----------  ---------  ---------  -----------  ---------            -----------
<S>                           <C>        <C>       <C>         <C>        <C>        <C>          <C>        <C>       <C>
FROM OPERATIONS:
  Net Investment Income       $  1,465   $ 2,924   $   1,322   $  1,284   $  3,048   $      200   $    143   $   509   $      310 
  Net Realized Gain/(Loss)
    on Investments                  44      (169)        164         --      3,892           13         44        47           85 
  Net Unrealized Gain/(Loss)
    on Investments                (534)      952       2,566         --      9,295          271         30       533        1,531 

Net Increase in Contract
  Owners' Equity Resulting
     from Operations               975     3,707       4,052      1,284     16,235          484        217     1,089        1,926 

From Account Unit
  Transactions:
 Contributions by Cova              --        --          --         --         --          500      5,000     5,000       15,000 

 Redemptions by Cova                --        --          --         --         --         (508)    (3,000)   (5,135)      (3,846)

 Proceeds from Units of
  the Account Sold               1,603     1,989       2,777     43,943      3,731        3,795        995     6,112          800 
 Payments for Units of the
  Account Redeemed              (4,251)   (2,299)       (866)    (3,044)    (4,891)        (164)       (19)      (71)          -- 
Account Transfers               12,246     2,962       6,836    (45,603)   (11,728)       3,344      2,083     6,998        1,871 

Net Increase/(Decrease) in
  Contract Owners' Equity
    From Account Unit            9,598     2,652       8,747     (4,704)   (12,888)       6,967      5,059    12,904       13,825 
      Transactions

Net Increase/(Decrease) in
  Contract Owners' Equity       10,573     6,359      12,799     (3,420)     3,347        7,451      5,276    13,993       15,751 

Contract Owners' Equity:
  Beginning of Period           41,253    36,512      19,617     34,128     85,762           --         --        --           -- 
  End of Period               $ 51,826   $42,871   $  32,416   $ 30,708   $ 89,109   $    7,451   $  5,276   $13,993   $   15,751 

                                SELECT       INTL     GROWTH &    GLOBAL    Money
                               CAP STOCK    EQUITY     EQUITY     INCOME    EQUITY    MARKET    TOTAL
                              -----------  --------  ----------  --------  --------  ---------  -----
<S>                           <C>          <C>       <C>         <C>       <C>       <C>        <C>
FROM OPERATIONS:
  Net Investment Income       $      228   $    25   $  15,839   $   262       ($1)  $ 27,558 
  Net Realized Gain/(Loss)
    on Investments                   (17)       72         532        43        --      4,750 
  Net Unrealized Gain/(Loss)
    on Investments                 1,210       796      24,020      (151)        6     40,525 

Net Increase in Contract
  Owners' Equity Resulting
     from Operations               1,421       893      40,391       154         5     72,833 

From Account Unit
  Transactions:
 Contributions by Cova             5,000     5,000          --        --        --     35,500 

 Redemptions by Cova              (4,922)   (5,128)         --        --        --    (22,539)

 Proceeds from Units of
  the Account Sold                10,306     5,710      31,434       231        88    113,514 
 Payments for Units of the
  Account Redeemed                  (115)      (60)    (13,615)     (328)       --    (29,723)
Account Transfers                 10,469     7,918      45,518      (174)      265     43,005 

Net Increase/(Decrease) in
  Contract Owners' Equity
    From Account Unit             20,738    13,440      63,337      (271)      353    139,757 
      Transactions

Net Increase/(Decrease) in
  Contract Owners' Equity         22,159    14,333     103,728      (117)      358    212,590 

Contract Owners' Equity:
  Beginning of Period                 --        --     190,630     2,500        --    410,402 
  End of Period               $   22,159   $14,333   $ 294,358   $ 2,383   $   358   $622,992 
</TABLE>

See accompanying notes to financial statements.




<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
STATEMENT OF CHANGES IN CONTRACT OWNERS' EQUITY
For the Year Ended December 31, 1995
(In thousands of dollars)

                             VAN KAMPEN MERRITT                               
                       LORD ABBETT

                                       SERIES TRUST                           
                              SERIES FUND, INC.

<TABLE>

<CAPTION>

                                   QUALITY     HIGH     GROWTH &     MONEY     STOCK     GROWTH &    GLOBAL
                                   INCOME     YIELD      INCOME     MARKET     INDEX      INCOME     EQUITY     TOTAL
                                  ---------  --------  ----------  ---------  --------  ----------  --------  ---------
<S>                               <C>        <C>       <C>         <C>        <C>       <C>         <C>       <C>
From Operations:
  Net Investment Income           $  1,948   $ 2,332   $   1,371   $  2,318   $ 2,875   $  12,502   $   149   $ 23,495 
  Net Realized Gain/(Loss)
    on Investments                      16      (117)         46        _ _     2,589         383        63      2,980 
  Net Unrealized Gain
    on Investments                   3,600     1,786       2,248        110    11,838      22,184         5     41,771 

Net Increase in Contract
  Owners' Equity
    Resulting from
     Operations                      5,564     4,001       3,665      2,428    17,302      35,069       217     68,246 

From Account Unit Transactions:

  Redemptions by Cova                  _ _       _ _         _ _        _ _       _ _         _ _      (132)      (132)
 Proceeds from Units of
  the Account Sold                   2,609     3,648       2,179     27,608     2,384      29,458       686     68,572 
 Payments for Units of the
  Account Redeemed                  (5,174)   (2,111)       (718)    (4,508)   (4,200)    (18,059)   (1,244)   (36,014)
Account Transfers                    4,321    11,321       3,550    (67,278)   33,469      29,746      (135)    14,994 

Net Increase/(Decrease) in
  Contract Owners' Equity
    From Account Unit
      Transactions                   1,756    12,858       5,011    (44,178)   31,653      41,145      (825)    47,420 

Net Increase/(Decrease) in
  Contract Owners' Equity            7,320    16,859       8,676    (41,750)   48,955      76,214      (608)   115,666 

Contract Owners' Equity:
  Beginning of Period               33,933    19,653      10,941     75,878    36,807     114,416     3,108    294,736 
  End of Period                   $ 41,253   $36,512   $  19,617   $ 34,128   $85,762   $ 190,630   $ 2,500   $410,402 
                                  =========  ========  ==========  =========  ========  ==========  ========  =========

</TABLE>

See accompanying notes to financial statements.

<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>

<CAPTION>
COVA SERIES TRUST - QUALITY INCOME PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)

                                                                      FOR THE YEAR    FOR THE YEAR    FOR THE YEAR
                                                                         ENDED           ENDED           ENDED
                                                                        12/31/96        12/31/95        12/31/94
                                                                     --------------  --------------  --------------
<S>                                                                  <C>             <C>             <C>
ACCUMULATION UNIT VALUE,
  BEGINNING OF PERIOD                                                $       15.33   $       13.17   $       13.97 

  NET INVESTMENT INCOME                                                        .45             .72             .60 

  NET REALIZED AND UNREALIZED
    GAIN/(LOSS) FROM SECURITY
      TRANSACTIONS                                                            (.24)           1.44           (1.40)


 TOTAL FROM INVESTMENT OPERATIONS OPERATIONS1.38(.80)1.22.73.140 O             .21            2.16            (.80)
- -------------------------------------------------------------------                                                

 ACCUMULATION UNIT VALUE,
  END OF PERIOD                                                      $       15.54   $       15.33   $       13.17 
                                                                     ==============  ==============  ==============


TOTAL RETURN*                                                                 1.36%          16.41%         (5.70)%


CONTRACT OWNERS EQUITY,
  END OF  PERIOD (IN THOUSANDS)                                      $      51,826   $      41,253   $      33,933 

RATIO OF EXPENSES TO AVERAGE
  CONTRACT OWNERS' EQUITY                                                     1.40%           1.40%           1.40%


RATIO OF NET INVESTMENT INCOME
  TO AVERAGE CONTRACT
    OWNERS' EQUITY                                                            2.94%           4.99%           4.48%


NUMBER OF UNITS OUTSTANDING
  AT END OF PERIOD                                                       3,334,960       2,690,633       2,576,412 


                                                                      FOR THE YEAR    FOR THE YEAR
                                                                         ENDED           ENDED
                                                                        12/31/93        12/31/92
                                                                     --------------  --------------
<S>                                                                  <C>             <C>
ACCUMULATION UNIT VALUE,
  BEGINNING OF PERIOD                                                $       12.75   $       12.02 

  NET INVESTMENT INCOME                                                       1.00             .64 

  NET REALIZED AND UNREALIZED
    GAIN/(LOSS) FROM SECURITY
      TRANSACTIONS                                                             .22             .09 


 TOTAL FROM INVESTMENT OPERATIONS OPERATIONS1.38(.80)1.22.73.140 O            1.22             .73 
- -------------------------------------------------------------------                                

 ACCUMULATION UNIT VALUE,
  END OF PERIOD                                                      $       13.97   $       12.75 
                                                                     ==============  ==============


TOTAL RETURN*                                                                 9.50%           6.10%


CONTRACT OWNERS EQUITY,
  END OF  PERIOD (IN THOUSANDS)                                      $      51,111   $      24,124 

RATIO OF EXPENSES TO AVERAGE
  CONTRACT OWNERS' EQUITY                                                     1.40%           1.40%


RATIO OF NET INVESTMENT INCOME
  TO AVERAGE CONTRACT
    OWNERS' EQUITY                                                            8.30%           5.45%


NUMBER OF UNITS OUTSTANDING
  AT END OF PERIOD                                                       3,659,656       1,891,499 

<FN>
* INVESTMENT RETURNS DO NOT REFLECT ANY CONTRACT BASED CHARGES (WITHDRAWAL CHARGES, CONTRACT MAINTENANCE FEES OR
ACCOUNT TRANSFER CHARGES),
   BUT DO REFLECT MORTALITY AND EXPENSE CHARGES, ADMINISTRATION EXPENSE CHARGES AS WELL AS ALL EXPENSES OF THE
UNDERLYING PORTFOLIOS
   (INVESTMENT ADVISORY FEES AND PORTFOLIO OPERATING EXPENSES).
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>

<CAPTION>
COVA SERIES TRUST - HIGH YIELD PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)

                                    For the Year    For the Year    For the Year    For the Year    For the Year
                                       Ended           Ended           Ended           Ended           Ended
                                      12/31/96        12/31/95        12/31/94        12/31/93        12/31/92
<S>                                <C>             <C>             <C>             <C>             <C>

Accumulation Unit Value,
  Beginning of Period              $       19.52   $       16.98   $       18.02   $       14.99   $       12.75 
                                   --------------  --------------  --------------  --------------  --------------

  Net Investment Income                     1.55            1.44            1.38            1.80            2.26 

  Net Realized and Unrealized
    Gain/(Loss) from Security
      Transactions                           .35            1.10           (2.42)           1.23            (.02)


Total from Investment Operations            1.90            2.54           (1.04)           3.03            2.24 

Accumulation Unit Value,
  End of Period                    $       21.42   $       19.52   $       16.98   $       18.02   $       14.99 
                                   ==============  ==============  ==============  ==============  ==============


Total Return*                               9.73%          14.99%         (5.79)%          20.21%          17.53%


Contract Owners Equity,
  End of  Period (in thousands)    $      42,871   $      36,512   $      19,653   $      18,846   $       5,416 


Ratio of Expenses to Average
  Contract Owners' Equity                   1.40%           1.40%           1.40%           1.40%           1.40%


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                          7.52%           7.98%           7.92%          13.05%          16.04%


Number of Units Outstanding
  at End of Period                     2,001,184       1,870,232       1,157,642       1,045,815         361,296 
<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees or
account transfer charges),
   but do reflect mortality and expense charges, administration expense charges as well as all expenses of the
underlying portfolios
   (investment advisory fees and portfolio operating expenses).
</TABLE>

See accompanying notes to financial statements.

<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:
<TABLE>

<CAPTION>
COVA SERIES TRUST - GROWTH & INCOME PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)

                                                                                                    FOR THE PERIOD FROM
                                    FOR THE YEAR    FOR THE YEAR    FOR THE YEAR    FOR THE YEAR    5/1/92 (COMMENCEMENT
                                       ENDED           ENDED           ENDED           ENDED           OF OPERATIONS)
                                      12/31/96        12/31/95        12/31/94        12/31/93        THROUGH 12/31/92
                                   --------------                                                             
<S>                                <C>             <C>             <C>             <C>             <C>
ACCUMULATION UNIT VALUE,
  BEGINNING OF PERIOD              $       14.61   $       11.20   $       11.92   $       10.47   $                10.00
                                   --------------  --------------  --------------  --------------  ----------------------

  NET INVESTMENT INCOME                      .68            1.02             .19             .54                      .19

  NET REALIZED AND UNREALIZED
    GAIN/(LOSS) FROM SECURITY
      TRANSACTIONS                          1.72            2.39            (.91)            .91                      .28


TOTAL FROM INVESTMENT OPERATIONS            2.40            3.41            (.72)           1.45                      .47

ACCUMULATION UNIT VALUE,
  END OF PERIOD                    $       17.01   $       14.61   $       11.20   $       11.92   $                10.47
                                   ==============  ==============  ==============  ==============  ======================


TOTAL RETURN**                             16.42%          30.49%         (6.07)%          13.84%                  7.09%*


CONTRACT OWNERS EQUITY,
  END OF  PERIOD (IN THOUSANDS)    $      32,416   $      19,617   $      10,941   $       6,528   $                2,627


RATIO OF EXPENSES TO AVERAGE
  CONTRACT OWNERS' EQUITY                   1.40%           1.40%           1.40%           1.40%                  1.40%*


RATIO OF NET INVESTMENT INCOME
  TO AVERAGE CONTRACT
    OWNERS' EQUITY                          5.16%           9.92%           2.05%           7.54%                  3.82%*

NUMBER OF UNITS OUTSTANDING
  AT END OF PERIOD                     1,905,896       1,342,833         977,209         574,643                  250,919
<FN>
*    ANNUALIZED
**  INVESTMENT RETURNS DO NOT REFLECT ANY CONTRACT BASED CHARGES (WITHDRAWAL CHARGES, CONTRACT MAINTENANCE FEES OR
ACCOUNT TRANSFER CHARGES),
      BUT DO REFLECT MORTALITY AND EXPENSE CHARGES, ADMINISTRATION EXPENSE CHARGES AS WELL AS ALL EXPENSES OF THE
UNDERLYING PORTFOLIOS
      (INVESTMENT ADVISORY FEES AND PORTFOLIO OPERATING EXPENSES).
</TABLE>

                               SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

<PAGE>
                                             COVA VARIABLE ANNUITY ACCOUNT ONE
                                                          FINANCIAL HIGHLIGHTS
    Financial Highlights for each accumulation unit outstanding throughout the
                                                                        period
                                          per sub-account are presented below:

<TABLE>

<CAPTION>     
COVA SERIES TRUST - MONEY MARKET PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)

                                    For the Year    For the Year    For the Year    For the Year    For the Year
                                       Ended           Ended           Ended           Ended           Ended
                                      12/31/96        12/31/95        12/31/94        12/31/93        12/31/92
<S>                                <C>             <C>             <C>             <C>             <C>

Accumulation Unit Value,
  Beginning of Period              $       11.43   $       10.90   $       10.61   $       10.46   $       10.21 
                                   --------------  --------------  --------------  --------------  --------------

  Net Investment Income                      .45             .50             .30             .19             .25 

  Net Realized and Unrealized
    Gain/(Loss) from Security
      Transactions                            --             .03            (.01)           (.04)             -- 


Total from Investment Operations             .45             .53             .29             .15             .25 

Accumulation Unit Value,
  End of Period                    $       11.88   $       11.43   $       10.90   $       10.61   $       10.46 
                                   ==============  ==============  ==============  ==============  ==============


Total Return*                               3.98%           4.85%           2.70%           1.45%           2.44%


Contract Owners Equity,
  End of  Period (in thousands)    $      30,708   $      34,128   $      75,878   $       6,552   $       4,031 


Ratio of Expenses to Average
  Contract Owners' Equity                   1.40%           1.40%           1.40%           1.40%           1.40%


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                          3.90%           4.48%           2.90%           1.78%           2.46%


Number of Units Outstanding
  at End of Period                     2,584,926       2,987,132       6,963,421         617,575         385,448 
<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees or
account transfer charges),
   but do reflect mortality and expense charges, administration expense charges as well as all expenses of the
underlying portfolios
   (investment advisory fees and portfolio operating expenses).
</TABLE>

                               See accompanying notes to financial statements.

<PAGE>
                                             COVA VARIABLE ANNUITY ACCOUNT ONE
                                                          FINANCIAL HIGHLIGHTS
    Financial Highlights for each accumulation unit outstanding throughout the
                                                                        period
                                          per sub-account are presented below:

<TABLE>

<CAPTION>
COVA SERIES TRUST - STOCK INDEX PORTFOLIO
(MANAGED BY VAN KAMPEN AMERICAN CAPITAL INVESTMENT ADVISORY CORP.)

                                    For the Year    For the Year    For the Year    For the Year    For the Year
                                       Ended           Ended           Ended           Ended           Ended
                                      12/31/96        12/31/95        12/31/94        12/31/93        12/31/92
<S>                                <C>             <C>             <C>             <C>             <C>

Accumulation Unit Value,
  Beginning of Period              $       15.77   $       11.68   $       11.87   $       11.05   $       10.55 
                                   --------------  --------------  --------------  --------------  --------------

  Net Investment Income                      .67             .51             .37             .22             .52 

  Net Realized and Unrealized
    Gain/(Loss) from Security
      Transactions                          2.60            3.58            (.56)            .60            (.02)


Total from Investment Operations            3.27            4.09            (.19)            .82             .50 

Accumulation Unit Value,
  End of Period                    $       19.04   $       15.77   $       11.68   $       11.87   $       11.05 
                                   ==============  ==============  ==============  ==============  ==============


Total Return*                              20.69%          35.06%         (1.58)%           7.35%           4.75%


Contract Owners Equity,
  End of Period (in thousands)     $      89,109   $      85,762   $      36,807   $      91,269   $      34,979 


Ratio of Expenses to Average
  Contract Owners' Equity                   1.40%           1.40%           1.40%           1.40%           1.40%


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                          3.53%           4.85%           2.10%           2.99%          10.02%


Number of Units Outstanding
  at End of Period                     4,680,855       5,436,980       3,151,443       7,691,151       3,164,251 

<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees or
account transfer charges),
   but do reflect mortality and expense charges, administration expense charges as well as all expenses of the
underlying portfolios
   (investment advisory fees and portfolio operating expenses).
</TABLE>

                               See accompanying notes to financial statements.


<PAGE>
                                             COVA VARIABLE ANNUITY ACCOUNT ONE
                                                          FINANCIAL HIGHLIGHTS
    Financial Highlights for each accumulation unit outstanding throughout the
                                                                        period
                                          per sub-account are presented below:

<TABLE>

<CAPTION>
COVA SERIES TRUST - BOND DEBENTURE PORTFOLIO (MANAGED BY LORD, ABBETT & CO.)

                                   For the Period From 5/01/96
                                         Through 12/31/96
<S>                                <C>

Accumulation Unit Value,
  Beginning of Period              $                      10.10
                                   ----------------------------

  Net Investment Income                                     .32

  Net Realized and Unrealized
    Gain from Security
      Transactions                                          .87


Total from Investment Operations                           1.19

Accumulation Unit Value,
  End of Period                    $                      11.29
                                   ============================


Total Return**                                          18.17%*


Contract Owners Equity,
  End of Period (in thousands)     $                      7,451


Ratio of Expenses to Average
  Contract Owners' Equity                                1.40%*


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                                       7.76%*


Number of Units Outstanding
  at End of Period                                      659,663

<FN>
*   Annualized
** Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
     but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
     (investment advisory fees and portfolio operating expenses).
</TABLE>

See accompanying notes to financial statements.

<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:

<TABLE>

<CAPTION>
COVA SERIES TRUST - QUALITY BOND PORTFOLIO (MANAGED BY J.P. MORGAN INVESTMENT
MANAGEMENT, INC.)

                                   For the Period From 5/01/96
                                         Through 12/31/96
<S>                                <C>

Accumulation Unit Value,
  Beginning of Period              $                       9.90
                                   ----------------------------

  Net Investment Income                                     .28

  Net Realized and Unrealized
    Gain from Security
      Transactions                                          .19


Total from Investment Operations                            .47

Accumulation Unit Value,
  End of Period                    $                      10.37
                                   ============================


Total Return**                                           7.18%*


Contract Owners Equity,
  End of Period (in thousands)     $                      5,276


Ratio of Expenses to Average
  Contract Owners' Equity                                1.40%*


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                                       3.75%*


Number of Units Outstanding
  at End of Period                                      508,830

<FN>
*    Annualized
**  Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
      but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
      (investment advisory fees and portfolio operating expenses).
</TABLE>

See accompanying notes to financial statements.


<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:

<TABLE>

<CAPTION>
COVA SERIES TRUST - SMALL CAP STOCK PORTFOLIO (MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT, INC.)

                                   For the Period From 5/01/96
                                         Through 12/31/96
<S>                                <C>

Accumulation Unit Value,
  Beginning of Period              $                      10.51
                                   ----------------------------

  Net Investment Income                                     .39

  Net Realized and Unrealized
    Gain from Security
      Transactions                                          .41


Total from Investment Operations                            .80

Accumulation Unit Value,
  End of Period                    $                      11.31
                                   ============================


Total Return**                                          11.49%*


Contract Owners Equity,
  End of Period (in thousands)     $                     13,993


Ratio of Expenses to Average
  Contract Owners' Equity                                1.40%*


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                                       9.65%*


Number of Units Outstanding
  at End of Period                                    1,237,405

<FN>
*    Annualized
**  Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
      but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
      (investment advisory fees and portfolio operating expenses)..
</TABLE>

See accompanying notes to financial statements.



<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:

<TABLE>

<CAPTION>
COVA SERIES TRUST - LARGE CAP STOCK PORFOLIO (MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT, INC.)

                                   For the Period From 5/01/96
                                         Through 12/31/96
<S>                                <C>

Accumulation Unit Value,
  Beginning of Period              $                      10.00
                                   ----------------------------

  Net Investment Income                                     .22

  Net Realized and Unrealized
    Gain from Security
      Transactions                                         1.11


Total from Investment Operations                           1.33

Accumulation Unit Value,
  End of Period                    $                      11.33
                                   ============================


Total Return**                                          20.47%*


Contract Owners Equity,
  End of Period (in thousands)     $                     15,751


Ratio of Expenses to Average
  Contract Owners' Equity                                1.40%*


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                                       3.02%*


Number of Units Outstanding
  at End of Period                                    1,389,606

<FN>
*    Annualized
**  Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
      but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
      (investment advisory fees and portfolio operating expenses).
</TABLE>

See accompanying notes to financial statements.


<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:

<TABLE>

<CAPTION>
COVA SERIES TRUST - SELECT EQUITY PORTFOLIO (MANAGED BY J.P. MORGAN INVESTMENT
MANAGEMENT, INC.)

                                   FOR THE PERIOD FROM 5/01/96
                                         THROUGH 12/31/96
<S>                                <C>

Accumulation Unit Value,
  Beginning of Period              $                      10.08
                                   ----------------------------

  Net Investment Income                                     .10

  Net Realized and Unrealized
    Gain from Security
      Transactions                                          .66


Total from Investment Operations                            .76

Accumulation Unit Value,
  End of Period                    $                      10.84


Total Return**                                          11.34%*


Contract Owners Equity,
  End of Period (in thousands)     $                     22,159


Ratio of Expenses to Average
  Contract Owners' Equity                                1.40%*


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                                       3.12%*


Number of Units Outstanding
  at End of Period                                    2,044,523

<FN>
*   Annualized
** Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
     but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
     (investment advisory fees and portfolio operating expenses).
</TABLE>

                               See accompanying notes to financial statements.


<PAGE>
                                             COVA VARIABLE ANNUITY ACCOUNT ONE
                                                          FINANCIAL HIGHLIGHTS
    Financial Highlights for each accumulation unit outstanding throughout the
                                                                        period
                                          per sub-account are presented below:

<TABLE>

<CAPTION>
COVA SERIES TRUST - INTERNATIONAL EQUITY PORTFOLIO (MANAGED BY J.P. MORGAN
INVESTMENT MANAGEMENT, INC.)

                                   For the Period From 5/01/96
                                         Through 12/31/96
<S>                                <C>

Accumulation Unit Value,
  Beginning of Period              $                      10.21
                                   ----------------------------

  Net Investment Income                                     .02

  Net Realized and Unrealized
    Gain from Security
      Transactions                                          .74


Total from Investment Operations                            .76

Accumulation Unit Value,
  End of Period                    $                      10.97
                                   ============================


Total Return**                                          11.16%*


Contract Owners Equity,
  End of Period (in thousands)     $                     14,333


Ratio of Expenses to Average
  Contract Owners' Equity                                1.40%*


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                                       0.46%*


Number of Units Outstanding
  at End of Period                                    1,306,892

<FN>
*    Annualized
**  Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges),
      but do reflect mortality and expense charges, administration expense
charges as well as all expenses of the underlying portfolios
      (investment advisory fees and portfolio operating expenses).
</TABLE>

See accompanying notes to financial statements.


<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:

<TABLE>

<CAPTION>
LORD ABBETT SERIES FUND, INC. - GROWTH AND INCOME PORTFOLIO

<S>                                <C>             <C>            <C>             <C>             <C>
                                   For the Year    For theYear    For the Year    For the Year    For the Year
                                   Ended           Ended          Ended           Ended           Ended
                                        12/31/96       12/31/95        12/31/94        12/31/93        12/31/92 

Accumulation Unit Value,
  Beginning of Period              $       21.31   $      16.64   $       16.42   $       14.50   $       12.73 
                                   --------------  -------------  --------------  --------------  --------------

  Net Investment Income                     1.32           1.37             .76             .88            1.06 

  Net Realized and Unrealized
    Gain/(Loss) from Security
      Transactions                          2.46           3.30            (.54)           1.04             .71 


Total from Investment Operations            3.78           4.67             .22            1.92            1.77 
                                   --------------  -------------  --------------  --------------  --------------

Accumulation Unit Value,
- ---------------------------------                                                                               
  End of Period                    $       25.09   $      21.31   $       16.64   $       16.42   $       14.50 
- ---------------------------------  ==============  =============  ==============  ==============  ==============


Total Return*                              17.76%         28.03%           1.32%          13.24%          13.98%
- ---------------------------------  --------------  -------------  --------------  --------------  --------------


Contract Owners Equity,
- ---------------------------------                                                                               
  End of  Period (in thousands)    $     294,358   $    190,630   $     114,416   $      82,033   $      37,146 
- ---------------------------------  --------------  -------------  --------------  --------------  --------------


Ratio of Expenses to Average
- ---------------------------------                                                                               
  Contract Owners' Equity                   1.40%          1.40%           1.40%           1.40%           1.40%
- ---------------------------------  --------------  -------------  --------------  --------------  --------------


Ratio of Net Investment Income
- ---------------------------------                                                                               
  to Average Contract
- ---------------------------------                                                                               
    Owners' Equity                          6.59%          8.57%           5.40%           8.12%          10.59%
- ---------------------------------  --------------  -------------  --------------  --------------  --------------


Number of Units Outstanding
- ---------------------------------                                                                               
  at End of Period                    11,732,301      8,947,108       6,875,139       4,994,582       2,560,999 
- ---------------------------------  --------------  -------------  --------------  --------------  --------------
<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees
or account transfer charges), but do reflect mortality and expense charges, administration expense charges as well as
all expenses of the underlying portfolio  (investment advisory fees and portfolio operating expenses)
</TABLE>

See accompanying notes to financial statements.

<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:

<TABLE>

<CAPTION>
LORD ABBETT SERIES FUND, INC. - GLOBAL EQUITY PORTFOLIO

                                    For the Year    For the Year    For the Year    For the Year    For the Year
                                   --------------  --------------  --------------  --------------  --------------
                                       Ended           Ended           Ended           Ended           Ended
                                   --------------  --------------  --------------  --------------  --------------
                                      12/31/96        12/31/95        12/31/94        12/31/93        12/31/92
                                   --------------  --------------  --------------  --------------  --------------
<S>                                <C>             <C>             <C>             <C>             <C>


Accumulation Unit Value,
- ---------------------------------                                                                                
  Beginning of Period              $       14.52   $       13.33   $       13.29   $       10.64   $       10.97 
- ---------------------------------  --------------  --------------  --------------  --------------  --------------

  Net Investment Income                     1.70             .91            1.45             .24             .18 

  Net Realized and Unrealized
    Gain/(Loss) from Security
      Transactions                          (.81)            .28           (1.41)           2.41            (.51)

Total from Investment Operations             .89            1.19             .04            2.65            (.33)
                                   --------------  --------------  --------------  --------------  --------------

Accumulation Unit Value,
- ---------------------------------                                                                                
  End of Period                    $       15.41   $       14.52   $       13.33   $       13.29   $       10.64 
- ---------------------------------  ==============  ==============  ==============  ==============  ==============

Total Return*                               6.18%           8.91%            .27%          24.91%         (2.98)%
- ---------------------------------  --------------  --------------  --------------  --------------  --------------


Contract Owners Equity,
- ---------------------------------                                                                                
  End of  Period (in thousands)    $       2,383   $       2,500   $       3,108   $       3,635   $       3,249 
- ---------------------------------  --------------  --------------  --------------  --------------  --------------


Ratio of Expenses to Average
- ---------------------------------                                                                                
  Contract Owners' Equity                   1.40%           1.40%           1.40%           1.40%           1.40%
- ---------------------------------  --------------  --------------  --------------  --------------  --------------


Ratio of Net Investment Income
- ---------------------------------                                                                                
  to Average Contract
- ---------------------------------                                                                                
    Owners' Equity                         10.33%           5.36%           9.78%           1.88%           1.38%
- ---------------------------------  --------------  --------------  --------------  --------------  --------------


Number of Units Outstanding
- ---------------------------------                                                                                
  at End of Period                       154,609         172,206         233,186         273,399         305,314 
- ---------------------------------  --------------  --------------  --------------  --------------  --------------

<FN>
* Investment returns do not reflect any contract based charges (withdrawal charges, contract maintenance fees
or account transfer charges), but do reflect mortality and expense charges, administration expense charges as well
as all expenses of the underlying portfolios (investment advisory fees and portfolio operating expenses).
</TABLE>


See accompanying notes to financial statements.



COVA VARIABLE ANNUITY ACCOUNT ONE
FINANCIAL HIGHLIGHTS
Financial Highlights for each accumulation unit outstanding throughout the
period
per sub-account are presented below:

<TABLE>

<CAPTION>
GENERAL AMERICAN CAPITAL COMPANY - MONEY MARKET PORTFOLIO

                                    For the Period From 6/03/96
                                   -----------------------------
                                         Through 12/31/96
                                   -----------------------------
<S>                                <C>


Accumulation Unit Value,
- ---------------------------------                               
  Beginning of Period              $                      10.00 
- ---------------------------------  -----------------------------

  Net Investment Income                                    (.08)

  Net Realized and Unrealized
    Gain from Security
      Transactions                                          .31 


Total from Investment Operations                            .23 

Accumulation Unit Value,
  End of Period                    $                      10.23 
                                   =============================


Total Return**                                           4.05%* 


Contract Owners Equity,
  End of Period (in thousands)     $                        358 


Ratio of Expenses to Average
  Contract Owners' Equity                                1.40%* 


Ratio of Net Investment Income
  to Average Contract
    Owners' Equity                                     (1.40)%* 


Number of Units Outstanding
  at End of Period                                       34,964 

<FN>
*    Annualized
**   Investment returns do not reflect any contract based charges (withdrawal
charges, contract maintenance fees or account transfer charges), but do reflect mortality and expense charges, administration
expense charges as well as all expenses of the underlying portfolios (investment advisory fees and portfolio operating expenses).
</TABLE>


See accompanying notes to financial statements.

COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS

For the year ended December 31, 1996
and for the year ended December 31, 1995

1.  Organization:

Cova Variable Annuity Account One, (the "Separate Account") is a separate
investment account established by a resolution of the Board of Directors of
Cova Financial Services Life Insurance Company ("Cova").  The Separate Account
operates as a Unit Investment Trust under the Investment Company Act of 1940.

The  Separate  Account  is  divided into sub-accounts, with the assets of each
sub-account invested in the Cova Series Trust ("Trust"), the Lord Abbett
Series  Fund,  Inc.  ("Fund") or General American Capital Company (GACC).  The
Trust  consists  of  eleven portfolios of which five portfolios are managed by
Van  Kampen  American  Capital  Investment Advisory Corp., five are managed by
J.P. Morgan Investment Management, Inc.  and one portfolio is managed by Lord,
Abbett  &  Co.   The Trust portfolios available for investment are the Quality
Income, High Yield, Growth and Income, Money Market, Stock Index, Select
Equity,  Large Cap Stock, Small Cap Stock, International Equity, Quality Bond,
and Bond Debenture Portfolios.  The Fund has two portfolios available for
investment:    the  Growth and Income, and Global Equity Portfolios.  GACC has
the Money Market Portfolio available for investment. Not all portfolios of the
Trust,  Fund  and  GACC are available for investment depending upon the nature
and specific terms of the different contracts currently being offered for
sale.  The Trust, Fund and GACC are all diversified, open-end, management
investment companies which are intended to meet differing investment
objectives.

The Trust Quality Income Portfolio invests in U.S. Government issued debt
obligations and in various investment-grade debt instruments, including
mortgage  pass-through  certificates and collateralized mortgage obligations. 
The  Trust  High  Yield  Portfolio invests primarily in medium and lower-grade
debt securities and futures and options contracts.  The Trust Growth and
Income  Portfolio  invests  primarily in common stocks and futures and options
contracts.   The Trust Money Market and GACC Money Market Portfolios invest in
short-term  money market instruments.  The Trust Stock Index Portfolio invests
in common stocks, stock index futures and options, and short-term securities. 
The  Trust  Select  Equity  and Large Cap Stock Portfolios invest in stocks of
large and medium-sized companies.  The Trust Small Cap Stock Portfolio invests
primarily in the common stock of small U.S. companies.  The Trust
International Equity Portfolio invests primarily in stocks of established
companies based in developed countries.  The Trust Quality Bond Portfolio
invests  primarily  in higher grade debt securities.  The Trust Bond Debenture
Portfolio  invests primarily in convertible and discount debt securities.  The
Fund  Growth  and  Income Portfolio invests in common stocks.  The Fund Global
Equity  Portfolio invests primarily in both domestic and foreign common stocks
and forward currency contracts.

In order to satisfy diversification requirements and provide for optimum
policyholder  returns,  Cova  has made periodic contributions to the Trust and
Fund to provide for the initial purchases of investments.  In return, Cova has
been  credited with accumulation units of the Separate Account.  As additional
funds  are received through policyholder deposits, Cova has, at its discretion
and  without  adversely  impacting  the investment operations of the Trust and
Fund,  removed  its  capital investment in the Separate Account by liquidating
accumulation  units.  In 1996, Cova contributed approximately $35.5 million to
the  Separate  Account of which, after subsequent redemptions, net of realized
and  unrealized  gains  and losses on investments, approximately $15.0 million
remains as of December 31, 1996.

2.  SIGNIFICANT ACCOUNTING POLICIES:

A.  INVESTMENT VALUATION

Investments in shares of the Trust, Fund and GACC are carried in the statement
of assets and liabilities at the underlying net asset value of the Trust, Fund
and GACC.  The net asset value of the Trust, Fund and GACC has been determined
on the market value basis and is valued daily by the Trust, Fund and GACC
investment  managers.  Realized gains and losses are calculated by the average
cost method.


<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS

For the year ended December 31, 1996
and for the year ended December 31, 1995

B.  REINVESTMENT OF DIVIDENDS

With  the exception of GACC, dividends received from net investment income and
net realized capital gains are reinvested in additional shares of the
portfolio  of the Trust or Fund making the distribution or, at the election of
the Separate Account, received in cash.  Dividend income and capital gain
distributions are recorded as income on the ex-dividend date.

GACC  follows  the  Federal  income tax practice known as consent dividending,
whereby substantially all of its net investment income and net realized
capital  gains  are deemed to be passed through to the Separate Account.  As a
result, GACC does not distribute any dividends or capital gains.  During
December  of each year, accumulated investment income and capital gains of the
underlying  GACC  fund are allocated to the Separate Account by increasing the
cost basis and recognizing a capital gain in the Separate Account.

C.  FEDERAL INCOME TAXES

Operations  of  the  Separate Account form a part of Cova, which is taxed as a
"Life Insurance Company" under the Internal Revenue Code ("Code").  Under
current  provisions  of  the Code, no Federal income taxes are payable by Cova
with respect to earnings of the Separate Account.

Under  the  principles set forth in Internal Revenue Ruling 81-225 and Section
817(h)  of  the Code and regulations thereunder, Cova believes that it will be
treated as the owner of the assets invested in the Separate Account for
Federal  income tax purposes, with the result that earnings and gains, if any,
derived from those assets will not be included in a contract owners gross
income until amounts are withdrawn or received pursuant to an Optional Payment
Plan.

3.  CONTRACT CHARGES:

There  are  no deductions made from purchase payments for sales charges at the
time of purchase.  However, if all or a portion of the contract value is
withdrawn,  a  withdrawal  charge is calculated and deducted from the contract
value.    The  withdrawal  charge is imposed on withdrawals of contract values
attributable to purchase payments within five years after receipt and is equal
to 5% of the purchase payment withdrawn.  After the first contract
anniversary, provided that the contract value prior to withdrawal exceeds
$5,000,  an owner may make a withdrawal each contract year of up to 10% of the
aggregate purchase payments free from withdrawal charges.

An  annual contract maintenance charge of $30 is imposed on all contracts with
contract  values  less  than  $50,000 on their policy anniversary.  The charge
covers the cost of contract administration for the previous year and is
prorated between the sub-accounts to which the contract value is allocated.

Subject to certain restrictions, the contract owner may transfer all or a part
of  the  accumulated  value  of the contract among other offered and available
account  options of the Separate Account and fixed rate annuities of Cova.  If
more  than 12 transfers have been made in the contract year, a transfer fee of
$25  per  transfer  or, if less, 2% of the amount transferred will be deducted
from the account value.  If the owner is participating
in  the  Dollar  Cost  Averaging program, such related transfers are not taken
into account in determining any transfer fee.

For  the year ended December 31, 1996, withdrawal and account transfer charges
of approximately $280 thousand and contract maintenance charges of
approximately $240 thousand were deducted from the contract values in the
Separate Account.

Mortality and expense risks assumed by Cova are compensated by a charge
equivalent to an annual rate of 1.25% of the value of net assets.  The
mortality  risks assumed by Cova arise from its contractual obligation to make
annuity  payments after the annuity date for the life of the annuitant, and to
waive the withdrawal charge in the event of the death of the contract owner.


COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS

For the year ended December 31, 1996
and for the year ended December 31, 1995

In addition, the Separate Account bears certain administration expenses, which
are equivalent to an annual rate of .15% of net assets.  These charges cover
the cost of establishing and maintaining the contracts and Separate Account.

Cova currently advances any premium taxes due at the time purchase payments
are made and then deducts premium taxes from the contract value at the time
annuity payments begin or upon withdrawal if Cova is unable to obtain a
refund.  Cova, however, reserves the right to deduct premium taxes when
incurred.

4.  GAIN/(LOSS) ON INVESTMENTS:

The table below summarizes realized and unrealized gains and losses on
investments:
<TABLE>

<CAPTION>
REALIZED GAIN/(LOSS) ON INVESTMENTS (IN THOUSANDS OF DOLLARS):

                                             For the Year    For the Year
                                            --------------  --------------
                                                Ended           Ended
                                            --------------  --------------
                                               12/31/96        12/31/95
                                            --------------  --------------
<S>                                         <C>             <C>

Trust Quality Income Portfolio:
- ------------------------------------------                                
 Aggregate Proceeds From Sales              $      13,850   $      21,223 
- ------------------------------------------  --------------  --------------
 Aggregate Cost                                    13,806          21,207 
- ------------------------------------------  --------------  --------------
   Net Realized Gain on Investments         $          44   $          16 
- ------------------------------------------  --------------  ==============

Trust High Yield Portfolio:
- ------------------------------------------                                
 Aggregate Proceeds From Sales              $      22,909   $       1,957 
- ------------------------------------------  --------------  --------------
 Aggregate Cost                                    23,078           2,074 
- ------------------------------------------  --------------  --------------
   Net Realized Loss on Investments         $        (169)  $        (117)
- ------------------------------------------  ==============  ==============

Trust Growth and Income Portfolio:
- ------------------------------------------                                
 Aggregate Proceeds From Sales              $       1,508   $       1,127 
- ------------------------------------------  --------------  --------------
 Aggregate Cost                                     1,344           1,082 
- ------------------------------------------  --------------  --------------
   Net Realized Gain on Investments         $         164   $          46 
- ------------------------------------------  ==============  ==============

Trust Money Market Portfolio:
- ------------------------------------------                                
 Aggregate Proceeds From Sales              $      36,177   $      71,027 
- ------------------------------------------  --------------  --------------
 Aggregate Cost                                    36,177          71,027 
- ------------------------------------------  --------------  --------------
   Net Realized Gain/(Loss) on Investments             --              -- 
- ------------------------------------------  ==============  ==============

Trust Stock Index Portfolio:
- ------------------------------------------                                
 Aggregate Proceeds From Sales              $      21,062   $      19,097 
- ------------------------------------------  --------------  --------------
 Aggregate Cost                                    17,170          16,508 
- ------------------------------------------  --------------  --------------
   Net Realized Gain on Investments         $       3,892   $       2,589 
- ------------------------------------------  ==============  ==============

Trust Bond Debenture Portfolio
- ------------------------------------------                                
 Aggregate Proceeds From Sales              $         635 
- ------------------------------------------  --------------                
 Aggregate Cost                                       622   N/A
- ------------------------------------------  --------------  --------------
   Net Realized Gain on Investments         $          13 
- ------------------------------------------  ==============                
</TABLE>


<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS

For the year ended December 31, 1996
and for the year ended December 31, 1995

4.  GAIN/(LOSS) ON INVESTMENTS, CONTINUED:
<TABLE>

<CAPTION>
REALIZED GAIN/(LOSS) ON INVESTMENTS (IN THOUSANDS OF DOLLARS):

                                       For the Year   For the Year
                                      --------------  -------------
                                          Ended           Ended
                                      --------------  -------------
                                         12/31/96       12/31/95
                                      --------------  -------------
<S>                                   <C>             <C>

Trust Quality Bond Portfolio
- ------------------------------------                               
 Aggregate Proceeds From Sales        $       2,991 
- ------------------------------------  --------------               
 Aggregate Cost                               2,947   N/A
- ------------------------------------  --------------               
   Net Realized Gain on Investments   $          44 
                                      ==============               

Trust Small Cap Stock Portfolio       $       1,882 
 Aggregate Proceeds From Sales                1,835   N/A
                                      --------------               
 Aggregate Cost                       $          47 
                                      ==============               
   Net Realized Gain on Investments

Trust Large Cap Stock  Portfolio
 Aggregate Proceeds From Sale         $       1,423 
 Aggregate Cost                               1,338   N/A
                                      --------------               
   Net Realized Gain on Investments   $          85 
                                      ==============               

Trust Select Equity Portfolio
 Aggregate Proceeds From Sales        $       1,680 
 Aggregate Cost                               1,697   N/A
                                      --------------               
   Net Realized Loss on Investments   $         (17)
                                      ==============               

Trust International Equity Portfolio
 Aggregate Proceeds From Sales        $       4,568 
 Aggregate Cost                               4,496   N/A
                                      --------------               
   Net Realized Gain on Investments   $          72 
                                      ==============               



Fund Growth and Income Portfolio:
 Aggregate Proceeds From Sales        $       2,696   $       4,043
 Aggregate Cost                               2,164           3,660
   Net Realized Gain on Investments   $         532   $         383
                                      ==============  =============

Fund Global Equity Portfolio:
 Aggregate Proceeds From Sales        $         372   $         946
 Aggregate Cost                                 329             883
   Net Realized Gain on Investments   $          43   $          63
                                      ==============  =============
</TABLE>


COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS

For the year ended December 31, 1996
and for the year ended December 31, 1995

4.  GAIN/(LOSS) ON INVESTMENTS, CONTINUED:
<TABLE>

<CAPTION>
REALIZED GAIN/(LOSS) ON INVESTMENTS (IN THOUSANDS OF DOLLARS):

                                                                   For the Year    For the Year
                                                                  --------------  --------------
                                                                      Ended           Ended
                                                                  --------------  --------------
                                                                     12/31/96        12/31/95
                                                                  --------------  --------------
<S>                                                               <C>             <C>

GACC Money Market Portfolio
- ----------------------------------------------------------------                                
 Aggregate Proceeds From Sales                                    $           6 
- ----------------------------------------------------------------  --------------                
 Aggregate Cost                                                               6   N/A
- ----------------------------------------------------------------  --------------                
   Net Realized Gainon Investments                                           -- 
                                                                  ==============                

UNREALIZED GAIN/(LOSS) ON INVESTMENTS (IN THOUSANDS OF DOLLARS):
- ----------------------------------------------------------------                                
Trust Quality Income Portfolio:
 End of Period                                                    $         935   $       1,469 
 Beginning of Period                                                      1,469          (2,131)
   Net Change in Unrealized Gain/(Loss) on Investments            $        (534)  $       3,600 
                                                                                  ==============

Trust High Yield Portfolio:
 End of Period                                                    $         491   $        (461)
 Beginning of Period                                                       (461)         (2,247)
   Net Change in Unrealized Gain on Investments                   $         952   $       1,786 
                                                                                  ==============

Trust Growth and Income Portfolio:
 End of Period                                                    $       4,202   $       1,636 
 Beginning of Period                                                      1,636            (612)
   Net Change in Unrealized Gain on Investments                   $       2,566   $       2,248 
                                                                  ==============  ==============

Trust Money Market Portfolio:
 End of Period                                                               --              -- 
 Beginning of Period                                                         --            (110)
   Net Change in Unrealized Gain on Investments                              --   $         110 
                                                                  ==============  ==============


Trust Stock Index Portfolio:
 End of Period                                                    $      20,271   $      10,976 
 Beginning of Period                                                     10,976            (862)
   Net Change in Unrealized Gain on Investments                   $       9,295   $      11,838 
                                                                  ==============  ==============

Trust Bond Debenture Portfolio:
 End of Period                                                    $         271 
 Beginning of Period                                                         --   N/A
   Net Change in Unrealized Gain on Investments                   $         271 
                                                                  ==============                
</TABLE>









<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS

For the year ended December 31, 1996
and for the year ended December 31, 1995

4.  GAIN/(LOSS) ON INVESTMENTS, CONTINUED:
<TABLE>

<CAPTION>
UNREALIZED GAIN/(LOSS) ON INVESTMENT (IN THOUSANDS OF DOLLARS):


                                                         For the Year   For the Year
                                                            Ended           Ended
                                                           12/31/96       12/31/95
<S>                                                     <C>             <C>
Trust Quality Bond Portfolio:
 End of Period                                          $          30 
 Beginning of Period                                               --   N/A
   Net Change in Unrealized Gain on Investments         $          30 
                                                        ==============               

Trust Small Cap Portfolio:
 End of Period                                          $         533 
 Beginning of Period                                               --   N/A
   Net Change in Unrealized Gain on Investments         $         533 
                                                        ==============               

Trust Large Cap Portfolio:
 End of Period                                          $       1,531 
 Beginning of Period                                               --   N/A
   Net Change in Unrealized Gain on Investments         $       1,531 
                                                        ==============               

Trust Select Equity Portfolio:
 End of Period                                          $       1,210 
 Beginning of Period                                               --   N/A
   Net Change in Unrealized Gain on Investments         $       1,210 
                                                        ==============               

Trust International Equity Portfolio:
 End of Period                                          $         796 
 Beginning of Period                                               --   N/A
   Net Change in Unrealized Gain on Investments         $         796 
                                                        ==============               

Fund Growth and Income Portfolio:
 End of Period                                          $      46,489   $      22,469
 Beginning of Period                                           22,469             285
   Net Change in Unrealized Gain on Investments         $      24,020   $      22,184
                                                        ==============  =============

Fund Global Equity Portfolio:
 End of Period                                          $           1   $         152
 Beginning of Period                                              152             147
   Net Change in Unrealized Gain/(Loss) on Investments          ($151)  $           5
                                                        ==============  =============

GACC Money Market Portfolio
 End of Period                                          $           6   N/A
 Beginning of Period                                               -- 
   Net Change in Unrealized Gain on Investments         $           6 
                                                        ==============               
</TABLE>


<PAGE>
COVA VARIABLE ANNUITY ACCOUNT ONE
NOTES TO FINANCIAL STATEMENTS

For the year ended December 31, 1996
and for the year ended December 31, 1995

5.  ACCOUNT UNIT TRANSACTIONS:

The change in the number of accumulation units resulting from account unit
transactions is as follows:

                                COVA                                          
                                                        LORD ABBETT

                         SERIES TRUST                                         
                                                 SERIES FUND, INC.  GACC

_____________________________________________________________________________
_______________         ______________   _______
<TABLE>
__
<CAPTION>

                             QUALITY       HIGH      GROWTH &      MONEY       STOCK        BOND      QUALITY     SMALL
                              INCOME      YIELD       INCOME      MARKET       INDEX     DEBENTURE     BOND     CAP STOCK
                            ----------  ----------  ----------  -----------  ----------  ----------  ---------  ----------
<S>                         <C>         <C>         <C>         <C>          <C>         <C>         <C>        <C>
Balances at
   December 31, 1994        2,576,412   1,157,642     977,209    6,963,421   3,151,443   N/A         N/A        N/A

Redemptions by Cova                --          --          --           --          --          --         --          -- 
Units Sold                    181,275     195,356     162,687    2,450,650     163,890          --         --          -- 
Units Redeemed               (362,175)   (114,778)    (55,487)    (405,521)   (300,704)         --         --          -- 
Units Transferred             295,120     632,013     258,424   (6,021,418)  2,422,351          --         --          -- 

Balance at
   December 31, 1995        2,690,633   1,870,232   1,342,833    2,987,132   5,436,980   N/A         N/A        N/A

Contributions by Cova Life         --          --          --           --          --      50,000    500,000     500,000 
Redemptions by Cova                --          --          --           --          --     (50,000)  (294,154)   (500,000)
Units Sold                    106,671      98,690     180,267    3,772,567     216,989     360,638     98,567     580,659 
Units Redeemed               (280,149)   (113,437)    (59,321)    (259,281)   (283,639)    (10,552)    (2,065)     (6,730)
Units Transferred             817,805     145,699     442,117   (3,915,492)   (689,475)    309,577    206,482     663,476 

Balance at
   December 31, 1996        3,334,960   2,001,184   1,905,896    2,584,926   4,680,855     659,663    508,830   1,237,405 


                              LARGE       SELECT       INTL      GROWTH &     GLOBAL    MONEY
                            CAP STOCK     EQUITY      EQUITY      INCOME      EQUITY   MARKET      TOTAL
                            ----------  ----------  ----------  -----------  --------  -------  -----------
<S>                         <C>         <C>         <C>         <C>          <C>       <C>      <C>
Balances at
   December 31, 1994        N/A         N/A         N/A          6,875,139   233,186   N/A      21,934,453 

Redemptions by Cova                --          --          --           --   (10,000)              (10,000)
Units Sold                         --          --          --    1,505,688    50,282             4,709,829 
Units Redeemed                     --          --          --     (940,462)  (91,135)           (2,270,262)
Units Transferred                  --          --          --    1,506,743   (10,127)             (916,893)

Balance at
   December 31, 1995        N/A         N/A         N/A          8,947,108   172,206   N/A      23,447,125 

Contributions by Cova Life  1,500,000     500,000     500,000           --        --       --    3,550,000 
Redemptions by Cova          (367,586)   (500,000)   (500,000)          --        --       --   (2,211,740)
Units Sold                     76,199   1,024,461     550,620    1,374,562    15,160    8,787    8,464,837 
Units Redeemed                   (522)    (11,729)     (5,835)    (587,874)  (21,479)     (96)  (1,642,709)
Units Transferred             181,515   1,031,791     762,107    1,998,505   (11,278)  26,273    1,969,102 

Balance at
   December 31, 1996        1,389,606   2,044,523   1,306,892   11,732,301   154,609   34,964   33,576,614 

</TABLE>



COVA FINANCIAL SERVICES
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Consolidated Financial Statements

December 31, 1996, 1995 and 1994

(With Independent Auditors' Report Thereon)

















<PAGE>






                         INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholder
Cova Financial Services Life Insurance Company:


We have audited the accompanying consolidated balance sheets of Cova Financial
Services Life Insurance Company and subsidiaries (a wholly owned subsidiary of
Cova Corporation) as of December 31, 1996 and 1995, and the related
consolidated  statements of income, shareholders equity and cash flows for the
year  ended December 31, 1996 and the period from June 1, 1995 to December 31,
1995  (Successor  periods),  and from January 1, 1995 to May 31, 1995, and for
the  year  ended  December 31, 1994 (Predecessor periods).  These consolidated
financial  statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cova
Financial  Services Life Insurance Company and subsidiaries as of December 31,
1996  and  1995,  and the results of their operations and their cash flows for
the Successor periods, in conformity with generally accepted accounting
principles.  Also, in our opinion, the aforementioned Predecessor consolidated
financial  statements present fairly, in all material respects, the results of
their  operations  and their cash flows for the Predecessor periods presented,
in conformity with generally accepted accounting principles.






St. Louis, Missouri
March 7, 1997



<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Consolidated Balance Sheets

December 31, 1996 and 1995
(In thousands of dollars)
<TABLE>

<CAPTION>

                 ASSETS                                       1996         
1995

<S>                                                   <C>         <C>
Investments:
  Debt securities available for sale at market
(cost of $952,817 in 1996 and $583,868 in 1995)       $  949,611  $  594,556
  Mortgage loans (net)                                   244,103      77,472
  Policy loans                                            22,336      19,125
  Short-term investments at cost which approximates
    market                                                 4,404       7,859
                                                      ----------  ----------

Total investments                                      1,220,454     699,012
                                                      ----------  ----------

Cash and cash equivalents - interest bearing              38,322      59,312
Cash - non-interest bearing                                5,501       2,944
Receivable from sale of securities                         1,064          --
Accrued investment income                                 15,011       9,116
Deferred policy acquisition costs                         49,833      14,468
Present value of future profits                           46,389      38,155
Goodwill                                                  20,849      23,358
Federal and state income taxes recoverable                 1,461         397
Deferred tax benefits (net)                               13,537      13,556
Receivable from OakRe                                  1,973,813   2,391,982
Reinsurance receivables                                    3,504       8,891
Other assets                                               2,205       2,425
Separate account assets                                  641,871     410,449
                                                      ----------  ----------

Total Assets                                          $4,033,814  $3,674,065
                                                      ==========  ==========
</TABLE>

See accompanying notes to consolidated financial statements.
(continued)

<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Consolidated Balance Sheets (Continued)

December 31, 1996 and 1995
(In thousands of dollars)
<TABLE>

<CAPTION>

LIABILITIES AND SHAREHOLDERS EQUITY                   1996         1995

<S>                                           <C>          <C>
Policyholder deposits                         $3,135,325   $3,033,763 
Future policy benefits                            32,342       28,071 
Payable on purchase of securities                 15,978        5,327 
Accounts payable and other liabilities            19,764       20,143 
Future purchase price payable to OakRe            16,051       23,967 
Guaranty fund assessments                         12,409       14,259 
Separate account liabilities                     626,901      410,449 
                                              -----------  -----------

Total Liabilities                              3,858,770    3,535,979 
                                              -----------  -----------

Shareholders equity:
  Common stock, $2 par value.  (Authorized
5,000,000 shares; issued and outstanding
2,899,446 shares in 1996 and 1995)                 5,799        5,799 
  Additional paid-in capital                     166,491      129,586 
  Retained earnings                                3,538          (63)
  Net unrealized appreciation/(depreciation)
    on securities, net of tax                       (784)       2,764 
                                              -----------  -----------

Total Shareholders Equity                        175,044      138,086 
                                              -----------  -----------

Total Liabilities and Shareholders Equity     $4,033,814   $3,674,065 
                                              ===========  ===========
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Consolidated Statements of Income

Years ended December 31, 1996, 1995, and 1994
(In thousands of dollars)
<TABLE>

<CAPTION>
                                                       THE COMPANY             PREDECESSOR
                                                             7 MONTHS      5 MONTHS
                                                               ENDED        ENDED
                                                    1996      12/31/95     5/31/95       1994

<S>                                                 <C>      <C>       <C>         <C>
Revenues:
  Premiums                                          $ 3,154  $   921   $   1,097   $    2,787 
  Net investment income                              70,629   24,188      92,486      277,616 
  Net realized gain (loss) on sale of investments       472    1,324     (12,414)    (101,361)
  Separate Account charges                            7,205    2,957       1,818        3,992 
  Other income                                        1,320      725       1,037        2,713 
                                                    -------  --------  ----------  -----------

Total revenues                                       82,780   30,115      84,024      185,747 
                                                    -------  --------  ----------  -----------

Benefits and expenses:
  Interest on policyholder deposits                  50,100   17,706      97,867      249,905 
  Current and future policy benefits                  5,130    1,785       1,830        5,259 
  Operating and other expenses                       14,573    7,126      12,777       24,479 
  Amortization of purchased intangible assets         2,332    3,030          --           -- 
  Amortization of deferred acquisition costs          4,389      100      11,157      125,357 
                                                    -------  --------  ----------  -----------

Total Benefits and Expenses                          76,524   29,747     123,631      405,000 
                                                    -------  --------  ----------  -----------

Income/(loss) before income taxes                     6,256      368     (39,607)    (219,253)
                                                    -------  --------  ----------  -----------
Income Taxes:
  Current                                             1,740    1,011     (16,404)     (46,882)
  Deferred                                              915     (580)      6,340      (30,118)
                                                    -------  --------  ----------  -----------

Total income tax expense/(benefit)                    2,655      431     (10,064)     (77,000)
                                                    -------  --------  ----------  -----------

Net Income/(Loss)                                   $ 3,601  $   (63)  $ (29,543)  $(142,253))
                                                    =======  ========  ==========  ===========
</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Consolidated Statements of Shareholders Equity

Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>

<CAPTION>
                                                     THE COMPANY                PREDECESSOR
                                                             7 MONTHS      5 MONTHS
                                                              ENDED          ENDED
                                                     1996    12/31/95       5/31/95     1994

<S>                                                <C>        <C>        <C>        <C>
Common stock ($2 par value common stock;
  Authorized 5,000,000 shares; issued and
    outstanding 2,899,446 in 1996, 1995 and 1994
      Balance at beg. of period)                   $  5,799   $  5,799   $  5,799   $   5,632 
  Par value of additional shares issued                  --         --         --         167 
                                                   ---------  ---------             ----------

Balance at end of period                              5,799      5,799      5,799       5,799 
                                                   ---------  ---------  ---------  ----------

Additional paid-in capital:
  Balance at beginning of period                    129,586    137,749    136,534     120,763 
Adjustment to reflect purchase acquisition
  indicated in note 2                                    --    (52,163)        --          -- 
Capital contribution                                 36,905     44,000      1,215      15,771 
                                                   ---------  ---------  ---------  ----------

Balance at end of period                            166,491    129,586    137,749     136,534 
                                                   ---------  ---------  ---------  ----------

Retained earnings/(deficit):
  Balance at beginning of period                        (63)   (36,441)     1,506     143,759 
Adjustment to reflect purchase acquisition               --     36,441         --          -- 
   indicated in note 2
 Net income/(loss)                                    3,601        (63)   (29,543)   (142,253)
 Dividends to shareholder                                --         --     (8,404)         -- 
                                                   ---------  ---------  ---------  ----------

Balance at end of period                           $  3,538   $    (63)  $(36,441)  $   1,506 
                                                   ---------  ---------  ---------  ----------
</TABLE>

See accompanying notes to consolidated financial statements.
(Continued)

<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Consolidated Statements of Shareholders Equity (Continued)

Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)

<TABLE>

<CAPTION>
                                                          THE COMPANY            PREDECESSOR
                                                                 7 MONTHS   5 MONTHS
                                                                   ENDED     ENDED
                                                         1996    12/31/95   5/31/95     1994

<S>                                                          <C>        <C>        <C>         <C>
Net unrealized appreciation/(depreciation)of   securities:
 Balance at beginning of period                                 2,764   $(28,837)  $ (65,228)  $    (321)
 Adjustment to reflect purchase acquisition
   indicated in note 2                                             --     28,837          --          -- 
 Implementation of change in accounting for
    marketable debt and equity securities,
      net of effects of deferred taxes
       of $18,375 and deferred acquisition
          costs of $42,955                                         --         --          --      34,125 
 Change in unrealized appreciation/(depreciation)
    of debt and equity securities                             (13,915)    10,724     178,010    (357,502)
 Change in deferred Federal income taxes                        1,910     (1,489)    (18,458)     53,324 
 Change in deferred acquisition costs attributable
    to unrealized losses/(gains)                                1,561         --    (123,161)    205,146 
 Change in present value of future profits
    attributable to unrealized losses/(gains)                   6,896     (6,471)         --          -- 
                                                             ---------  ---------              ----------
 Balance at end of period                                        (784)     2,764     (28,837)    (65,228)
                                                             ---------  ---------  ----------  ----------

 Total Shareholders Equity                                   $175,044   $138,086   $  78,270   $  78,611 
                                                             =========  =========  ==========  ==========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Consolidated Statements of Cash Flows

Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)
<TABLE>

<CAPTION>

                                                      THE COMPANY            PREDECESSOR
                                                            7 MONTHS    5 MONTHS
                                                              ENDED       ENDED
                                                  1996       12/31/95    5/31/95      1994


<S>                                              <C>         <C>         <C>          <C>
Cash flows from operating activities:
  Interest and dividend receipts                 $  68,622   $  18,744   $  131,439   $   309,856 
  Premiums received                                  3,154         921        1,097         2,787 
  Insurance and annuity benefit payments            (3,729)     (2,799)      (1,809)       (3,755)
  Operating disbursements                          (17,158)    (10,480)      (9,689)      (26,023)
  Taxes on income refunded (paid)                   (3,016)         60       48,987        17,032 
  Commissions and acquisition costs paid           (36,735)    (17,456)     (23,872)      (26,454)
  Other                                                937         529        1,120           836 
                                                 ----------  ----------  -----------  ------------

Net cash provided by/(used in) operating
  activities                                        12,075     (10,481)     147,273       274,279 
                                                 ----------  ----------  -----------  ------------

Cash flows from investing activities:
  Cash used for the purchase of investment
    securities                                    (715,274)   (875,994)    (575,891)   (1,935,353)
  Proceeds from investment securities sold and
    matured                                        262,083     253,814    2,885,053     3,040,474 
  Other                                            (14,166)        179       (8,557)       (8,185)
                                                 ----------  ----------  -----------  ------------

Net cash provided by/(used in) investing
  activities                                     $(467,357)  $(622,003)  $2,300,605   $ 1,096,936 
                                                 ----------  ----------  -----------  ------------
</TABLE>

See accompanying notes to consolidated financial statements.
(Continued)

<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Consolidated Statements of Cash Flows (Continued)

Years ended December 31, 1996, 1995 and 1994
(In thousands of dollars)

<TABLE>

<CAPTION>
                                                     THE COMPANY             PREDECESSOR
                                                            7 MONTHS     5 MONTHS
                                                              ENDED        ENDED
                                                  1996       12/31/95     5/31/95     1994

<S>                                          <C>         <C>         <C>            <C>
Cash flows from financing activities:
  Policyholder deposits                      $ 446,784   $ 132,752   $    130,660   $  274,960 
  Transfers from/(to) OakRe                    574,010     628,481     (3,048,531)          -- 
  Transfer to Separate Accounts               (119,592)    (37,946)        (4,835)     (33,548)
  Return of policyholder deposits             (491,025)   (436,271)      (290,586)    (608,868)
  Dividends to Shareholder                          --          --         (8,404)          -- 
  Capital contributions received                20,000      44,000          1,215       15,938 
                                             ----------  ----------  -------------  -----------

Net cash provided by/(used in) financing
  activities                                   430,177     331,016     (3,220,481)    (351,518)
                                             ----------  ----------  -------------  -----------

Increase/(decrease) in cash and cash
  equivalents                                  (25,105)   (301,468)      (772,603)   1,019,697 

Cash and cash equivalents at beginning of
  period                                        62,256     363,724      1,136,327      116,630 
CFLIC contributed cash (Note 9)                  6,672          --             --           -- 
Cash and cash equivalents at end of period   $  43,823   $  62,256   $    363,724   $1,136,327 
                                             ==========  ==========  =============  ===========
</TABLE>


See accompanying notes to consolidated financial statements.

(Continued)

<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Consolidated Statements of Cash Flows, Continued
(In thousands of dollars)
<TABLE>

<CAPTION>
                                                       THE COMPANY          PREDECESSOR
                                                              7 MONTHS   5 MONTHS
                                                                ENDED      ENDED
                                                    1996      12/31/95    5/31/95    1994

<S>                                                  <C>        <C>        <C>        <C>
Reconciliation of net income/(loss)to net cash
 provided by operating activities:
   Net income/(loss)                                 $  3,601   $    (63)  $(29,543)  $(142,253)
   Adjustments to reconcile net income/(loss)
     to net cash provided by operating activities:
       Increase/(decrease) in future policy
         benefits (net of reinsurance)                    680     (1,013)        11       1,494 
       Increase/(decrease) in payables and accrued
           liabilities                                  2,900       (392)   (10,645)      3,830 
       Decrease/(increase) in accrued investment
           income                                      (4,778)    (7,904)    32,010      21,393 
       Amortization of intangible assets                6,721      3,831     11,309     125,722 
       Amortization and accretion of securities
           premiums and discounts                       2,751        307      2,410       3,635 
       Recapture commissions paid to OakRe             (4,483)    (4,777)        --          -- 
       Net realized losson sale of
           investments                                   (472)    (1,324)    12,414     101,361 
       Interest accumulated on policyholder
           deposits                                    50,100     17,706     97,867     249,905 
       Investment expenses paid                         1,151        642      2,373       7,296 
       Decrease/(Increase)in guaranty assessments          --       (104)     5,070        (935)
       Increase/(decrease) in current and deferred
           Federal income taxes                          (351)       491     38,923     (59,263)
       Separate account net loss                       (2,008)         1          1           2 
       Deferral of acquisition costs                  (34,803)   (14,568)   (13,354)    (30,024)
       Other                                           (8,934)    (3,314)    (1,573)     (7,884)
                                                                           ---------  ----------

Net cash provided by operating activities            $ 12,075   $(10,481)  $147,273   $ 274,279 
                                                     =========  =========  =========  ==========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

December 31, 1996, 1995 and 1994

(1)  NATURE OF BUSINESS AND ORGANIZATION

     NATURE OF THE BUSINESS

Cova  Financial Services Life Insurance Company (CFSLIC) and subsidiaries (the
Company), formerly  Xerox Financial Services Life Insurance Company (the
Predecessor),  market and service single premium deferred annuities, immediate
annuities, variable annuities, and single premium whole-life insurance
policies.  The Company is licensed to do business in 47 states and the
District of Columbia.  Most of the policies issued present no significant
mortality  nor  longevity risk to the Company, but rather represent investment
deposits by the policyholders.  Life insurance policies provide policy
beneficiaries  with mortality benefits amounting to a multiple, which declines
with age, of the original premium.

Under  the deferred annuity contracts, interest rates credited to policyholder
deposits  are guaranteed by the Company for periods from one to ten years, but
in no case may renewal rates be less than 3%.  The Company may assess
surrender  fees  against  amounts  withdrawn prior to scheduled rate reset and
adjust  account  values  based on current crediting rates.  Policyholders also
may incur certain Federal income tax penalties on withdrawals.

Although the Company markets its products through numerous distributors,
including regional brokerage firms, national brokerage firms and banks,
approximately  66%,  59%  and 57% of the companies sales have been through two
specific  brokerage firms, A.G. Edwards & Sons, Incorporated. and Edward Jones
& Company in 1996, 1995 and 1994, respectively.

     ORGANIZATION

Prior to June 1, 1995 Xerox Financial Services, Inc. (XFSI) owned 100% or
2,899,446  shares  of  the  Predecessor.  XFSI is a wholly owned subsidiary of
Xerox Corporation.

On  June  1,  1995  XFSI sold 100% of the issued and outstanding shares of the
Predecessor to Cova Corporation, a subsidiary of General American Life
Insurance  Company  (GALIC),  a  Missouri domiciled life insurance company, in
exchange  for  approximately $91.4 million in cash and $22.7 million in future
payables.  In  conjunction  with  this Agreement, the Predecessor also entered
into a financing reinsurance transaction that caused OakRe Life Insurance
Company(OakRe),a subsidiary of the Predecessor, to assume the economic
benefits  and  risks  of the existing single premium deferred annuity deposits
(SPDAs) of Cova Financial Services Life Insurance Company, which had an
aggregate  carrying  value  at June 1, 1995 of $2,982.0 million.  In exchange,
the  Predecessor  transferred  specifically  identified assets to OakRe with a
market value at June 1, 1995 of $2,986.0 million. Ownership of OakRe was
retained by XFSI subsequent to the sale of the Predecessor and other
affiliates.  The Receivable from OakRe to the Company that was created by this
transaction will be liquidated over the remaining crediting rate guaranty
periods (which will be substantially expired in four years) by the transfer of
cash in the amount of the then current account value, less a recapture
commission fee to OakRe on policies retained beyond their 30-day no-fee
surrender  window  by  the Company, upon the next crediting rate reset date of
each annuity policy.  The Company may then reinvest that cash for those
policies  that  are  retained  and thereafter assume the benefits and risks of
those deposits.




COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

In  the  event that both OakRe and XFSI default on the receivable, the Company
may draw funds from a standby bank irrevocable letter of credit established by
XFSI  in  the  amount  of $500 million.  No funds were drawn on this letter of
credit during the periods ending December 31, 1996 and 1995.

In  substance, terms of the agreement have allowed the seller, XFSI, to retain
substantially all of the existing financial benefits and risks of the existing
business,  while  the  purchaser,  GALIC, obtained the corporate operating and
product  licenses,  marketing  and administrative capabilities of the Company,
and  access  to  the  retention of the policyholder deposit base that persists
beyond the next crediting rate reset date.

The  Company  owns 100% of the outstanding shares of First Cova Life Insurance
Company  (a  New  York domiciled insurance company) (FCLIC) and Cova Financial
Life  Insurance  Company  (a California domiciled insurance company) (CFLIC). 
Ownership  of  Cova  Financial Life Insurance Company was obtained on December
31,  1996  as  the  result of a capital contribution by Cova Corporation.  The
Company has presented  the consolidated financial position and results of
operations  for  its subsidiaries from the dates of actual ownership (see note
9).

(2)  CHANGE IN ACCOUNTING

Upon closing the sale, the Company restated its financial statements in
accordance with "push down purchase accounting", which allocates the net
purchase  price  for  the  Company and its then sole subsidiary FCLIC of $91.4
million  according  to the fair values of the acquired assets and liabilities,
including the estimated present value of future profits.  These allocated
values were dependent upon policies in force and market conditions at the time
of  closing,  however,  these  allocations were not finalized until 1996.  The
table below summarizes the final allocation of purchase price:
<TABLE>

<CAPTION>
(In Millions)                                                                 

<S>                                <C>             June 1, 1995
                                   --------------
Assets acquired:
  Debt securities                  $         32.4
  Policy loans                               18.3
  Cash and cash equivalents                 363.7
  Present value of future profits            47.4
  Goodwill                                   20.5
  Deferred tax benefit                       24.9
  Receivable from OakRe                   2,969.0
  Other assets                                5.9
  Separate account assets                   332.7
                                   --------------
                                          3,814.8
                                   --------------
Liabilities assumed:
  Policyholder deposits                   3,299.2
  Future policy benefits                     27.2
  Future purchase price payable              22.7
  Deferred Federal income taxes              12.6
  Other liabilities                          29.0
  Separate account liabilities              332.7
                                   --------------
                                          3,723.4
                                   --------------
Adjusted purchase price            $         91.4
                                   ==============
</TABLE>




<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

In addition to revaluing all material tangible assets and liabilities to their
respective estimated market values as of the closing date of the sale, the
Company also recorded in its financial statements the excess of cost over fair
value of net assets acquired (goodwill) as well as the present value of future
profits to be derived from the purchased and reinsured business. These amounts
were determined in accordance with the purchase method of accounting. This new
basis of accounting resulted in an increase in shareholders equity of $13.1
million in 1995 reflecting the application of push down purchase accounting. 
The Companys consolidated financial statements subsequent to June 1, 1995
reflect this new basis of accounting.

All amounts for periods ended before June 1, 1995 are labeled Predecessor and
are based on predecessor historical costs.  The periods ending on or after
such date are labeled The Company, and are based on the new cost basis of the
Company or fair values at June 1, 1995 and subsequent results of operations.

(3)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     SECURITIES

Investments in all debt securities and those equity securities with readily
determinable market values are classified into one of three categories:
held-to-maturity, trading, or available-for-sale. Classification of
investments is based on management's current intent. All debt and equity
securities at December 31, 1996 and 1995 were classified as
available-for-sale. Securities available-for-sale are carried at market value,
with unrealized holding gains and losses reported as a separate component of
stockholders equity, net of deferred effects of income tax and related effects
on deferred acquisition costs.

Amortization of the discount or premium from the purchase of mortgage-backed
bonds is recognized using a level-yield method which considers the estimated
timing and amount of prepayments of the underlying mortgage loans.  Actual
prepayment experience is periodically reviewed and effective yields are
recalculated when differences arise between the prepayments previously
anticipated and the actual prepayments received and currently anticipated. 
When such a difference occurs, the net investment in the mortgage-backed bond
is adjusted to the amount that would have existed had the new effective yield
been applied since the acquisition of the bond, with a corresponding charge or
credit to interest income (the "retrospective method").

A realized loss is recognized and charged against income if the Company's
carrying value in a particular investment in the available-for-sale category
has experienced a significant decline in market value that is deemed to be
other than temporary.

Investment income is recorded when earned.  Realized capital gains and losses
on the sale of investments are determined on the basis of specific costs of
investments and are credited or charged to income.  Gains or losses on
financial future or option contracts which qualify as hedges of investments
are treated as basis adjustments and are recognized in income over the life of
the hedged investments.

     MORTGAGE LOANS AND OTHER INVESTED ASSETS

Mortgage loans and policy loans are carried at their unpaid principal
balances.  Real estate is carried at cost less accumulated depreciation. 
Other invested assets are carried at lower of cost or market.



<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

Real estate reserves are established when declines in collateral values,
estimated in light of current economic conditions and calculated in conformity
with Statement of Financial Accounting Standards No. 114, Accounting by
Creditors for Impairment of a Loan (SFAS 114), indicate a likelihood of loss. 
Prior to 1995, the Company evaluated its real estate-related assets (including
accrued interest) by estimating the probabilities of loss utilizing various
projections that included several factors relating to the borrower, property,
term of the loan, tenant composition, rental rates, other supply and demand
factors and overall economic conditions.  Generally, at that time, the reserve
was based upon the excess of the loan amount over the estimated future cash
flows from the loan.

In 1995, the Company adopted Statement of Financial Accounting Standards No.
118, Accounting by Creditors for Impairment of a Loan -- Income Recognition
and Disclosures (SFAS 118).  SFAS 118 amends SFAS 114, providing clarification
of income recognition issues and requiring additional disclosures relating to
impaired loans.  The adoption of SFAS 114 and 118 had no effect on the
Companys financial position or results of operations at or for the period
ended December 31, 1995. The Company had no impaired loans, but did establish
a valuation allowance for potential losses on mortgage loans of $88 thousand
at December 31, 1996.

Prior to 1995, when an investment supported by real estate collateral was
deemed "in-substance" foreclosed, the investment was reclassified as real
estate and recorded at its fair value, with any reduction in carrying value
recorded as a realized loss.  The change in this valuation was recorded as a
realized capital gain or loss in the statements of income.

     CASH AND CASH EQUIVALENTS

Cash and cash equivalents include currency and demand deposits in banks, US
Treasury bills, money market accounts, and commercial paper with maturities
under 90 days, which are not otherwise restricted.

SEPARATE ACCOUNT ASSETS

The separate account investments are assigned to the policyholders in the
separate accounts, and are not guaranteed or supported by the other general
investments of the Company.  The Company earns mortality and expense risk fees
from the separate accounts and assesses withdrawal charges in the event of
early withdrawals.  Separate accounts assets are valued at fair market value.

In order to provide for optimum policyholder returns, and to allow for the
replication of the investment performance of existing cloned mutual funds, the
Company has periodically transferred capital to the separate account to
provide for the initial purchase of investments in new portfolios.  As
additional funds have been received through policyholder deposits, the Company
has periodically reduced its capital investment in the separate accounts.  As
of December 31, 1996, approximately $15.0 million of capital investments
remained within the separate accounts.

<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

     DEFERRED POLICY ACQUISITION COSTS

The costs of acquiring new business which vary with and are directly related
to the production of new business, principally commissions, premium taxes,
sales costs, and certain policy issuance and underwriting costs, are deferred.
 These deferred costs are amortized in proportion to estimated future gross
profits derived from investment income, realized gains and losses on sales of
securities, unrealized securities gains and losses, interest credited to
accounts, surrender fees, mortality costs, and policy maintenance expenses. 
The estimated gross profit streams are periodically reevaluated and the
unamortized balance of deferred acquisition costs is adjusted to the amount
that would have existed had the actual experience and revised estimates been
known and applied from the inception of the policies and contracts.  The
amortization and adjustments resulting from unrealized gains and losses is not
recognized currently in income but as an offset to the unrealized gains and
losses reflected as a separate component of equity.

The components of deferred policy acquisition costs are shown below.  The
effects on deferred policy acquisition costs of the consolidation of CFLIC
(see note 9) with the Company are presented separately.


<TABLE>

<CAPTION>
                                              THE COMPANY             PREDECESSOR
                                                      7 MONTHS    5 MONTHS
                                                        ENDED       ENDED
(In Thousands)                    1996     12/31/95    5/31/95      1994

<S>                                         <C>       <C>        <C>         <C>
Deferred policy acquisition costs,
  beginning of period                       $14,468   $ 92,398   $ 213,362   $ 146,504 
Effects of push down purchase
  accounting                                     --    (92,398)         --          -- 
Commissions and expenses deferred            34,803     14,568      13,354      30,025 
Amortization                                 (4,389)      (100)    (11,157)   (125,357)
Deferred policy acquisition costs
 attributable to unrealized gains/(losses)    1,561         --    (123,161)    162,190 
Effects on deferred policy acquisition
  costs of CFLIC consolidation                3,390         --          --          -- 
                                            --------                                   
Deferred policy acquistion costs,
  end of period                             $49,833   $ 14,468   $  92,398   $ 213,362 
                                            ========  =========  ==========  ==========
</TABLE>


     PURCHASE RELATED INTANGIBLE ASSETS AND LIABILITIES

In accordance with the purchase method of accounting for business
combinations, two intangible assets and a future payable related to accrued
purchase price consideration were established as of the purchase date:

     PRESENT VALUE OF FUTURE PROFITS

As of June 1, 1995 the Company established an intangible asset which
represents the present value of future profits to be derived from both the
purchased and transferred blocks of business. Certain estimates were utilized
in the computation of this asset including estimates of future policy
retention, investment income, interest credited to policyholders, surrender
fees, mortality costs, and policy maintenance costs discounted at a pre-tax
rate of 18% (12% net after tax).




<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

In addition, as the Company has the option of retaining its SPDA policies
after they reach their next interest rate reset date and are recaptured from
OakRe, a component of this asset represents estimates of future profits on
recaptured business. This asset will be amortized in proportion to estimated
future gross profits derived from investment income, realized gains and losses
on sales of securities, unrealized securities gains and losses, interest
credited to accounts, surrender fees, mortality costs, and policy maintenance
expenses.  The estimated gross profit streams are periodically reevaluated and
the unamortized balance of present value of future profits will be adjusted to
the amount that would have existed had the actual experience and revised
estimates been known and applied from the inception.  The amortization and
adjustments resulting from unrealized gains and losses is not recognized
currently in income but as an offset to the unrealized gains and losses
reflected as a separate component of equity.  The amortization period is the
remaining life of the policies, which is estimated to be 20 years from the
date of original policy issue.

Based on current assumptions, amortization of the original in-force PVFP
asset, expressed as a percentage of the original in-force asset, are projected
to be 6.8%, 5.8%, 4.6%, 4.5% and 4.7% for the years ended December 31, 1997
through 2001, respectively.  Actual amortization incurred during these years
may be more or less as assumptions are modified to incorporate actual results.

During 1996, the Company adjusted its original purchase accounting to include
a revised estimate of the ultimate renewal (recapture) rate.  This adjustment
resulted in a re-allocation of the net purchased intangible asset between
present value of future profits, goodwill and the future payable.  This final
allocation and the resulting impact on inception to date amortization was
recorded, in its entirety, in 1996.  No restatement of the June 1, 1995
opening Balance Sheet was made.

The components of present value of future profits are below.  The effects on
present value of future profits of the consolidation of CFLIC (see note 9)
with the Company are presented separately.
<TABLE>

<CAPTION>
                                                                        The Company
                                                                             7 Months
Ended
(In Thousands)                                                        1996     
12/31/95

<S>                                                                <C>       <C>
Present value of future profits - beginning of period               38,155    46,709 
Interest added                                                       3,274     1,941 
Net amortization                                                    (3,747)   (4,024)
Present value of future profits attributable to unrealized gains     6,896    (6,471)
Adjustment due to revised push down purchase accounting                698        -- 
Effects on present value of future profits of CFLIC consolidation    1,113        -- 
Present value of future profits - end of period                    $46,389   $38,155 
</TABLE>

                                                                Future payable

    Pursuant to the financial reinsurance agreement with OakRe, the receivable
from OakRe becomes due in installments when the SPDA policies reach their next
crediting rate reset date.  For any recaptured policies that continue in force
 into the next guarantee period, the Company will pay a commission to OakRe of
        1.75% up to 40% of policy account values originally reinsured and 3.5%
   thereafter. On policies that are recaptured and subsequently exchanged to a
 variable annuity policy, the Company will pay a commission to OakRe of 0.50%.
                                                                   (continued)


<PAGE>
               COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
                               (a wholly owned subsidiary of Cova Corporation)

                                    Notes to Consolidated Financial Statements

   The Company has recorded a future payable that represents the present value
        ofthe anticipated future commission payments payable to OakRe over the
        remaining life of the financial reinsurance agreement discounted at an
     estimated borrowing rate of 6.5%.  This liability represents a contingent
  purchase price payable for the policies transferred to OakRe on the purchase
date and has been pushed down to the Company through the financial reinsurance
       agreement.  The Company expects that this payable will be substantially
                                                extinguished by the year 2000.

   The components of this future payable are below.  The effects on the future
       payable of the consolidation of CFLIC (see note 9) with the Company are
                                                         presented separately.
<TABLE>

<CAPTION>
                                                              The Company
                                                                 7 Months
Ended
(In Thousands)                                              1996     12/31/95

<S>                                                      <C>       <C>
Future payable - beginning of period                     $23,967   $27,797 
Interest added                                               943       947 
Payments to OakRe                                         (4,483)   (4,777)
Adjustment due to revised push down purchase accounting   (5,059)       -- 
Effects on future payable of CFLIC consolidation             683        -- 
                                                         --------          
Future payable - end of period                           $16,051   $23,967 
                                                         ========  ========
</TABLE>


<PAGE>
               COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
                               (a wholly owned subsidiary of Cova Corporation)

                                    Notes to Consolidated Financial Statements

                                                                      Goodwill

     Under the push down method of purchase accounting, the excess of purchase
   price over the fair value of tangible and intangible assets and liabilities
 acquired is established as an asset and referred to as Goodwill.  The Company
    has elected to amortize goodwill on the straight line basis over a 20 year
period.  The components of goodwill are below.  The effects on goodwill of the
consolidation of CFLIC (see note 9) with the Company are presented separately.

<TABLE>

<CAPTION>

<S>                                                       <C>                   <C>
(In Thousands)                                                   The Company
                                                          --------------------                  
                                                                                 7 Months Ended 
                                                                         1996          12/31/95 
                                                                                ----------------
Goodwill - beginning of period                            $            23,358   $        24,060 
Amortization                                                             (916)             (702)
Adjustment due to revised push down purchase accounting
                                                                       (3,626)               -- 
Effects on goodwill of CFLIC consolidation                              2,033                -- 
                                                          --------------------                  

Goodwill - end of period                                  $            20,849   $        23,358 
</TABLE>


     Deferred Tax Assets and Liabilities

XFSI and GALIC agreed to file an election to treat the acquisition of the
Company as an asset acquisition under the provisions of Internal Revenue Code
Section 338(h)(10).  As a result of that election, the tax basis of the
Companys assets as of the date of acquisition were revalued based upon fair
market values.  The principal effect of the election was to establish a tax
asset on the tax-basis balance sheet of approximately $35.3 million for the
value of the business acquired that is amortizable for tax purposes over ten
to fifteen years.

     POLICYHOLDER DEPOSITS

The Company recognizes its liability for policy amounts that are not subject
to policyholder mortality nor longevity risk at the stated contract value,
which is the sum of the original deposit and accumulated interest, less any
withdrawals.  The average weighted interest crediting rate on the Companys
policyholder deposits as of December 31, 1996 was 5.77%.

     FUTURE POLICY BENEFITS

Reserves are held for future annuity benefits that subject the Company to
risks to make payments contingent upon the continued survival of an individual
or couple (longevity risk).  These reserves are valued at the present value of
estimated future benefits discounted for interest, expenses, and mortality. 
The assumed mortality is the 1983 Individual Annuity Mortality Tables
discounted at 5.50% to 8.50%, depending upon year of issue.

Current mortality benefits payable are recorded for reported claims and
estimates of amounts incurred but not reported.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

     PREMIUM REVENUE

The Company recognizes premium revenue at the time of issue on annuity
policies that subject it to longevity risks.

The Company currently assesses no explicit life insurance premium for its
commitment to make payments in excess of its recorded liability that are
contingent upon policyholder mortality.  Benefits paid in excess of the
recorded liability are recognized when incurred as the amounts are not
material to the financial statements.

Amounts collected on policies not subject to any mortality or longevity risk
are recorded as increases in the policyholder deposits liability.

     FEDERAL INCOME TAXES

Prior to June 1,1995 the revenues and expenses of the Predecessor were
included in a consolidated Federal income tax return with its parent company
and other affiliates.  Allocations of Federal income taxes were based upon
separate return calculations.

Subsequent to June 1, 1995, the Company filed its own separate income tax
return, independent from its ultimate parent, GALIC.

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards.  Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled.  The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income to the period that includes
the enactment date.

     RISKS AND UNCERTAINTIES

In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
date of the balance sheet and revenues and expenses for the period.  Actual
results could differ significantly from those estimates.

The following elements of the consolidated financial statements are most
affected by the use of estimates and assumptions:

      -   Investment market valuation
      -   Amortization of deferred policy acquisition costs
      -   Amortization of present value of future profits
      -   Recoverability of Goodwill

The market value of the Company's investments is subject to the risk that
interest rates will change and cause a temporary increase or decrease in the
liquidation value of debt securities.  To the extent that fluctuations in
interest rates cause the cash flows of assets and liabilities to change, the
Company might have to liquidate assets prior to their maturity and recognize a
gain or loss.  Interest rate exposure for the investment portfolio is managed
through asset/liability management techniques which attempt to control the
risks presented by differences in the probable cash flows and reinvestment of
assets with the timing of crediting rate changes in the Company's policies and
contracts.  Changes in the estimated prepayments of mortgage-backed securities
also may cause retrospective changes in the amortization period of securities
and the related recognition of income.


COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

The amortization of deferred acquisition costs is based on estimates of
long-term future gross profits from existing policies.  These gross profits
are dependent upon policy retention and lapses, the spread between investment
earnings and crediting rates, and the level of maintenance expenses.  Changes
in circumstances or estimates may cause retrospective adjustment to the
periodic amortization expense and the carrying value of the deferred expense.

In a similar manner, the amortization of present value of future profits is
based on estimates of long-term future profits from existing and recaptured
policies.

These gross profits are dependent upon policy retention and lapses, the spread
between investment earnings and crediting rates, and the level of maintenance
expenses.  Changes in circumstances or estimates may cause retrospective
adjustment to the periodic amortization expense and the carrying value of the
asset.

In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long Lived Assets and for Long Lived Assets
to be Disposed of (SFAS 121), which was adopted by the Company in the fourth
quarter of 1995, the Company has considered the recoverability of Goodwill and
has concluded that no circumstances have occurred which would give rise to
impairment of Goodwill for the period ending December 31, 1996.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standard No. 107, "Disclosures About Fair
Value of Financial Instruments" (SFAS #107) applies fair value disclosure
practices with regard to financial instruments, both assets and liabilities,
for  which it is practical to estimate fair value.  In cases where quoted
market prices are not readily available, fair values are based on estimates
that use present value or other valuation techniques.

These techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows.  Although fair value
estimates are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially.  In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, might
not be realized in the immediate settlement of the instruments.  SFAS #107
excludes certain financial instruments and all nonfinancial instruments from
its disclosure requirements.  Because of this, and further because a value of
a business is also based upon its anticipated earning power, the aggregate
fair value amounts presented do not represent the underlying value of the
Company.

The Predecessor adopted Statement of Financial Accounting Standard No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments" (SFAS #119), as of December 31, 1994. SFAS #119 requires
increased disclosures about derivative financial instruments including the
amount, nature, and terms of all derivative financial instruments as well as
disclosure of the purposes for which derivative financial instruments are
held, end-of-period fair values and any net gains or losses arising from
trading of derivative financial instruments.

The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:

     CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENTS
     AND ACCRUED INVESTMENT INCOME:

The carrying values amounts reported in the balance sheets for these
instruments approximate their fair values.  Short-term debt securities are
considered "available for sale."



<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

     INVESTMENT SECURITIES (INCLUDING MORTGAGE-BACKED SECURITIES):

Fair values for debt securities are based on quoted market prices, where
available.  For debt securities not actively traded, fair value estimates are
obtained from independent pricing services.  In some cases, such as private
placements and certain mortgage-backed securities, fair values are estimated
by discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the investments.  (See
note 4 for fair value disclosures).  Fair values for mortgages are based on
management estimates and incorporate independent appraisals of underlying real
property.  As of December 31, 1996, fair value of the Companys mortgage loans
are equivalent to their carrying value.

    INTEREST RATE SWAPS AND FINANCIAL FUTURES CONTRACTS:

The fair value of interest rate swaps and financial futures contracts are the
amounts the Company would receive or pay to terminate the contracts at the
reporting date, thereby taking into account the current unrealized gains or
losses of open contracts.  Amounts are based on quoted market prices or
pricing models or formulas using current assumptions.  (See note 6 for fair
value disclosures).

     INVESTMENT CONTRACTS:

The Company's policy contracts require the beneficiaries to commence receipt
of payments by the later of age 85 or 10 years after purchase, and
substantially all permit earlier surrenders, generally subject to fees and
adjustments.  Fair values for the Company's liabilities for investment type
contracts (Policyholder Deposits) are estimated as the amount payable on
demand.  As of December 31, 1996 and 1995 the cash surrender value of
policyholder funds on deposit were approximately $29.1 million and $2.2
million less than their stated carrying value, respectively.  Of the contracts
permitting surrender, 90% provide the option to surrender without fee or
adjustment during the 30 days following reset of guaranteed crediting rates. 
The Company has not determined a practical method to determine the present
value of this option.

All of the Company's deposit obligations are fully guaranteed by the acquirer,
GALIC, and the receivable from OakRe equal to the SPDA obligations is
guaranteed by OakRe's parent, XFSI.

     REINSURANCE:

The impact of reinsurance on the December 31, 1996 financial statements is not
considered material.

The financing reinsurance agreement entered into with OakRe does not meet the
conditions for reinsurance accounting under Generally Accepted Accounting
Principles (GAAP).  The net assets initially transferred to OakRe were
established as a receivable and are subsequently increased as interest is
accrued on the underlying liabilities and decreased as funds are transferred
back to the Company when policies reach their crediting rate reset date or
benefits are claimed.

     OTHER

Certain 1994 and 1995 amounts have been reclassified to conform to the 1996
presentation.




<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

(4)  INVESTMENTS

The Company's investments in debt and equity securities are considered
available for sale and carried at estimated fair value, with the aggregate
unrealized appreciation or depreciation being recorded as a separate component
of shareholder equity. The carrying value and amortized cost of investments at
December 31, 1996 and 1995 were as follows:
<TABLE>

<CAPTION>
                                                           1996
                                                       GROSS      GROSS     ESTIMATED
                                          CARRYING   UNREALIZED UNREALIZED    FAIR    
AMORTIZED
                                            VALUE       GAINS    LOSSES      VALUE       COST
                                                (in thousands of dollars)

<S>                                      <C>         <C>     <C>       <C>         <C>
Debt Securities:
  US. Government Treasuries              $    7,175  $   29     ($50)  $    7,175  $    7,196
  Collateralized mortgage obligations       382,335     985   (2,721)     382,335     384,071
  Corporate, state, municipalities, and
    political subdivisions                  560,101   3,971   (5,427)     560,101     561,557

Total debt securities                       949,611   4,985   (8,198)     949,611     952,824

Mortgage loans                              244,103      --       --      244,103     244,103
Policy loans                                 22,336      --       --       22,336      22,336
Short term investments                        4,404      21       --        4,404       4,383

Total investments                        $1,220,454  $5,006  ($8,198)  $1,220,454  $1,223,646
Companys beneficial interest in
 separate accounts                       $   14,970      --       --   $   14,970          --
</TABLE>

<TABLE>

<CAPTION>
                                                                                     1995
                                                        GROSS      GROSS     ESTIMATED
                                           CARRYING  UNREALIZED  UNREALIZED    FAIR   
AMORTIZED
                                             VALUE     GAINS      LOSSES      VALUE     
COST
                                                 (in thousands of dollars)

<S>                                      <C>       <C>      <C>        <C>       <C>
Debt Securities:
  US. Government Treasuries              $  4,307  $   156        --   $  4,307  $  4,151
  Collateralized mortgage obligations     252,148    4,344  $   (237)   252,148   248,041
  Corporate, state, municipalities, and
    political subdivisions                338,101    7,261      (836)   338,101   331,676
                                         --------  -------  ---------  --------  --------

Total debt securities                     594,556   11,761    (1,073)   594,556   583,868
                                         --------  -------  ---------  --------  --------

Mortgage loans                             77,472       --        --     77,472    77,472
Policy loans                               19,125       --        --     19,125    19,125
Short term investments                      7,859       36        --      7,859     7,823
                                         --------  -------  ---------  --------  --------

Total investments                        $699,012  $11,797  $ (1,073)  $699,012  $688,288
                                         ========  =======  =========  ========  ========
<FN>
As of December 31, 1996, the Company had no impaired investments. The Company did
establish a valuation allowance for potential losses on mortgage loans of $88 thousand as
of December 31, 1996.
</TABLE>


COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements


The amortized cost and estimated market value of debt securities at December
31, 1996, by contractual maturity, are shown below.  Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties. 
Maturities of mortgage-backed securities will be substantially shorter than
their contractual maturity because they require monthly principal installments
and mortgagees may prepay principal.
<TABLE>

<CAPTION>
                                                 1996
                                                    ESTIMATED
                                          AMORTIZED   MARKET
                                            COST      VALUE

<S>                                      <C>       <C>
(in thousands of dollars)
Due after one year through five years    $233,232  $234,493
Due after five years through ten years    283,884   281,155
Due after ten years                        51,630    51,628
Mortgage-backed securities                384,078   382,335

Total                                    $952,824  $949,611
<FN>
At December 31, 1996, approximately 98.7% of the Company's debt securities are
investment grade or are non-rated but considered to be of investment grade. 
Of the 1.3% non-investment grade debt securities, all are rated as BB+.
</TABLE>


Included in debt securities in 1994 and the first five months of 1995 are
investments in interest-only mortgage-backed stripped securities (IOs) and
similar IOettes.  Accounting for investments in "high risk" (interest only)
collateralized mortgage obligations (CMOs), is in accordance with the
provisions of EITF Nos. 89-4 and 93-18.  An effective yield is calculated for
each high risk CMO based on the current amortized cost of the investment and
the current estimate of future cash flow.  The recalculated effective yield is
used to record interest income in subsequent periods (the "prospective
method").  If the anticipated cash flow for any "high risk" CMO discounted at
the comparable risk-free rate is less than the unamortized cost, an impairment
loss is recorded and the unamortized cost adjusted.  The write-down is treated
as a realized loss.  Write-downs of $3,341,163 were recorded in 1994.  No IOs
or IOettes were held by the Company at December 31, 1996 or 1995.  The
weighted average of the effective yield that was used to accrue interest
income in 1994 was 11.88%.

The Company participates in a securities lending program whereby certain
securities are loaned to third parties, primarily major brokerage firms.  The
agreement with a custodian bank facilitating such lending requires a minimum
of 102% of the initial market value of the domestic loaned securities to be
maintained in a collateral pool.  To further minimize the credit risk related
to this lending program, the Company monitors the financial condition of the
counter parties to these agreements.  Securities loaned at December 31, 1996
had market values totaling $16,612,411.  Cash, letters of credit, and
government securities of $17,251,070 was held by the custodian bank as
collateral to secure this agreement.  Income on the Companys security lending
program in 1996 was immaterial.

No debt securities were non-income producing during the years ended December
31, 1996 and 1995.



<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

Information related to troubled debt restructurings during 1994 is as follows:
<TABLE>

<CAPTION>
                                                                       THE
PREDECESSOR
                                                    DEBT      MORTGAGE
                                                 SECURITIES    LOANS     TOTAL
                                                   (in thousands of dollars)

<S>                                            <C>     <C>  <C>
Aggregate carrying value at December 31, 1994  $3,306  --  $3,306
Gross interest income included in net income
  during 1994                                     205  --     205
Gross interest income that would have been
  earned during 1994 if there had been no
  restructuring                                   538  --     538
</TABLE>


The components of net investment income, realized capital gains/(losses) and
unrealized gains/(losses) were as follows:
<TABLE>

<CAPTION>
                                                   THE COMPANY           PREDECESSOR
                                                          7 MONTHS   5 MONTHS
                                                           ENDED      ENDED
                                                 1996     12/31/95   5/31/95    1994
                                                     (in thousands of dollars)

<S>                                               <C>       <C>       <C>        <C>
Income on debt securities                         $53,632   $19,629   $ 63,581   $        267,958 
Income on equity securities                            --        --        302                645 
Income on short-term investments                    2,156     2,778     28,060             11,705 
Income on cash on deposit                              --        --         --                316 
Income on interest rate swaps                          --        --        377               (244)
Income on policy loans                              1,454       868        624              1,376 
Interest on mortgage loans                         13,633     1,444        248              1,162 
Income on foreign exchange                             --        --        184               (433)
Income of real estate                                  --        --      1,508              3,278 
Income on separate account investments                772        --         (1)                 2 
Miscellaneous interest                                133       109        (24)              (853)
                                                            --------  ---------  -----------------

Total investment income                            71,780    24,828     94,859            284,912 
                                                                      ---------                   
Investment expenses                                (1,151)     (640)    (2,373)            (7,296)
                                                  --------  --------  ---------                   

Net investment income                             $70,629   $24,188   $ 92,486   $        277,616 
                                                  ========  ========  =========  =================

Realized capital gains/(losses) were as follows:
  Debt securities                                     469   $ 1,344   $(16,749)  $        (79,300)
  Mortgage loans                                        4        --      1,431             (3,452)
  Equity securities                                    --        --       (423)               (76)
  Real estate                                          --        --       (124)                -- 
  Short-term investments                               (1)      (20)    (1,933)              (282)
  Other assets                                         --        --        (76)               147 
  Interest rate swaps                                  --        --      5,460         -- (18,398)
                                                                      ---------  -----------------

Net realized gains/(losses) on investments        $   472   $ 1,324   $(12,414)  $       (101,361)
                                                  ========  ========  =========  =================
</TABLE>


COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements


<TABLE>

<CAPTION>
                                                     THE COMPANY           PREDECESSOR
                                                           7 MONTHS    5 MONTHS
                                                             ENDED      ENDED
                                                     1996   12/31/95   5/31/95      1994
                                                                                 (In thousands
of dollars)

<S>                                                    <C>       <C>       <C>        <C>
Unrealized gains/(losses) were as follows:
  Debt securities                                      ($3,213)  $10,688   $(85,410)  $(261,947)
  Short-term investments                                    21        36        879        (594)
  Effects on deferred acquisition costs amortization     1,561        --     39,030     162,190 
  Effects on present value of future profits               425    (6,471)        --          -- 
Unrealized gains/(losses) before income tax             (1,206)    4,253    (45,501)   (100,351)
Unrealized income tax benefit/(expense)                    422    (1,489)    16,664      35,123 

Net unrealized gains (losses) on investments             ($784)  $ 2,764   $(28,837)   ($65,228)
                                                                 ========  =========  ==========
</TABLE>


        Proceeds from sales of investments in debt securities during 1996 were
    $223,430,495.  Gross gains of $1,158,518 and gross losses of $687,126 were
     realized on those sales.  Included in these amounts were $28,969 of gross
                gains realized on the sale of non-investment grade securities.

  Proceeds from sales of investments in debt securities for the Company during
   1995 were $214,811,186, and for the Predecessor were $2,786,998,780.  Gross
 gains of $1,533,501 and gross losses of $190,899 were realized by the Company
     on its sales.   Included in these amounts for the Company are $373,768 of
     gross gains realized on the sale of non-investment grade securities.  The
Predecessor realized gross gains of $9,499,191 and gross losses of $26,249,279
   on its sales.  Included in these amounts are $6,367,297  of gross gains and
       $7,607,167 of gross losses realized on the sale of non-investment grade
                                                                   securities.

        Proceeds from sales of investments in debt securities during 1994 were
  $3,081,863,341.  Gross gains of $59,472,808 and gross losses of $136,394,109
    were realized on those sales.  Included in these amounts are $6,455,887 of
            gross gains and $6,692,683 of gross losses realized on the sale of
                                              non-investment grade securities.

  Unrealized appreciation/(depreciation) of debt securities for the Company in
       1996 and 1995, and the Predecessor in 1995 and 1994 were $(13,900,000),
       $10,688,000, $176,537,000, and $(357,401,000), respectively. Unrealized
     appreciation/(depreciation)of debt securities is calculated as the change
      between the cost and market values of debt securities for the years then
                                                                        ended.

 Securities with a book value of approximately $7,032,267 at December 31, 1996
                were deposited with government authorities as required by law.




<PAGE>
               COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
                               (a wholly owned subsidiary of Cova Corporation)

                                    Notes to Consolidated Financial Statements

                       (5)  SECURITIES GREATER THAN 10% OF SHAREHOLDERS EQUITY

  As of December 31, 1996 the Company held the following individual securities
                                    which exceeded 10% of shareholders equity:
<TABLE>

<CAPTION>

                                 LONG-TERM DEBT                       CARRYING
                                    SECURITIES                           VALUE

<S>                          <C>
Countrywide Mtg. 1993-12 A4  $19,347,536
FNMA Remic Tr 1996-50 A1      19,104,500
</TABLE>


As of December 31, 1995 the Company held the following individual securities
which exceeded 10% of shareholders equity:
<TABLE>

<CAPTION>
      LONG-TERM DEBT                      CARRYING
        SECURITIES                         VALUE


<S>                          <C>
Countrywide Mtg. 1993-12 A4  $18,726,875
American Airlines             15,080,392
</TABLE>


                        (6)  FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

                                                   FINANCIAL FUTURES CONTRACTS

Futures  contracts  are  contracts for delayed delivery of securities in which
the  seller  agrees to make delivery at a specified future date for a specific
price.    Gains or losses are realized in daily cash settlements.  Risks arise
from the possible inability of counter parties to meet the terms of their
contracts  and  from  movements in securities values and interest rates.  When
future  contracts  are designated as hedges, additional risks arise due to the
possibility that the futures contract will provide an imperfect correlation to
the hedged security.

The  Company  periodically enters into financial futures contracts in order to
hedge  its  short  term  investment spread risks encountered during occasional
periods  of  unusually  large recapture activity.  Gains and losses from these
anticipatory  hedges are applied to the cost basis of the assets acquired with
recaptured funds.  In 1996, $381,105 in net losses were recorded as basis
adjustments to hedged debt securities.

In order to limit its exposure to market fluctuations while it holds temporary
seed  money  investments within the separate account (see note 3), the Company
has  adopted a hedging policy that involves holdings of futures contracts.  As
of  December  31, 1996, the Company held 35 S&P 500 index futures contracts, 5
5-year T-Note futures contracts and 10 10-year T-Note futures contracts with a
total  notional  face  amount  of $14,528,750 and a total fair market value of
$14,652,969.  Collateral requirements set by the Chicago Board of Trade
averaged  $9,800 per contract at December 31, 1996.  At December 31, 1996, the
Company  recorded as a component of net investment income, $1,639,717 of gross
losses from terminated contracts and $406,141 of gross gains from open
contracts.   In 1996, the Company also recorded, as an offsetting component of
net  investment  income,  a net gain of $2,007,720 from market appreciation on
the underlying hedged securities within the separate account.





<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

(7)  POST-RETIREMENT AND POSTEMPLOYMENT BENEFITS

The  Company  has no direct employees and no retired employees.  All personnel
used to support the operations of the Company are supplied by contract by Cova
Life Management Company (CLMC), a wholly owned subsidiary of Cova Corporation.
  The Company is allocated a portion of certain health care and life insurance
benefits  for future retired employees of CLMC.  In 1996 and 1995, the Company
was  allocated a portion of benefit costs including severance pay, accumulated
vacations,  and disability benefits.  At December 31, 1996 CLMC had no retired
employees nor any employees fully eligible for retirement and had no
disbursements  for  such  benefit commitments.  The expense arising from these
obligations is not material.

(8)  INCOME TAXES

The Company will file a consolidated Federal Income Tax return with its
wholly-owned  subsidiary,  FCLIC.    Amounts payable or recoverable related to
periods  before  June 1, 1995 are subject to an indemnification agreement with
XFSI, which has the effect that the Company is not at risk for any income
taxes nor entitled to recoveries related to those periods, except for
approximately $1.4 million of state income tax recoveries.

Income taxes are recorded in the statements of earnings and directly in
certain  shareholders  equity  accounts.  Income tax expense (benefit) for the
years ended December 31 was allocated as follows:

<TABLE>

<CAPTION>
                                                     THE COMPANY           PREDECESSOR
                                                           7 MONTHS    5 MONTHS
                                                             ENDED      ENDED
                                                     1996   12/31/95   5/31/95     
1994
                                                          (In thousands of dollars)

<S>                                            <C>       <C>      <C>        <C>
Statements of income:
  Operating income (excluded realized
    investment gains and losses)               $ 2,493   $  (85)  $ (5,038)  $ (39,511)
  Realized investment gains/(losses)               162      516     (5,026)    (37,489)
                                               --------  -------                       
  Income tax expense/(benefit) included
    in the statements of income                  2,655      431    (10,064)    (77,000)
Shareholders equity:
  Unrealized gains/(losses) on securities
    available for sale and intangible assets    (1,910)   1,489     18,458     (53,324)
Total income tax expense/(benefit)             $   745   $1,920   $  8,394   $(130,324)
</TABLE>



<PAGE>

COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of COVA Corporation)

Notes to Consolidated Financial Statements


The actual Federal income tax expense differed from the expected tax expense
computed by applying the US. Federal statutory rate to income before taxes on
income as follows:

<TABLE>

<CAPTION>
                                 THE COMPANY                     PREDECESSOR
                                1996           1995           1995          1994
                                             7 MONTHS       5 MONTHS
                                              (in thousands of dollars)

<S>                                               <C>     <C>     <C>    <C>     <C>        <C>     <C>        <C>
Computed expected tax expense                     $2,190   35.0%  $129    35.0%  $(13,862)   35.0%  $(76,739)  35.0%
State income taxes, net                               77   1.23     11     3.0       (306)    0.8     (1,552)   0.7 
Tax-exempt bond interest                              --     --    (22)   (6.0)      (332)    0.8     (1,208)   0.6 
Amortization of intangible assets                    320   5.12    254    69.0         --      --        111   (0.1)
Permanent difference due to derivative  transfer
                                                      --     --     --      --      4,399   (11.1)        --     -- 
Other                                                 68   1.09     59    16.1         37     (.1)     2,388   (1.1)
Total                                             $2,655  42.44%  $431   117.1%  $(10,064)   25.4%  $(77,000)  35.1%
                                                  ======  ======  =====  ======  =========  ======  =========  =====
</TABLE>


The tax effect of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1996 &
1995 follows:
<TABLE>

<CAPTION>
                                                    1996        1995
                                               (In thousands of dollars)

<S>                                       <C>      <C>
Deferred tax assets:
PVFP                                      $ 1,639       --
Policy Reserves                            19,237  $ 7,601
Liability for commissions on recapture      6,073    8,868
Tax basis of intangible assets purchased    6,230   13,141
DAC Proxy Tax                               9,032    4,749
Unrealized losses on investments              422       --
Other deferred tax assets                     827    2,860

Total assets                              $43,460  $37,219
                                          -------  -------

Deferred tax liabilities:
PVFP                                      $19,169  $16,774
Unrealized gains on investments                --    1,489
Deferred Acquisition Costs                 10,694    5,316
Other deferred tax liabilities                 60       84

Total liabilities                          29,923   23,663
                                                   -------

Net Deferred Tax Asset                    $13,537  $13,556
                                          =======  =======
</TABLE>


COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax assets will not be realized.  Management believes
the deferred tax assets will be fully realized in the future based upon
expectation of the reversal of existing temporary differences, anticipated
future earnings, and consideration of all other available evidence. 
Accordingly no valuation allowance is established.

(9)  RELATED-PARTY TRANSACTIONS

The Company has entered into management, operations and services agreements
with both affiliated and unaffiliated companies.  The affiliated companies are
Cova Life Management Company (CLMC), a Delaware corporation, which provides
management services and the employees necessary to conduct the activities of
the Company, and Conning Asset Management, which provides investment advice. 
Additionally, a portion of overhead and other corporate expenses are allocated
by the Companys ultimate parent, GALIC.  The unaffiliated companies are
Johnson & Higgins, a New Jersey corporation, and Johnson & Higgins/Kirke Van
Orsdel, a Delaware corporation, which provide various services for the Company
including underwriting, claims and administrative functions.  The affiliated
and unaffiliated service providers are reimbursed for the cost of their
services and are paid a service fee.  Expenses and fees paid to affiliated
companies during 1996 and the 7 months of 1995 for the Company were
$6,618,303, and $7,139,525, respectively, and the five months of 1995 and the
year 1994 for the Predecessor were 6,364,609, and $8,553,028, respectively.

On December 31, 1996 Cova Corporation transferred its ownership of Cova
Financial Life Insurance Company (CFLIC), an affiliated life insurer domiciled
in the state of California, to the Company.  The transfer of ownership was
recorded as additional paid in capital and increased Shareholders Equity on
the Companys December 31, 1996 Balance Sheet by approximately $16.9 million. 
This change in direct ownership had no effect on the operations of either the
Company or CFLIC as both entities had existed under common management and
control prior to the December 31, 1996 transfer.  Although CFLICs Balance
Sheet is fully consolidated with the Companys December 31, 1996 Balance Sheet,
CFLICs 1996 Income Statement and Cash Flow have not been consolidated with the
Companys 1996 Income Statement or Cash Flow Statement.  However, CFLICs
year-end cash balance of $6.7 million is included in the Cash Flow Statement.

(10)  STATUTORY SURPLUS AND DIVIDEND RESTRICTION

Generally accepted accounting principles (GAAP) differ in certain respects
from the accounting practices prescribed or permitted by insurance regulatory
authorities (statutory accounting principles).

The major differences arise principally from the immediate expense recognition
of policy acquisition costs and intangible assets for statutory reporting,
determination of policy reserves based on different discount rates and
methods, the recognition of deferred taxes under GAAP reporting, the
non-recognition of financial reinsurance for GAAP reporting, the establishment
of an Asset Valuation Reserve as a contingent liability based on the credit
quality of the Company's investment securities, and an Interest Maintenance
Reserve as an unearned liability to defer the realized gains and losses of
fixed income investments presumably resulting from changes to interest rates
and amortize them into income over the remaining life of the investment sold.
In addition, SFAS #115 adjustments to record the carrying values of debt
securities and certain equity securities at market are applied only under GAAP
reporting and capital contributions in the form of notes receivable from an
affiliated company are not recognized under GAAP reporting.

Purchase accounting creates another difference as it requires the restatement
of GAAP assets and liabilities to their estimated fair values and shareholders
equity to the net purchase price.  Statutory accounting does not recognize the
purchase method of accounting.


<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

As of December 31, the differences between statutory capital and surplus and
shareholder's equity determined in conformity with generally accepted
accounting principles (GAAP) were as follows:

<TABLE>

<CAPTION>
                                                 1996        1995
                                             (in thousands of dollars)

<S>                                           <C>        <C>
Statutory Capital and Surplus                 $ 75,354   $ 59,682 
Reconciling items:
  GAAP investment valuation reserves               (88)        -- 
  Statutory Asset Valuation Reserves            17,599     13,378 
  Interest Maintenance Reserve                   2,301      1,892 
  GAAP investment adjustments to fair value     (3,191)    10,724 
  Deferred policy acquisition costs             49,833     14,468 
  GAAP basis policy reserves                   (30,202)   (11,233)
  Deferred federal income taxes (net)           13,537     13,556 
  Modified coinsurance                              --         -- 
  Goodwill                                      20,849     23,358 
  Present value of future profits               46,389     38,155 
  Future purchase price payable                (16,051)   (23,967)
  Other                                         (1,286)    (1,927)

GAAP Shareholders' Equity                     $175,044   $138,086 
                                              =========  =========
</TABLE>


Statutory net losses for CFSLIC for the years ended December 31, 1996, 1995
and 1994 were $(13,575,788), $(74,012,650), and $(92,952,989), respectively.

The maximum amount of dividends which can be paid by State of Missouri
insurance companies to shareholders without prior approval of the insurance
commissioner is the greater of 10% of statutory earned surplus or statutory
net gain from operations for the preceding year.  Accordingly, the maximum
dividend permissible during 1997 will be $0.

The National Association of Insurance Commissioners has developed certain Risk
Based Capital (RBC) requirements for life insurers.  If prescribed levels of
RBC are not maintained, certain actions may be required on the part of the
Company or its regulators.  At December 31, 1996 the Company's Total Adjusted
Capital and Authorized Control Level - RBC were, $92,953,237, and $21,058,220
respectively.  This level of adjusted capital qualifies under all tests.

(11)  GUARANTY FUND ASSESSMENTS

The Company participates with all life insurance companies licensed throughout
the United States, in associations formed to guarantee benefits to
policyholders of insolvent life insurance companies.  Under state laws, as a
condition for maintaining the Companys authority to issue new business, the
Company is contingently liable for its share of claims covered by the guaranty
associations for insolvencies incurred through 1996, but for which assessments
have not yet been determined nor assessed, to a maximum in each state
generally of 2% of statutory premiums per annum in the given state.  Most
states then permit recovery of assessments as a credit against premium or
other state taxes over, most commonly, five years.



<PAGE>
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Cova Corporation)

Notes to Consolidated Financial Statements

At December 31, 1996, the National Organization of Life and Health Guaranty
Associations (NOLHGA) distributed a study of the major outstanding industry
insolvencies, with estimates of future assessments by state.  Based on this
study, the Company has accrued a liability for approximately $12.4 million in
future assessments on insolvencies that occurred before December 31, 1996.
Under the coinsurance agreement between the Company and OakRe (see note 1),
OakRe is required to reimburse the Company for any future assessments that it
pays which relate to insolvencies occurring prior to June 1, 1995.  As such,
the Company has recorded a receivable from Oakre for approximately $12.3
million.

At the same time, the Company is liable to OakRe for 80% of any future premium
tax recoveries that are realized from any such assessments, and may retain the






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