LIFE RE CORP, 10-K405, 1999-03-31

LIFE RE CORP
10-K405, 1999-03-31
LIFE INSURANCE

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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FORM 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-11340

LIFE RE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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DELAWARE 01-0437851
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

969 HIGH RIDGE ROAD, STAMFORD, CT 06905
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 321-3000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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NONE NONE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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

[ ] by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of March 30, 1999, the aggregate market value of Common Stock, $.01 par
value held by non-affiliates was $0.

APPLICABLE ONLY TO CORPORATE REGISTRANTS:

As of March 30, 1999, 1,000 shares of Common Stock, $.01 par value were
outstanding.

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TABLE OF CONTENTS

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ITEM PAGE
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PART I
1 Business.................................................... 1
2 Properties.................................................. 12
3 Legal Proceedings........................................... 12
4 Submission of Matters to a Vote of Security Holders......... 12

PART II
5 Market for Registrant's Common Equity and Related 13
Stockholder Matters.........................................
6 Selected Financial Data..................................... 13
7 Management's Discussion and Analysis of Financial Condition 15
and Results of Operations...................................
7A Quantitative and Qualitative Disclosures About Market 22
Risk........................................................
8 Financial Statements and Supplementary Data................. 23
9 Changes in and Disagreements with Accountants on Accounting 49
and Financial Disclosure....................................

PART III
10 Directors and Executive Officers of the Registrant.......... 49
11 Executive Compensation...................................... 52
12 Security Ownership of Certain Beneficial Owners and 61
Management..................................................
13 Certain Relationships and Related Transactions.............. 61

PART IV
14 Exhibits, Financial Statement Schedules, and Reports on Form 62
8-K.........................................................
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PART I

ITEM 1 BUSINESS

Life Re Corporation ("Life Re" or the "Company"), through its principal
wholly-owned subsidiary, Life Reassurance Corporation of America ("Life
Reassurance"), provides ordinary and group life reinsurance in the United
States. Life Reassurance has specialized in providing life reinsurance since its
formation in 1967.

Pursuant to an Agreement and Plan of Merger, dated as of July 27, 1998 (the
"Merger Agreement"), by and among Swiss Reinsurance Company, a Swiss corporation
("Swiss Re"), SRC Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Swiss Re ("Sub"), Swiss Re America Holding Corporation, a Delaware
corporation and a wholly owned subsidiary of Swiss Re ("Holding") and the
Company, on December 1, 1998, Sub was merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation and became a
wholly owned subsidiary of Swiss Re and Holding, and each outstanding share of
common stock, par value $.001 per share, of the Company (the "Common Stock"),
other than shares held by the Company in its treasury, Swiss Re, Holding, the
Sub or any other wholly owned subsidiary of Swiss Re, and shares held by the
stockholders, if any, who properly exercised their appraisal rights under
Delaware law, was converted into the right to receive $95.00 in cash.

Life Re serves as a holding company for all of the common stock of TexasRe
Life Insurance Company ("TexasRe"), which in turn owns all of the common stock
of Life Reassurance.

Life Re's two core lines of business are traditional life reinsurance,
which involves the transfer of mortality risks on new sales from primary (or
ceding) insurers of ordinary and group life insurance to the Company, and
Administrative Reinsurance(SM), which involves the acquisition of blocks of life
insurance in force and, frequently, the assumption of administrative
responsibility by the Company.

In July 1995, Life Reassurance acquired all of the common stock of John
Deere Life Insurance Company (since renamed Reassure America Life Insurance
Company or "REALIC") from two subsidiaries of Deere & Company for an adjusted
purchase price of $33.3 million, to serve as the Company's initial platform for
Administrative Reinsurance(SM). With the acquisition of REALIC, the Company
obtained primary insurance licenses and began outsourcing administrative
services for primary insurance in force on a variable cost basis. During 1998
the Company acquired Mission Life Insurance Company ("Mission Life"), Lincoln
Liberty Life Insurance Company ("Lincoln Liberty Life"), First Delaware Life
Insurance Company ("First Delaware Life"), Atlas Life Insurance Company ("Atlas
Life"), Capitol Bankers Life Insurance Company ("Capitol Bankers Life"), Aristar
Life Insurance Company ("Aristar Life") and First Capital Life Insurance Company
of Louisiana ("First Capital Life"). In addition, during 1997 the Company
entered into reinsurance agreements covering in force business of Allianz Life
Insurance Company of North America ("Allianz") and UNUM Life Insurance Company
of America ("UNUM") and acquired 79% of AML Acquisition Company, the owner of
American Merchants Life Insurance Company ("AML").

TexasRe, Life Reassurance, REALIC, AML, Mission Life, Capitol Bankers Life
and First Capital Life are sometimes referred to herein collectively as the
"Subsidiaries."

In 1995, Life Re formed a Bermuda subsidiary, Life Re International, Ltd.,
for the reinsurance of domestic and internationally generated life and health
insurance risks. Currently, Life Re International, Ltd. has minimal business in
force.

During 1997, Life Re withdrew from the group accident and health and
special risk reinsurance business.

On March 17, 1998, the Company completed two separate public offerings
(together, the "Offerings") in which it sold 3,500,000 shares of common stock
and 2,070,000 6.0% Adjustable Conversion-rate Equity Security Units (the
"Units") issued through Life Re Capital Trust II, a subsidiary of Life Re. The
Units consist of a stock purchase contract and Quarterly Income Preferred
Securities. Net proceeds from the Offerings were $352.3 million of which $207.0
million was contributed to the Subsidiaries.
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BUSINESS WRITTEN

General

The business of reinsurance generally consists of reinsurers, such as Life
Re, which enter into contractual arrangements (treaties) with primary insurers
(ceding companies) whereby the reinsurer agrees to indemnify the ceding company
for all or a portion of the risks associated with the underlying insurance
policy in exchange for a reinsurance premium payable to the reinsurer.
Reinsurers also may enter into retrocessional reinsurance arrangements with
other reinsurers, which operate in a manner similar to the underlying
reinsurance arrangement described above. Under retrocessional reinsurance
arrangements, the reinsurer shifts a portion of the risk associated with the
underlying insurance policy to the retrocessionaires.

Reinsurance agreements may be written on an automatic treaty basis or
facultative basis, and reinsurance may be marketed directly by the reinsurer or
through reinsurance intermediaries or brokers. An automatic treaty provides for
a ceding company to cede contractually agreed-upon risks on specific blocks of
business to a reinsurer and binds that reinsurer without obtaining further
approval from that reinsurer. Facultative reinsurance is the reinsurance of
individual risks whereby a reinsurer has the opportunity to analyze and
separately underwrite a risk prior to agreeing to accept the risk. In addition,
both automatic treaty and facultative reinsurance may be written on either a
quota share basis (a percentage of each risk in the reinsured class of risk is
assumed by the reinsurer from the ceding company with premiums proportional to
such assumed risk being paid to reinsurers) or an excess of loss basis
(reinsurers indemnify the ceding company up to a contractually-specified amount
for a portion of claims exceeding a specified retention amount in consideration
of non-proportional premiums being paid).

Life Re's major lines of business are traditional life reinsurance, which
includes ordinary and group life reinsurance, and Administrative
Reinsurance(SM). The Administrative Reinsurance(SM) line of business, which
focuses on acquiring and administering primary life insurance in force, includes
closed blocks of directly written life insurance, annuities and automobile
credit life and disability reinsurance. Life Re's lines of business cover the
following risks: (i) mortality and morbidity, (ii) investment, (iii) lapsation,
and (iv) expense. Life Re writes reinsurance predominantly on a direct basis
with primary life insurance companies. Life Re ceased writing new group accident
and health and special risk reinsurance during 1997.

The following table sets forth selected information for the indicated
periods concerning Life Re's insurance operations:

DISTRIBUTION OF POLICY REVENUES AND INSURANCE IN FORCE
(DOLLARS IN THOUSANDS)

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YEARS ENDED DECEMBER 31,
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1998 1997 1996
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AMOUNT % AMOUNT % AMOUNT %
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Policy revenues:
Traditional life reinsurance......... $480,107 67.7% $319,404 65.2% $292,115 64.8%
Administrative Reinsurance(SM)....... 170,536 24.0 49,633 10.1 19,224 4.2
Group accident and health and special
risk reinsurance (in run-off)........ 58,947 8.3 121,242 24.7 139,653 31.0
-------- ----- -------- ----- -------- -----
Total policy revenues........ $709,590 100.0% $490,279 100.0% $450,992 100.0%
======== ===== ======== ===== ======== =====
Insurance in force at end of year (in
millions and before reinsurance
ceded):
Traditional life reinsurance......... $199,149 $135,451 $111,493
Administrative Reinsurance(SM)....... 21,393 22,152 4,519
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Total insurance in force..... $220,542 $157,603 $116,012
======== ======== ========
Ordinary life lapse ratio.............. 10.2% 9.8% 9.4%
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Traditional Life Reinsurance

Life Re's traditional life reinsurance business has two primary components,
ordinary life reinsurance and group life reinsurance. The Company provides life
reinsurance primarily for mortality risks with respect to both ordinary and
group life reinsurance products.

Ordinary life reinsurance generally is the reinsurance of individual term
life insurance policies, whole life insurance policies, universal life insurance
policies, and joint and survivor insurance policies. Life Re's ordinary life
line of business reinsures all of these products.

Substantially all of Life Re's policy revenues with respect to ordinary
life reinsurance are written on an automatic treaty basis. Ordinary life
reinsurance is written on a facultative basis only in limited circumstances,
generally for primary insurers with which Life Re has automatic treaty
reinsurance business. Facultative reinsurance is individually underwritten by
Life Re for each policy to be reinsured, with the pricing and other terms
established at the time the policy is underwritten based upon rates negotiated
in advance. Most of Life Re's ordinary life reinsurance business is written on a
quota share basis. Life Re generally requires ceding companies to retain at
least 10% of every risk, whether the business is written on an excess or quota
share basis. Life Re generally limits its own net liability on any one ordinary
life risk to $1.0 million. Life Re's reinsurance agreements frequently provide
for rights of recapture, which permit the ceding company to increase the amount
of liability it retains on the reinsured policies after the policies have
remained in force for a designated period of time (generally between ten and
twenty years).

Life Re's ordinary life reinsurance agreements typically remain in force
for the life of the underlying policies reinsured. Life Re is entitled to
renewal policy revenues absent the death of the insured, voluntary surrender or
lapse of the policy due to nonpayment of premium or the recapture by the ceding
company of the risks reinsured.

The following table sets forth Life Re's net policy revenues on traditional
life reinsurance separated between first year business and renewal business for
the periods indicated:

DISTRIBUTION OF FIRST YEAR AND RENEWAL POLICY REVENUES
FOR TRADITIONAL LIFE REINSURANCE
(DOLLARS IN THOUSANDS)

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(1) First year policy revenues are premiums received within one year of the date
of issuance of the underlying policy, whether reinsured under treaties
entered into prior to or during the indicated period.

As of December 31, 1998 Life Re reinsured ordinary life insurance business
under treaties with approximately 500 ceding companies. In 1998, 64 ceding
companies each accounted for at least $1.0 million of ordinary life reinsurance
policy revenues and in the aggregate represented approximately 95% of Life Re's
ordinary life reinsurance policy revenues. Life Re markets its ordinary life
reinsurance to a broad cross section of companies, which vary in size, corporate
structure and geographic location. Except for Metropolitan Life Insurance
Company which provided approximately $60.9 million of policy revenues in 1998,
no ordinary life ceding company accounted for more than 10% of Life Re's policy
revenues in 1998.

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Life Re reinsures, or retrocedes, portions of certain risks for which it
has accepted liability. Life Re's policy is to retain up to $1.0 million of
liability on any one life for ordinary life insurance. The next $15.0 million of
liability in excess of $1.0 million is retroceded to a pool of ten
retrocessionaires. In certain limited circumstances Life Re reinsures policies
where the underlying risk exceeds $16.0 million. In such cases, Life Re
retrocedes any such risk in excess of $16.0 million on a facultative basis.

Each retrocessionaire in Life Re's current ordinary life pool reinsures a
percentage of each risk that is retroceded to the pool. Each of the domestic
participants in the pool is rated "A" or better by A.M. Best Company, Inc.
("A.M. Best"). Although the foreign retrocessionaires, which constitute 20% of
the pool, are not rated by A.M. Best, each of the foreign retrocessionaires
provides Life Re with an irrevocable letter of credit drawn on a U.S. bank or a
U.S. branch of a foreign bank in the amount of the reserves held by such
retrocessionaire for the benefit of Life Re. If a foreign retrocessionaire were
to default on its payments, Life Re could collect such funds by exercising its
rights under the applicable letter of credit. To date, Life Re has not
experienced any default in connection with its retrocessional arrangements.

Group life reinsurance is the reinsurance of various types of group life
policies. These policies generally include employee-employer group term life
(representing the majority of such business), voluntary and supplemental term
life, association or affinity term life, group universal life and voluntary
group universal life. Group life reinsurance generally is written on an annual
basis resulting in the terms of such contracts being subject to renegotiation or
cancellation each year. Life Re typically reinsures group life clients on an
experience rated basis, whereby the ceding company receives a refund of a
portion of the profits resulting from favorable claims experience with respect
to the underlying policies. Group life reinsurance policy revenues were $17.1
million, $15.2 million and $23.2 million in 1998, 1997 and 1996, respectively.
Experience rating refunds amounted to $4.2 million, $0.7 million and $3.1
million for 1998, 1997 and 1996, respectively.

Life Re markets its group life reinsurance to a broad cross section of
client entities, which vary in size, corporate structure and geographic
location. No group life client accounted for more than 10% of Life Re's policy
revenues in 1998.

Life Re's group life retrocessionaire is rated "A" by A.M. Best and to
date, Life Re has not experienced any default in connection with its
retrocessional arrangements of group life claims. Life Re's retention limit for
group life insurance business generally may be in an amount up to $350,000, with
amounts in excess thereof being retroceded.

Administrative Reinsurance(SM)

Administrative Reinsurance(SM) is Life Re's other core line of business. In
furtherance of Life Re's strategy of providing its clients with block
reinsurance of existing insurance in force and assisting those clients who wish
to discontinue the administration of older non-core blocks of business, Life Re
established its Administrative Reinsurance(SM) line of business. By combining an
administrative transfer with block reinsurance of insurance in force, Life Re's
clients may realize value and release capital embedded in non-core businesses or
ease administrative burdens and costs associated with maintaining outdated or
inefficient systems. Through Administrative Reinsurance(SM), Life Re
participates in the consolidation in the life insurance industry by focusing on
acquiring non-core or smaller blocks of life insurance in force.

Administrative Reinsurance(SM) takes at least two forms: the reinsurance
of insurance in force from life insurers, and the acquisition of life insurance
companies that lack critical mass to effectively market products and efficiently
administer blocks of insurance. In either case, Life Re generally organizes the
conversion of the client's block of business to the systems of one of its
current third party administrators, including Cybertek Corporation ("Cybertek"),
Computer Sciences Corporation ("CSC") or Transaction Applications Group, Inc.
("TAG").

The Company generally utilizes the services of outside administrators to
provide the administrative services needed for the primary business. The
administrative services provided by the outside administrators are set forth in
written agreements and include premium processing, billing, policyholder service
and claims administration. The use of several outside administrators allows the
Company to efficiently integrate

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acquisitions and retain the capacity to pursue multiple acquisition
opportunities simultaneously, while at the same time reduce its dependence on
any one provider. The supervision of the outside administrators is performed by
Life Re.

During 1998, the Company's completed Administrative Reinsurance(SM)
transactions included the reinsurance of blocks of insurance in force with
respect to business from Allianz Insurance Company of North America ("Allianz")
and CNA Financial Corporation ("CNA"), and the acquisitions of Mission Life,
Lincoln Liberty Life, First Delaware Life, Atlas Life, Capitol Bankers Life,
Aristar Life and First Capital Life. These transactions, in the aggregate, added
approximately $850 million in assets and liabilities to Life Re, consisting
primarily of fixed maturities and future policy benefits, respectively.

In connection with the Allianz transaction, in December 1997, the Company
entered into a transaction whereby the Company and Employers Reassurance
Corporation ("ERAC") coinsured a block of life insurance and annuity business
from Allianz, with the Company's portion of the business reinsured increasing
from 20% to 60% during 1998. The total block of business being coinsured entails
approximately $1.1 billion of life insurance and annuity reserves. Under its
agreement with ERAC, the Company assumed administrative responsibility for this
block. The administration of the block is performed by CSC. Effective October 1,
1998, the Company's share of the business reinsured increased to 60%.

Included in Administrative Reinsurance(SM) is the automobile credit life
and disability reinsurance line of business. In connection with such business,
in July 1996, Life Re entered into certain transactions with Resource Financial
Corporation ("Resource"), which was formerly Ryan Dealer Group and a subsidiary
of Aon Corporation ("Aon"). Resource also purchased from Aon a life insurance
carrier, American Combined Life Insurance Company, which was renamed Resource
Life Insurance Company ("Resource Life").

Group Accident and Health and Special Risk Reinsurance (in run-off)

Life Re announced in 1997 its withdrawal from the group accident and health
and special risk reinsurance business. Accordingly, the Company did not renew or
accept new participations in this line of business during 1998. The Company
previously had reduced or canceled certain of its participations, and effective
January 1, 1997, retroceded 50% of its 1997 group accident and health and
special risk reinsurance risks. Group accident and health reinsurance consists
of the reinsurance of medical expense, disability and accident risks. Special
risk reinsurance consists principally of accidental death coverage and
catastrophic excess of loss coverage, as well as occupational accident coverage.
In the substantial majority of Life Re's group accident and health reinsurance
treaties, the original client is a self insured corporate health plan.
Reinsurance for such self insured plans is secured in order to minimize the risk
to the plan of claims in excess of those originally projected. The reinsurance
is usually in the form of specific and aggregate stop loss coverage. Specific
stop loss coverages provide for reimbursement of individual losses in excess of
a specified per person retention. Aggregate stop loss covers accumulations of
claims within the specified retention, once they exceed an agreed percentage
(usually 125%) of the total original estimated claims cost. The average
specified retention is generally at a level in excess of $25,000 to $100,000 per
person. Group accident and health and special risk reinsurance policy revenues
were $58.9 million, $121.2 million and $139.7 million in 1998, 1997 and 1996,
respectively.

Life Re generally participated in group accident and health and special
risk reinsurance through reinsurance facilities. Such reinsurance facilities
typically are formed by managing general underwriters to accept given types of
risk. The managing general underwriters then market their facilities and invite
reinsurers to share the risks. Usually, reinsurance facilities consist of
several reinsurance companies. Other functions performed by managing general
underwriters typically include underwriting of the reinsurance risk, adjustment
and payment of claims, marketing and accounting.

Reinsurance of group accident and health and special risk business
generally was written on an annual basis resulting in the terms of such
contracts being subject to renegotiation or cancellation each year. Many of the
specific and aggregate medical facilities have a profit commission feature which
is based on the profitability of the treaty.

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As measured by policy revenues, a substantial portion of the group accident
and health and special risk business was written on an excess basis.

At December 31, 1998, Life Re reinsured risks under treaties with
approximately 150 ceding client entities with respect to group accident and
health and special risk business. In 1998, 21 ceding client entities each
accounted for at least $1.0 million of group accident and health or special risk
policy revenues and represented, in the aggregate, approximately 94% of Life
Re's group accident and health and special risk policy revenues. Prior to
withdrawing from this line of business, Life Re marketed its group accident and
health and special risk reinsurance to a broad cross section of client entities,
which varied in size, corporate structure and geographic location. No group
accident and health or special risk ceding client entity accounted for more than
5% of Life Re's policy revenues in 1998.

On group health reinsurance, Life Re generally retains up to $300,000 for
any one insured person per year. Life Re's net liability in excess of its
retention up to $1.0 million is retroceded to a pool of reinsurers and the next
$1.0 million of liability is retroceded to a single retrocessionaire. For one
group health client, Life Re has a retrocessional arrangement with a single
retrocessionaire. To date, Life Re has not experienced any default in connection
with its group health retrocessional arrangements.

On special risk reinsurance, Life Re generally retains up to $1.0 million
on any one risk. Amounts in excess of $1.0 million are retroceded to a syndicate
of reinsurers in Europe. Life Re has not experienced any difficulty in
collecting claims recoverable from its special risk retrocessionaires.

Approximately 8% of group accident and health and special risk reinsurance
was written directly. The remaining 92% of group accident and health and special
risk reinsurance was placed through reinsurance intermediaries, and of that
amount, 21% was placed by a single intermediary, D.W. Van Dyke and Company of
Connecticut, Inc. Intermediaries solicit, negotiate or place reinsurance
cessions or retrocessions on behalf of a ceding insurer, reinsurer or a
reinsurance facility. Intermediaries do not have the authority to bind Life Re
with respect to reinsurance agreements, and Life Re does not commit in advance
to accept any portion of the business that intermediaries submit.

UNDERWRITING

Life Re has developed underwriting guidelines, policies and procedures with
the objective of controlling the quality and pricing of business written. Life
Re's underwriting process emphasizes close collaboration among its underwriting,
actuarial, administration and claims departments.

Life Re determines whether to write reinsurance business by considering
many factors, including the type of risks to be covered, ceding company
retention and binding authority, product and pricing assumptions and the ceding
company's underwriting standards, financial strength and distribution systems.
Life Re generally does not assume 100% of a risk and requires the ceding company
to retain at least 10% of every reinsured risk. Life Re generally assumes all of
the risks in connection with Administrative Reinsurance(SM).

Life Re regularly updates its underwriting policies, procedures and
standards to take into account changing industry conditions, market developments
and changes in medical technology. Life Re endeavors to ensure that the
underwriting standards and procedures of its ceding client entities are
compatible with those of Life Re. Toward this end, Life Re conducts periodic
reviews of the ceding clients' underwriting and claims procedures. Life Re
maintains its underwriting manual, which is distributed for use by its ceding
clients, to reflect current medical technology and Life Re's underwriting
standards. In addition, with respect to a portion of Life Re's run-off group
accident and health and special risk reinsurance business, certain underwriting
functions are performed on Life Re's behalf by managing general underwriters
according to underwriting guidelines reviewed by Life Re.

MARKETING

Life Re has developed its business on the basis of direct marketing
relationships established over many years through responsive service. Life Re's
senior management is directly involved in most aspects of Life Re's marketing
efforts, including the formulation, execution and evaluation of marketing
strategies, the identifica-

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tion of marketing opportunities and the maintenance of relationships with senior
executives at client companies. Life Re seeks to evaluate each client's specific
reinsurance needs, tailor reinsurance programs to meet those needs and be
responsive in processing claims. Life Re believes this strategy will enable it
to achieve its objective of favorably competing on the basis of service as well
as price.

In January 1996, Life Re announced the creation of the Office of Life
Marketing. The Office of Life Marketing is responsible for direct marketing of
traditional life reinsurance products, all of which are marketed on a direct
basis. The Office of Life Marketing consists of executives having expertise in
various disciplines within the insurance industry. These disciplines include
actuarial, legal, marketing and underwriting. The Office of Life Marketing is
designed to provide excellent service to Life Re's clients by working with
clients to identify and address their specific needs.

During 1998, most policy revenues with respect to traditional life
reinsurance were written directly.

CLAIMS ADMINISTRATION

Life Re's claims department (i) reviews and verifies reinsurance claims,
(ii) obtains information necessary to evaluate claims, (iii) determines Life
Re's liability with respect to claims and (iv) arranges for timely claim
payments. Claims are subjected to a thorough review process to ensure that the
risk was properly ceded, the claim complies with the contract provisions and the
ceding company is current in the payment of reinsurance policy premiums to Life
Re. Ordinary life and group life claims generally are reported on an individual
basis by the ceding entity. The ceding entity will provide the Company with
proofs of loss, which the Company then reviews for compliance with treaty terms.

Ordinary life claims under policies reinsured on a facultative basis and
underwritten within the five previous years and ordinary life claims under
policies reinsured under automatic treaties and underwritten within the two
previous years generally are reviewed by the underwriting department. The claims
department also investigates claims generally for evidence of misrepresentation
in the policy application and approval process. In addition to reviewing and
paying claims, the claims department monitors both specific claims and overall
claims handling procedures of ceding companies.

Group accident and health claims generally are reported to the Company by
the ceding entity on an aggregate basis. The ceding entity will provide the
Company with a listing of the claims paid by the ceding entity, which the
Company then reviews for compliance with treaty terms.

Outside administrators provide claims administration for the Company's
Administrative Reinsurance(SM) on a variable fee basis. The administrators
review and process all claims information and provide for the payment of claims.
The Company reviews and must approve prior to payment all claims received by the
respective administrators which involve a death benefit in excess of certain
specified levels or in which the insured died within two years of policy
issuance.

POLICY BENEFIT LIABILITIES

Policy benefit liabilities comprise the majority of the Company's financial
obligations. Policy benefit liabilities for other than annuities and interest
sensitive life insurance products reflected in Life Re's consolidated financial
statements included herein are based upon Life Re's best estimates of mortality,
persistency and investment income, with appropriate provision for adverse
deviation. The liabilities for policy benefits established by Life Re with
respect to individual risks or classes of business may be greater or less than
those established by ceding companies due to the use of different mortality and
other assumptions. Policy benefit liabilities for annuities and interest
sensitive life insurance products are reported at the accumulated fund balance
of such contracts. Policy benefit liabilities include both mortality and
morbidity claims in the process of settlement and claims that have been incurred
but not yet reported. Actual experience in a particular period may be worse than
assumed experience and, consequently, may adversely affect Life Re's operating
results for such period. See Notes 2 and 7 of "Notes to Consolidated Financial
Statements" for

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certain additional information regarding reserve assumptions under generally
accepted accounting principles ("GAAP").

INVESTMENTS

All investments made by Life Re are governed by the general requirements
and guidelines established and approved by the Boards of Directors of Life Re
and the Subsidiaries and by qualitative and quantitative limits prescribed by
Connecticut, Illinois, Michigan and Texas insurance laws and regulations. Life
Re's investment policy is designed to maintain a high quality portfolio,
maximize current income, maintain a high degree of liquidity, and match the cash
flows of the portfolio to the required cash flows of Life Re's liabilities.

At December 31, 1998, Life Re's invested assets had an aggregate fair value
of $3,775.5 million, of which 91% were fixed maturities with a weighted average
investment quality rating of "A." At December 31, 1998, the weighted average
duration of invested assets was 6.3 years. In the event the duration of invested
assets were to materially differ from the duration of liabilities and if
significant rapid increases in market interest rates were to occur, Life Re
could be required to sell assets at a loss. Conversely, if significant rapid
decreases in market interest rates were to occur, Life Re could earn less income
than it credits to policyholders under interest sensitive contracts. Such
consequences could have a material adverse effect on Life Re's capital resources
and financial condition. Although no assurances as to future performance can be
given, Life Re has not experienced any material differences in cash flows
relating to its assets and liabilities.

Life Re's investment securities are managed primarily by two professional
investment advisors, Conseco Capital Management, Inc. ("CCM") and Liberty
Capital Advisors, Inc. ("LCA"), each of which manages a segment of the
portfolio. Certain equity and short-term investments aggregating approximately
$122.6 million at fair value are managed directly by Life Re. CCM is the primary
investment advisor for Life Re, managing 82% of its invested assets
(approximately $3,105.6 million at fair value as of December 31, 1998). LCA acts
as an investment advisor for the portion of Life Re's invested assets relating
to the reinsured universal life insurance policies of an affiliate of LCA
(approximately $281.0 million at fair value as of December 31, 1998). The
agreements with CCM and LCA may be terminated by either party at the end of each
calendar year upon sixty days' notice. The performance of CCM and LCA and the
fees associated with the arrangements are reviewed periodically by the Boards of
Directors of Life Re and the Subsidiaries.

The following table summarizes certain of Life Re's investment results for
the years indicated:

INVESTMENT RESULTS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Total invested assets(1)............................... $3,775,461 $2,784,630 $1,833,242
Investment income, net of related expenses............. $ 233,947 $ 150,960 $ 124,340
Effective yield rate(2)................................ 7.01% 7.65% 7.77%
Realized investment gains.............................. $ 3,101 $ 4,514 $ 17,210
</TABLE>

- ---------------
(1) Fair value at end of the indicated year.

(2) The effective yield rate equals (i) net pre-tax investment income divided by
(ii) the average of total adjusted invested assets (fixed maturities at
amortized cost) at the end of each calendar quarter included in the
indicated period.

Life Re's invested assets consist primarily of fixed maturities. The
Company's fixed maturities are invested primarily in U.S. government
obligations, foreign government obligations, public utilities obligations,
corporate fixed maturities, and mortgage-backed securities.

Mortgage-backed securities represented approximately 13.7% of total
invested assets as of December 31, 1998. Investors in these securities are
compensated primarily for reinvestment risk rather than credit quality risk.
Investments in mortgage-backed securities include collateralized mortgage
obligations ("CMOs") and

8
<PAGE> 11

mortgage-backed pass-through securities. Mortgage-backed securities generally
are collateralized by mortgages issued by the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC"), all of which are agencies of
the U.S. government. Of these, only GNMA mortgages are backed by the full faith
and credit of the U.S. government. Credit risk generally is not a consideration
when investing in agency mortgage-backed securities. Life Re's mortgage-backed
securities portfolio had a weighted average investment quality rating of AAA at
December 31, 1998.

At December 31, 1998 approximately 25.0% of Life Re's mortgage-backed
investment portfolio consisted of planned amortization class ("PAC") and target
amortization class ("TAC") instruments. These investments are designed to
amortize in a more predictable manner by shifting the primary risk of prepayment
of the underlying collateral to investors in other tranches ("support classes")
of the CMO.

In addition to fixed maturities, approximately 4.8% of the Company's
invested assets consisted of policy loans at December 31, 1998. These policy
loans present no credit risk because the amount of the loan cannot exceed the
obligation due the ceding company upon the death of the insured or surrender of
the underlying policy. The policy loan interest rates charged are determined by
the provisions of the treaties in force and the underlying policies.

COMPETITION

Life Re operates in a highly competitive environment. Reinsurers compete
based upon many factors, including financial strength, A.M. Best rating, pricing
and other terms and conditions of reinsurance agreements, reputation, service
and experience in the lines of business underwritten. Life Re believes that
there are over 30 companies with significant competitive positions within the
traditional life reinsurance market. Life Re believes that within this market it
is among the five largest of those companies, based on reinsurance in force.

In connection with Administrative Reinsurance(SM), the nature of the
competition faced by Life Re depends on the company targeted for acquisition or
the block of business to be reinsured. Based on results achieved thus far, Life
Re believes that it is competitively positioned to achieve its objectives for
growth in this area.

A.M. BEST RATING

Life Reassurance has been rated "A+" (Superior) by A.M. Best every year
since 1981. A.M. Best's ratings for insurance companies currently range from
"A++" to "F", and some companies are not rated. Publications of A.M. Best
indicate that "A++" and "A+" ratings are assigned to those companies which in
A.M. Best's opinion have achieved superior overall performance when compared to
the norms of the life insurance industry and generally have demonstrated a
strong ability to meet their policyholder and other contractual obligations.
Life Reassurance's A.M. Best "Financial Size Category" is Class VIII, which
encompasses companies with adjusted policyholders' surplus of $100.0 million to
$250.0 million.

REALIC currently is rated "A" (Excellent) by A.M. Best, the rating that was
given to REALIC prior to its acquisition by Life Reassurance. Publications of
A.M. Best indicate that "A" and "A-" ratings are assigned to those companies
which in A.M. Best's opinion have a strong ability to meet their obligations to
policyholders over a long period of time. REALIC's A.M. Best "Financial Size
Category" is Class VI, which encompasses companies with adjusted policyholders'
surplus of $25.0 million to $50.0 million.

In evaluating a company's financial and operating performance, A.M. Best
reviews such company's profitability, leverage and liquidity as well as its book
of business, the adequacy and soundness of its reinsurance, the quality and
estimated market value of its assets, the adequacy of its policy reserves and
the experience and competency of its management. A.M. Best's ratings are based
upon factors of concern to policyholders, agents and intermediaries and are not
directed toward the protection of investors.

9
<PAGE> 12

EMPLOYEES

As of December 31, 1998, Life Re had 119 employees. None of these employees
is represented by a labor union. Life Re believes that its relationship with its
employees is satisfactory.

REGULATION

The Company and the Subsidiaries are subject to the insurance laws and
regulations of Connecticut, Illinois, Michigan and Texas, the domiciliary states
of the Subsidiaries, and the laws and regulations of the other states in which
the Subsidiaries are licensed to do business. At present, Life Reassurance is
licensed to conduct business or is an authorized reinsurer in all 50 states, the
District of Columbia and Puerto Rico, and REALIC is licensed to conduct business
in all such locations except for New Hampshire, New York, and Puerto Rico. The
insurance laws and regulations, as well as the level of supervisory authority
that may be exercised by the various state insurance departments vary by
jurisdiction, but generally grant broad powers to supervisory agencies or state
regulators to examine and supervise insurance companies and insurance holding
companies with respect to every significant aspect of the conduct of the
insurance business. These laws and regulations generally require insurance
companies to meet certain solvency standards and asset tests, to maintain
minimum standards of business conduct and to file certain reports with
regulatory authorities, including information concerning their capital
structure, ownership and financial condition. The Subsidiaries generally are
required to file annual and quarterly statutory financial statements in each
jurisdiction in which they are licensed. Additionally, the Subsidiaries are
subject to periodic examination by the insurance departments of the
jurisdictions in which each is licensed, authorized and accredited. The
Connecticut Insurance Department completed its most recent examination of Life
Reassurance for the years ended December 31, 1993 through December 31, 1996, and
the Texas Department of Insurance completed its examination of TexasRe for years
through December 31, 1995. The Illinois Department of Insurance completed its
most recent examination of REALIC for years through December 31, 1995. The
results of each of the completed examinations contained no findings which would
have a material adverse effect on the operations of any of the Subsidiaries.
Although the rates and policy terms of primary insurance agreements are
regulated by state insurance departments, the rates, policy terms and conditions
of reinsurance agreements generally are not subject to regulation by any
regulatory authority.

Restrictions on Dividends and Distributions. The principal sources of cash
for the Company to make payments of principal and interest are payments under
two surplus notes issued by TexasRe to the Company in connection with the
purchase of Life Reassurance from General Reinsurance Corporation in 1988 (the
"Surplus Debentures") and dividends paid by TexasRe. TexasRe's principal sources
of funds are dividends from Life Reassurance and distributions by Life
Reassurance under a tax allocation agreement among the Company, TexasRe and Life
Reassurance (the "Tax Allocation Agreement"), a portion of which distributions
are used to pay TexasRe's income taxes. Under current Connecticut, Illinois,
Michigan and Texas laws, any proposed payment of a dividend or distribution
which, together with dividends or distributions paid during the preceding twelve
months, exceeds the greater of (i) 10% of statutory capital and surplus as of
the preceding December 31 or (ii) statutory net gain from operations for the
preceding calendar year, is designated an "extraordinary dividend" and may not
be paid until either it has been approved, or a 30-day waiting period shall have
passed during which it has not been disapproved, by the Insurance Commissioner
of the State of Connecticut (the "Connecticut Insurance Commissioner"), the
Director of Insurance of the State of Illinois (the "Illinois Director of
Insurance"), the Insurance Commissioner of the State of Michigan (the "Michigan
Insurance Commissioner")or the Commissioner of Insurance of the State of Texas
(the "Texas Insurance Commissioner"), as the case may be. In addition,
Connecticut law provides that an insurance company may not pay dividends in an
amount exceeding its earned surplus without prior regulatory approval. Life
Reassurance has received approval from the Connecticut Department of Insurance
to define its earned surplus for this purpose to include amounts of paid in
surplus in excess of $125.0 million, and as of December 31, 1998, such earned
surplus was $242.7 million. Currently, no prior approval of the Texas Department
of Insurance is required to pay scheduled principal or interest on the Surplus
Debentures provided that, after giving effect to any such payment, the statutory
surplus of TexasRe exceeds $125.0 million. Life Reassurance paid no dividends in
1998 and paid $23.2 million of dividends in 1997, which was the maximum amount
of

10
<PAGE> 13

dividends Life Reassurance could have paid in 1997 without the prior approval of
the Connecticut Insurance Commissioner. Life Reassurance paid $14.9 million of
dividends in 1996, although the maximum amount of dividends Life Reassurance
could have paid in 1996 without the prior approval of the Connecticut Insurance
Commissioner was $34.8 million. TexasRe had the capacity to pay dividends of
$12.6 million, $16.3 million, and $27.1 million in 1998, 1997 and 1996,
respectively, without the prior approval of the Texas Insurance Commissioner.
TexasRe paid no dividends in 1998 and paid dividends aggregating $16.3 million
and $12.1 million in 1997 and 1996, respectively. REALIC has not paid any
dividends subsequent to its acquisition by Life Reassurance in July 1995.
Capitol Bankers Life paid an extraordinary dividend of $35.0 million to Life
Reassurance in 1998.

The Connecticut, Illinois, Michigan and Texas insurance laws require that
the statutory surplus of Life Reassurance, REALIC, Capitol Bankers and TexasRe,
as the case may be, following any dividend or distribution, be reasonable in
relation to its outstanding liabilities and adequate to meet its financial
needs. The Insurance Commissioner of any such state may bring an action to
enjoin or rescind the payment of a dividend or distribution that would cause
statutory surplus to be unreasonable or inadequate under this standard.

In the event of a default on the Company's capital securities or the
bankruptcy, liquidation or other reorganization of the Company, the capital
securities holders of the Company will have no right to proceed against the
assets of the Life Reassurance, REALIC, Capitol Bankers or TexasRe. If Life
Reassurance, REALIC, Capitol Bankers or TexasRe were to be liquidated, such
liquidation would be conducted by the Connecticut, Illinois, Michigan or Texas
Insurance Commissioner, as the case may be, as the receiver with respect to such
insurance company's property and business. Under the Connecticut, Illinois,
Michigan and Texas insurance laws, all creditors of such insurance companies,
including, without limitation, holders of its reinsurance agreements and the
various state guaranty associations, would be entitled to payment in full from
such assets before the Company, as a stockholder, would be entitled to receive
any distribution therefrom.

Codification. The National Association of Insurance Commissioners (the
"NAIC") is in the process of codifying statutory accounting principles. The
purpose of such codification is to establish a uniform set of accounting rules
and regulations for use by insurance companies in financial report preparation
in connection with financial reporting to regulatory authorities. The Company is
unable to determine what impact, if any, this codification will have on its
Subsidiaries' statutory surplus requirements.

Assessments Against Insurers. Under insolvency or guaranty laws in most
states in which the Company operates, insurers can be assessed for policyholder
losses incurred by insolvent insurance companies. At present, most insolvency or
guaranty laws provide for assessments based upon the amount of primary
insurance, rather than reinsurance, underwritten in a given jurisdiction.
Primary insurance written by REALIC is subject to such laws. REALIC incurred an
immaterial amount of guaranty fund assessments in 1998. To date, the Company has
paid only a de minimis amount of assessments with respect to insurer insolvency
proceedings.

Insurance Holding Company Regulations. The Company and the Subsidiaries
are subject to regulation under the insurance and insurance holding company
statutes of Connecticut, Illinois, Michigan and Texas. The insurance holding
company laws and regulations vary from jurisdiction to jurisdiction, but
generally require insurance and reinsurance subsidiaries of insurance holding
companies to register with the applicable state regulatory authorities and to
file with those authorities certain reports describing, among other information,
their capital structure, ownership, financial condition, certain intercompany
transactions and general business operations. The insurance holding company
statutes also require prior regulatory agency approval or, in certain
circumstances, prior notice of certain material intercompany transfers of assets
as well as certain transactions between insurance companies, their parent
companies and affiliates.

Under the Connecticut, Illinois, Michigan and Texas insurance laws, unless
(i) certain filings are made with the Connecticut Insurance Department, the
Illinois Department of Insurance, the Michigan Department of Insurance or the
Texas Department of Insurance, as the case may be, (ii) certain requirements are
met, including, in the case of Texas, a public hearing and/or (iii) approval or
exemption is granted by the applicable insurance commissioner, no person may
acquire any voting security or security convertible into a voting security of an
insurance holding company, such as the Company, which controls a Connecticut

11
<PAGE> 14

insurance company or an Illinois insurance company or a Michigan insurance
company or a Texas insurance company, or merge with such a holding company, if
as a result of such transaction such person would "control" the insurance
holding company. "Control" is presumed to exist in Connecticut, Illinois,
Michigan and Texas if a person directly or indirectly owns or controls 10% or
more of the voting securities of another person.

Federal Regulation. Although the federal government generally does not
directly regulate the insurance or reinsurance industries, federal legislation,
financial services regulation and federal taxation can significantly affect the
insurance business. In recent years, increased scrutiny has been placed upon the
insurance regulatory framework and legislation has been introduced in Congress
which could result in the federal government assuming some role in the
regulation of the insurance industry.

It is not possible to predict the future impact of changing state and
federal regulation on the operations of the Subsidiaries or the Company, and
there can be no assurance that existing insurance related laws and regulations
will not become more restrictive in the future or that laws and regulations
enacted in the future will not be more restrictive.

TAX MATTERS

Under applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), a life insurance company is not permitted to file a
consolidated federal income tax return with a company that is not a life
insurance company until such life insurance company has been a member of the
"affiliated group" (as such term is defined for federal income tax purposes) for
five taxable years. REALIC, Mission Life, Capitol Bankers Life and AML will each
file a separate company income tax return for the short taxable year ended with
the date of the merger. AML has retained its small life insurance company
identity and will be taxed accordingly. TexasRe and Life Reassurance (together,
the "Life Tax Group") as life insurance companies, file a consolidated federal
income tax return with Life Re for the short taxable year ended with the date of
the Merger. Losses generated by Life Re can be used to offset taxable income of
the Life Tax Group reported on the consolidated federal income tax return and
those losses can only be so used to a limited extent (generally, the lesser of
35% of such losses or 35% of the taxable income of the Life Tax Group).

Pursuant to the Tax Allocation Agreement, the members of the Life Tax Group
are required to pay to Life Re an amount of tax measured by the total amount
that would have been due and payable by the Life Tax Group to the taxing
authorities had the Life Tax Group filed a life insurance company consolidated
federal income tax return. That amount is required to be paid even if Life Re
is, due to its own tax status apart from the Life Tax Group, in a net tax loss
or nontaxable position. In the event that the Life Tax Group incurs tax losses,
credits or other benefits (including tax loss or credit carryforwards) that
reduce the tax liability of the consolidated group consisting of the Life Tax
Group and Life Re, Life Re is required to pay to the Life Tax Group the amount
of such reduction.

ITEM 2 PROPERTIES

Life Re's principal operations are conducted from approximately 51,000
square feet of leased office space located at 969 High Ridge Road, Stamford,
Connecticut 06905. The lease with respect to such space expires on September 30,
2004. The rental expense paid by Life Re under the lease during 1998 was $1.0
million.

ITEM 3 LEGAL PROCEEDINGS

Life Re is not a party to any material pending litigation or arbitration.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of 1998, one matter was submitted to the security
holders of Life Re for a vote. The meeting was held on November 23, 1998 and it
was a Special Meeting of Stockholders. The matter that was voted upon at the
meeting concerned the approval of the Agreement and Plan of Merger, dated as of
July 27, 1998, by and among Swiss Reinsurance Company, a Swiss corporation, SRC
Acquisition Corp., a

12
<PAGE> 15

Delaware corporation and a wholly owned subsidiary of Swiss Re, Swiss Re America
Holding Corporation, a Delaware corporation and a wholly owned subsidiary of
Swiss Re and the Company. Votes were cast as follows:

<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST ABSTENTIONS
- ---------- ------------- -----------
<S> <C> <C>
13,062,118 111,250 91,465
</TABLE>

PART II

ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

The common stock of Life Re was listed for trading on the New York Stock
Exchange (the "NYSE") under the symbol LRE from October 28, 1992, the date of
Life Re's initial public offering, until December 1, 1998, the date of the
Merger. Based upon information reported in the Bloomberg consolidated
transaction reporting system, the high and low sales prices for each quarterly
period from January 1, 1997 to December 1, 1998 were:

<TABLE>
<CAPTION>
PERIOD HIGH LOW
- ------ ---- ---
<S> <C> <C>
January 1, 1997 -- March 31, 1997........................... 45 3/8 38 5/8
April 1, 1997 -- June 30, 1997.............................. 48 1/8 37 3/8
July 1, 1997 -- September 30, 1997.......................... 56 46 5/8
October 1, 1997 -- December 31, 1997........................ 65 3/8 52 1/16
January 1, 1998 -- March 31, 1998........................... 74 5/16 58 1/8
April 1, 1998 -- June 30, 1998.............................. 82 7/8 71 1/8
July 1, 1998 -- September 30, 1998.......................... 91 15/16 83 1/16
October 1, 1998 -- December 1, 1998......................... 94 7/8 90 1/8
</TABLE>

As of March 30, 1999, there is one holder of the outstanding shares of
common stock, Swiss Re America Holding Inc.

DIVIDENDS

Dividends of $0.13 per share were declared in each calendar quarter of 1997
and dividends of $0.15 per share were declared in the first three calendar
quarters of 1998.

13
<PAGE> 16

ITEM 6 SELECTED FINANCIAL DATA

The following table sets forth selected financial data and other operating
information. The selected financial data have been derived from the consolidated
financial statements of Life Re Corporation and Subsidiaries ("Life Re") and
should be read in conjunction with the consolidated financial statements and
accompanying notes of Life Re and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere herein.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Policy revenues......................... $ 709.6 $ 490.3 $ 451.0 $ 383.2 $ 350.9
Investment income....................... 233.9 151.0 124.3 98.6 82.4
Realized investment gains............... 3.1 4.5 17.2 3.7 .1
-------- -------- -------- -------- --------
Total revenues................... 946.6 645.8 592.5 485.5 433.4
======== ======== ======== ======== ========
Benefits and Expenses
Policy benefits....................... 513.1 341.0 332.5 281.5 245.8
Acquisition costs..................... 188.5 142.2 111.9 95.7 88.7
Interest credited to policyholder
accounts........................... 75.5 40.7 34.6 21.2 15.0
Interest expense...................... 7.4 8.0 8.4 10.7 9.1
Distributions on capital securities... 15.2 5.0 -- -- --
Other operating expenses.............. 48.0 32.7 29.0 21.6 22.0
Merger costs.......................... 107.4 -- -- -- --
-------- -------- -------- -------- --------
Total benefits and expenses...... 955.1 569.6 516.5 430.8 380.6
-------- -------- -------- -------- --------
Income (loss) before federal income taxes
and extraordinary charge................ (8.5) 76.2 76.1 54.8 52.8
Provision for federal income taxes........ 24.0 26.7 21.9 19.2 18.5
-------- -------- -------- -------- --------
Income (loss) before extraordinary
charge.................................. (32.5) 49.5 54.2 35.6 34.3
Extraordinary charge, net of federal
income tax benefit...................... -- -- -- 1.0 --
-------- -------- -------- -------- --------
Net income (loss)......................... $ (32.5) $ 49.5 $ 54.2 $ 34.6 $ 34.3
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Invested assets........................... $3,775.5 $2,784.6 $1,833.2 $1,504.2 $ 998.5
Total assets.............................. $5,032.0 $3,700.2 $2,519.3 $2,024.1 $1,442.3
Loans payable............................. -- $ 125.0 $ 125.0 $ 140.0 $ 140.0
Corporation-obligated, mandatorily
redeemable capital securities of
subsidiary trusts holding solely parent
debentures.............................. $ 236.6 $ 100.0 -- -- --
Shareholder's equity...................... $ 816.1 $ 373.8 $ 290.1 $ 279.3 $ 194.9
OTHER FINANCIAL DATA (AS OF OR FOR THE
PERIOD ENDED):
First year reinsurance premiums assumed... $ 81.5 $ 61.3 $ 38.2 $ 22.6 $ 19.3
Capital invested in Administrative
Reinsurance(SM) transactions(1)......... $ 178.0 $ 85.1 $ 32.0 $ 35.9 $ --
Life insurance in force(2)................ $214,889 $148,986 $116,012 $ 91,283 $ 81,213
Statutory capital and surplus(2).......... $ 294.1 $ 210.5 $ 209.3 $ 208.2 $ 193.8
</TABLE>

- ---------------
(1) Capital invested in Administrative Reinsurance transactions represents the
sum of the consideration paid for life insurance in force acquired and the
related capital to support the business.

(2) Amounts have been derived from the Annual Statements of Life Reassurance,
REALIC, Mission Life, Capitol Bankers Life, AML and TexasRe, as filed with
insurance regulatory authorities and prepared in accordance with statutory
accounting practices. For purposes of this presentation, capital and surplus
are defined as statutory capital and surplus of Life Reassurance only, as
its capital and surplus materially reflect that of Life Reassurance, REALIC
and TexasRe, plus the Asset Valuation Reserve ("AVR") and the Interest
Maintenance Reserve ("IMR") of Life Reassurance and REALIC.

14
<PAGE> 17

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following analysis of Life Re's consolidated financial condition and
results of operations should be read in conjunction with "Selected Financial
Data" and the consolidated financial statements and accompanying notes included
elsewhere herein.

With the exception of historical information, the matters contained in the
following analysis are "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements may include, but
are not limited to, projections of earnings, revenues, income or loss, capital
expenditures, plans for future operations and financing needs or plans, as well
as assumptions relating to the foregoing. The words "expect", "project",
"estimate", "predict", "anticipate", "believes" and similar expressions are also
intended to identify forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties, some of which cannot be predicted
or quantified. Future events and actual results, performance and achievements
could differ materially from those set forth in, contemplated by or underlying
the forward-looking statements. Such factors include, but are not limited to,
the uncertainties relating to general economic and business conditions which may
impact the reinsurance marketplace; changes in laws and government regulations
applicable to Life Re, the ability of Life Re to implement its operating
strategies successfully, the ability of Life Re to execute Administrative
Reinsurance transactions and the amount, timing and returns therefrom; material
fluctuations in interest rate levels; material changes in mortality and
morbidity experience; material changes in persistency; material changes in the
level of operating expenses; and the success or failure of certain of Life Re's
clients in premium writing, and other risks and uncertainties. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual outcomes may vary materially from those
indicated.

General

The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
developed by management. Any adjustments to reported bases of assets or
liabilities resulting from changes in estimates are reflected in earnings in the
period the estimates are revised. Certain management estimates are based, in
part, on information provided by ceding companies. As is usual in the
reinsurance business, Life Re's ceding companies periodically update, refine and
revise reinsurance information provided to Life Re. The financial effects
resulting from the incorporation of revised data are reflected in earnings as
changes in estimates.

Mortality and morbidity experience, both significant factors in the
determination of the results of operations of Life Re, generally are predictable
over time but are subject to fluctuations from year to year and quarter to
quarter. Significant fluctuations from period to period could adversely affect
Life Re's results of operations.

Life Re's reinsurance agreements frequently provide for rights of
recapture, which permit the ceding company to increase the amount of liability
it retains on the reinsured policies after the policies have remained in force
for a designated period of time (generally ten to twenty years). Accordingly, an
increase in the amount of liability retained by the ceding company will decrease
both Life Re's insurance in force and premiums to be received from the reinsured
policies. To date, recaptures have not had a material impact on Life Re's
results of operations.

Life Re retrocedes portions of certain risks in excess of a predetermined
retention amount for which it has accepted liability. From time to time, Life Re
also has entered into quota share retrocessional agreements, and maintained
catastrophe reinsurance to protect against catastrophic event risks. Failure of
a retrocessionaire to honor its obligations could result in material losses to
Life Re; to date, no such losses have occurred. No amounts due Life Re from its
retrocessionaires were deemed uncollectible at December 31, 1998.

In 1998, Life Re derived approximately 68% of its policy revenues from
traditional life reinsurance, which includes ordinary and group life
reinsurance. Ordinary life reinsurance policy revenues were derived under
agreements with approximately 500 ceding companies and accounted for
approximately 65% of total policy

15
<PAGE> 18

revenues. The agreements cover primarily new business to be written by the
client and/or existing blocks of in force business. This business is
predominately marketed directly by Life Re without the use of intermediaries. In
1998, 64 ceding companies each accounted for at least $1.0 million of ordinary
life reinsurance policy revenues and in the aggregate represented approximately
95% of Life Re's ordinary life reinsurance policy revenues.

Group life reinsurance accounted for approximately 3% of policy revenues in
1998. Group life reinsurance is written on a direct basis and generally is
excess of loss and often includes experience rating provisions.

Approximately 24% of 1998 policy revenues were derived from Administrative
Reinsurance. This line of business involves the acquisition and administration
of blocks of primary insurance policies (both interest sensitive and
traditional) and annuity contracts and is expected to become an increasingly
significant component of policy revenues in the future. This line of business
also includes Life Re's reinsurance of automobile credit life and disability.

Approximately 8% of Life Re's policy revenues were generated from group
accident and health and special risk reinsurance in 1998. This business
generally is written on an annual basis through reinsurance facilities which are
managed by managing general underwriters. Generally the risks are shared by
several reinsurers on a quota share basis. During 1997, Life Re withdrew from
the group accident and health and special risk marketplace. Life Re previously
had reduced or canceled certain pool participations, and effective January 1,
1997, retroceded 50% of its 1997 group accident and health and special risk
reinsurance risks. For the year ended December 31, 1998, Life Re had $58.9
million of policy revenues related to group accident and health and special risk
reinsurance, a reduction of 51% from the prior year. Life Re anticipates further
declines of 80% in 1999 and policy revenues are expected to be minimal beyond
2000. Life Re expects no adverse financial impact from its withdrawal from this
business.

Recent Transactions

On December 1, 1998, Swiss Reinsurance Company ("Swiss Re") acquired in a
merger transaction (the "Merger") all of the outstanding common shares of Life
Re Corporation for $95.00 per share. Additionally, consideration equal to $95.00
less the exercise price was paid in exchange for the cancellation of all
outstanding common stock options. The total cash purchase price was $1,801.2
million. Pursuant to the Merger, Life Re became a wholly owned indirect
subsidiary of Swiss Re. Concurrently with the Merger, Life Re received a capital
contribution of $207.6 million from Swiss Re and repaid all outstanding bank
loans.

In 1995, Life Re, through its acquisition of REALIC, put into place a
platform for acquiring and administering blocks of primary insurance in force.
This platform, known as Administrative Reinsurance, provides a mechanism for an
insurer to transfer to Life Re administrative responsibilities to facilitate the
insurer's exit from a line of business by means of reinsurance or sale. Life Re
outsources policy administration to third party administrators while maintaining
management responsibilities.

During 1998 and 1997, Life Re completed several transactions through which
it acquired blocks of insurance in force (collectively, the "Transactions"). The
1998 transactions were the acquisition of 100% of the common stock of Capitol
Bankers Life Insurance Company, Mission Life Insurance Company, Lincoln Liberty
Life Insurance Company, First Delaware Life Insurance Company, Atlas Life
Insurance Company, Aristar Life Insurance Company and First Capital Life
Insurance Company of Louisiana. In 1998, Life Re also entered into several
indemnity reinsurance agreements and recaptured the 40% retroceded portion of a
block of business assumed in 1997 in conjunction with Employers Reassurance
Corporation from Allianz Life Insurance Company of North America ("Allianz").
The 1998 transactions represented assets acquired of approximately $850.0
million. The 1997 transactions, which were the 79% stock purchase of AML
Acquisition Company, parent of American Merchants Life Insurance Company, a
coinsurance agreement with UNUM Life Insurance Company of America and the
coinsurance agreement with Employers Reassurance Corporation covering in force
business of Allianz, together represented assets acquired of approximately
$970.0 million. The assets received as a result of the Transactions consisted
primarily of cash and high quality investments. The Transactions were accounted
for under the purchase method of accounting, and therefore, results of
operations include the effect of the Transactions only from their respective
dates of acquisition. For

16
<PAGE> 19

1998 and 1997, the Transactions contributed policy revenues totaling $94.0
million and $26.0 million, respectively, and approximately $65.3 million and
$32.7 million, respectively, of investment income. Policy revenues and
investment income related to the Transactions exclude the effects of the
acquisition of REALIC and the reinsurance of automobile credit life and
disability.

Results of Operations

NET INCOME decreased by $81.9 million in 1998 to a loss of $32.4 million,
compared with $49.5 million of income in 1997; in 1996, net income was $54.2
million. Included in the 1998 results were pretax costs related to the Merger of
$107.4 million. Income taxes in excess of the statutory rate in 1998 resulted
from the non-deductibility of certain of these costs. After-tax realized
investment gains of $2.0 million and $2.9 million in 1998 and 1997,
respectively, were also included in these results. In March 1996, Life Re
realized a gain of $13.5 million from the sale of its equity investment in
Nacolah Holding Corporation, parent of North American Company for Life and
Health Insurance (see Note 6 of "Notes to Consolidated Financial Statements").
Life Re utilized existing tax net operating loss carryforwards to offset the
taxes otherwise payable in connection with the gain and reversed an existing
deferred tax valuation allowance, resulting in a tax benefit of $4.8 million.

EARNINGS EXCLUDING REALIZED INVESTMENT GAINS AND AFTER-TAX MERGER COSTS
increased by $15.5 million, or 33%, to $62.1 million in 1998 compared with $46.6
million in 1997 and $38.3 million in 1996. The increase in earnings experienced
in 1998 and 1997 was due to higher volumes of ordinary life reinsurance in force
and the Transactions, partially offset by a deterioration in accident and health
morbidity experience.

POLICY REVENUES by segment for the three year period are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Ordinary and group life reinsurance.............. $480.1 $319.5 $292.2
Administrative Reinsurance....................... 170.6 49.6 19.2
Group accident and health and special risk
reinsurance.................................... 58.9 121.2 139.6
------ ------ ------
$709.6 $490.3 $451.0
====== ====== ======
</TABLE>

The growth in ordinary life reinsurance revenues largely was due to new
reinsurance agreements entered into during the last three years. First year
premiums totaled $77.8 million in 1998 and increased by 72% and 53% in 1998 and
1997, respectively. The ordinary life reinsurance in force lapse rate has ranged
from 9-11% during the last three years.

The growth in Administrative Reinsurance policy revenues was due to the
Transactions and an increase in automobile credit reinsurance premiums.

Group accident and health and special risk premiums decreased by $62.3
million in 1998 due to Life Re's aforementioned reduced participations and
retrocession agreement. Due to Life Re's decision to exit the accident and
health and special risk reinsurance business, it anticipates further declines in
group accident and health and special risk premiums of 80% in 1999. Premiums are
expected to be minimal beyond 2000. Growth in 1996 was due principally to
increased participation in major medical and accident reinsurance pools and
quota share arrangements.

INVESTMENT INCOME increased by 55% in 1998 to $233.9 million and by 21% in
1997 to $151.0 million. These increases largely were due to the growth in
invested assets resulting from the Transactions and the proceeds received from
the issuance of common stock and Adjustable Conversion-rate Equity Security
Units (see Financial Condition and Liquidity section). This rate of growth is
dependent on new Administrative Reinsurance transactions and, to a lesser
extent, new ordinary life reinsurance business. The weighted average portfolio
yield rate (amortized cost basis) was 7.1% in 1998, 7.4% in 1997 and 7.8% in
1996. The decrease in the yield rate primarily is due to the investment of
assets acquired from the Transactions at current rates.

17
<PAGE> 20

POLICY BENEFITS increased by 50% in 1998 and 3% in 1997. The increase in
1998 was due to the Transactions and higher volumes of ordinary life reinsurance
business. The increase in 1997 was due to an increase in accident and health and
special risk pool participations, the 1996 Transactions and the purchase of
REALIC in July 1995. As a percentage of policy revenues, policy benefits were
72% in 1998 and 70% in 1997 and 74% in 1996. The increase in 1998 is largely
attributable to higher morbidity in the group accident and health and special
risk reinsurance lines of business. Contributing to the lower percentage in 1997
was a shift in the mix of ordinary life reinsurance business from excess to
first dollar quota share reinsurance; under first dollar quota share
reinsurance, typically a higher portion of the reinsurance premium funds
acquisition costs and a lesser portion funds mortality costs. Partially
offsetting the shift in the mix of ordinary reinsurance business in 1997 was a
deterioration in group accident and health and special risk morbidity
experience. The higher percentage in 1996 primarily was due to an increase in
revenues generated under reinsurance treaties with no acquisition costs,
coinsurance involving paid-up insurance and Administrative Reinsurance, which
generally produces no new business and, therefore, generally has a higher ratio
of benefits to policy revenues.

ACQUISITION COSTS increased by 33% in 1998 and 27% in 1997. The increase in
1998 largely is due to the higher volumes of ordinary life business and the
Transactions. The increase in 1997 reflects the higher volumes of ordinary life
and group accident and health reinsurance business and the Transactions and, in
addition, the aforementioned shift in the mix of ordinary reinsurance business
from excess reinsurance to first dollar quota share reinsurance. As a percentage
of policy revenues, policy acquisition costs were 27% in 1998, 29% in 1997 and
25% in 1996.

INTEREST CREDITED TO POLICYHOLDER ACCOUNTS increased by 86% in 1998 and by
17% in 1997. These increases are attributable to Transactions as the majority of
the policy benefit liabilities acquired in these transactions are interest
sensitive.

INTEREST EXPENSE decreased to $7.4 million in 1998 from $8.0 million in
1997 and $8.4 million in 1996. In 1998, interest expense decreased due to the
repayment of bank loans on December 1, 1998. This decrease in 1997 was due to
(i) a decrease in the weighted average variable rate charged on outstanding
debt, which decreased to 6.0% in 1997 from 6.2% in 1996 and (ii) a decrease in
the outstanding principal balance to $125.0 million resulting from a first
quarter 1996 repayment of $15.0 million.

DISTRIBUTIONS ON CAPITAL SECURITIES of $15.2 million were incurred from the
issuance in June 1997 of $100.0 million of 8.72% capital securities by a
subsidiary trust and the issuance of 2,070,000 6.0% Adjustable Conversion-rate
Equity Security Units in March 1998 by a subsidiary trust as further described
in the Financial Condition and Liquidity section (also see Note 9 of the "Notes
to Consolidated Financial Statements").

OTHER OPERATING EXPENSES increased in 1998 and 1997 mainly due to i)
administrative fees of third party administrators ("TPAs") incurred within
Administrative Reinsurance due to the Transactions and ii) higher compensation
costs. Administrative Reinsurance utilizes the services of TPAs to administer
all of its business; accordingly, to the extent Life Re is successful in
expanding Administrative Reinsurance, its operating expenses will continue to
increase.

MERGER COSTS of $107.4 million related primarily to severance and other
compensation triggered by the Merger.

The effective FEDERAL INCOME TAX rate was in excess of the statutory rate
primarily due to the non-deductibility of certain compensation payments
triggered by the sale of the Life Re.

FINANCIAL CONDITION AND LIQUIDITY

Investments

Invested assets at fair value amounted to $3,775.5 million and $2,784.6
million at December 31, 1998 and 1997, respectively. The increase in invested
assets in 1998 resulted from the Transactions and the issuance of common stock
and Adjustable Conversion-rate Equity Security Units in March 1998. Net
unrealized gains on

18
<PAGE> 21

invested assets totaled $102.9 million and $101.5 million at year end 1998 and
1997, respectively, and generally reflect the lower interest rate environment.

Life Re's investment policy is designed to maintain a high quality
portfolio, maximize current income, maintain a high degree of liquidity and
match the cash flows of the portfolio to the required cash flows of Life Re's
liabilities.

Life Re does not engage in trading activities to generate realized
investment gains and, thus, does not have a trading portfolio. However, Life Re
evaluates the desirability of continuing to hold a security when market
conditions, creditworthiness or other measurement factors change. These changes
may relate to a change in the credit risk of an issuer and a decision to sell
may be made to avoid further declines in realizable value. Securities also may
be sold prior to maturity to provide liquidity should the need arise.

Life Re's fixed maturity securities, which constituted 91%, or $3,417.7
million, of the total fair value of its invested assets as of December 31 1998,
are predominantly investment grade, liquid securities with varying maturity
dates. The fair value of such investments may vary depending on economic and
market conditions, the level of interest rates and the perceived
creditworthiness of the issuer.

At December 31, 1998, approximately $95.1 million (at fair value), or less
than 3%, of Life Re's invested assets consisted of below investment grade
securities. Life Re generally limits its investments in fixed maturities that
are rated below investment grade, as these investments are subject to a higher
degree of credit risk than investment grade securities. Life Re closely monitors
its below investment grade securities as well as the creditworthiness of the
portfolio as a whole. When fair values decline for reasons other than changes in
interest rates or other perceived temporary conditions, the security is written
down to its net realizable value. In 1998, 1997 and 1996, Life Re wrote down the
value of certain securities by $5.9 million, $2.6 million and $0.5 million,
respectively. Life Re had no fixed maturities in default at December 31, 1998.

The results of operations and the financial condition of Life Re are
significantly affected by the performance of its investments and by changes in
interest rates. During a period of declining interest rates, if Life Re's
investments are prematurely sold, called, prepaid or redeemed, Life Re would be
unable to reinvest the proceeds in securities with comparable rates of return.
During a period of rising interest rates, the fair value of Life Re's invested
assets could decline. In addition, rising interest rates could also cause
disintermediation which in turn could cause Life Re to be required to sell
investments at prices and times when the fair values of such investments are
less than their amortized cost. Life Re believes that its traditional life
insurance liabilities are not highly interest sensitive and, therefore, the
effects of fluctuating interest rates on these liability cash flows are not
significant. For interest sensitive liabilities, Life Re utilizes
asset/liability matching to minimize the impact of changes in interest rates.
Life Re has not engaged in hedging activities to mitigate the effects of
interest rate changes on its invested assets and related liabilities.

At December 31, 1998, collateralized mortgage obligations and
mortgage-backed pass-through securities represented approximately 14% of Life
Re's invested assets. Certain of such investments may be subject to prepayment
risk and, therefore, are susceptible to fluctuations in the level of interest
rates. Prepayments of these investments did not have a material impact on Life
Re's 1998 results of operations.

During 1998, 1997 and 1996, proceeds from sales of fixed maturities
amounted to $799.7 million, $301.0 million and $253.4 million, respectively. The
net gains realized from such sales were $7.4 million, $7.3 million and $1.8
million for the respective periods. The majority of the 1998 and 1997 sales was
attributable to the restructuring of portfolios acquired in connection with the
Transactions.

Real estate and mortgages (at cost) totaled $30.7 million at December 31,
1998 and were acquired as part of the Transactions. Mortgage loans comprise the
majority of this amount.

Policy Benefit Liabilities

Life Re's obligations for policy benefit liabilities increased by 30% and
45% during 1998 and 1997, respectively. These increases resulted from the
Transactions and increased reinsurance of new and in force life insurance.
Policy benefits consist of the present value of future benefits under
traditional ordinary and group

19
<PAGE> 22

life insurance policies, account values under interest sensitive life and
annuity contracts, group accident and health claim reserves, life claims payable
and other miscellaneous liabilities. Through the Transactions, the relative
proportion of interest sensitive and annuity policy benefit liabilities to the
total has increased significantly and, at December 31, 1998, totaled
approximately 60% of the policy benefits under life insurance contracts.

Asset/liability management techniques are utilized by Life Re to minimize
the risks associated with interest rate fluctuations. For interest sensitive
policy benefits, Life Re seeks to invest in assets with equal durations while
attaining a targeted rate of return. Life Re currently does not engage in
hedging transactions to mitigate the effects of interest rate fluctuations.

Debt, Capital Securities and Shareholder's Equity

On December 1, 1998, as part of the acquisition of the Company by Swiss Re,
the bank loans of $125.0 million were repaid.

On June 6, 1997, Life Re completed a private placement under Rule 144A of
the Securities Act of 1933, as amended, of $100.0 million of 8.72% capital
securities of Life Re Capital Trust I ("Trust I"), a subsidiary of Life Re.
Distributions are cumulative and payable in arrears beginning December 15, 1997.
The securities have a maturity date of June 15, 2027 and may be redeemed at any
time on or after June 12, 2007. Payments on the securities are fully and
unconditionally guaranteed by Life Re. The securities have an effective interest
rate of 8.75%. The assets of the Trust I consist of junior subordinated
debentures issued by Life Re which have terms that parallel the terms of the
capital securities.

On March 17, 1998 Life Re completed two separate public offerings in which
it sold 3,500,000 shares of common stock, and 2,070,000 6.0% Adjustable
Conversion-rate Equity Security Units issued through Life Re Capital Trust II
("Trust II") (the "Units"), (together, the "Offerings"). Life Re realized net
proceeds of approximately $352 million from the Offerings. The Units consist of
a stock purchase contract (the "Contract") and Quarterly Income Preferred
Securities ("QUIPS"). Distributions on the QUIPS are cumulative, accrue from the
first date of issuance of the QUIPS and are payable at a stipulated annual rate
on a quarterly basis in arrears on a predetermined payment date. The QUIPS have
a maturity of March 15, 2003 and are subject to a put option exercisable by the
QUIPS holder on either March 15, 2001 or June 15, 2001. As a result of the
Merger, the aggregate payment to Unit holders (net of the amount paid by Unit
holders to the Company under the Contracts) will be approximately $24.6 million.

Shareholder's equity increased by $442.3 million to $816.1 million at
December 31, 1998 from $373.8 million at December 31, 1997 primarily as a result
of the issuance of common stock for $219.1 million, a capital contribution of
$207.6 million and a tax benefit $56.4 million, partially offset by a net loss
of $32.4 million, common shareholder dividends of $7.2 million, issuance costs
of Trust II securities of $3.4 million and an unrealized loss of $1.3 million.

Dividends paid to common shareholders were $.45 per share in 1998, $.52 per
share in 1997 and $.40 per share in 1996.

Liquidity

Sources of liquidity are available to Life Re in the form of cash and
short-term investments and, if necessary, the sale of invested assets. Life Re
may enter into reverse repurchase agreements to fund short-term cash needs.
Additionally, Life Re believes that it has a significant source of capital and
liquidity from its ultimate parent, Swiss Reinsurance Company. In addition to
its capital securities distribution obligations, Life Re's financial obligations
consist of policy benefit and acquisition costs, taxes and general operating
expenses. During the next twelve months, management believes these obligations
will be adequately provided for by policy revenues and investment income.

The primary sources of funds for Life Re Corporation (the "Parent") consist
of dividends and surplus debenture interest payments from TexasRe, which are
further funded by dividends from LRCA to TexasRe. The ability of the Parent to
make distributions on capital securities is ultimately dependent on the
statutory

20
<PAGE> 23

earnings and surplus of its subsidiaries. The following table shows surplus
debenture interest payments and dividends received by the Parent for the last
three years as well as dividends available for payment in that year without
prior approval of state regulatory authorities, and dividends paid to TexasRe
for the last three years as well as dividends available for payment to TexasRe
in that year without prior approval of state regulatory authorities:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Surplus debentures interest......................... $ 9.2 $10.0 $10.0
Dividends received from TexasRe..................... 16.3 12.1
----- ----- -----
$ 9.2 $26.3 $22.1
===== ===== =====
Dividends available for payment by TexasRe.......... $12.6 $16.3 $27.1
===== ===== =====
Dividends paid to TexasRe by LRCA................... $ -0- $23.2 $14.9
===== ===== =====
Dividends available for payment by LRCA............. $17.4 $23.2 $34.8
===== ===== =====
</TABLE>

The unpaid principal amount of the surplus debentures at December 31, 1998
was $160.5 million. The interest rate payable under the terms of the surplus
debentures is 5.42%.

Currently, no prior approval of the Texas Insurance Commissioner is
required to prepay or pay scheduled interest or principal on the surplus
debentures provided that, after giving effect to any such payment, the statutory
surplus of TexasRe is $125.0 million. TexasRe relies primarily on dividends from
LRCA to meet its obligations under the surplus debentures as well as to pay
dividends to Life Re Corporation.

The payments of dividends by TexasRe and LRCA are subject to restrictions
set forth in Texas and Connecticut insurance laws and regulations (see Note 10
of "Notes to Consolidated Financial Statements"). Under Connecticut law, no
dividend in an amount exceeding LRCA's earned surplus may be paid without prior
regulatory approval. Approval has been received from the Connecticut Department
of Insurance to define earned surplus for this purpose to include amounts of
paid in surplus in excess of $125.0 million.

Purchases and sales of fixed maturities increased substantially in 1998 and
1997 due primarily to restructuring of portfolios related to the Transactions.
The completion of these types of transactions generally produces a cash outlay
for acquisitions and a net cash inflow upon reinsurance of insurance in force.
Financing cash flows include debt prepayments of $15.0 million in 1996.
Withdrawals from annuity and interest sensitive life insurance contracts totaled
$174.4 million in 1998 compared to $108.6 million in 1997 due to increased
volumes of business resulting from the Transactions and an increase in the
related rate of lapsation.

IMPACT OF YEAR 2000

Life Re has completed its comprehensive review of its computer systems
which could be affected by year 2000 processing issues. All of Life Re's core,
or mission-critical, systems were year 2000 compliant at December 1998. Other
non-core systems are planned to be compliant by June 1999. The costs associated
with these efforts is not expected to exceed $1.0 million.

The computer systems of Life Re's third party administrators are or are in
the process of becoming year 2000 compliant. Life Re is in the process of
reviewing the third party administrators systems to ensure such compliance.
Generally, the costs associated with these efforts are being borne by the third
party administrators and the costs associated with this review are anticipated
to be immaterial.

Life Re has sent questionnaires to its ceding company clients to determine
the extent to which data received and utilized by Life Re is vulnerable to those
third parties failure to remediate their own year 2000 issues. Life Re has
received responses from a significant number of these clients and is in the
process of evaluating the information. There is no guarantee that the systems of
other companies on which Life Re may rely for data will be timely converted and
would not have an adverse effect on analyses and reports that utilize

21
<PAGE> 24

that data. However, Life Re believes its own systems and processes mitigate the
risk that ceding companies year 2000 noncompliance would have a material adverse
effect on its operations.

Life Re currently has no formal contingency plans in place in the event it
does not complete all phases of Year 2000 compliance due to its expectation of
completing all phases. However, should Life Re not complete all associated
compliance work, Life Re would use estimating techniques based on available
historical data to bill reinsurance premiums and record policy benefits and
acquisition costs on business affected by this noncompliance. However, there can
be no assurance that noncompliance would not have a material adverse impact on
Life Re's operations.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk relates, broadly, to changes in the value of financial
instruments that arise from adverse movements in interest rates, equity prices
and foreign exchange rates. Life Re is exposed principally to changes in
interest rates that offset the market prices of its fixed maturities. Life Re's
exposure to changes in equity prices and foreign currency exchange rates is
immaterial.

Interest Rate Risk

Life Re could experience economic losses if it were required to liquidate
fixed income securities during periods of rising and/or volatile interest rates.
However, Life Re attempts to mitigate its exposure to adverse interest rate
movements through a combination of active portfolio management, asset/liability
duration matching exercises, and by staggering the maturities of its fixed
income investments to assure sufficient liquidity to meet its obligations and to
address reinvestment risk considerations.

Asset/liability management techniques are utilized by Life Re to minimize
the risks associated with interest rate fluctuations. For interest sensitive
contracts, Life Re seeks to invest in assets with equal durations while
attaining a targeted rate of return. Life Re currently does not engage in
hedging transactions to mitigate the effects of interest rate fluctuations.

Sensitivity Analysis

Life Re regularly conducts various analyses to gauge the financial impact
of changes in interest rates on its financial condition. The ranges selected in
these analyses reflect management's assessment as being reasonably possible over
the succeeding twelve month period. The magnitude of changes modeled in the
accompanying analyses should, in no manner, be construed as a prediction of
future economic events, but rather, be treated as a simple illustration of the
potential impact of such events on Life Re's consolidated financial results.

The sensitivity analysis of interest rate risk assumes an instantaneous
shift in market interest rates in a parallel fashion across the yield curve,
with scenarios of interest rates increasing and decreasing 100 and 200 basis
points from their levels at December 31, 1998, and with all other variables held
constant. A 100 and 200 basis point increase in market interest rates would
result in a pre-tax decrease in the market value of Life Re's fixed maturity
securities of $89.1 million and $284.6 million, respectively. Similarly, a 100
and 200 basis point decrease in market interest rates would result in a pre-tax
increase in the market value of Life Re's fixed maturity securities of $338.9
million and $589.4 million.

The following table reflects the estimated effects on the market value of
Life Re's fixed maturity securities due to an increase in interest rates of 100
basis points. All of Life Re's fixed maturity securities have been categorized
as other than trading (available for sale) in accordance with Statement of
Financial Accounting Standard No. 115.

<TABLE>
<CAPTION>
INTEREST RATE
DECEMBER 31, 1998 MARKET VALUE RISK
- ----------------- ------------ -------------
<S> <C> <C>
Fixed maturity securities.......................... $3,417,736 $(89,070)
</TABLE>

22
<PAGE> 25

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
LIFE RE CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS
Report of Management...................................... 24
Report of Independent Auditors............................ 25
Consolidated Balance Sheets at December 31, 1998 and
1997................................................... 26
Consolidated Statements of Operations and Comprehensive
Income for the years ended December 31, 1998, 1997 and
1996................................................... 27
Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1998, 1997 and 1996... 28
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996....................... 29
Notes to Consolidated Financial Statements................ 30-45

FINANCIAL STATEMENT SCHEDULE
Schedule II Condensed Financial Information of
Registrant............................................. 46-48
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been
omitted or the information is presented in the
consolidated financial statements or accompanying notes.
</TABLE>

23
<PAGE> 26

REPORT OF MANAGEMENT

The Management of Life Re Corporation has primary responsibility for
preparing the accompanying financial statements and for their integrity and
objectivity. The statements were prepared in accordance with generally accepted
accounting principles applied on a consistent basis and are fairly stated in all
material respects. The financial statements include amounts that are based on
management's best estimates and judgements. Management also prepared the other
information presented in the annual report and is responsible for its accuracy
and consistency with the financial statements.

Management of the Company has established and maintains a system of
internal control that provides reasonable assurance as to the integrity and
reliability of the financial statements, the protection of assets from
unauthorized use or disposition and the prevention and detection of fraudulent
financial reporting. In addition, the adequacy and effectiveness of the system
of internal control is reviewed periodically by the Company's internal auditors.

The Company's financial statements have been audited by independent
auditors. The independent auditors have unrestricted access to each member of
management in conducting their audit. Management has made available to the
independent auditors all of the Company's financial records and related data, as
well as the minutes of shareholders' and directors' meetings. Furthermore,
management believes that all representations made to the independent auditors
during their audits were valid and appropriate.

The Audit Committee of the Board of Directors is comprised of certain
directors who are neither employees nor officers of the Company. The Audit
Committee meets periodically with management and the independent auditors
regarding independent audit scope, timing, results and to discuss other auditing
and financial reporting matters. The independent auditors have direct access to
and meet privately with the Audit Committee.

JACQUES E. DUBOIS
Chairman and
Chief Executive Officer

ALAN D. HEAD
Vice President and
Chief Financial Officer

24
<PAGE> 27

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Life Re Corporation

We have audited the accompanying consolidated balance sheets of Life Re
Corporation and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations and comprehensive income, changes in
shareholder's equity, and cash flows for each of the three years in the period
ended December 31, 1998. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule 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 consolidated financial position of
Life Re Corporation and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

ERNST & YOUNG LLP

Stamford, Connecticut
March 1, 1999

25
<PAGE> 28

LIFE RE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
---------- ----------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Fixed maturities -- at fair value (amortized cost:
$3,225,921 and $2,243,423, respectively).................. $3,320,814 $2,335,795
Equity securities -- at fair value (cost: $56,273 and
$25,171, respectively).................................... 57,437 26,775
Assets held by ceding company under reinsurance treaty -- at
fair value (amortized cost: $94,307 and $101,767,
respectively)............................................. 101,182 109,266
Mortgage loans and real estate.............................. 30,650 12,007
Short-term investments...................................... 82,316 166,801
Policy loans................................................ 183,062 133,986
---------- ----------
Total investments................................. 3,775,461 2,784,630
Cash........................................................ 26,408 16,797
Accrued investment income................................... 65,060 43,378
Policy revenues receivable.................................. 218,074 158,560
Amounts receivable on reinsurance ceded..................... 365,460 347,828
Deferred acquisition costs.................................. 532,702 325,570
Other assets................................................ 48,852 23,479
---------- ----------
Total assets...................................... $5,032,017 $3,700,242
========== ==========
LIABILITIES
Policy benefits............................................. $3,728,270 $2,871,243
Acquisition costs payable................................... 67,084 54,247
Amounts due on reinsurance ceded............................ 53,194 55,085
Other liabilities........................................... 130,702 120,877
Loans payable............................................... 125,000
---------- ----------
Total liabilities................................. 3,979,250 3,226,452
---------- ----------
Corporation-obligated, mandatorily redeemable capital
securities of subsidiary trusts holding solely parent
debentures................................................ 236,620 100,000
---------- ----------
SHAREHOLDER'S EQUITY
Preferred stock (1998: par value $.01 per share; authorized,
issued and outstanding 100 shares)
Common stock (1998: par value $.01 per share; authorized,
issued and outstanding 1,000 shares -- 1997: par value
$.001 per share; authorized 40,000,000 shares; issued
15,835,785 shares)........................................ 16
Paid in capital............................................. 546,428 111,337
Accumulated other comprehensive income...................... 60,072 61,416
Retained earnings........................................... 209,647 249,297
Treasury stock -- at cost (-0- and 2,205,223 shares,
respectively)............................................. (48,276)
---------- ----------
Total shareholder's equity........................ 816,147 373,790
---------- ----------
Total liabilities and shareholder's equity........ $5,032,017 $3,700,242
========== ==========
</TABLE>

The accompanying notes are an integral component of the consolidated financial
statements.

26
<PAGE> 29

LIFE RE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Policy revenues.......................................... $709,590 $490,278 $450,992
Investment income........................................ 233,947 150,960 124,340
Realized investment gains................................ 3,101 4,514 17,210
-------- -------- --------
Total revenues................................... 946,638 645,752 592,542
-------- -------- --------
BENEFITS AND EXPENSES
Policy benefits.......................................... 513,098 341,044 332,476
Acquisition costs........................................ 188,494 142,144 111,933
Interest credited to policyholder accounts............... 75,524 40,647 34,637
Interest expense......................................... 7,350 7,997 8,356
Distributions on corporation-obligated, mandatorely
redeemable capital securities of subsidiary trusts
holding solely parent debentures...................... 15,187 4,970
Other operating expenses................................. 48,024 32,726 29,049
Merger costs............................................. 107,379
-------- -------- --------
Total benefits and expenses...................... 955,056 569,528 516,451
-------- -------- --------
Income (loss) before federal income taxes................ (8,418) 76,224 76,091
Provision for federal income taxes....................... 24,003 26,678 21,890
-------- -------- --------
NET INCOME (LOSS).......................................... (32,421) 49,546 54,201
Other comprehensive income (loss), net of provision
(benefit) for federal income taxes:
Unrealized appreciation (depreciation) of securities..... (726) 39,635 (21,281)
Unrealized gains of prior periods realized in the current
period................................................ (618) (3,073) (3,268)
-------- -------- --------
Net unrealized appreciation (depreciation) of
securities............................................ (1,344) 36,562 (24,549)
-------- -------- --------
COMPREHENSIVE INCOME (LOSS)................................ $(33,765) $ 86,108 $ 29,652
======== ======== ========
</TABLE>

The accompanying notes are an integral component of the consolidated financial
statements.

27
<PAGE> 30

LIFE RE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
------------ ----------- -----------
(IN THOUSANDS EXCEPT SHARE DATA)
AMOUNTS
<S> <C> <C> <C>
COMMON STOCK AND PAID IN CAPITAL
Balance, beginning of year................................ $ 111,353 $ 105,242 $ 101,598
Issuance of common stock.................................. 219,119
Capital contribution...................................... 207,600
Issuance costs of capital securities...................... (3,443)
Retirement of treasury stock.............................. (48,968)
Exercises of stock options................................ 3,737 2,921 3,464
Federal income tax benefit related to stock options and
stock grants............................................ 56,433 2,331
Reductions of employee stock loans........................ 559 369 180
Other..................................................... 38 490 --
------------ ----------- -----------
Balance, end of year...................................... 546,428 111,353 105,242
------------ ----------- -----------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year................................ 61,416 24,854 49,403
Net unrealized appreciation (depreciation) of
securities.............................................. (1,344) 36,562 (24,549)
------------ ----------- -----------
Balance, end of year...................................... 60,072 61,416 24,854
------------ ----------- -----------
RETAINED EARNINGS
Balance, beginning of year................................ 249,297 206,822 158,075
Net income (loss)......................................... (32,421) 49,546 54,201
Common stock dividends.................................... (7,229) (7,071) (5,454)
------------ ----------- -----------
Balance, end of year...................................... 209,647 249,297 206,822
------------ ----------- -----------
TREASURY STOCK
Balance, beginning of year................................ (48,276) (46,807) (29,763)
Treasury stock acquired................................... (692) (1,469) (17,044)
Retirement of treasury stock.............................. 48,968
------------ ----------- -----------
Balance, end of year...................................... -0- (48,276) (46,807)
------------ ----------- -----------
TOTAL SHAREHOLDER'S EQUITY.................................. $ 816,147 $ 373,790 $ 290,111
============ =========== ===========

SHARES
PREFERRED STOCK
Balance, beginning of year................................ -0-
Issuance of preferred stock............................... 100
------------
Balance, end of year...................................... 100
============
COMMON STOCK ISSUED
Balance, beginning of year................................ 15,835,785 15,700,935 15,531,310
Exercises of stock options................................ 166,650 134,850 169,625
Issuance of common stock.................................. 3,500,000
Retirement of treasury stock.............................. (2,215,906)
Conversion of common stock................................ (17,285,529)
------------ ----------- -----------
Balance, end of year...................................... 1,000 15,835,785 15,700,935
------------ ----------- -----------
TREASURY STOCK
Balance, beginning of year................................ (2,205,223) (2,172,769) (1,557,969)
Treasury stock acquired................................... (10,683) (32,454) (614,800)
Retirement of treasury stock.............................. 2,215,906
------------ ----------- -----------
Balance, end of year...................................... -0- (2,205,223) (2,172,769)
------------ ----------- -----------
COMMON STOCK OUTSTANDING.................................... 1,000 13,630,562 13,528,166
============ =========== ===========
</TABLE>

The accompanying notes are an integral component of the consolidated financial
statements.

28
<PAGE> 31

LIFE RE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1998 1997 1996
----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) before federal income taxes.............. $ (8,418) $ 76,224 $ 76,091
Adjustments to reconcile income (loss) before federal
income taxes to net cash provided (used) by operating
activities:
Change in accrued investment income.................. (12,901) (2,751) (2,815)
Change in policy revenues receivable, net............ (17,400) (16,771) (13,373)
Change in policy benefits............................ 65,756 (10,605) 51,063
Change in reinsurance ceded balances................. (5,553) 19,447 4,769
Interest credited to policyholder accounts........... 75,524 39,492 34,637
Fees and charges deducted from policyholder
accounts.......................................... (77,671) (35,918) (29,636)
Deferral of acquisition costs........................ (76,120) (56,576) (37,410)
Amortization of acquisition costs, net of interest
accretion......................................... 47,486 20,396 16,852
Net realized gains on investments.................... (3,101) (4,514) (17,210)
Depreciation and amortization........................ 6,878 1,799 1,095
Other................................................ 25,041 19,964 5,411
----------- --------- ---------
Net cash provided by operations.............. 19,521 50,187 89,474
Federal income taxes recovered (paid)................ (25,737) 2,354 (13,500)
----------- --------- ---------
Net cash provided (used) by operating
activities................................. (6,216) 52,541 75,974
----------- --------- ---------
INVESTING ACTIVITIES
Purchases of fixed maturities.......................... (1,358,427) (528,191) (433,608)
Purchases of equity securities......................... (30,948) (4,202) (17,200)
Sales of fixed maturities.............................. 799,666 301,020 253,408
Maturities of fixed maturities......................... 158,557 78,617 78,259
Sales or redemptions of equity securities.............. 2,987 902 26,808
Change in short-term investments, policy loans and
other investments.................................... 294,851 (134,347) 18,441
Cash received (paid) in connection with acquisitions
and reinsurance transactions, net.................... (181,857) 212,960 63,365
Other, net............................................. (1,462) (2,491) (829)
----------- --------- ---------
Net cash used by investing activities........ (316,633) (75,732) (11,356)
----------- --------- ---------
FINANCING ACTIVITIES
Purchases of common stock for treasury................. (692) (956) (16,861)
Proceeds from exercises of common stock options........ 3,737 2,921 3,570
Issuance of stock...................................... 219,120
Capital contribution................................... 207,600
Issuance of corporation-obligated, mandatorily
redeemable capital securities of subsidiary trusts
holding solely parent debentures, net of issuance
costs................................................ 133,177 98,803
Loan principal repayments.............................. (125,000) (15,000)
Dividends on common stock.............................. (7,229) (7,071) (5,454)
Deposits to policyholder accounts...................... 76,196 48,595 45,092
Withdrawals from policyholder accounts................. (174,449) (108,641) (74,691)
Other.................................................. -- -- 7
----------- --------- ---------
Net cash provided (used) by financing
activities................................. 332,460 33,651 (63,337)
----------- --------- ---------
Increase in cash....................................... 9,611 10,460 1,281
Cash, beginning of year................................ 16,797 6,337 5,056
----------- --------- ---------
Cash, end of year...................................... $ 26,408 $ 16,797 $ 6,337
=========== ========= =========
</TABLE>

The accompanying notes are an integral component of the consolidated financial
statements.

29
<PAGE> 32

LIFE RE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS

The accompanying consolidated financial statements of Life Re Corporation
and Subsidiaries (the "Company") have been prepared in accordance with generally
accepted accounting principles. All significant intercompany balances and
transactions have been eliminated. All dollar amounts are reported in thousands
unless otherwise indicated.

On December 1, 1998, the Company was acquired by Swiss Reinsurance Company
("Swiss Re") in a merger transaction (the "Merger") (Note 3). As is permitted in
certain circumstances, the cost of the Merger was not "pushed down" to establish
a new accounting basis for the Company. Accordingly, the accompanying financial
statements reflect the Company's historical cost basis.

Business

The Company's business, which is conducted through its principal wholly
owned life insurance subsidiaries, Life Reassurance Corporation of America
("LRCA") and Reassure America Life Insurance Company ("REALIC") and its 79%
owned subsidiary, American Merchants Life Insurance Company ("AML"), consists of
three segments: traditional life reinsurance, Administrative Reinsurance(SM) and
group accident and health and special risk reinsurance. Traditional life
reinsurance primarily involves the transfer to the Company of mortality risks on
insurance products from primary (or ceding) insurers of ordinary and group life
policies. Substantially all of the traditional life reinsurance business is
marketed directly by the Company without the use of intermediaries.
Administrative Reinsurance involves the acquisition of blocks of life insurance
and/or annuity contracts in force. The Company obtains its Administrative
Reinsurance business through purchases of life insurance companies and also
through indemnity coinsurance and assumption reinsurance agreements with ceding
insurers. The Company also assumes responsibility for policy administration of
the business obtained from these transactions which it outsources to third party
administrators.

Group accident and health and special risk reinsurance, involving the
reinsurance of medical expenses, disability income, accidental death and
catastrophic loss coverage, is conducted primarily through participation in
reinsurance pools. In 1997, the Company decided to withdraw from the group
accident and health and special risk reinsurance business and, since October
1997, has ceased to renew or accept new pool participations and has also ceased
direct marketing activity.

Estimates, Risks and Uncertainties

Certain management estimates are based, in part, on information provided by
ceding companies. As is usual in the reinsurance business, ceding companies
periodically update, refine and revise reinsurance information provided to the
Company. The financial effects resulting from the incorporation of revised data
are reflected in earnings as changes in estimates.

Mortality and morbidity experience, significant factors in the
determination of the results of operations for the life insurance industry,
generally are predictable over time but are subject to fluctuations from year to
year and quarter to quarter. A significant fluctuation from period to period
could adversely affect the Company's results of operations.

30
<PAGE> 33

2. SIGNIFICANT ACCOUNTING POLICIES

Investments

Fixed maturities in these notes include fixed maturity securities which are
part of assets held by ceding company under reinsurance treaty and those
included in the caption fixed maturities in the accompanying consolidated
balance sheets.

Fixed maturities, consisting of bonds and redeemable preferred stocks, and
equity securities, consisting of common and nonredeemable preferred stocks, are
classified as available for sale and are reported at fair value. Unrealized
gains and losses on available for sale securities are recorded as other
comprehensive income. These amounts are net of deferred income taxes and a
valuation adjustment which represents the change in amortization of deferred
acquisition costs that would have been recorded as a charge or credit to
operations had the relating unrealized gains or losses been realized.

Mortgage loans are carried at amortized unpaid balances, net of provisions
for estimated losses. Real estate is carried at cost.

Short-term investments are stated at cost and policy loans are stated at
aggregate unpaid principal balances.

Realized gains or losses from sales of investments, determined on the
specific identification basis, and declines in fair value determined to be other
than temporary are included in net income.

Realized investment gains and losses are reported net of related expenses
and include the amount of amortization of deferred acquisition costs resulting
from the inclusion of such realized gains or losses in the gross profits used
for the calculation of such amortization.

Fair Values of Financial Instruments

The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties.
All financial instruments of the Company are carried at amounts which
approximate fair value except amounts related to insurance contracts, which are
exempt from fair value reporting and disclosure requirements.

The following methods and assumptions were used by the Company to estimate
the fair value of financial instruments reported or disclosed in the financial
statements.

Investment securities: Fair values of fixed maturities and equity
securities are obtained from independent pricing services which generally use
quoted market prices, where available. For securities for which quoted market
prices are not available and for securities which independent pricing services
are unable to price, fair values are obtained from the Company's outside
portfolio managers, who obtain them from broker/dealers or estimate them using
analytic pricing methods. These pricing methods determine fair values by
discounting expected future cash flows using current market rates applicable to
the yield, credit quality and maturity of comparable quoted securities. The fair
values resulting from the application of these methods are affected by the
assumptions used, including the discount rate and estimates of future cash
flows. Such derived fair value estimates may not be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlements of the instruments.

Policy loans: The carrying value of policy loans approximates fair value,
as the average loan interest rate approximates interest rates currently offered
for similar loans.

Cash and short-term investments: The carrying amounts reported for these
instruments approximate their fair values, due to their short maturity.

Loans payable: The carrying value of loans payable approximates their fair
value, as these loans have variable rate interest terms.

Capital Securities: The carrying value of capital securities approximates
their fair value.

31
<PAGE> 34

Insurance contracts: Fair values of insurance contracts are not required
to be disclosed. The fair values of liabilities under all insurance contracts
are taken into consideration in the Company's overall management of interest
rate risk, which minimizes exposure to changing interest rates by seeking to
match investment cash flows with amounts due under insurance contracts.

Recognition of Policy Revenues and Related Expenses

Policy revenues consist of premiums under traditional life and accident and
health and special risk insurance policies and fees and charges under interest
sensitive life insurance policies and annuity contracts.

Premiums are recognized as revenues over the premium paying periods of the
policies. Benefits and expenses are provided against such revenues to recognize
profits over the estimated lives of the policies through the provision for
future policy benefits and the deferral and amortization of acquisition costs.

Revenues for annuities and interest sensitive life insurance contracts
consist of policy fees and charges for the cost of insurance, policy
administration and surrenders that have been assessed against policyholder
account balances during the period. Policy claims and benefits in excess of
related policyholder account balances are charged to expense.

Deferred Acquisition Costs

The costs of acquiring new business are deferred as acquisition costs and
amortized. For acquisitions of in force blocks of business and stock
acquisitions accounted for as purchases, such costs represent the excess of the
liabilities assumed over the net assets received. For new reinsurance, such
costs are those which vary with and are directly related to the production of
new business, principally commissions. Costs deferred in connection with
traditional life insurance products are amortized over the premium paying period
of the related policies using assumptions consistent with those used to compute
future policy benefits. For annuities and interest sensitive life insurance
products, acquisition costs are amortized generally in proportion to the present
value of expected gross profits from such products. Amortization is adjusted
when current estimates of future gross profits are revised.

Policy Benefit Liabilities

Future policy benefits under traditional long-term and group life insurance
contracts have been computed based upon expected investment yields, mortality,
persistency and other assumptions. These assumptions include a margin for
adverse deviation and vary with the characteristics of the plan of insurance,
year of issue, age of insured and other appropriate factors. Mortality and
persistency assumptions are based on the Company's experience as well as
industry experience and standards.

Future policy benefits for annuities and interest sensitive life insurance
contracts are recorded at accumulated policyholder account values.

Policy claims include amounts determined on an individual case basis for
reported claims and estimates of incurred but not reported claims developed on
the basis of past experience.

Federal Income Taxes

The Company accounts for income taxes using the liability method. Under
this method, deferred tax assets and liabilities are determined based on the
differences between the financial reporting and tax bases of assets and
liabilities calculated using the tax rate in effect at the measurement date.

Stock Options

Prior to their cancellation (Note 3), the Company accounted for its stock
options under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and related Interpretations. Under APB 25, the
Company did not incur any expense from the issuance of stock options because the
exercise price of the option equaled the market price of the underlying stock on
the date of grant.

32
<PAGE> 35

Earnings Per Share

Earnings per share are not required to be presented in the financial
statements of wholly owned subsidiaries.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133"). The Company does not expect the
implementation of SFAS 133 will have a significant impact on its financial
statements.

3. MERGER

On December 1, 1998, Swiss Re acquired all of the outstanding common shares
of Life Re Corporation for $95.00 per share. Additionally, consideration equal
to the excess of $95.00 over the exercise price of each option was paid in
exchange for the cancellation of all outstanding common stock options. The total
cash purchase price was $1,801,151. Pursuant to the Merger, the Company became a
wholly owned indirect subsidiary of Swiss Re. Costs incurred by the Company
related to the Merger, primarily severance payments to certain executives and
employees and compensation arrangements triggered by the Merger, are separately
stated in the consolidated statement of operations and comprehensive income.
Concurrently with the Merger, the Company received a capital contribution of
$207,600 from Swiss Re and repaid all outstanding bank loans.

4. ACQUISITIONS AND REINSURANCE TRANSACTIONS

The following table summarizes the acquisitions and in force reinsurance
transactions completed by the Company during the three years ended December 31,
1998. These transactions were accounted for as purchases and therefore results
of operations include their effects only from their respective dates of
acquisition. Significant transactions are further discussed below.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fair value of assets acquired.............. $670,110 $901,632 $360,372
Deferred acquisition costs................. 180,950 71,040 31,993
-------- -------- --------
Total assets acquired...................... $851,060 $972,672 $392,365
======== ======== ========
Fair value of liabilities assumed.......... $851,060 $972,672 $392,365
======== ======== ========
</TABLE>

Effective June 30, 1998, the Company acquired, for a purchase price of
$70,834, 100% of the common stock of Capitol Bankers Life Insurance Company
("Capitol Bankers"), an indirect subsidiary of The Manufacturers Life Insurance
Company. The fair values of the assets acquired and liabilities assumed were
approximately $183,148 and $118,210, respectively.

During 1998, the Company acquired, and merged into REALIC, Atlas Life
Insurance Company and Aristar Life Insurance Company. The purchase price of
these companies was $29,338 and $22,890, respectively. Together they had assets
at fair value of $240,200 and liabilities of $188,241.

Effective February 28, 1998, the Company acquired, for a purchase price of
$61,596, 100% of the common stock of Mission Life Insurance Company ("Mission").
The fair values of assets acquired and liabilities assumed were $258,982 and
$199,586, respectively. Effective December 22, 1998, Mission acquired, for a
purchase price of $17,552, 100% of the common stock of First Capital Life
Insurance Company of Louisiana with assets at fair value of $85,364 and
liabilities of $67,812. The primary business of these companies is insurance for
final expenses. The Company also acquired a 20% interest in Mission Life
Insurance Company of America which writes this type of business, substantially
all of which is reinsured by the Company.

33
<PAGE> 36

On September 30, 1997, the Company acquired a 79% interest in AML through
the purchase of 79% of the common stock of AML's parent company, AML Acquisition
Company, for a purchase price of $13,034. In conjunction with the purchase, the
Company repaid $9,800 of long-term debt of AML Acquisition Company. The assets
acquired had a fair value of $145,268 and the liabilities assumed aggregated
$132,234.

Effective April 1, 1998, the Company acquired, for a purchase price of
$46,600, 100% of the common stock of Lincoln Liberty Life Insurance Company and
First Delaware Life Insurance Company from First Lincoln Holdings, Inc. and
merged them into AML. The combined fair values of the assets acquired and the
liabilities assumed were $242,196 and $195,472, respectively.

During 1996, the Company acquired and merged into REALIC three life
insurance companies with assets at fair value of $302,409 and liabilities of
$263,267. The total purchase price was $39,142.

During 1998, the Company entered into several indemnity reinsurance
agreements pursuant to which the Company acquired existing blocks of in force
business with liabilities for future policy benefits amounting to $50,199.

Effective December 30, 1997, the Company entered into an indemnity
reinsurance agreement to coinsure 60% of a block of life insurance policies and
annuity contracts coinsured by Employers Reassurance Corporation ("ERAC") from
Allianz Life Insurance Company of North America. The Company simultaneously
retroceded to ERC Life Insurance Company ("ERC Life"), a subsidiary of ERAC, on
a modified coinsurance basis, 67% of the business assumed. The Company recorded
a liability for policy benefits aggregating $683,345 and received assets,
primarily fixed maturities, with a fair value of $652,019. The Company is
required to maintain assets in a trust at least equal to the statutory reserves
reinsured. The trust assets are managed by the Company's primary investment
manager and are included in total investments in the accompanying balance sheet.
The Company administers the entire block using a third party administrator.
During 1998, the Company recaptured the business retroceded to ERC Life.

Effective July 1, 1997, the Company entered into an indemnity reinsurance
agreement with life insurance subsidiaries of UNUM Corporation to coinsure and
administer a block of insurance in force with liabilities for policy benefits
under life insurance and annuity contracts totaling $117,622. Assets,
principally cash, totaling $108,122 were transferred to the Company.

Effective May 31, 1996, REALIC acquired a block of insurance in force under
an assumption reinsurance agreement with United Insurance Company of America, a
subsidiary of Unitrin, Inc., whereby it assumed liabilities for future policy
benefits totaling $124,245. Assets totaling $107,334, principally cash, were
transferred to REALIC by the ceding company.

On March 4, 1999, the Company announced that it has entered into an
agreement to acquire 100% of the common stock of Royal Maccabees Life Insurance
Company and its wholly owned subsidiary, Royal Life Insurance Company of New
York (collectively "Royal"), from Royal Sun Alliance Group plc for approximately
$380,000. Royal has statutory assets of approximately $2,600,000. Its business
consists primarily of individual and group life, annuities and disability income
contracts. The transaction, which is subject to regulatory and other approvals,
is expected to close during the second or third quarter of 1999.

In December 1998, the Company entered into an agreement, subject to
regulatory approval, to acquire 100% of LSL Financial Corporation, parent of
Lone Star Life Insurance Company ("Lone Star Life"), for approximately $49,000.
As of December 31, 1998, Lone Star Life had statutory assets of approximately
$528,000 and capital and surplus of approximately $35,000. Its business consists
principally of individual disability income and individual life insurance
contracts. This transaction is expected to close in the first quarter of 1999.

34
<PAGE> 37

5. POLICY REVENUES AND ACQUISITION COSTS

Policy revenues are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Ordinary life reinsurance.................. $ 463,005 $ 304,198 $ 268,902
Group life reinsurance..................... 17,102 15,206 23,213
Group accident and health and special risk
reinsurance.............................. 58,947 121,241 139,653
Administrative Reinsurance................. 170,536 49,633 19,224
------------ ------------ ------------
Total policy revenues............ $ 709,590 $ 490,278 $ 450,992
============ ============ ============
Policy revenues by type are as follows:
Short-term accident and health insurance
Assumed.................................. $ 208,101 $ 271,142 $ 179,549
Ceded.................................... (130,212) (139,000) (39,329)
------------ ------------ ------------
Net short-term accident and
health policy revenues......... 77,889 132,142 140,220
------------ ------------ ------------
Percentage of amount assumed to net........ 267% 205% 128%
Short-term life insurance
Assumed.................................. 80,515 92,140 53,164
Ceded.................................... (52,771) (70,797) (29,517)
------------ ------------ ------------
Net short-term life policy
revenues....................... 27,744 21,343 23,647
------------ ------------ ------------
Percentage of amount assumed to net........ 290% 432% 225%
Long-term life insurance
Primary.................................. 91,076 32,385 19,521
Assumed.................................. 595,452 371,061 331,282
Ceded.................................... (82,571) (66,653) (63,678)
------------ ------------ ------------
Net long-term life policy
revenues....................... 603,957 336,793 287,125
------------ ------------ ------------
Percentage of amount assumed to net........ 99% 110% 115%
Total policy revenues............ $ 709,590 $ 490,278 $ 450,992
============ ============ ============
Percentage of amount assumed to net........ 125% 129% 125%
Life insurance in force
Primary.................................. $ 8,489,000 $ 5,257,000 $ 4,519,000
Assumed.................................. 212,053,000 152,346,000 111,493,000
Ceded.................................... (23,798,000) (28,694,000) (19,679,000)
------------ ------------ ------------
Net life insurance in force...... $196,744,000 $128,909,000 $ 96,333,000
============ ============ ============
Percentage of amount assumed to net........ 108% 118% 116%
</TABLE>

35
<PAGE> 38

Changes in deferred acquisition costs are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year........................... $325,570 $223,972 $166,424
Acquisitions and in force reinsurance transactions... 180,950 71,040 31,993
Capitalization of costs of acquiring new business.... 76,120 56,576 37,410
Interest accretion................................... 26,718 18,508 15,888
Amortization......................................... (74,204) (38,904) (32,740)
Amortization related to realized gains............... 352 (118) --
Valuation adjustment for unrealized (gains) losses... (2,804) (5,504) 4,997
-------- -------- --------
Balance, end of year................................. $532,702 $325,570 $223,972
======== ======== ========
</TABLE>

Deferred acquisition costs are amortized with interest at rates ranging
from 5.3% to 8.7% except for the amount attributable to the acquisition of LRCA
which is amortized with interest at 15%. The percentage of deferred acquisition
costs which is expected to be amortized in each of the next five years is 14.2%,
13.0%, 11.8%, 10.8%,and 10.2% and the percentage expected to be amortized in
each of the next five years, net of interest accretion, is 7.9%, 7.2%, 6.5%,
6.0%, and 5.7%.

6. INVESTMENTS

Securities with a fair value of $101,182 at December 31, 1998 are owned by
a ceding company and held in a dedicated portfolio in conjunction with an
indemnity reinsurance agreement. Under the terms of the agreement, investment
income, realized gains and losses and all other risks and rewards of ownership
of the assets in the portfolio inure to the benefit or detriment of the Company.
Accordingly, these assets, consisting of $96,922 of fixed maturities and $1,018
of equity securities classified as available for sale and $3,242 of short-term
investments at December 31, 1998, have been included as investments in the
accompanying balance sheet. The portfolio is managed by the Company's primary
investment advisor under guidelines approved by both parties to the reinsurance
agreement, subject to the requirement that the statutory carrying value of the
assets in the dedicated portfolio must be maintained by the Company in an amount
at least equal to the statutory reserves on the reinsured business.

Securities with a fair value of $146,550 at December 31, 1998 were on
deposit with various governmental insurance regulatory agencies to comply with
applicable insurance laws.

Net unrealized appreciation of available for sale securities is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Net unrealized gains on securities..................... $102,932 $101,475
Deferred federal income tax on net unrealized gains.... 36,026 35,357
-------- --------
Net unrealized gains.............................. 66,906 66,118
-------- --------
Adjustment to deferred acquisition costs on annuities
and interest sensitive life insurance products....... (9,816) (7,012)
Deferred federal income tax benefit on adjustment...... (3,435) (2,454)
-------- --------
Net adjustment.................................... (6,381) (4,558)
-------- --------
Minority interest in net unrealized appreciation of
securities........................................... (453) (144)
-------- --------
Net unrealized appreciation of securities......... $ 60,072 $ 61,416
======== ========
</TABLE>

36
<PAGE> 39

The amortized cost, unrealized gains and losses and estimated fair values
of available for sale securities are as follows (see Note 2 for a discussion of
the fair value of financial instruments):

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1998 COST GAINS LOSSES VALUE
- ----------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. government obligations........... $ 46,256 $ 1,405 $ 98 $ 47,563
Foreign government obligations........ 71,032 5,356 3,228 73,160
Public utilities...................... 270,982 20,711 1,363 290,330
Corporate securities.................. 2,426,750 90,977 28,227 2,489,500
Mortgage-backed securities............ 499,243 17,024 833 515,434
Redeemable preferred stock............ 1,723 26 1,749
---------- -------- ------- ----------
3,315,986 135,499 33,749 3,417,736
Equity securities....................... 57,273 1,187 5 58,455
---------- -------- ------- ----------
$3,373,259 $136,686 $33,754 $3,476,191
========== ======== ======= ==========
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1997 COST GAINS LOSSES VALUE
- ----------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. government obligations........... $ 31,910 $ 583 $ 5 $ 32,488
Foreign government obligations........ 68,278 3,693 684 71,287
Public utilities...................... 215,656 14,635 155 230,136
Corporate securities.................. 1,559,850 71,918 7,248 1,624,520
Mortgage-backed securities............ 461,545 17,085 560 478,070
Redeemable preferred stock............ 5,825 575 3 6,397
---------- -------- ------ ----------
2,343,064 108,489 8,655 2,442,898
Equity securities....................... 26,171 1,643 2 27,812
---------- -------- ------ ----------
$2,369,235 $110,132 $8,657 $2,470,710
========== ======== ====== ==========
</TABLE>

At December 31, 1998, the contractual maturities of investments in fixed
maturities are as follows:

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---------- ----------
<S> <C> <C>
Due in one year or less............................. $ 71,427 $ 71,861
Due after one year through five years............... 472,273 483,029
Due after five years through ten years.............. 762,091 781,191
Due after ten years................................. 1,510,952 1,566,221
Mortgage-backed securities.......................... 499,243 515,434
---------- ----------
$3,315,986 $3,417,736
========== ==========
</TABLE>

Investments in any entity in excess of ten percent of shareholder's equity
at December 31, 1998, other than investments issued or guaranteed by the U.S.
government, are as follows:

<TABLE>
<CAPTION>
FAIR VALUE
----------
<S> <C>
Fixed maturities:
Federal National Mortgage Association..................... $123,511
Federal Home Loan Mortgage Corporation.................... $204,962
</TABLE>

37
<PAGE> 40

Major sources and related amounts of investment income are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities........................... $217,697 $146,032 $120,759
Short-term investments..................... 9,417 2,348 1,901
Other...................................... 12,417 6,160 3,905
-------- -------- --------
Total investment income.................... 239,531 154,540 126,565
Investment expenses........................ (5,584) (3,580) (2,225)
-------- -------- --------
Investment income.......................... $233,947 $150,960 $124,340
======== ======== ========
</TABLE>

The changes in unrealized gains (losses) on securities are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
------ ------- --------
<S> <C> <C> <C>
Fixed maturities.............................. $1,916 $60,784 $(42,898)
Equity securities............................. (459) 946 133
------ ------- --------
Change in unrealized gains (losses)........... $1,457 $61,730 $(42,765)
====== ======= ========
</TABLE>

Realized investment gains are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Sales:
Realized gains.............................. $12,970 $ 8,659 $18,744
Realized losses............................. (5,531) (1,406) (3,383)
------- ------- -------
Net realized gains on sales................. 7,439 7,253 15,361
------- ------- -------
Calls, maturities and writedowns:
Realized gains.............................. 1,394 372 3,253
Realized losses............................. (215) (373) (194)
Writedowns.................................. (5,869) (2,620) (533)
------- ------- -------
Net realized gains (losses) on calls,
maturities and writedowns................ (4,690) (2,621) 2,526
------- ------- -------
Amortization of deferred acquisition costs.... 352 (118) --
------- ------- -------
Related expenses.............................. -- -- (677)
------- ------- -------
Total realized investment gains..... $ 3,101 $ 4,514 $17,210
======= ======= =======
</TABLE>

On March 18, 1996, Life Re Corporation sold its equity investment in
Nacolah Holding Corporation ("Nacolah"), the parent of North American Company
for Life and Health Insurance, in connection with the acquisition of Nacolah by
Sammons Enterprises, Inc. The Company received proceeds of $25,057 and recorded
a realized investment gain of $13,540.

38
<PAGE> 41

7. POLICY BENEFIT LIABILITIES

Policy benefit liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ INTEREST
1998 1997 RATE RANGE
---------- ---------- ----------
<S> <C> <C> <C>
Future policy benefits under life
insurance and annuity contracts:
Traditional life...................... $1,543,412 $1,019,078 6.0%-9.5%
Interest sensitive life............... 1,307,729 1,046,036 4.0%-7.0%
Annuities............................. 557,180 512,175 4.0%-9.0%
Group life............................ 10,757 11,042 2.5%-5.5%
---------- ----------
3,419,078 2,588,331
Claims payable under life insurance
contracts............................. 128,713 92,970
Accident and health insurance claim
reserves.............................. 116,032 134,220 3.0%-7.0%
Other policy benefits................... 64,447 55,722
---------- ----------
$3,728,270 $2,871,243
========== ==========
</TABLE>

The Company's accident and health insurance business is of short duration
and generally claims are reported within a short period of time after incurral.
There have been no material favorable or adverse developments affecting accident
and health insurance claims reserves in 1998, 1997 or 1996.

8. INCOME TAXES

Through the date of the Merger, LRCA and LRCA's parent, TexasRe Life
Insurance Company ("TexasRe"), filed a consolidated federal income tax return
with Life Re Corporation and REALIC and AML filed separate federal income tax
returns. Effective with the Merger, TexasRe files a consolidated federal life
insurance return with its direct and indirect wholly owned subsidiaries, AML
files a separate federal income tax return and Life Re Corporation files a
consolidated federal income tax return with certain Swiss Re subsidiaries.

The provisions for federal income taxes are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
Current..................................... $(21,652) $ 24,362 $ 4,065
Deferred.................................... 17,825 (10,778) (15)
Allocated to paid in capital for tax benefit
related to stock options and stock
grants.................................... 56,433 2,331 --
-------- -------- -------
Provision for federal income taxes.......... $ 24,003 $ 26,678 $21,890
======== ======== =======
</TABLE>

39
<PAGE> 42

The deferred income tax balances, included in other liabilities, are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Deferred acquisition costs........................... $143,153 $ 84,621
Net unrealized appreciation of securities............ 36,026 35,357
Other investment items............................... 2,772 (1,174)
Policy receivables, net.............................. 148 2,637
-------- --------
Total deferred tax liabilities............... 182,099 122,615
-------- --------
Deferred tax assets:
Policy benefits, net................................. 34,199 52,211
Operating and capital loss carryforwards............. 73,553 805
Other, net........................................... 2,262 5,258
-------- --------
Total deferred tax assets.................... 110,014 59,448
-------- --------
Net deferred tax liabilities................. $ 72,085 $ 63,167
======== ========
</TABLE>

At December 31, 1998, income taxes recoverable of $29,419, included in
other assets, reflect a refund anticipated from the carryback of tax operating
losses generated in 1998 primarily from Merger related compensation and
cancellation consideration for non qualified stock options as well as
reinsurance ceding allowances. Life insurance company operating losses of
approximately $205,000 are available for carryforward which generally expire
after 15 years. The Company has performed an actuarial valuation which indicates
that its existing business will generate income in the carryforward period
sufficient to utilize the operating losses. Therefore no valuation allowance has
been established. In 1998, the provision for federal income taxes of $24,003
differed from an expected tax benefit of $2,946 based on the statutory rate of
35% primarily due to certain non-deductible Merger compensation payments. In
1996, the realized gain on the sale of Nacolah (Note 6) and other income
triggered the utilization of tax net operating loss carryforwards available to
Life Re Corporation and a corresponding reversal of the previously established
deferred tax valuation allowance, resulting in a tax benefit of $4,775. This
reduced the effective income tax rate in 1996 to 29%.

9. LOANS PAYABLE AND CORPORATION-OBLIGATED, MANDATORILY REDEEMABLE CAPITAL
SECURITIES OF SUBSIDIARY TRUSTS HOLDING SOLELY PARENT DEBENTURES

On December 1, 1998 in conjunction with the Merger (Note 3), the Company
repaid all outstanding bank loans. Interest paid on bank loans was $7,768,
$8,083 and $8,774 in 1998, 1997 and 1996, respectively.

On June 6, 1997, the Company completed a private placement under Rule 144A
of the Securities Act of 1933, as amended, of $100,000 of 8.72% capital
securities of Life Re Capital Trust I ("Trust I"), a subsidiary of the Company.
Distributions are cumulative and payable in arrears beginning December 15, 1997.
The securities have a maturity date of June 15, 2027 and may be redeemed, at the
option of the Company, at any time on or after June 15, 2007. Payments on the
securities are fully and unconditionally guaranteed by the Company. The
securities have an effective interest rate of 8.75%.

On March 17, 1998, the Company, through Life Re Capital Trust II ("Trust
II"), completed a public offering of 2,070,000 6% Adjustable Conversion-rate
Equity Security Units ("Units") (the "Units Offering"). The Units consist of
Quarterly Income Preferred Securities ("QUIPS") and a forward purchase contract
(the "Contract") for the Company's common stock. The QUIPS have a maturity of
March 15, 2003 and are subject to a put option by the QUIPS holder on either
March 15, 2001 or June 15, 2001 and the Contract matures on March 15, 2001.
Because of the Merger, the Contract redemption rate became fixed at $95.00 and
the Units ceased to trade publicly. Payments on the Units are fully and
unconditionally guaranteed by the Company. As a result of the Merger, the
aggregate payment to Unit holders (net of the amount paid by Unit holders to the
Company under the Contracts) will be approximately $24,600 million.

40
<PAGE> 43

The assets of Trust I and Trust II consist of junior subordinated
debentures issued by Life Re Corporation which have terms that parallel the
terms of the capital securities. The Trusts are accounted for as wholly owned
subsidiaries of the Company.

10. SHAREHOLDER'S EQUITY

Concurrently with the Units Offering (Note 9), on March 17, 1998, the
Company completed a public offering in which it sold 3,500,000 shares of common
stock (the "Common Stock Offering"). The net proceeds of the Common Stock
Offering and the Units Offering totaled $352,297 of which $207,000 was
contributed to the insurance subsidiaries.

Pursuant to a stock repurchase program approved by the Company's Board of
Directors, 2,150,400 shares of common stock out of a total authorization of
3,000,000 shares were acquired through December 31, 1997 for a total purchase
price of $46,647. In conjunction with the Common Stock and Units Offerings, the
Board of Directors elected to discontinue the stock repurchase program. The
treasury stock was retired effective with the Merger.

The Merger was effected by the conversion of each outstanding common share
into consideration of $95.00 and a concurrent recapitalization whereby Swiss Re,
through its wholly owned subsidiaries, became the sole holder of the Company's
preferred and common stock consisting of 1,000 and 100 shares, respectively. The
preferred stock has no dividend rights and a liquidation preference at par
value.

In January 1999, pursuant to its Restated Certificate of Incorporation, the
Company issued 10,000 shares of preferred stock with a par value of $.01 to its
parent in exchange for a promissory note in the amount of $615,000 which bears
interest at 5% payable annually in arrears beginning December 31, 1999. The note
may be prepaid at any time and is due on December 31, 2008.

As of the Merger date, all outstanding common stock options vested and were
cancelled in exchange for consideration equal to the excess of $95.00 over the
exercise price of each option. During 1998, prior to the Merger, 582,000 options
were granted at a weighted average exercise price of $64.98 and 166,650 options
were exercised.

Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" ("SFAS 123"), requires disclosure of pro forma information
regarding net income and as if the Company had accounted for its employee stock
options under the fair value method of SFAS 123. This method provides for
employee stock options to be measured at fair value on the date of grant which
is then amortized to expense over the options' vesting period. The fair value of
the options for the pro forma disclosures which follow was estimated using a
Black-Scholes option pricing model with the following assumptions for 1998, 1997
and 1996, respectively: risk-free interest rates ranging from 5.4% to 5.7%, 6.3%
to 6.4% and 5.4% to 6.8%, respectively; dividend yields of 1.0% in each year;
volatility factors of the expected market price of the Company's common stock of
20% in 1998 and 1997 and 25% in 1996; and weighted-average expected life of the
options of 5 years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. Option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options had characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models did not necessarily provide a reliable single
measure of the fair value of its employee stock options.

Pro forma net income (loss) including the effects of amortization of the
estimated fair values of stock options granted after December 15, 1994 is
$(36,496), $47,256 and $53,116 for 1998, 1997 and 1996, respectively.

The availability of funds to meet obligations, including, capital security
distributions is dependent, in part, on the ability of its subsidiaries to
transfer funds to Life Re Corporation. The subsidiaries are subject to certain
state laws and regulations which limit their ability to transfer funds and pay
dividends. Generally, the

41
<PAGE> 44

subsidiaries may not, without prior regulatory approval, transfer cash
dividends, loans or advances in any twelve month period in excess of the greater
of the prior year's statutory operating income or 10% of capital and surplus at
the preceding year end. Additionally, under Connecticut law, no dividend in an
amount exceeding LRCA's earned surplus may be transferred to TexasRe without
prior regulatory approval. Approval has been received from the Connecticut
Department of Insurance to define earned surplus for this purpose to include
amounts of paid in surplus in excess of $125,000. At December 31, 1998, net
assets of TexasRe totaling $113,130 are not available for transfer to Life Re
Corporation in 1999 except with prior approval of state regulatory authorities.
Dividends paid to Life Re Corporation by TexasRe were $0 in 1998, $16,314 in
1997 and $12,087 in 1996.

Life Re Corporation owns $160,500 of surplus debentures issued by TexasRe
which provide funds to Life Re Corporation in the form of principal and interest
payments. Under the terms of an amendment to TexasRe's surplus debentures, no
prior approval of the Texas Department of Insurance is required to pay or prepay
scheduled principal or interest on the surplus debentures provided that, after
giving effect to any such payment, the statutory surplus of TexasRe exceeds
$125,000. The amendment to TexasRe's surplus debentures was approved under the
consideration that statutory surplus, as defined, in excess of $125,000 be
reflected in liabilities to the extent of outstanding surplus debenture interest
and principal. Payments of surplus debenture interest to Life Re Corporation by
TexasRe totaled $9,237, $9,799 and $10,008 in 1998, 1997 and 1996, respectively.

The subsidiaries' statutory basis financial statements are prepared in
accordance with accounting practices prescribed or permitted by their respective
domiciliary states. "Prescribed" statutory accounting practices include state
laws, regulations and general administrative rules, as well as publications of
the National Association of Insurance Commissioners ("NAIC"). "Permitted"
statutory accounting practices encompass all accounting practices that are not
prescribed; such practices may differ from state to state, may differ from
company to company within a state and may change in the future. The Company does
not utilize any permitted accounting practices. The NAIC currently is in the
process of codifying statutory accounting practices. That project, when
completed, may change prescribed statutory accounting practices and thus may
result in changes to the accounting practices that the subsidiaries use to
prepare their statutory basis financial statements.

The combined statutory basis financial position of TexasRe and subsidiaries
as of December 31, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>
CAPITOL
BANKERS MISSION REALIC LRCA TEXASRE ELIMINATIONS* TOTAL
-------- -------- -------- ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Assets....................... $128,945 $310,198 $895,620 $2,457,768 $259,355 $(379,398) $3,672,488
======== ======== ======== ========== ======== ========= ==========
Liabilities.................. 116,873 292,269 823,845 2,211,043 133,655 (30,897) 3,546,788
Capital and surplus.......... 12,072 17,929 71,775 246,725 125,700 (348,501) 125,700
-------- -------- -------- ---------- -------- --------- ----------
$128,945 $310,198 $895,620 $2,457,768 $259,355 $(379,398) $3,672,488
======== ======== ======== ========== ======== ========= ==========
DECEMBER 31, 1997
Assets....................... $689,664 $2,328,054 $184,645 $(328,881) $2,873,482
======== ========== ======== ========= ==========
Liabilities.................. $644,100 $2,154,144 $ 58,945 $(109,407) $2,747,782
Capital and surplus.......... 45,564 173,910 125,700 (219,474) 125,700
-------- ---------- -------- --------- ----------
$689,664 $2,328,054 $184,645 $(328,881) $2,873,482
======== ========== ======== ========= ==========
</TABLE>

- ---------------
* Represents the elimination of intercompany balances.

Combined statutory basis net loss for TexasRe and subsidiaries was $159,319
and $54,121 in 1998 and 1997. In 1996, TexasRe and subsidiaries had combined
statutory basis net income of $16,315.

42
<PAGE> 45

11. EMPLOYEE BENEFIT PLANS

Substantially all full time employees are covered by a noncontributory
defined benefit pension plan. Benefits are determined by a formula which relates
the pension payable to years of service at retirement, final five year average
salary and wages covered by Social Security. Annual contributions to the plan
are sufficient to satisfy legal funding requirements. In addition, the Company
has an unfunded Supplemental Executive Retirement Plan which is a nonqualified
plan that provides certain officers defined pension benefits in excess of limits
imposed by federal tax law. The Company also sponsors a defined contribution
savings plan covering substantially all employees with at least six months of
service. The Company contributes 50% of the first 6% of salary contributed by
employees. Participants vest in Company contributions over a four year period.
The combined expense associated with employee benefit plans was $761, $1,438 and
$1,151 in 1998, 1997 and 1996, respectively.

12. REINSURANCE CEDED

In the normal course of business, the Company seeks to limit its exposure
to loss by ceding reinsurance to retrocessionaires. In general, the Company
retains a maximum of $1,000 on any one life for ordinary life insurance business
with certain limited exceptions depending upon age and classification of the
risk. Amounts in excess of the retention are ceded to a pool of
retrocessionaires. From time to time, the Company has also entered into quota
share retrocessional agreements. In general, the Company's policy in regard to
group insurance business is to retain not more than $250 of liability on any one
life insurance risk, $300 on any one accident or health insurance risk or, for
special risk insurance, $1,000 on any one risk. The Company has agreements with
group retrocessionaires primarily on an excess basis. Contracts for reinsurance
ceded do not relieve the Company from its obligations under contracts for
reinsurance assumed. Failure of retrocessionaires to honor their obligations
could result in losses to the Company; however, no amounts are deemed
uncollectible at December 31, 1998.

The Company's policy generally is to require collateral from those
retrocessionaires not authorized to conduct reinsurance business in Connecticut,
LRCA's domiciliary state, in an amount at least equal to the statutory reserves
reinsured. Collateral is provided in the form of letters of credit and trust
agreements.

Amounts receivable on reinsurance ceded are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Future policy benefits under life insurance
contracts............................................ $261,210 $192,259
Claims recoverable under life insurance contracts...... 25,077 23,577
Accident and health insurance claims reserves.......... 41,168 42,302
Other policy benefits.................................. 20,138 15,245
Acquisition costs...................................... 17,867 74,445
-------- --------
$365,460 $347,828
======== ========
</TABLE>

Policy benefits recovered on reinsurance ceded for the years ended December
31, 1998, 1997 and 1996 were $306,393, $107,309 and $75,971, respectively.

43
<PAGE> 46

13. BUSINESS SEGMENT INFORMATION

The following table presents summarized data for the Company's business
segments. One client within traditional reinsurance comprised over 10% of policy
revenues in 1998.

<TABLE>
<CAPTION>
GROUP ACCIDENT &
TRADITIONAL ADMINISTRATIVE HEALTH AND SPECIAL
LIFE REINSURANCE REINSURANCE RISK REINSURANCE OTHER TOTAL
---------------- -------------- ------------------ --------- ----------
<S> <C> <C> <C> <C> <C>
1998
Policy revenues.............. $ 480,107 $ 170,536 $ 58,947 $ $ 709,590
Investment income and
realized investment
gains...................... 82,624 145,326 9,098 237,048
---------- ---------- -------- ----------
Total revenues............... 562,731 315,862 68,045 946,638
---------- ---------- -------- ----------
Policy benefits.............. 335,173 121,249 56,676 513,098
Acquisition costs............ 122,384 44,530 21,580 188,494
Interest credited to
policyholder accounts...... 16,148 59,376 75,524
Interest expense and
distributions on capital
securities................. 13,514 7,358 1,665 22,537
Other expenses............... 14,777 31,751 1,496 48,024
Merger costs................. 107,379 107,379
---------- ---------- -------- --------- ----------
Total expenses............... 501,996 264,264 81,417 107,379 955,056
---------- ---------- -------- --------- ----------
Income (loss) before federal
income taxes............... 60,735 51,598 (13,372) (107,379) (8,418)
Provision for federal income
taxes...................... 21,257 18,059 (4,680) (10,633) 24,003
---------- ---------- -------- --------- ----------
Net income (loss)............ $ 39,478 $ 33,539 $ (8,692) $ (96,746) $ (32,421)
========== ========== ======== ========= ==========
Investments and other
assets..................... $1,574,761 $2,744,583 $179,971 $4,499,315
Deferred acquisition costs... 261,880 270,512 310 532,702
---------- ---------- -------- ----------
Total assets................. $1,836,641 $3,015,095 $180,281 $5,032,017
========== ========== ======== ==========
</TABLE>

44
<PAGE> 47

<TABLE>
<CAPTION>
GROUP ACCIDENT &
TRADITIONAL ADMINISTRATIVE HEALTH AND SPECIAL
LIFE REINSURANCE REINSURANCE RISK REINSURANCE TOTAL
---------------- ---------------- ------------------ ----------
<S> <C> <C> <C> <C>
1997
Policy revenues................... $ 319,404 $ 49,632 $121,242 $ 490,278
Investment income and realized
investment gains................ 82,452 60,527 12,495 155,474
---------- ---------- -------- ----------
Total revenues.................... 401,856 110,159 133,737 645,752
---------- ---------- -------- ----------
Policy benefits................... 208,491 34,510 98,043 341,044
Acquisition costs................. 89,348 14,519 38,277 142,144
Interest credited to policyholder
accounts........................ 12,662 27,985 40,647
Interest expense and distributions
on capital securities........... 8,787 2,391 1,789 12,967
Other expenses.................... 14,674 16,619 1,433 32,726
---------- ---------- -------- ----------
Total expenses.................... 333,962 96,024 139,542 569,528
---------- ---------- -------- ----------
Income before federal income
taxes........................... 67,894 14,135 (5,805) 76,224
Provision for federal income
taxes........................... 23,763 4,947 (2,030) 26,680
---------- ---------- -------- ----------
Net income........................ $ 44,131 $ 9,188 $ (3,775) $ 49,544
========== ========== ======== ==========
Investments and other assets...... $1,788,576 $1,316,122 $269,974 $3,374,672
Deferred acquisition costs........ 201,742 123,419 409 325,570
---------- ---------- -------- ----------
Total assets...................... $1,990,318 $1,439,541 $270,383 $3,700,242
========== ========== ======== ==========

1996
Policy revenues................... $ 292,115 $ 19,224 $139,653 $ 450,992
Investment income and realized
investment gains................ 93,658 37,808 10,084 141,550
---------- ---------- -------- ----------
Total revenues.................... 385,773 57,032 149,737 592,542
---------- ---------- -------- ----------
Policy benefits................... 213,522 16,458 102,496 332,476
Acquisition costs................. 68,084 4,042 39,807 111,933
Interest credited to policyholder
accounts........................ 15,088 19,549 34,637
Interest expense and distributions
on capital securities........... 5,652 1,425 1,279 8,356
Other expenses.................... 16,511 7,424 5,114 29,049
---------- ---------- -------- ----------
Total expenses.................... 318,857 48,898 148,696 516,451
Income before federal income
taxes........................... 66,916 8,134 1,041 76,091
Provision for federal income
taxes........................... 18,677 2,848 365 21,890
---------- ---------- -------- ----------
Net income........................ $ 48,239 $ 5,286 $ 676 $ 54,201
========== ========== ======== ==========
Investments and other assets...... $1,446,069 $ 665,651 $183,628 $2,295,348
Deferred acquisition costs........ 197,526 26,385 61 223,972
---------- ---------- -------- ----------
Total assets...................... $1,643,595 $ 692,036 $183,689 $2,519,320
========== ========== ======== ==========
</TABLE>

45
<PAGE> 48

LIFE RE CORPORATION AND SUBSIDIARIES

CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SCHEDULE II

LIFE RE CORPORATION
BALANCE SHEETS
(PARENT COMPANY)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
---------- --------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
Investment in common stock of subsidiaries(1)............... $ 761,562 $412,716
Long-term debt of subsidiaries(1)........................... 198,300 170,300
Securities available for sale............................... 47,854 6,472
Short-term investments...................................... 40,505 9,174
Cash........................................................ (7) (127)
Interest receivable on long-term debt of subsidiaries(1).... 1,764 869
Due from subsidiaries(1).................................... 13,427
Other assets................................................ 37,873 7,861
---------- --------
Total assets...................................... $1,087,851 $620,692
========== ========
LIABILITIES
Accrued expenses and other liabilities...................... $ 9,785 $ 21,902
Due to subsidiaries(1)...................................... 25,299
Junior subordinated debentures payable to subsidiaries(1)... 236,620 100,000
Loans payable............................................... 125,000
---------- --------
Total liabilities................................. 271,704 246,902
---------- --------
SHAREHOLDER'S EQUITY
Preferred stock (1998: par value $.01 per share, authorized,
issued and outstanding 100 shares)
Common stock (1998: par value $.01 per share; authorized,
issued and outstanding 1,000 shares -- 1997 par value
$.001 per share; authorized 40,000,000 shares; issued
15,835,785 shares)........................................ $ $ 16
Paid in capital............................................. 546,428 111,337
Accumulated other comprehensive income...................... 60,072 61,416
Retained earnings........................................... 209,647 249,297
Treasury stock -- at cost (-0- and 2,205,203 shares,
respectively)............................................. (48,276)
---------- --------
Total shareholder's equity........................ 816,147 $373,790
---------- --------
Total liabilities and shareholder's equity........ $1,087,851 $620,692
========== ========
</TABLE>

- ---------------
(1) Eliminated in consolidation.

The condensed parent company financial statements should be read in
conjunction with the consolidated financial statements of Life Re Corporation
and Subsidiaries included elsewhere herein.

46
<PAGE> 49

LIFE RE CORPORATION AND SUBSIDIARIES

CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SCHEDULE II -- CONTINUED

LIFE RE CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(PARENT COMPANY)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1998 1997 1996
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Interest income on long-term debt of subsidiaries(1)........ $ 11,266 $ 9,906 $ 9,892
Investment income........................................... 7,412 1,574 767
Realized investment gains................................... (68) 12,767
-------- ------- --------
Total revenues.................................... 18,610 11,480 23,426
-------- ------- --------
EXPENSES
Interest expense on loans payable........................... 7,350 7,997 8,356
Interest expense on junior subordinated debentures(1)....... 15,187 4,970
Other operating expenses.................................... 3,164 4,693 4,647
-------- ------- --------
Total expenses.................................... 25,701 17,660 13,003
-------- ------- --------
Income (loss) before income taxes and equity in
undistributed earnings (loss) of subsidiaries............. (7,091) (6,180) 10,423
Provision for federal income taxes (benefit)................ (2,482) (1,510) 6
-------- ------- --------
Income (loss) before equity in undistributed earnings (loss)
of subsidiaries........................................... (4,609) (4,670) 10,417
Equity in earnings (loss) of subsidiaries(1)................ (27,812) 54,216 43,784
-------- ------- --------
NET INCOME (LOSS)........................................... (32,421) 49,546 54,201
Other comprehensive income (loss), net of provision
(benefit) for federal income taxes:
Net unrealized appreciation (depreciation) of
securities............................................. (1,344) 36,562 (24,549)
-------- ------- --------
COMPREHENSIVE INCOME (LOSS)................................. $(33,765) $86,108 $ 29,652
======== ======= ========
</TABLE>

- ---------------
(1) Eliminated in consolidation.

The condensed parent company financial statements should be read in
conjunction with the consolidated financial statements of Life Re Corporation
and Subsidiaries included elsewhere herein.

47
<PAGE> 50

LIFE RE CORPORATION AND SUBSIDIARIES

CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SCHEDULE II -- CONTINUED

LIFE RE CORPORATION
STATEMENTS OF CASH FLOWS
(PARENT COMPANY)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................................... $(32,421) $ 49,546 $ 54,201
Adjustments to reconcile net income (loss) to net cash used
by operating activities
Equity in earnings (loss) of subsidiaries(1)............. 27,812 (54,216) (43,784)
Interest on long-term debt of subsidiaries(1)............ (11,266) (9,906) (9,892)
Realized gains (losses) on investments................... 68 (12,767)
Other.................................................... (644) 3,674 950
-------- -------- --------
Net cash used by operating activities............ (16,451) (10,902) (11,292)
-------- -------- --------
INVESTING ACTIVITIES
Purchases of securities.................................... (92,369) (5,917) (200)
Sales of securities........................................ 50,681 25,057
Change in short-term investments........................... (31,331) (7,475) (1,069)
Interest received from subsidiaries(1)..................... 9,972 9,799 10,008
Contributions to subsidiaries(1)........................... (319,958) (75,000)
Dividends received from subsidiaries(1).................... 2,550 18,982 12,087
Loan to subsidiary(1)...................................... (28,000)
Cash paid for acquisition of subsidiary.................... (4,225) (20,995)
Purchases of furniture and equipment, net.................. (1,462) (2,491) (829)
-------- -------- --------
Net cash (used) provided by investing
activities..................................... (414,142) (83,097) 45,054
-------- -------- --------
FINANCING ACTIVITIES
Purchases of common stock for treasury..................... (692) (956) (16,861)
Proceeds from exercises of common stock options............ 3,737 2,921 3,570
Issuance of stock.......................................... 219,120
Capital contribution....................................... 207,600
Issuance of junior subordinated debentures(1).............. 136,620 100,000
Issuance costs of capital securities of subsidiary trust... (3,443) (1,197)
Loan principal repayments.................................. (125,000) (15,000)
Dividends on common stock.................................. (7,229) (7,071) (5,454)
Other...................................................... 7
-------- -------- --------
Net cash provided (used) by financing
activities..................................... 430,713 93,697 (33,738)
-------- -------- --------
Increase (decrease) in cash................................ 120 (302) 24
Cash balance at beginning of period........................ (127) 175 151
-------- -------- --------
Cash balance at end of period.............................. $ (7) $ (127) $ 175
======== ======== ========
</TABLE>

- ---------------
(1) Eliminated in consolidation.

The condensed parent company financial statements should be read in
conjunction with the consolidated financial statements of Life Re Corporation
and Subsidiaries included elsewhere herein.

48
<PAGE> 51

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

Set forth below is biographical information concerning each Director,
including as to each Director, the Director's principal occupation and the
period during which the nominee has served as a Director of the Company. Ages
shown are as of December 31, 1998.

F. SEDGWICK BROWNE (56) DIRECTOR SINCE 1998

From 1994 to the present, Mr. Browne has served as a Partner of Morgan,
Lewis & Bockius LLP. From 1967 to 1994 he was a partner at Lord Day & Lord,
Barrett Smith. Mr. Browne is a graduate of Yale University and the University of
Pennsylvania Law School.

JOHN R. COOMBER (49) DIRECTOR SINCE 1998

Mr. Coomber is a graduate of Nottingham University, where he studied
theoretical mechanics. He started his career in insurance as an actuarial
trainee with the Phoenix Insurance Company and in 1973 moved to Swiss
Reinsurance Company (UK). Having qualified as an actuary in 1974, he became
involved in all aspects of Swiss Re's life reinsurance activities, namely
pricing, valuation, marketing and administration.

He was Swiss Re UK's Appointed Actuary from 1983 to 1990, and was appointed
General Manager and head of the Life division in 1987. He became Director and
CEO of Swiss Re (UK) in January 1993.

In April 1995 he was appointed a Member of the Executive Board of Swiss Re.
He is currently divisional chief executive of Swiss Re Life & Health.

CHRISTOPH DORSCHEL (60) DIRECTOR SINCE 1998

Mr. Dorschel studied law. In January 1993 he was appointed Member of Swiss
Re's Group Management, responsible for the Group's Finance division. Since April
1995 he has been a Member of the Executive Board Committee, responsible for
human and financial resources; since March 1997 for human resources, law and
logistics.

In February 1998, he assumed the functions of Chief Finance Officer in
addition, on an interim basis. As from July 1998, he is entrusted with special
assignments.

JACQUES E. DUBOIS (49) DIRECTOR SINCE 1988

Mr. Dubois has served as President and Director of the Company since
November 1988 and Chairman and Chief Executive Officer since March 1999. Mr.
Dubois also serves as Chief Executive Officer of Life Reassurance, REALIC and of
AML. In addition, Mr. Dubois was associated with Insurance Investment Associates
from 1979 to 1998.

GEORGE L. FARR (57) DIRECTOR SINCE 1999

Mr. Farr is presently retired. From 1995 to 1998 Mr. Farr served as Vice
Chairman of American Express Co. and from 1968 to 1995 he served as Director of
McKinsey & Co. and Mr. Farr is a graduate of University of Michigan, where he
earned his B.A. and M.B.A.

49
<PAGE> 52

THOMAS H. FOX (56) DIRECTOR SINCE 1998

Mr. Fox is presently retired. From 1966 to 1993, he held various positions
at JP Morgan & Co. Incorporated. At the time of his retirement, he was a
Managing Director. Mr. Fox is a graduate of the University of Notre Dame and
received an M.B.A. from the University of Michigan.

HEIDI E. HUTTER (41) DIRECTOR SINCE 1998

Ms. Hutter is Chairman, President and Chief Executive Officer of Swiss Re
America Corporation. She received her B.A. degree in mathematics from Cornell
University.

Ms. Hutter began her career with the Swiss Re Group in the actuarial
department, later specializing in financial and finite risks. She left the Swiss
Re Group in October 1993, and headed the "Equitas" project at Lloyd's of London
until December 1995, developing ways of reinsuring all business written at
Lloyd's in 1992 and prior years.

Ms. Hutter took over responsibility for Swiss Re America in January 1996,
becoming a Member of the Swiss Re Executive Board at the same time. In July
1996, Ms. Hutter was also appointed CEO of Swiss Re America Holding Corporation
and in January 1997, she assumed responsibility for Swiss Re Canada. She is a
Fellow of the Casualty Actuarial Society and has served on its Board of
Directors. Ms. Hutter was named APIW Insurance Woman of the year in 1995 and
received the Federation of Insurance and Corporate Counsel's Award in 1996.

WALTER B. KIELHOLZ (47) DIRECTOR SINCE 1998

Mr. Kielholz studied business administration at the University of St. Gall,
Switzerland, graduating in 1976 with a degree in business finance and
accounting.

He joined Swiss Re at the beginning of 1989 as head of the Japan and Far
East section, where he was responsible for coordinating marketing and for
underwriting property and casualty business. At the beginning of 1992 he was
also assigned responsibility for the head office's reinsurance business in the
USA and the UK. In January 1993 he became a Member of the Executive Board of
Swiss Re, Zurich. Since April 1995, he has been a Member of the Executive Board
Committee, responsible for the alternative Risk Transfer division.

He became Swiss Re's Chief Executive Officer on January 1, 1997.

At the Annual General Meeting of June 26, 1998, the shareholders elected
him to the Board of Directors. In the subsequent inaugural meeting of the Board
of Directors he was appointed Managing Director.

WILLIAM L. MUSSER, JR. (56) DIRECTOR SINCE 1998

Mr. Musser has served as President of William L. Musser Co., Inc. from 1995
to the present. From 1989 to 1995 he was a Partner at Barker, Lee & Co. Mr.
Musser is a graduate of Princeton University (A.B) and Harvard Business School
(M.B.A.).

JAY A. NOVIK (54) DIRECTOR SINCE 1998

From January 1998 to January 1999, Mr. Novik served as Vice Chairman of
Swiss Re America Holding; from 1983 to 1998 he served as President of Atrium
Corp.; from 1982 to 1988 he was Vice Chairman of North American Reinsurance Co.
and from 1978 to 1982 he was an Actuary North American Reassurance Co. Mr. Novik
is a graduate of Temple University and Northeastern University.

STANLEY TABEN (66) DIRECTOR SINCE 1998

From 1972 to the present, Mr. Taben has served as Chairman, President and
Director of Swiss Re Investors. Mr. Taben is a graduate of Cornell University.

50
<PAGE> 53

N. DAVID THOMPSON (64) DIRECTOR SINCE 1998

Mr. Thompson is retired. Mr. Thompson is the former Chairman and Chief
Executive Officer of Swiss Re America Holding Corp. having served from 1977 to
1997. Mr. Thompson is a graduate of Wesleyan University and Columbia University.

CHARLES G. WATSON (67) DIRECTOR SINCE 1998

Mr. Watson is presently retired and was formerly a partner and Senior
Investment Counsel of Brundage, Story & Rose. Mr. Watson received a B.A. from
Yale University and had post graduate education at the Stern School of Business
of New York University.

ERWIN K. ZIMMERMAN (45) DIRECTOR SINCE 1998

Mr. Zimmermann read social sciences at the University of Constance, where
he completed his doctorate.

At the beginning of 1990, Mr. Zimmermann began his employment with Swiss Re
as head of corporate development in the former direct insurance division. His
nomination to senior management followed in 1992. Later the same year, he was
elected to the Board of Directors of Savoia Assicuranzioni S.p.A., where he took
over as Chairman the following year.

In 1995, Mr. Zimmermann joined the Run-off department in Zurich, becoming
head of that department in 1996. In January 1997 he was appointed to the
Executive Board of Swiss Re, Zurich and Chief Executive Officer of Swiss Re New
Markets, Zurich.

EXECUTIVE OFFICERS

DAVID J. WALSH (49)

Mr. Walsh serves as Senior Vice President and General Counsel of the
Company. Mr. Walsh has served as Senior Vice President, General Counsel &
Corporate Secretary of Swiss Re America Holding Corporation since October 1998.
He served as General Counsel from January 1995 to June 1998 for American
International Group. He was the Director of Insurance for the State of Alaska
from February 1990 to January 1995.

ALAN D. HEAD (42)

Mr. Head has served as Vice President and Chief Financial Officer since
December 1998. Mr. Head has also served as Executive Vice President and Chief
Financial Officer of Life Reassurance since December 1998, its Senior Vice
President and Controller since January 1998 and as its Vice President since
January 1994. Mr. Head has also served as Vice President and Chief Financial
Officer of REALIC since December 1998 and as its Assistant Secretary since
August 1995.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, the Company's directors, executive officers and certain other officers
are required to file reports of ownership and changes in ownership of the
Company's securities with the Securities and Exchange Commission and the New
York Stock Exchange. Copies of such reports also must be provided to the
Company.

Based solely upon a review of the copies of the reports provided to the
Company and written representations from certain persons that no other reports
were required, the Company believes that during the preceding year the
directors, executive officers and certain other officers complied with all
applicable filing requirements.

51
<PAGE> 54

ITEM 11 EXECUTIVE COMPENSATION

LIFE RE CORPORATION

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------
AWARDS
----------
NUMBER OF PAYOUTS
ANNUAL COMPENSATION SHARES ----------
---------------------------------------------- UNDERLYING LTIP ALL OTHER
OTHER ANNUAL OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITIONS(1) YEAR SALARY(2) BONUS COMPENSATION SARS (3) (4)
------------------------------- ---- --------- ------------------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jacques E. Dubois................ 1998 $756,733 $ 930,000 $0 90,000 $7,246,990 $33,964,283
President and Chief Executive 1997 $693,717 $ 995,973 $0 100,000 $ 523,384 $ 9,585
Officer; Life Reassurance -- 1996 $655,437 $ 607,720 $0 100,000 $ 657,408 $ 9,448
Chairman and Chief Executive
Officer

Chris C. Stroup.................. 1998 $390,808 $2,641,507(5) $0 45,000 $ 0 $12,206,183
Life Reassurance -- President 1997 $358,662 $ 495,817(5) $0 50,000 $ 0 $ 5,968
and Chief Operating Officer 1996 $195,199 $ 218,735(5) $0 100,000 $ 0 $ 770

Robert L. Beisenherz............. 1998 $390,808 $2,641,507(5) $0 45,000 $ 0 $12,066,310
REALIC -- President; 1997 $358,662 $ 495,817(5) $0 50,000 $ 0 $ 9,647
Life Reassurance -- Executive 1996 $219,430 $ 218,735(5) $0 100,000 $ 0 $ 3,360
Vice President

W. Weldon Wilson................. 1998 $369,738 $2,641,507(5) $0 30,000 $ 0 $12,394,206
Vice President and Secretary; 1997 $307,690 $ 449,917(5) $0 35,000 $ 0 $ 5,891
Life Reassurance -- Executive 1996 $251,417 $ 247,477(5) $0 25,000 $ 0 $ 5,866
Vice President, General Counsel
and Secretary

Alan D. Head..................... 1998 $162,365 $ 100,000 $0 12,500 $ 0 $ 1,759,893
Vice President and Chief 1997 $113,327 $ 60,000 $0 5,000 $ 0 $ 4,226
Financial Officer; 1996 $108,808 $ 32,500 $0 5,000 $ 0 $ 4,051
Life Reassurance -- Executive
Vice President and Chief
Financial
Officer
</TABLE>

- ---------------
(1) Positions are at Life Re Corporation unless otherwise noted.

(2) Mr. Stroup and Mr. Beisenherz joined the Company in June and May of 1996,
respectively, and therefore their respective salaries shown for 1996 only
cover the period from their hire dates through December 1996.

(3) The 1996, 1997 and 1998 LTIP Payouts for Mr. Dubois were determined in
accordance with the terms of the Life Re Corporation Long-Term Incentive
Plan. All of the 1996 LTIP Payouts related to (i) the acquisition of a block
of insurance from United Insurance Company of America ("United"), (ii) the
investment in Resource Financial Corporation and certain of its affiliates
("RFC") and reinsurance arrangements with RFC and affiliates of Aon
Corporation, (iii) the acquisitions of Modern American Life Insurance
Company ("Modern"), Western Pioneer Life Insurance Company ("Western") and
New American Life Insurance Company ("New American") and (iv) the sale at a
gain of the Company's investment in Nacolah Holding Corporation ("Nacolah");
all of the 1997 LTIP Payouts related to (i) the reinsurance of a block of
business from a subsidiary of UNUM Corporation ("UNUM"), (ii) the
acquisition of 79% of the common stock of AML Acquisition Company, the owner
of AML, (iii) the reinsurance of a block of business from Allianz Life
Insurance Company of North America ("Allianz"), and (iv) reinsurance
arrangements with RFC and certain of its affiliates; and all of the 1998
LTIP Payouts related to (i) the acquisition of Mission Life Insurance
Company; (ii) the acquisition of Lincoln Liberty Life Insurance Company and
First Delaware Life Insurance Company, (iii) the reinsurance of an
additional 20% of the block of business from Allianz, (iv) the acquisition
of

52
<PAGE> 55

Atlas Life Insurance Company, (v) the coinsurance agreement with CNA
Financial Corporation, (vi) reinsurance arrangements with RFC and certain of
its affiliates, and (vii) the Merger.

(4) Represents Company matching contributions under the 401(k) defined
contribution plan (in 1998: $4,800 each for Messrs. Dubois, Stroup,
Beisenherz, Wilson and Head; in 1997: $4,750 each for Messrs. Dubois,
Stroup, Beisenherz and Wilson, and $3,400 for Mr. Head; in 1996: $4,750 each
for Messrs. Dubois and Wilson, and $3,264 for Mr. Head), life insurance
premiums (in 1998: $5,962 for Mr. Dubois, $1,334 for Mr. Stroup, $4,897 for
Mr. Beisenherz, $1,313 for Mr. Wilson and $1,187 for Mr. Head; in 1997:
$4,835 for Mr. Dubois, $1,218 for Mr. Stroup, $4,897 for Mr. Beisenherz,
$1,141 for Mr. Wilson and $826 for Mr. Head; in 1996: $4,698 for Mr. Dubois,
and $770 for Mr. Stroup, $3,360 for Mr. Beisenherz, $1,116 for Mr. Wilson
and $787 for Mr. Head), excise tax gross-up amounts related to the Merger
(in 1998: $3,897,896 for Mr. Dubois, $1,603,486 for Mr. Stroup, $1,385,055
for Mr. Beisenherz, and $1,352,874 for Mr. Wilson), the value of stock
options exercised related to the Merger ($30,055,625 for Mr. Dubois,
$10,596,563 for Mr. Stroup, $10,671,563 for Mr. Beisenherz, $10,515,000 for
Mr. Wilson and $1,753,906 for Mr. Head), and the value of shares of common
stock that became vested upon the forgiveness of a non-recourse note (in
1998: $520,219 for Mr. Wilson).

(5) A portion of the bonuses paid in 1998 to Messrs. Stroup, Beisenherz and
Wilson in the amount of $2,391,507 each, in 1997 in the amount of $172,717
each, and in 1996 in the amounts of $96,235, $142,477 and $142,477,
respectively, were special bonuses paid in accordance with their employment
agreements or arrangements which provided for bonuses upon the completion of
the 1998 transactions, the 1997 transactions and certain of the 1996
transactions noted in footnote (3) above, except 1996 bonuses paid to
Messrs. Beisenherz and Wilson did not include the Nacolah transaction, and
the 1996 bonus for Mr. Stroup did not include the Nacolah, United, Modern
and Western transactions.

53
<PAGE> 56

LIFE RE CORPORATION

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/ GRANTED TO EXERCISE OR GRANT DATE
NAME AND PRINCIPAL SARS EMPLOYEES BASE PRICE EXPIRATION PRESENT
POSITIONS(1) GRANTED(2) 1998 ($/SHARE) DATE VALUE(3)
- ------------------ ---------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Jacques E. Dubois............ 90,000 15.46% $64.9375 01/02/2008 $1,345,300
President and Chief
Executive Officer; Life
Reassurance -- Chairman and
Chief Executive Officer
Chris C. Stroup.............. 45,000 7.73% $64.9375 01/02/2008 $ 772,650
Life
Reassurance -- President
and Chief Operating Officer
Robert L. Beisenherz......... 45,000 7.73% $64.9375 01/02/2008 $ 772,650
REALIC -- President; Life
Reassurance -- Executive
Vice President
W. Weldon Wilson............. 30,000 5.15% $64.9375 01/02/2008 $ 515,100
Vice President and
Secretary; Life
Reassurance -- Executive
Vice President, General
Counsel and Secretary
Alan D. Head................. 12,500 2.15% $64.9375 01/02/2008 $ 214,625
Vice President and Chief
Financial Officer; Life
Reassurance -- Executive
Vice President and Chief
Financial Officer
</TABLE>

- ---------------
(1) Positions are at Life Re Corporation unless otherwise noted.

(2) Only stock options were granted, which were scheduled to vest over four
years at a rate of 25% per year with initial vesting on January 2, 1999.

(3) Option values are determined using the Black-Scholes option pricing model
adapted for use in valuing executive stock options. The values are based on
assumptions regarding a number of variables for the term of an option such
as interest rates, future volatility of the price of Common Shares, and the
Company's future dividend yield. Therefore, there can be no assurance that
the values realized upon exercise of options by the named executive officers
will be at or near the values estimated by the Black-Scholes model.

54
<PAGE> 57

LIFE RE CORPORATION

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT YEAR END AT FISCAL YEAR END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME AND PRINCIPAL POSITION(1) EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- ----------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Jacques E. Dubois................. 490,000 $30,055,625 E 0 E $ 0
President and Chief Executive U 0 U $ 0
Officer; Life Reassurance --
Chairman and Chief Executive
Officer
Chris C. Stroup................... 195,000 $10,596,563 E 0 E $ 0
Life Reassurance -- President
and U 0 U $ 0
Chief Operating Officer
Robert L. Beisenherz.............. 195,000 $10,671,563 E 0 E $ 0
REALIC -- President; U 0 U $ 0
Life Reassurance -- Executive
Vice President
W. Weldon Wilson.................. 170,000 $10,515,000 E 0 E $ 0
Vice President and Secretary; U 0 U $ 0
Life Reassurance -- Executive
Vice President General Counsel
and Secretary
Alan D. Head...................... 32,500 $ 1,753,906 E 0 E $ 0
Vice President and Chief
Financial U 0 U $ 0
Officer; Life Reassurance --
Executive Vice President and
Chief Financial Officer
</TABLE>

- ---------------
(1) Positions are at Life Re Corporation unless otherwise noted.

LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR

The Company has not included a Long-Term Incentive Plan table because
future payments under the Life Re Corporation Long-Term Incentive Plan ("LTIP"),
which terminated on December 1, 1998, are not expected at this time. The Company
has provided the following narrative description of the LTIP:

Mr. Dubois was previously eligible to participate in the LTIP. Such
executive officer was granted one unit under the LTIP. Such unit entitled the
holder, upon the attainment of performance goals as established by the
Compensation Committee of the Board of Directors and the closing of the
transaction related to the performance goal, to receive a portion of the Bonus
Pool (as defined in the LTIP) as a cash lump sum payment. The value of each unit
was equal to the total amount allocated to the Bonus Pool, multiplied by a
fraction, the numerator of which was one, and the denominator of which was the
total number of units which were granted with respect to such Bonus Pool.

The Bonus Pool established upon the closing of a transaction by the Company
was equal to (i) 2% of the amount involved in connection with any eligible
acquisition or merger with another entity, (ii) 2% of the amount involved in
connection with any eligible acquisition of a block of insurance in force, and
(iii) 5% of the amount involved in connection with a recognition of capital
gains upon the sale of an eligible investment.

In 1998, LTIP payments were made as a result of the successful achievement
of performance goals, which resulted in (i) the acquisition of Mission Life
Insurance Company, (ii) the acquisition of Lincoln

55
<PAGE> 58

Liberty Life Insurance Company and First Delaware Life Insurance Company, (iii)
the reinsurance of an additional 20% of the block of business from Allianz, (iv)
the acquisition of Atlas Life Insurance Company, (v) the coinsurance agreement
with CNA Financial Corporation, (vi) reinsurance arrangements with RFC and
certain of its affiliates, and (vii) the Merger. The 1998 LTIP payments for Mr.
Dubois were $7,246,990. Future LTIP payments are not expected at this time.

EMPLOYEE BENEFIT PLANS

Savings Plan. The Life Reassurance Corporation of America and Its
Affiliates Employee Savings Plan (the "Savings Plan") is a defined contribution
plan that is qualified under Sections 401(a) and 401(k) of the Code. Employees
of the Company and its subsidiaries who have completed six consecutive months of
service and attained age twenty-one are eligible to participate in the Savings
Plan. Under the Savings Plan, each participant is eligible to enter into a
written salary reduction agreement with the Company whereby the participant's
salary will be reduced as elected by the participant on a pre-tax basis in
accordance with the rules governing cash or deferred arrangements under Section
401(k) of the Code, with the total reduction not exceeding $10,000 for 1999. The
amount deferred by a participant is contributed to the trust fund for the
Savings Plan and invested in accordance with the election of the participant
from among investment funds established under the trust agreement in accordance
with Section 404(c) of the Code. The Company makes a contribution to the Savings
Plan trust fund equal to 50% of the participant's pre-tax contributions that
equal up to 6% of that participant's base salary. All employee contributions are
100% vested at all times. With respect to matching contributions by the Company,
such contributions are 50% vested after two years of service, 75% vested after
three years of service and 100% vested after four years of service with the
Company. Participants' vested accounts under the Savings Plan are distributable
after termination of employment. During employment, participants may withdraw
funds from their accounts in the event of financial hardship as defined in the
Savings Plan and permitted under the Code. The Code imposes various limits on
the amounts which can be contributed to the Savings Plan by or for any
participant each year. During the year ended December 31, 1998, the following
matching contributions were made on behalf of the individuals named in the
executive compensation table: $4,800 for each of Messrs. Dubois, Stroup,
Beisenherz, Wilson and Head; and $24,000 for all named executive officers as a
group.

Retirement Plan. The Company maintains the Employees' Retirement Plan of
Life Reassurance Corporation of America and Its Affiliates (the "Retirement
Plan"), which is a defined benefit pension plan qualified under Section 401(a)
of the Code.

The table set forth below illustrates the approximate annual retirement
benefits which would be payable at age 65 as a single life annuity, based on the
Average Monthly Compensation and years of credited service indicated, under the
Retirement Plan to participants whose benefits are determined by the Retirement
Plan formula, before any reduction for benefits under any General Reassurance
Corporation plan or for Social Security benefits. The values shown below reflect
the change in tax law effective January 1, 1994 that limits the amount of annual
compensation that may be taken into account under qualified plans, such as the
Retirement Plan, to $150,000, indexed annually. For 1998, the amount of annual
compensation that may be taken into account under qualified plans was $160,000.

PENSION PLAN TABLE

ESTIMATED ANNUAL RETIREMENT BENEFITS

<TABLE>
<CAPTION>
PARTICIPANTS WHOSE BENEFITS ARE DETERMINED BY
RETIREMENT PLAN FORMULA
------------------------------------------------
YEARS OF CREDITED SERVICE
------------------------------------------------
AVERAGE YEARLY COMPENSATION 15 20 25 30
- --------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$ 50,000............................................ $12,099 $16,132 $20,165 $24,198
$100,000............................................ $25,599 $34,132 $42,665 $51,198
$160,000 and over................................... $41,799 $55,732 $69,665 $83,598
</TABLE>

56
<PAGE> 59

With respect to each of the individuals named in the executive compensation
table, the estimated credited years of service under the Retirement Plan as of
December 31, 1998 were as follows: Mr. Dubois, ten years; Mr. Stroup, three
years; Mr. Beisenherz, three years; Mr. Wilson, eight years; Mr. Head, five
years and all named executive officers as of December 31, 1998 as a group, an
average of six years.

Benefits are funded through employer contributions to a trust. Employees of
the Company are eligible to participate in the Retirement Plan when they have
completed one year of service and attained age twenty and one-half. Participants
become vested in their benefits under the Retirement Plan as follows: 20% after
three years' service, 40% after four, 60% after five, 80% after six, and 100%
(fully) vested after seven years' service, subject to certain break-in-service
rules. The Retirement Plan provides a benefit upon retirement at the normal
retirement age of 65 which, when expressed as a single life annuity, equals (i)
1.5% of Average Monthly Compensation (as that term is defined in the Retirement
Plan) multiplied by the number of the participant's years of service up to a
maximum of thirty years, plus (ii) 0.3% of Average Monthly Compensation in
excess of Social Security Retirement Benefits covered compensation multiplied by
the participant's years of service up to a maximum of thirty years, less (iii)
the amount of any accrued benefit provided under any defined benefit plan of
General Reassurance Corporation for service prior to January 1, 1989. Average
Monthly Compensation is the participant's average monthly compensation
(excluding overtime pay and bonuses) for the five most highly compensated
consecutive calendar years of service from the participant's date of hire to his
or her date of termination of employment. A participant may elect to commence
receiving benefits under the Retirement Plan when he or she has attained age 55
and completed ten years of service. Benefits under the Retirement Plan are
normally payable in the form of a single life annuity in the case of unmarried
participants and in the form of a joint and survivor annuity in the case of
married participants. If a participant continues employment past Normal
Retirement Age (as that term is defined in the Retirement Plan), his or her
retirement benefit determined at the close of each Plan Year (as that term is
defined in the Retirement Plan) prior to actual retirement is equal to the
greater of (i) the actuarial equivalent of the monthly retirement benefit as of
the close of the prior Plan Year, or (ii) his or her accrued benefit at the
close of the Plan Year. This benefit is offset by any benefit distributions
during the Plan Year. Sections 401(a)(17) and 415 of the Code limit both the
amount of a participant's compensation that may be taken into account for
purposes of calculating Average Monthly Compensation and the amount of benefits
that may be paid from the Retirement Plan.

Supplemental Executive Retirement Plan. With certain exceptions, Section
415 of the Code currently limits pension benefits which may be paid under plans
qualified under the Code to an annual benefit of $120,000, indexed annually. The
Tax Reform Act of 1986 limits the amount of annual compensation which may be
considered in determining qualified plan pensions to $150,000, indexed annually,
effective January 1, 1994. Previously, the limit was $200,000, indexed annually.
For 1998, the amount of annual compensation which could be considered in
determining qualified plan pensions was $160,000. In March 1995 the Board of
Directors, upon the recommendation of the Benefits Committee, established the
Life Re Corporation Supplemental Executive Retirement Plan ("SERP") for certain
designated officers of Life Re Corporation to whom these limits apply, or will
apply in the future, so that these employees would obtain the benefit that would
have applied in the absence of these limits, as well as to provide additional
retirement benefits to a number of key executives whose many years of service in
the industry prior to joining the Company would not be counted as years of
service under the Retirement Plan.

The table set forth below illustrates the approximate annual retirement
benefits which would be payable at age 62 based on the Average Monthly
Compensation and years of credited service indicated under the SERP to
participants whose benefits are determined by the SERP formula.

57
<PAGE> 60

SUPPLEMENTAL EXECUTIVE RETIREMENT PENSION PLAN TABLE

ESTIMATED ANNUAL RETIREMENT BENEFITS

<TABLE>
<CAPTION>
PARTICIPANTS WHOSE BENEFITS ARE
DETERMINED BY SERP FORMULA
--------------------------------------------
YEARS OF CREDITED SERVICE
--------------------------------------------
AVERAGE YEARLY COMPENSATION 15 20 25 30
- --------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$200,000........................................ $ 37,428 $ 49,904 $ 62,380 $ 80,501
$250,000........................................ $ 56,178 $ 74,904 $ 93,630 $118,001
$300,000........................................ $ 74,928 $ 99,904 $124,880 $155,501
$350,000........................................ $ 93,678 $124,904 $156,130 $193,001
$400,000........................................ $112,428 $149,904 $187,380 $230,501
$450,000........................................ $131,178 $174,904 $218,630 $268,001
$500,000........................................ $149,928 $199,904 $249,880 $305,501
$550,000........................................ $168,678 $224,904 $281,130 $343,001
$600,000........................................ $187,428 $249,904 $312,380 $380,501
$650,000........................................ $206,178 $274,904 $343,630 $418,001
$700,000........................................ $224,928 $299,904 $374,880 $455,501
</TABLE>

The SERP provides monthly supplemental benefits upon retirement equal to
2.5% of the participant's Average Monthly Compensation (as defined in the above
described Retirement Plan) multiplied by the number of the participant's Years
of Service (as defined under the Retirement Plan) less (i) 3.33% of Social
Security Retirement Benefits multiplied by Years of Service and (ii) the amount
of the monthly benefit provided under the Retirement Plan. Upon a Change in
Control, Years of Service will automatically be increased by five years. The
Merger constituted a Change in Control under the SERP and resulted in each
participant's Years of Service increasing by five years.

The estimated annual benefits payable upon retirement at normal retirement
age for each of the named executive officers designated under the SERP are
$757,124 for Mr. Dubois, $677,717 for Mr. Stroup and $679,661 for Mr. Wilson.
These amounts include an additional five years of service resulting from the
Change in Control from the Merger.

Discretionary Bonus Plan. The Company's Bonus Plan (the "Discretionary
Bonus Plan") previously provided individual awards based on annual performance
goals. The Executive Committee of the Board of Directors evaluated qualitative
performance and approved the list of participants. Individual awards for
performance were determined by the Executive Committee and were paid during the
first quarter after the close of the fiscal year to which the award pertained.
No award was payable to a participant who terminated employment voluntarily or
was terminated by the Company with or without cause prior to the payment date,
except that a pro-rated award would be paid in the event of termination by
reason of retirement, death or permanent disability. No awards were paid to the
Company's five named Executive Officers under the Discretionary Bonus Plan for
the 1996, 1997 and 1998 fiscal years. Award payments would be made in cash
solely from general corporate assets. Awards under the Discretionary Bonus Plan
do not meet the criteria for performance-based compensation, and therefore may
not be deductible under the applicable rules and regulations of Section 162(m)
of the Code.

Annual Plan. The Life Re Corporation Annual Incentive Plan (the "Annual
Plan") previously provided annual cash bonuses to officers of the Company.
Participants were the key executives of the Company selected by the Compensation
Committee to participate in the Annual Plan prior to the start of each plan
year. The amount of the awards, if any, were based on the attainment of certain
performance objectives determined by the Compensation Committee including,
without limitation, the future performance of the Company, the participant's
level of responsibilities, performance, salary and other compensation. The
performance objectives applicable to a plan year were set prior to the beginning
of that plan year and were related to measures of the Company's performance such
as profitability and growth. The participants were assigned an impact level
determined in the discretion of the Compensation Committee. The performance

58
<PAGE> 61

objectives and the benefits may have been different between and among impact
levels. If a participant's employment terminated or there was a reduction in
duties, title or position, within twelve months after a Change in Control, the
participant would be entitled to a payment under the Annual Plan equal to the
current year's pro-rata portion of the bonus amount earned in the previous year.
The Board may alter, amend, suspend, or discontinue the Annual Plan, but
participants' rights regarding outstanding awards may not be adversely affected.
The Compensation Committee did not designate any officers of the Company as
participants in the Annual Plan for 1999.

The Compensation Committee intends to administer the Annual Plan in
accordance with the applicable rules and regulations under Section 162(m) of the
Code.

Long-Term Plan. The Life Re Corporation Long-Term Incentive Plan (the
"LTIP") previously provided cash bonuses to designated officers of the Company.
Participants were selected by the Compensation Committee to participate in the
LTIP prior to the start of each plan year. The amount of the awards, if any,
were based on the attainment of certain performance goals set forth in the LTIP
including, without limitation, acquisitions, mergers, and gains on the sale of
certain investments. The Board may alter, amend, suspend, or discontinue the
LTIP, but participants' rights regarding outstanding awards may not be adversely
affected. The Compensation Committee did not designate any officers of the
Company as participants under the LTIP for 1999. The participants and the
percentage participation in the pool may change from year to year in the
discretion of the Compensation Committee.

The Compensation Committee intends to administer the LTIP in accordance
with the applicable rules and regulations under Section 162(m) of the Code.

Employment Agreements. Swiss Re has entered into new employment agreements
with Messrs. Dubois, Stroup, Wilson and Beisenherz (the "Executives") as of July
27, 1998 (the "1998 Agreements"). The 1998 Agreements superseded the Executives'
prior employment agreements (or severance agreement in the case of Mr.
Beisenherz). The "Term" of the 1998 Agreements began on December 1, 1998 and
terminates on December 31, 2001.

Each 1998 Agreement provides that the Executive's annual base salary will
be increased as of January 1, 1999 (to $800,000 for Mr. Dubois and $400,000 for
each of the other Executives), will be reviewed annually, and will not be
reduced. Each Executive is eligible for an annual Performance Bonus to be
calculated with respect to the increase in "Operational Embedded Value" (as
defined in the 1998 Agreements) of the Administrative Reinsurance business of
the Company and its subsidiaries. If the "Management Target" (as defined in the
1998 Agreements) is attained for a given year, the amount of the Performance
Bonus for each Executive will be as follows: for 1999, $1.125 million; for 2000,
$1.4 million; and, for 2001, $1.68 million. If the Management Target for a given
year is at least 50% attained, but not fully attained, the Performance Bonus
will be reduced ratably. If less than 50% of the Management Target is attained
for a given year, no Performance Bonus will be paid for that year. If the
Management Target for a given year is exceeded, the Executive's Performance
Bonus will be increased ratably, up to the following maximum amounts: for 1999,
$4.5 million; for 2000, $5.6 million; and for 2001, $6.72 million. The Executive
also is eligible for a discretionary annual bonus reflecting group, division,
Swiss Re and individual performance in a maximum amount equal to a percentage of
annual base salary (100% as to Mr. Dubois and 83.33% as to the other
Executives). Further, the Executive is eligible to receive annually a Special
Bonus. If the Management Target is attained for any year during the Term, the
Executive will receive a Special Bonus (equal to $4 million for Mr. Dubois and
$1,333,400 for each of the other Executives), which will be reduced pro rata if
the Management Target is not attained. If the Management Target for a given year
is exceeded, the Executive's Special Bonus will be increased ratably, up to a
maximum (of $8 million for Mr. Dubois and $2,666,800 for each of the other
Executives) for attainment of 200% or more of the Management Target.

On December 1, 1998, the Executives were granted a number of restricted
shares of Swiss Re common stock determined by dividing a certain amount ($8
million as to Mr. Dubois and $4 million as to each of the other Executives, as
such amounts may be adjusted by the respective Executive and Swiss Re in good
faith) by the closing price per share of the Swiss Re common stock on December
1, 1998. The restrictions on such shares will lapse on December 31, 2001, unless
the Executive's employment is terminated earlier by Swiss Re

59
<PAGE> 62

for "Cause" (as defined in the 1998 Agreement) or by the Executive without "Good
Reason" (as defined in the 1998 Agreement). Either such termination will result
in forfeiture of all such shares. If the Executive's employment is terminated
before December 31, 2001, by the Company without "Cause", by the Executive with
"Good Reason", by the Executive's death or by the Executive's "Disability" (as
defined in the 1998 Agreement), all restrictions on such shares lapse and they
become vested. The Executive will be eligible to receive discretionary annual
stock option grants (with exercise prices equal to the fair market value of the
underlying shares). Each annual grant is expected to cover shares having an
aggregate fair market value equal to the then-current amount of the Executive's
annual base salary. If the Executive's employment is terminated by the Company
without "Cause", by the Executive with "Good Reason", by the Executive's death
or by the Executive's Disability" (as defined in the 1998 Agreement), all
restrictions on such shares lapse and they become vested.

The Executive will be eligible to receive discretionary annual stock option
grants (with exercise prices equal to the fair market value of the underlying
shares). Each annual grant is expected to cover shares having an aggregate fair
market value equal to the then-current amount of the Executive's annual base
salary. If the Executive's employment is terminated by the Company without
"Cause", by the Executive with "Good Reason", by the Executive's death or by the
Executive's "Disability", all stock options so granted will immediately vest and
become exercisable. The stock option grants will otherwise be subject to the
terms of the stock option plan of Holding.

The Executive will be eligible to participate in employee benefit plans
made available to other senior executives of Swiss Re which shall be, in the
aggregate, substantially comparable to the plans (other than the Long-Term
Incentive Plan and stock option plans) in which the Executive participated
immediately prior to December 1, 1998. The Executive will be entitled to
perquisites and fringe benefits at least equal to those to which he was entitled
on July 27, 1998.

If the Executive's employment is terminated during the Term by Swiss Re
without "Cause", by the Executive with "Good Reason", by the Executive's death
or by the Executive's "Disability", Swiss Re will pay the Executive: (i) with
respect to any complete calendar year remaining in the Term, an amount equal to
50% of the Special Bonus that was or would have been payable upon attainment of
100% of the Management Target for 1999 (the "Termination Bonus Payment"); (ii)
with respect to a calendar year in which termination occurs before July 1, an
amount equal to the Termination Bonus Payment; or (iii) with respect to a
calendar year in which termination occurs after July 1, an amount equal to the
sum of (x) a pro rata portion of the Special Bonus (based on actual attainment
relative to the Management Target during the entirety of such year) for the
period from January 1 through the date of termination, and (y) a pro rata
portion of the Termination Bonus for the period from the date of termination
through December 31. Swiss Re will pay reasonable attorney's fees and expenses
and court costs incurred by the Executive as a result of Swiss Re's failure to
perform any provision of the 1998 Agreements.

If the Executive's employment is terminated by death, Swiss Re will pay
health insurance benefits for all the Executive's dependents for one year.

If any payments or distributions to the Executive (whether pursuant to the
1998 Agreement or otherwise) are subject to the Excise Tax, Swiss Re will pay
the Executive an additional payment so that the net amount retained by the
Executive, after deduction of the Excise Tax and all income taxes and Excise Tax
on such additional payment, will be the same as if the Excise Tax had not been
imposed.

If Swiss Re defaults on its obligation to pay certain amounts to the
Executive (and fails to cure the default within thirty days after notice), Swiss
Re is required to pay the Executive a lump sum amount actuarially equivalent to
future payments otherwise payable under the 1998 Agreements, as well as all past
due payments. Swiss Re indemnifies the Executive to the full extent permitted by
law for amounts connected with any action relating to performance of the
Executive's services. Swiss Re will maintain a directors' and officers'
liability insurance policy, using its best efforts to provide substantially
similar protection to the protection provided by the policy in effect on July
27, 1998.

60
<PAGE> 63

The Executive agrees that he will not disclose confidential information or
trade secrets of Swiss Re at any time and that, during the Term and for a period
of one year thereafter, he will not engage in competition with Swiss Re in the
business of reinsuring life insurance risks or solicit any Swiss Re employee to
leave such employment.

Any controversy related to the 1998 Agreements will be settled by binding
arbitration in Stamford, Connecticut.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of March 30, 1999, no director or executive officer of the Company owned
any Common Shares.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

INDEBTEDNESS OF MANAGEMENT

During 1992, the Company issued, subject to restricted stock purchase
agreements, 214,510 Common Shares to certain officers of the Company and its
subsidiaries in exchange for notes in favor of the Company. Certain of the sales
were at prices below fair value at the date of sale, resulting in compensation
expense to the Company in 1992. Listed in the chart below is the aggregate of
the only two remaining loans to an executive officer of the Company to purchase
Common Shares that aggregated in excess of $60,000, including accrued interest,
during 1998. The loans were fully satisfied in December 1998.

<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF END OF
NAME OF DEBTOR 1998 ADDITIONS DEDUCTIONS 1998
- -------------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C>
W. Weldon Wilson............... $212,743 $10,221 $222,964 $0
</TABLE>

61
<PAGE> 64

PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed or incorporated by reference as part of
this Form 10-K:

1. Financial Statements

The audited consolidated financial statements of Life Re and the related
auditor's report listed in the Index to Financial Statements and Financial
Statement Schedule appearing on page 23.

2. Financial Statement Schedule

The schedule listed in the Index to Financial Statements and Financial
Statement Schedule appearing on page 46.

3. Exhibits

The accompanying Exhibit Index appearing on page 65 is incorporated herein
by reference. The exhibits listed in the Exhibit Index are filed or incorporated
by reference as part of this Form 10-K.

(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the three months ended December 31, 1998.

62
<PAGE> 65

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

LIFE RE CORPORATION

By: /s/ JACQUES E. DUBOIS
------------------------------------
Jacques E. Dubois
Chairman of the Board,
Chief Executive Officer
and Director

March 30, 1999

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

/s/ JACQUES E. DUBOIS Chairman of the Board, Chief Executive March 30, 1999
- ------------------------------------------ Officer and Director
Jacques E. Dubois

/s/ ALAN D. HEAD Vice President and Chief Financial March 30, 1999
- ------------------------------------------ Officer (principal accounting officer and
Alan D. Head principal financial officer)

/s/ F. SEDGWICK BROWNE Director March 30, 1999
- ------------------------------------------
F. Sedgwick Browne

/s/ JOHN R. COOMBER Director March 30, 1999
- ------------------------------------------
John R. Coomber

/s/ CHRISTOPH DORSCHEL Director March 30, 1999
- ------------------------------------------
Christoph Dorschel

/s/ GEORGE L. FARR Director March 30, 1999
- ------------------------------------------
George L. Farr

/s/ THOMAS H. FOX Director March 30, 1999
- ------------------------------------------
Thomas H. Fox

/s/ HEIDI E. HUTTER Director March 30, 1999
- ------------------------------------------
Heidi E. Hutter

/s/ WALTER B. KIELHOLZ Director March 30, 1999
- ------------------------------------------
Walter B. Kielholz

/s/ WILLIAM L. MUSSER, JR. Director March 30, 1999
- ------------------------------------------
William L. Musser, Jr.

/s/ JAY A. NOVIK Director March 30, 1999
- ------------------------------------------
Jay A. Novik

/s/ STANLEY TABEN Director March 30, 1999
- ------------------------------------------
Stanley Taben
</TABLE>

63
<PAGE> 66
<TABLE>
<S> <C> <C>
/s/ N. DAVID THOMPSON Director March 30, 1999
- ------------------------------------------
N. David Thompson

/s/ CHARLES G. WATSON Director March 30, 1999
- ------------------------------------------
Charles G. Watson

/s/ ERWIN K. ZIMMERMANN Director March 30, 1999
- ------------------------------------------
Erwin K. Zimmermann
</TABLE>

64
<PAGE> 67

LIFE RE CORPORATION

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ------- ---------------------- ----------
<C> <C> <S> <C>
2.01 -- Certificate of Merger of SRC Acquisition Corp. with and into
Life Re Corporation (the "Company"), dated December 1, 1998
3.01 -- By-Laws of the Company
4.01 -- Specimen Common Stock Certificate of the Company,
incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-1 (File No. 33-50556)
4.02 -- Certificate of Trust of Life Re Capital Trust II ("Trust
II"), incorporated by reference to Exhibit 4.3 of the
Company's Registration Statement on Form S-3 (File No.
333-46213)
4.03 -- Declaration of Trust of Trust II, incorporated by reference
to Exhibit 4.4 of the Company's Registration Statement on
Form S-3 (File No. 333-46213)
4.04 -- Form of Amended and Restated Declaration of Trust of Trust
II, incorporated by reference to Exhibit 4.5 of the
Company's Registration Statement on Form S-3 (File No.
333-46213)
4.05 -- Form of Quarterly Income Preferred Security ("QUIPS") of
Trust II, incorporated by reference to Exhibit 4.6 of the
Company's Registration Statement on Form S-3 (File No.
333-46213)
4.06 -- Form of Junior Subordinated Debenture, incorporated by
reference to Exhibit 4.8 of the Company's Registration
Statement on Form S-3 (File No. 333-46213)
4.07 -- Form of Indenture between the Company and The Bank of New
York, as Trustee, pursuant to which the Junior Subordinated
Debentures are to be issued, incorporated by reference to
Exhibit 4.7 of the Company's Registration Statement on Form
S-3 (File No. 333-46213)
4.08 -- Form of Guarantee Agreement with respect to the QUIPS,
incorporated by reference to Exhibit 4.9 of the Company's
Registration Statement on Form S-3 (File No. 333-46213)
4.09 -- Form of Master Unit Agreement, incorporated by reference to
Exhibit 4.11 of the Company's Registration Statement on Form
S-3 (File No. 333-46213)
4.10 -- Form of Adjustable Conversion-rate Equity Security Units,
incorporated by reference to Exhibit 4.12 of the Company's
Registration Statement on Form S-3 (File No. 333-46213)
4.11 -- Form of Pledge Agreement, incorporated by reference to
Exhibit 4.13 of the Company's Registration Statement on Form
S-3 (File No. 333-46213)
4.12 -- Form of Call Option Agreement, incorporated by reference to
Exhibit 4.14 of the Company's Registration Statement on Form
S-3 (File No. 333-46213)
4.13 -- Company's Agreement to File Indenture, incorporated by
reference to Exhibit 4.02 of the Company's Form 10-Q for the
quarterly period ended June 30, 1997, as filed with the SEC
on August 13, 1997
10.01 -- Surplus Debenture No. 1 in the amount of $180,500,000, dated
November 16, 1988, issued by First of Groves Life Insurance
Company ("First of Groves") to the Company, incorporated by
reference to Exhibit 10.16 of the Company's Registration
Statement on Form S-1 (File No. 33-50556)
</TABLE>

65
<PAGE> 68

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ------- ---------------------- ----------
<C> <C> <S> <C>
10.02 -- First Amendment to Surplus Debenture No. 01 of TexasRe Life
Insurance Company (formerly known as First of
Groves)("TexasRe"), effective November 3, 1992, incorporated
by reference to Exhibit 10.12 of the Company's Form 10-K for
the year ended December 31, 1994, as filed with the SEC on
March 31, 1994
10.03 -- Second Amendment to Surplus Debenture No. 01 of TexasRe
(formerly known as First of Groves), effective January 1,
1994, incorporated by reference to Exhibit 10.13 of the
Company's Form 10-K for the year ended December 31, 1994, as
filed with the SEC on March 31, 1995
10.04 -- Third Amendment to Surplus Debenture No. 01 of TexasRe
(formerly known as First of Groves), effective November 6,
1995, incorporated by reference to Exhibit 10.13 of the
Company's Form 10-K for the year ended December 31, 1995, as
filed with the SEC on March 28, 1996
10.05 -- Surplus Debenture No. 02 in the amount of $80,000,000, dated
November 16, 1988, issued by First of Groves to the Company,
incorporated by reference to Exhibit 10.17 of the Company's
Registration Statement on Form S-1 (File No. 33-50556)
10.06 -- First Amendment to Surplus Debenture No. 02 of TexasRe
(formerly known as First of Groves), effective November 3,
1992, incorporated by reference to Exhibit 10.15 of the
Company's Form 10-K for the year ended December 31, 1994, as
filed with the SEC on March 31, 1995
10.07 -- Second Amendment to Surplus Debenture No. 02 of TexasRe
(formerly known as First of Groves), effective January 1,
1994, incorporated by reference to Exhibit 10.16 of the
Company's Form 10-K for the year ended December 31, 1994, as
filed with the SEC on March 31, 1995
10.08 -- Third Amendment to Surplus Debenture No. 02 of TexasRe
(formerly known as First of Groves), effective November 6,
1995, incorporated by reference to Exhibit 10.17 of the
Company's Form 10-K for the year ended December 31, 1995, as
filed with the SEC on March 28, 1996
10.09 -- Tax Allocation Agreement, effective as of the first day of
the consolidated return taxable year beginning January 1,
1994 by and among the Company, TexasRe and Life Reassurance
Corporation of America ("Life Reassurance"), incorporated by
reference to Exhibit 10.1 of the Company's Form 10-Q for the
quarterly period ended June 30, 1995, as filed with the SEC
on August 14, 1995
10.10 -- Life Reassurance and its Affiliates Employee Savings Plan,
effective January 1, 1989, incorporated by reference to
Exhibit 10.31 of the Company's Registration Statement on
Form S-1 (File No. 33-50556)
10.11 -- Employees' Retirement Plan of Life Reassurance and its
Affiliates, effective January 1, 1989, as amended on January
1, 1991, incorporated by reference to Exhibit 10.32 of the
Company's Registration Statement on Form S-1 (File No.
33-50556)
10.12 -- The Company's Supplemental Executive Retirement Plan,
Effective: January 1, 1995, incorporated by reference to
Exhibit 10.09 of the Company's Form 10-Q for the quarterly
period ended June 30, 1996, as filed with the SEC on August
13, 1996
10.13 -- The Company's Long-Term Incentive Plan, dated November 3,
1994, incorporated by reference to Exhibit 10.66 of the
Company's Form 10-K for the year ended December 31, 1996, as
filed with the SEC on March 28, 1997
10.14 -- The Company's Annual Incentive Plan, dated November 3, 1994,
incorporated by reference to Exhibit 10.65 of the Company's
Form 10-K for the year ended December 31, 1996, as filed
with the SEC on March 28, 1997
</TABLE>

66
<PAGE> 69

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBIT NUMBER
- ------- ---------------------- ----------
<C> <C> <S> <C>
10.15 -- Amended and Restated Advisory Agreement, dated November 16,
1988, between Life Reassurance and Conseco Capital
Management, Inc. (the "Conseco Amended and Restated Advisory
Agreement"), incorporated by reference to Exhibit 10.45 of
the Company's Registration Statement on Form S-1 (File No.
33-50556)
10.16 -- October 1993 Amendment, dated October 1, 1993, to the
Conseco Amended and Restated Advisory Agreement,
incorporated by reference to Exhibit 10.25 of the Company's
Form 10-K for the year ended December 31, 1993, as filed
with the SEC on March 31, 1994
10.17 -- November 1994 Amendment to the Conseco Amended and Restated
Advisory Agreement, effective as of November 1, 1994,
incorporated by reference to Exhibit 10.04 of the Company's
Form 10-Q for the quarterly period ended September 30, 1996,
as filed with the SEC on November 14, 1996
10.18 -- May 1995 Amendment to the Conseco Amended and Restated
Advisory Agreement, effective as of May 31, 1995,
incorporated by reference to Exhibit 10.05 of the Company's
Form 10-Q for the quarterly period ended September 30, 1996,
as filed with the SEC on November 14, 1996
10.19 -- September 1996 Amendment to the Conseco Amended and Restated
Advisory Agreement, effective as of September 15, 1996,
incorporated by reference to Exhibit 10.06 of the Company's
Form 10-Q for the quarterly period ended September 30, 1996,
as filed with the SEC on November 14, 1996
10.20 -- January 1998 Amendment to the Conseco Amended and Restated
Advisory Agreement, effective as of January 1, 1998,
incorporated by reference to Exhibit 10.47 of the Company's
Form 10-K for the fiscal year ended December 31, 1997, as
filed with the SEC on March 30, 1998
10.21 -- April 15, 1998 Amendment to the Conseco Amended and Restated
Advisory Agreement, incorporated by reference to Exhibit
10.03 of the Company's Form 10-Q for the quarterly period
ended June 30, 1998, as filed with the SEC on August 12,
1998
10.22 -- Advisory Agreement, dated December 31, 1991, between Life
Reassurance and Liberty Capital Advisors, Inc. (The "Liberty
Advisory Agreement"), incorporated by reference to Exhibit
10.46 of the Company's Registration Statement on Form S-1
(File No. 33-50556)
10.23 -- Amendment Number One to the Liberty Advisory Agreement,
effective as of July 1, 1996, incorporated by reference to
Exhibit 10.07 of the Company's Form 10-Q for the quarterly
period ended September 30, 1996, as filed with the SEC on
November 14, 1996
21.01 -- Subsidiaries of the Company
27 -- Financial Data Schedule
</TABLE>

<PAGE> 1
Exhibit 2.01

CERTIFICATE OF MERGER

OF
SRC ACQUISITION CORP.

WITH AND INTO
LIFE RE CORPORATION

Pursuant to Section 251(c) of the General
Corporation Law of the State of Delaware

LIFE RE CORPORATION, a Delaware corporation, does hereby certify to the
following facts relating to the merger of SRC ACQUISITION CORP., a Delaware
corporation, with and into LIFE RE CORPORATION (the "Merger"):

I. The names and states of incorporation of the constituent
corporations to the Merger are as follows:

Name State of Incorporation
---- ----------------------

Life Re Corporation Delaware
SRC Acquisition Corp. Delaware

II. An Agreement and Plan of Merger, dated as of July 27, 1998, by and
between Swiss Reinsurance Company, SRC Acquisition Corp., Life Re Corporation
and Swiss Re America Holding Corporation has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with Section 251 of the General Corporation Law of the State of Delaware.

III. Life Re Corporation shall survive the Merger (the "Surviving
Corporation").

IV. The Certificate of Incorporation of Life Re Corporation, as now in
force and effect, shall be amended in its entirety to read as set forth in
Exhibit A hereto.

V. An executed copy of the Agreement and Plan of Merger is on file at
the principal place of business of the Surviving Corporation, which is located
at 969 High Ridge Road, Stamford, Connecticut 06905.
<PAGE> 2
2

VI. A copy of the Agreement and Plan of Merger will be furnished by the
Surviving Corporation, on request and without costs, to any stockholders of
either constituent corporation.

VII. This Certificate of Merger shall be effective upon filing with the
Secretary of State of the State of Delaware.

IN WITNESS WHEREOF, Life Re Corporation has caused this Certificate of
Merger to be executed in its corporate name this __ day of December, 1998.

LIFE RE CORPORATION

a Delaware corporation

By:
----------------------------------------
Name: W. Weldon Wilson
Title: Vice President, General Counsel
and Secretary
<PAGE> 3
EXHIBIT A

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

LIFE RE CORPORATION

8. Name. The name of the corporation is Life Re Corporation (the
"Corporation").

9. Address; Registered Office and Agent. The address of the
Corporation's registered office is 9 East Loockerman Street, City of Dover,
County of Kent, State of Delaware; and its registered agent at such address is
National Corporate Research, Ltd.

10. Purposes. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law.

11. Number of Shares; Designations and Powers, Preferences and
Rights and Qualifications and Limitations or Restrictions
thereof.

11.1 Number of Shares. The total number of shares of stock
that the Corporation shall have authority to issue is one thousand one hundred
(1,100), of which one hundred (100) shall be shares of Preferred Stock of the
par value of one cent ($.01) each (the "Preferred Stock") and one thousand
(1,000) shall be shares of Common Stock of the par value of one cent ($.01) each
(the "Common Stock").

11.2 Common Stock. Except as otherwise required by law, each
holder of Common Stock shall be entitled to one vote for each share of Common
Stock held of record on all matters on which stockholders generally are entitled
to vote
<PAGE> 4
and to all other rights, powers and privileges of stockholders under Delaware
law. The holders of shares of Common Stock shall have the right to receive
dividends, as, when and if declared by the Board of Directors of the Corporation
(the "Board"), out of funds legally available therefor. Upon the dissolution,
liquidation or winding up of the Corporation, either voluntary or involuntary,
after any preferential amounts to be distributed to the holders of the Preferred
Stock have been paid or declared and funds sufficient for the payment thereof in
full set apart for payment, the holders of Common Stock shall be entitled to
participate in all the remaining assets of the Corporation available for
distribution to its stockholders.

11.3 Preferred Stock.

(a) Voting Rights. Each share of Preferred Stock shall
entitle the holder thereof to vote, in person or by proxy, at a
special or annual meeting of stockholders, on all matters voted on
by holders of Common Stock voting together as a single class with
the holders of the Common Stock and with holders of all other
shares entitled to vote thereon. With respect to any such vote,
each share of Preferred Stock shall entitle the holder thereof to
cast one vote per share of Preferred Stock.

(b) Liquidation, Dissolution or Winding Up. In the event
of any liquidation, dissolution or winding up of the Corporation,
either voluntary or involuntary, before any distribution or
payment to holders of

4
<PAGE> 5
Common Stock, the holders of shares of Preferred Stock shall be
entitled to be paid an amount equal to $.01 with respect to each
share of Preferred Stock.

(c) Dividends. The holders of Preferred Stock shall have
no right to receive dividends, whether or not dividends are
distributed to the holders of Common Stock.

12. Election of Directors. Members of the Board may be elected either
by written ballot or by voice vote.

13. Limitation of Liability. No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, provided that this provision shall
not eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under section 174 of the General Corporation Law
or (d) for any transaction from which the director derived any improper personal
benefits.

Any repeal or modification of the foregoing provision shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.

5
<PAGE> 6
14. Indemnification.

14.1 To the extent not prohibited by law, the Corporation
shall indemnify any person who is or was made, or threatened to be made, a party
to any threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees, disbursements and other
charges). Persons who are not directors or officers of the Corporation (or
otherwise entitled to indemnification pursuant to the preceding sentence) may be
similarly indemnified in respect of service to the Corporation or to an Other
Entity at the request of the Corporation to the extent the Board at any time
specifies that such persons are entitled to the benefits of this Section 8.

14.2 The Corporation shall, from time to time, reimburse or
advance to any director or officer or other person entitled to indemnification
hereunder

6
<PAGE> 7
the funds necessary for payment of expenses, including attorneys' fees and
disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding; provided, however, that, if required by
the General Corporation Law, such expenses incurred by or on behalf of any
director or officer or other person may be paid in advance of the final
disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such director, officer or other person is not
entitled to be indemnified for such expenses.

14.3 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, this Certificate of Incorporation, the
By-laws of the Corporation (the "By-laws"), any agreement, any vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.

14.4 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall

7
<PAGE> 8
continue as to a person who has ceased to be a director or officer (or other
person indemnified hereunder) and shall inure to the benefit of the executors,
administrators, legatees and distributees of such person.

14.5 The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of an Other Entity, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Section 8, the By-laws or under section 145 of the
General Corporation Law or any other provision of law.

14.6 The provisions of this Section 8 shall be a contract
between the Corporation, on the one hand, and each director and officer who
serves in such capacity at any time while this Section 8 is in effect and any
other person entitled to indemnification hereunder, on the other hand, pursuant
to which the Corporation and each such director, officer, or other person intend
to be, and shall be, legally bound. No repeal or modification of this Section 8
shall affect any rights or obligations with respect to any state of facts then
or theretofore existing or thereafter arising or any

8
<PAGE> 9
proceeding theretofore or thereafter brought or threatened based in whole or in
part upon any such state of facts.

14.7 The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent jurisdiction.
The burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Corporation. Neither the failure
of the Corporation (including its Board, its independent legal counsel and its
stockholders) to have made a determination prior to the commencement of such
action that such indemnification or reimbursement or advancement of expenses is
proper in the circumstances nor an actual determination by the Corporation
(including its Board, its independent legal counsel and its stockholders) that
such person is not entitled to such indemnification or reimbursement or
advancement of expenses shall constitute a defense to the action or create a
presumption that such person is not so entitled. Such a person shall also be
indemnified for any expenses incurred in connection with successfully
establishing his or her right to such indemnification or reimbursement or
advancement of expenses, in whole or in part, in any such proceeding.

14.8 Any director or officer of the Corporation serving in any
capacity of (a) another corporation of which a majority of the shares entitled
to vote in

9
<PAGE> 10
the election of its directors is held, directly or indirectly, by the
Corporation or (b) any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing so at the
request of the Corporation.

14.9 Any person entitled to be indemnified or to reimbursement
or advancement of expenses as a matter of right pursuant to this Section 8 may
elect to have the right to indemnification or reimbursement or advancement of
expenses interpreted on the basis of the applicable law in effect at the time of
the occurrence of the event or events giving rise to the applicable Proceeding,
to the extent permitted by law, or on the basis of the applicable law in effect
at the time such indemnification or reimbursement or advancement of expenses is
sought. Such election shall be made, by a notice in writing to the Corporation,
at the time indemnification or reimbursement or advancement of expenses is
sought; provided, however, that if no such notice is given, the right to
indemnification or reimbursement or advancement of expenses shall be determined
by the law in effect at the time indemnification or reimbursement or advancement
of expenses is sought.

15. Adoption, Amendment and/or Repeal of By-Laws. The Board
may from time to time adopt, amend or repeal the By-laws of the Corporation;
provided, however, that any By-laws adopted or amended by the Board may be
amended or repealed, and any By-laws may be adopted, by the stockholders of the

10
<PAGE> 11
Corporation by vote of a majority of the holders of shares of stock of the
Corporation entitled to vote in the election of directors of the Corporation.

<PAGE> 1

Exhibit 3.02

BY-LAWS

SRC ACQUISITION CORP.

(A Delaware Corporation)

------------------------

ARTICLE 1

DEFINITIONS

As used in these By-laws, unless the context otherwise requires, the
term:

1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.

1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.

1.3 "Board" means the Board of Directors of the Corporation.

1.4 "By-laws" means the initial by-laws of the Corporation, as amended
from time to time.

1.5 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.

1.6 "Chairman" means the Chairman of the Board of Directors of the
Corporation.

1.7 "Corporation" means SRC Acquisition Corp.

1.8 "Directors" means directors of the Corporation.
<PAGE> 2
1.9 "Entire Board" means all directors of the Corporation in office,
whether or not present at a meeting of the Board, but disregarding vacancies.

1.10 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.

1.11 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.

1.12 "President" means the President of the Corporation.

1.13 "Secretary" means the Secretary of the Corporation.

1.14 "Stockholders" means stockholders of the Corporation.

1.15 "Treasurer" means the Treasurer of the Corporation.

1.16 "Vice President" means a Vice President of the Corporation.

ARTICLE 2

STOCKHOLDERS

2.1 Place of Meetings. Every meeting of stockholders shall be held at
the office of the Corporation or at such other place within or without the State
of Delaware as shall be specified or fixed in the notice of such meeting or in
the waiver of notice thereof.

2.2 Annual Meeting. A meeting of stockholders shall be held annually
for the election of Directors and the transaction of other business at such hour
<PAGE> 3
and on such business day in March or April or as may be determined by the Board
and designated in the notice of meeting.

2.3 Deferred Meeting for Election of Directors, Etc. If the annual
meeting of stockholders for the election of Directors and the transaction of
other business is not held within the months specified in Section 2.2 hereof,
the Board shall call a meeting of stockholders for the election of Directors and
the transaction of other business as soon thereafter as convenient.

2.4 Other Special Meetings. A special meeting of stockholders (other
than a special meeting for the election of Directors), unless otherwise
prescribed by statute, may be called at any time by the Board or by the
President or by the Secretary. At any special meeting of stockholders only such
business may be transacted as is related to the purpose or purposes of such
meeting set forth in the notice thereof given pursuant to Section 2.6 hereof or
in any waiver of notice thereof given pursuant to Section 2.7 hereof.

2.5 Fixing Record Date. For the purpose of (a) determining the
Stockholders entitled (i) to notice of or to vote at any meeting of Stockholders
or any adjournment thereof, (ii) unless otherwise provided in the Certificate of
Incorporation to express consent to corporate action in writing without a
meeting or (iii) to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock; or (b) any other lawful action, the
Board may fix a record date, which record date shall not
<PAGE> 4
4

precede the date upon which the resolution fixing the record date was adopted by
the Board and which record date shall not be (x) in the case of clause (a)(i)
above, more than sixty nor less than ten days before the date of such meeting,
(y) in the case of clause (a)(ii) above, more than 10 days after the date upon
which the resolution fixing the record date was adopted by the Board and (z) in
the case of clause (a)(iii) or (b) above, more than sixty days prior to such
action. If no such record date is fixed:

2.5.1 the record date for determining Stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held;

2.5.2 the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting
(unless otherwise provided in the Certificate of Incorporation), when
no prior action by the Board is required under the General Corporation
Law, shall be the first day on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of
Delaware, its principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded; and when prior action by the
Board is required under the General Corporation Law, the record date
for determining stockholders
<PAGE> 5
5
entitled to consent to corporate action in writing without a meeting
shall be at the close of business on the date on which the Board adopts
the resolution taking such prior action; and

2.5.3 the record date for determining stockholders for any
purpose other than those specified in Sections 2.5.1 and 2.5.2 shall
be at the close of business on the day on which the Board adopts the
resolution relating thereto.

When a determination of Stockholders entitled to notice of or to vote at any
meeting of Stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting. Delivery made to the Corporation's
registered office in accordance with Section 2.5.2 shall be by hand or by
certified or registered mail, return receipt requested.

2.6 Notice of Meetings of Stockholders. Except as otherwise provided in
Sections 2.5 and 2.7 hereof, whenever under the provisions of any statute, the
Certificate of Incorporation or these By-laws, Stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten nor more than sixty days before the date of the
<PAGE> 6
6
meeting, to each Stockholder entitled to notice of or to vote at such meeting.
If mailed, such notice shall be deemed to be given when deposited in the United
States mail, with postage prepaid, directed to the Stockholder at his or her
address as it appears on the records of the Corporation. An affidavit of the
Secretary or an Assistant Secretary or of the transfer agent of the Corporation
that the notice required by this Section 2.6 has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. When a
meeting is adjourned to another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted at the meeting as originally called.
If, however, the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each Stockholder of record entitled to
vote at the meeting.

2.7 Waivers of Notice. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the Stockholder or Stockholders entitled to said notice,
whether before or after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a Stockholder at a meeting shall
constitute a waiver of notice of such meeting except when the Stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened. Neither the business
<PAGE> 7
7

to be transacted at, nor the purpose of, any regular or special meeting of the
Stockholders need be specified in any written waiver of notice unless so
required by statute, the Certificate of Incorporation or these By-laws.

2.8 List of Stockholders. The Secretary shall prepare and make, or
cause to be prepared and made, at least ten days before every meeting of
Stockholders, a complete list of the Stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
Stockholder and the number of shares registered in the name of each Stockholder.
Such list shall be open to the examination of any Stockholder, the Stockholder's
agent, or attorney, at the Stockholder's expense, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any Stockholder who is present. The Corporation
shall maintain the Stockholder list in written form or in another form capable
of conversion into written form within a reasonable time. Upon the willful
neglect or refusal of the Directors to produce such a list at any meeting for
the election of Directors, they shall be ineligible for election to any office
at such meeting. The stock ledger shall be the only evidence as to who are the
Stockholders entitled to examine the stock ledger, the list of Stockholders or
the
<PAGE> 8
8

books of the Corporation, or to vote in person or by proxy at any meeting of
Stockholders.

2.9 Quorum of Stockholders; Adjournment. Except as otherwise provided
by any statute, the Certificate of Incorporation or these By-laws, the holders
of one-third of all outstanding shares of stock entitled to vote at any meeting
of Stockholders, present in person or represented by proxy, shall constitute a
quorum for the transaction of any business at such meeting. When a quorum is
once present to organize a meeting of Stockholders, it is not broken by the
subsequent withdrawal of any Stockholders. The holders of a majority of the
shares of stock present in person or represented by proxy at any meeting of
Stockholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.

2.10 Voting; Proxies. Unless otherwise provided in the Certificate of
Incorporation, every Stockholder of record shall be entitled at every meeting of
Stockholders to one vote for each share of capital stock standing in his or her
name on the record of Stockholders determined in accordance with Section 2.5
hereof. If the
<PAGE> 9
9

Certificate of Incorporation provides for more or less than one vote for any
share on any matter, each reference in the By-laws or the General Corporation
Law to a majority or other proportion of stock shall refer to such majority or
other proportion of the votes of such stock. The provisions of Sections 212 and
217 of the General Corporation Law shall apply in determining whether any shares
of capital stock may be voted and the persons, if any, entitled to vote such
shares; but the Corporation shall be protected in assuming that the persons in
whose names shares of capital stock stand on the stock ledger of the Corporation
are entitled to vote such shares. Holders of redeemable shares of stock are not
entitled to vote after the notice of redemption is mailed to such holders and a
sum sufficient to redeem the stocks has been deposited with a bank, trust
company, or other financial institution under an irrevocable obligation to pay
the holders the redemption price on surrender of the shares of stock. At any
meeting of Stockholders (at which a quorum was present to organize the
meeting), all matters, except as otherwise provided by statute or by the
Certificate of Incorporation or by these By-laws, shall be decided by a majority
of the votes cast at such meeting by the holders of shares present in person or
represented by proxy and entitled to vote thereon, whether or not a quorum is
present when the vote is taken. All elections of Directors shall be by written
ballot unless otherwise provided in the Certificate of Incorporation. In voting
on any other question on which a vote by ballot is required by law or is
demanded by any Stockholder entitled to vote, the voting shall be by ballot.
Each ballot shall be signed by the Stockholder voting or the Stockholder's proxy
and shall state the number of shares
<PAGE> 10
10

voted. On all other questions, the voting may be viva voce. Each Stockholder
entitled to vote at a meeting of Stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person or
persons to act for such Stockholder by proxy. The validity and enforceability of
any proxy shall be determined in accordance with Section 212 of the General
Corporation Law. A Stockholder may revoke any proxy that is not irrevocable by
attending the meeting and voting in person or by filing an instrument in writing
revoking the proxy or by delivering a proxy in accordance with applicable law
bearing a later date to the Secretary.

2.11 Voting Procedures and Inspectors of Election at Meetings of
Stockholders. The Board, in advance of any meeting of Stockholders, may appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Board may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate has been appointed
or is able to act at a meeting, the person presiding at the meeting may appoint,
and on the request of any Stockholder entitled to vote thereat shall appoint,
one or more inspectors to act at the meeting. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall (a) ascertain the number of
shares outstanding and the voting power of each, (b) determine the shares
represented at the meeting and the validity of proxies and ballots, (c) count
all votes and ballots, (d) determine and retain for a reasonable period a record
of the disposition of any
<PAGE> 11
11

challenges made to any determination by the inspectors, and (e) certify their
determination of the number of shares represented at the meeting and their count
of all votes and ballots. The inspectors may appoint or retain other persons or
entities to assist the inspectors in the performance of their duties. Unless
otherwise provided by the Board, the date and time of the opening and the
closing of the polls for each matter upon which the Stockholders will vote at a
meeting shall be determined by the person presiding at the meeting and shall be
announced at the meeting. No ballot, proxies or votes, or any revocation thereof
or change thereto, shall be accepted by the inspectors after the closing of the
polls unless the Court of Chancery of the State of Delaware upon application by
a Stockholder shall determine otherwise.

2.12 Organization. At each meeting of Stockholders, the President, or
in the absence of the President, the Chairman, or if there is no Chairman or if
there be one and the Chairman is absent, a Vice President, and in case more than
one Vice President shall be present, that Vice President designated by the Board
(or in the absence of any such designation, the most senior Vice President,
based on age, present), shall act as chairman of the meeting. The Secretary, or
in his or her absence, one of the Assistant Secretaries, shall act as secretary
of the meeting. In case none of the officers above designated to act as chairman
or secretary of the meeting, respectively, shall be present, a chairman or a
secretary of the meeting, as the case may be, shall be chosen by a majority of
the votes cast at such meeting by the holders of shares of capital stock present
in person or represented by proxy and entitled to vote at the meeting.
<PAGE> 12
12

2.13 Order of Business. The order of business at all meetings of
Stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.

2.14 Written Consent of Stockholders Without a Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered (by hand or by certified or registered mail, return
receipt requested) to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent shall
be effective to take the corporate action referred to therein unless, within 60
days of the earliest dated consent delivered in the manner required by this
Section 2.14, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation as
<PAGE> 13
13

aforesaid. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those Stockholders who
have not consented in writing.

ARTICLE 3

Directors

3.1 General Powers. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by these By-laws, the Board may exercise all powers and
perform all acts that are not required, by these Bylaws or the Certificate of
Incorporation or by statute, to be exercised and performed by the Stockholders.

3.2 Number; Qualification; Term of Office. The Board shall consist of
one or more members. The number of Directors shall be fixed initially by the
incorporator and may thereafter be changed from time to time by action of the
stockholders or by action of the Board. Directors need not be stockholders. Each
Director shall hold office until a successor is elected and qualified or until
the Director's death, resignation or removal.
<PAGE> 14
14

3.3 Election. Directors shall, except as otherwise required by statute
or by the Certificate of Incorporation, be elected by a plurality of the votes
cast at a meeting of stockholders by the holders of shares entitled to vote in
the election.

3.4 Newly Created Directorships and Vacancies. Unless otherwise
provided in the Certificate of Incorporation, newly created Directorships
resulting from an increase in the number of Directors and vacancies occurring in
the Board for any other reason, including the removal of Directors without
cause, may be filled by the affirmative votes of a majority of the entire Board,
although less than a quorum, or by a sole remaining Director, or may be elected
by a plurality of the votes cast by the holders of shares of capital stock
entitled to vote in the election at a special meeting of stockholders called for
that purpose. A Director elected to fill a vacancy shall be elected to hold
office until a successor is elected and qualified, or until the Director's
earlier death, resignation or removal.

3.5 Resignation. Any Director may resign at any time by written notice
to the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified in such resignation, the acceptance
of such resignation shall not be necessary to make it effective.

3.6 Removal. Subject to the provisions of Section 141(k) of the General
Corporation Law, any or all of the Directors may be removed with or without
cause by vote of the holders of a majority of the shares then entitled to vote
at an election of Directors.
<PAGE> 15
15

3.7 Compensation. Each Director, in consideration of his or her service
as such, shall be entitled to receive from the Corporation such amount per annum
or such fees for attendance at Directors' meetings, or both, as the Board may
from time to time determine, together with reimbursement for the reasonable
out-of-pocket expenses, if any, incurred by such Director in connection with the
performance of his or her duties. Each Director who shall serve as a member of
any committee of Directors in consideration of serving as such shall be entitled
to such additional amount per annum or such fees for attendance at committee
meetings, or both, as the Board may from time to time determine, together with
reimbursement for the reasonable out-of-pocket expenses, if any, incurred by
such Director in the performance of his or her duties. Nothing contained in this
Section 3.7 shall preclude any Director from serving the Corporation or its
subsidiaries in any other capacity and receiving proper compensation therefor.

3.8 Times and Places of Meetings. The Board may hold meetings, both
regular and special, either within or without the State of Delaware. The times
and places for holding meetings of the Board may be fixed from time to time by
resolution of the Board or (unless contrary to a resolution of the Board) in the
notice of the meeting.

3.9 Annual Meetings. On the day when and at the place where the annual
meeting of stockholders for the election of Directors is held, and as soon as
practicable thereafter, the Board may hold its annual meeting, without notice of
such
<PAGE> 16
16

meeting, for the purposes of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time and place specified in a notice given as provided in Section 3.11
hereof for special meetings of the Board or in a waiver of notice thereof.

3.10 Regular Meetings. Regular meetings of the Board may be held
without notice at such times and at such places as shall from time to time be
determined by the Board.

3.11 Special Meetings. Special meetings of the Board may be called by
the Chairman, the President or the Secretary or by any two or more Directors
then serving on at least one day's notice to each Director given by one of the
means specified in Section 3.14 hereof other than by mail, or on at least three
days' notice if given by mail. Special meetings shall be called by the Chairman,
President or Secretary in like manner and on like notice on the written request
of any two or more of the Directors then serving.

3.12 Telephone Meetings. Directors or members of any committee
designated by the Board may participate in a meeting of the Board or of such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 3.12 shall constitute
presence in person at such meeting.
<PAGE> 17
17

3.13 Adjourned Meetings. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.14 hereof other than by mail,
or at least three days' notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting as originally
called.

3.14 Notice Procedure. Subject to Sections 3.11 and 3.17 hereof,
whenever, under the provisions of any statute, the Certificate of Incorporation
or these By-laws, notice is required to be given to any Director, such notice
shall be deemed given effectively if given in person or by telephone, by mail
addressed to such Director at such Director's address as it appears on the
records of the Corporation, with postage thereon prepaid, or by telegram, telex,
telecopy or similar means addressed as aforesaid.

3.15 Waiver of Notice. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the person or persons entitled to said notice, whether before
or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the
<PAGE> 18
18

meeting has not been lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
Directors or a committee of Directors need be specified in any written waiver of
notice unless so required by statute, the Certificate of Incorporation or these
By-laws.

3.16 Organization. At each meeting of the Board, the Chairman, or in
the absence of the Chairman, the President, or in the absence of the President,
a chairman chosen by a majority of the Directors present, shall preside. The
Secretary shall act as secretary at each meeting of the Board. In case the
Secretary shall be absent from any meeting of the Board, an Assistant Secretary
shall perform the duties of secretary at such meeting; and in the absence from
any such meeting of the Secretary and all Assistant Secretaries, the person
presiding at the meeting may appoint any person to act as secretary of the
meeting.

3.17 Quorum of Directors. The presence in person of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.

3.18 Action by Majority Vote. Except as otherwise expressly required by
statute, the Certificate of Incorporation or these By-laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
<PAGE> 19
19

3.19 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.

<PAGE> 20
20

ARTICLE 4

COMMITTEES OF THE BOARD

The Board may, by resolution passed by a vote of a majority of the
entire Board, designate one or more committees, each committee to consist of one
or more of the Directors of the Corporation. The Board may designate one or more
Directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of such committee. If a member of a committee
shall be absent from any meeting, or disqualified from voting thereat, the
remaining member or members present and not disqualified from voting, whether or
not such member or members constitute a quorum, may, by a unanimous vote,
appoint another member of the Board to act at the meeting in the place of any
such absent or disqualified member. Any such committee, to the extent provided
in the resolution of the Board passed as aforesaid, shall have and may exercise
all the powers and authority of the Board in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
impressed on all papers that may require it, but no such committee shall have
the power or authority of the Board in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation under section
251 or section 252 of the General Corporation Law, recommending to the
stockholders (a) the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, or (b) a dissolution of the Corporation or a
revocation of a dissolution, or amending the By-laws of the Corporation; and,
unless the resolution designating it expressly so provides, no such committee
shall have the power and authority to declare a dividend, to authorize the
issuance of stock or to adopt a
<PAGE> 21
21

certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law. Unless otherwise specified in the resolution of the Board
designating a committee, at all meetings of such committee a majority of the
total number of members of the committee shall constitute a quorum for the
transaction of business, and the vote of a majority of the members of the
committee present at any meeting at which there is a quorum shall be the act of
the committee. Each committee shall keep regular minutes of its meetings. Unless
the Board otherwise provides, each committee designated by the Board may make,
alter and repeal rules for the conduct of its business. In the absence of such
rules each committee shall conduct its business in the same manner as the Board
conducts its business pursuant to Article 3 of these By-laws.

ARTICLE 5

OFFICERS

5.1 Positions. The officers of the Corporation shall be a President, a
Secretary, a Treasurer and such other officers as the Board may appoint,
including a Chairman, one or more Vice Presidents and one or more Assistant
Secretaries and Assistant Treasurers, who shall exercise such powers and perform
such duties as shall be determined from time to time by the Board. The Board may
designate one or more Vice Presidents as Executive Vice Presidents and may use
descriptive words or phrases to designate the standing, seniority or areas of
special competence of the Vice Presidents elected or appointed by it. Any number
of offices may be held by the same person unless the Certificate of
Incorporation or these By-laws otherwise provide.
<PAGE> 22
22

5.2 Appointment. The officers of the Corporation shall be chosen by the
Board at its annual meeting or at such other time or times as the Board shall
determine.

5.3 Compensation. The compensation of all officers of the Corporation
shall be fixed by the Board. No officer shall be prevented from receiving a
salary or other compensation by reason of the fact that the officer is also a
Director.

5.4 Term of Office. Each officer of the Corporation shall hold office
for the term for which he or she is elected and until such officer's successor
is chosen and qualifies or until such officer's earlier death, resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at such later time as is therein specified, and, unless otherwise
specified, the acceptance of such resignation shall not be necessary to make it
effective. The resignation of an officer shall be without prejudice to the
contract rights of the Corporation, if any. Any officer elected or appointed by
the Board may be removed at any time, with or without cause, by vote of a
majority of the entire Board. Any vacancy occurring in any office of the
Corporation shall be filled by the Board. The removal of an officer without
cause shall be without prejudice to the officer's contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights.

5.5 Fidelity Bonds. The Corporation may secure the fidelity of any or
all of its officers or agents by bond or otherwise.
<PAGE> 23
23

5.6 Chairman. The Chairman, if one shall have been appointed, shall
preside at all meetings of the Board and shall exercise such powers and perform
such other duties as shall be determined from time to time by the Board.

5.7 President. The President shall be the Chief Executive Officer of
the Corporation and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board and of any duly
authorized committee of Directors. The President shall preside at all meetings
of the Stockholders and at all meetings of the Board at which the Chairman (if
there be one) is not present. The President may sign and execute in the name of
the Corporation deeds, mortgages, bonds, contracts and other instruments except
in cases in which the signing and execution thereof shall be expressly delegated
by the Board or by these By-laws to some other officer or agent of the
Corporation or shall be required by statute otherwise to be signed or executed
and, in general, the President shall perform all duties incident to the office
of President of a corporation and such other duties as may from time to time be
assigned to the President by the Board.

5.8 Vice Presidents. At the request of the President, or, in the
President's absence, at the request of the Board, the Vice Presidents shall (in
such order as may be designated by the Board, or, in the absence of any such
designation, in order of seniority based on age) perform all of the duties of
the President and, in so performing, shall have all the powers of, and be
subject to all restrictions upon, the President. Any Vice President may sign and
execute in the name of the Corporation
<PAGE> 24
24

deeds, mortgages, bonds, contracts or other instruments, except in cases in
which the signing and execution thereof shall be expressly delegated by the
Board or by these By-laws to some other officer or agent of the Corporation, or
shall be required by statute otherwise to be signed or executed, and each Vice
President shall perform such other duties as from time to time may be assigned
to such Vice President by the Board or by the President.

5.9 Secretary. The Secretary shall attend all meetings of the Board and
of the Stockholders and shall record all the proceedings of the meetings of the
Board and of the stockholders in a book to be kept for that purpose, and shall
perform like duties for committees of the Board, when required. The Secretary
shall give, or cause to be given, notice of all special meetings of the Board
and of the stockholders and shall perform such other duties as may be prescribed
by the Board or by the President, under whose supervision the Secretary shall
be. The Secretary shall have custody of the corporate seal of the Corporation,
and the Secretary, or an Assistant Secretary, shall have authority to impress
the same on any instrument requiring it, and when so impressed the seal may be
attested by the signature of the Secretary or by the signature of such Assistant
Secretary. The Board may give general authority to any other officer to impress
the seal of the Corporation and to attest the same by such officer's signature.
The Secretary or an Assistant Secretary may also attest all instruments signed
by the President or any Vice President. The Secretary shall have charge of all
the books, records and papers of the Corporation relating to its organization
and management, shall
<PAGE> 25
25

see that the reports, statements and other documents required by statute are
properly kept and filed and, in general, shall perform all duties incident to
the office of Secretary of a corporation and such other duties as may from time
to time be assigned to the Secretary by the Board or by the President.

5.10 Treasurer. The Treasurer shall have charge and custody of, and be
responsible for, all funds, securities and notes of the Corporation; receive and
give receipts for moneys due and payable to the Corporation from any sources
whatsoever; deposit all such moneys and valuable effects in the name and to the
credit of the Corporation in such depositaries as may be designated by the
Board; against proper vouchers, cause such funds to be disbursed by checks or
drafts on the authorized depositaries of the Corporation signed in such manner
as shall be determined by the Board and be responsible for the accuracy of the
amounts of all moneys so disbursed; regularly enter or cause to be entered in
books or other records maintained for the purpose full and adequate account of
all moneys received or paid for the account of the Corporation; have the right
to require from time to time reports or statements giving such information as
the Treasurer may desire with respect to any and all financial transactions of
the Corporation from the officers or agents transacting the same; render to the
President or the Board, whenever the President or the Board shall require the
Treasurer so to do, an account of the financial condition of the Corporation and
of all financial transactions of the Corporation; exhibit at all reasonable
times the records and books of account to any of the Directors upon application
at the office of the
<PAGE> 26
26

Corporation where such records and books are kept; disburse the funds of the
Corporation as ordered by the Board; and, in general, perform all duties
incident to the office of Treasurer of a corporation and such other duties as
may from time to time be assigned to the Treasurer by the Board or the
President.

5.11 Assistant Secretaries and Assistant Treasurers. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Treasurer, respectively, or by the
Board or by the President.

ARTICLE 6

CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

6.1 Execution of Contracts. The Board, except as otherwise provided in
these By-laws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute and deliver any
instrument, and any such authority may be general or confined to specific
instances, or otherwise limited.

6.2 Loans. The Board may prospectively or retroactively authorize the
President or any other officer, employee or agent of the Corporation to effect
loans and advances at any time for the Corporation from any bank, trust company
or other institution, or from any firm, corporation or individual, and for such
loans and advances the person so authorized may make, execute and deliver
promissory notes, bonds or other certificates or evidences of indebtedness of
the Corporation, and, when authorized
<PAGE> 27
27

by the Board so to do, may pledge and hypothecate or transfer any securities or
other property of the Corporation as security for any such loans or advances.
Such authority conferred by the Board may be general or confined to specific
instances, or otherwise limited.

6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.

6.4 Deposits. The funds of the Corporation not otherwise employed shall
be deposited from time to time to the order of the Corporation with such banks,
trust companies, investment banking firms, financial institutions or other
depositaries as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.

<PAGE> 28
28

ARTICLE 7

STOCK AND DIVIDENDS

7.1 Certificates Representing Shares. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
President or a Vice President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and may be impressed with the seal of
the Corporation or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles, if the certificate is countersigned by a transfer
agent or registrar other than the Corporation itself or its employee. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon any certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may, unless otherwise ordered by the Board, be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.

7.2 Transfer of Shares. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Cancelled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer
<PAGE> 29
29

agent of the Corporation. A person in whose name shares of capital stock shall
stand on the books of the Corporation shall be deemed the owner thereof to
receive dividends, to vote as such owner and for all other purposes as respects
the Corporation. No transfer of shares of capital stock shall be valid as
against the Corporation, its stockholders and creditors for any purpose, except
to render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of the
Corporation by an entry showing from and to whom transferred.

7.3 Transfer and Registry Agents. The Corporation may from time to time
maintain one or more transfer offices or agents and registry offices or agents
at such place or places as may be determined from time to time by the Board.

7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder of
any shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board
<PAGE> 30
30

may direct, to indemnify the Corporation and its transfer agents and registrars
against any claim that may be made against any of them on account of the
continued existence of any such certificate so alleged to have been lost,
destroyed, stolen or mutilated and against any expense in connection with such
claim.

7.5 Rules and Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws or
with the Certificate of Incorporation, concerning the issue, transfer and
registration of certificates representing shares of its capital stock.

7.6 Restriction on Transfer of Stock. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder, including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate rep resenting such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of
stockholders or among such stockholders and the Corporation. No restriction so
imposed shall be binding with respect to capital
<PAGE> 31
31

stock issued prior to the adoption of the restriction unless the holders of such
capital stock are parties to an agreement or voted in favor of the restriction.

7.7 Dividends, Surplus, Etc. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:

7.7.1 may declare and pay dividends or make other distributions on the
outstanding shares of capital stock in such amounts and at such time or times as
it, in its discretion, shall deem advisable giving due consideration to the
condition of the affairs of the Corporation;

7.7.2 may use and apply, in its discretion, any of the surplus of the
Corporation in purchasing or acquiring any shares of capital stock of the
Corporation, or purchase warrants therefor, in accordance with law, or any of
its bonds, debentures, notes, scrip or other securities or evidences of
indebtedness; and

7.7.3 may set aside from time to time out of such surplus or net
profits such sum or sums as, in its discretion, it may think proper, as a
reserve fund to meet contingencies, or for equalizing dividends or for the
purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best interests of
the Corporation.

<PAGE> 32
32

ARTICLE 8

INDEMNIFICATION

8.1 Indemnity Undertaking. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding"), whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of the Corporation
to procure a judgment in its favor, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a Director or
officer of the Corporation, or, at the request of the Corporation, is or was
serving as a director or officer of any other corporation or in a capacity with
comparable authority or responsibilities for any partnership, joint venture,
trust, employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees, disbursements and other
charges). Persons who are not directors or officers of the Corporation (or
otherwise entitled to indemnification pursuant to the preceding sentence) may be
similarly indemnified in respect of service to the Corporation or to an Other
Entity at the request of the Corporation to the extent the Board at any time
specifies that such persons are entitled to the benefits of this Article 8.

8.2 Advancement of Expenses. The Corporation shall, from time to time,
reimburse or advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred in connection with any Proceeding,
in
<PAGE> 33
33

advance of the final disposition of such Proceeding; provided, however, that, if
required by the General Corporation Law, such expenses incurred by or on behalf
of any Director or officer or other person may be paid in advance of the final
disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such Director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.

8.3 Rights Not Exclusive. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall not be deemed exclusive of any other rights to which a
person seeking indemnification or reimbursement or advancement of expenses may
have or hereafter be entitled under any statute, the Certificate of
Incorporation, these By-laws, any agreement, any vote of stockholders or
disinterested Directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.

8.4 Continuation of Benefits. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Article 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
<PAGE> 34
34

8.5 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of an Other Entity,
against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or
not the Corporation would have the power to indemnify such person against such
liability under the provisions of this Article 8, the Certificate of
Incorporation or under section 145 of the General Corporation Law or any other
provision of law.

8.6 Binding Effect. The provisions of this Article 8 shall be a
contract between the Corporation, on the one hand, and each Director and officer
who serves in such capacity at any time while this Article 8 is in effect and
any other person entitled to indemnification hereunder, on the other hand,
pursuant to which the Corporation and each such Director, officer or other
person intend to be, and shall be legally bound. No repeal or modification of
this Article 8 shall affect any rights or obligations with respect to any state
of facts then or theretofore existing or thereafter arising or any proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.

8.7 Procedural Rights. The rights to indemnification and reimbursement
or advancement of expenses provided by, or granted pursuant to, this Article 8
shall be enforceable by any person entitled to such indemnification or
<PAGE> 35
35

reimbursement or advancement of expenses in any court of competent jurisdiction.
The burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, its independent legal
counsel and its stockholders) to have made a determination prior to the
commencement of such action that such indemnification or reimbursement or
advancement of expenses is proper in the circumstances nor an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) that such person is not entitled
to such indemnification or reimbursement or advancement of expenses shall
constitute a defense to the action or create a presumption that such person is
not so entitled. Such a person shall also be indemnified for any expenses
incurred in connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.

8.8 Service Deemed at Corporation's Request. Any Director or officer of
the Corporation serving in any capacity (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
<PAGE> 36
36

8.9 Election of Applicable Law. Any person entitled to be indemnified
or to reimbursement or advancement of expenses as a matter of right pursuant to
this Article 8 may elect to have the right to indemnification or reimbursement
or advancement of expenses interpreted on the basis of the applicable law in
effect at the time of the occurrence of the event or events giving rise to the
applicable Proceeding, to the extent permitted by law, or on the basis of the
applicable law in effect at the time such indemnification or reimbursement or
advancement of expenses is sought. Such election shall be made, by a notice in
writing to the Corporation, at the time indemnification or reimbursement or
advancement of expenses is sought; provided, however, that if no such notice is
given, the right to indemnification or reimbursement or advancement of expenses
shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.
<PAGE> 37
37

ARTICLE 9

BOOKS AND RECORDS

9.1 Books and Records. There shall be kept at the principal office of
the Corporation correct and complete records and books of account recording the
financial transactions of the Corporation and minutes of the proceedings of the
stockholders, the Board and any committee of the Board. The Corporation shall
keep at its principal office, or at the office of the transfer agent or
registrar of the Corporation, a record containing the names and addresses of all
stockholders, the number and class of shares held by each and the dates when
they respectively became the owners of record thereof.

9.2 Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible written
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.

9.3 Inspection of Books and Records. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
stockholders for inspection.
<PAGE> 38
38

ARTICLE 10

SEAL

The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.

ARTICLE 11

FISCAL YEAR

The fiscal year of the Corporation shall be fixed, and may be changed,
by resolution of the Board.
<PAGE> 39
39

ARTICLE 12

PROXIES AND CONSENTS

Unless otherwise directed by the Board, the Chairman, the President,
any Vice President, the Secretary or the Treasurer, or any one of them, may
execute and deliver on behalf of the Corporation proxies respecting any and all
shares or other ownership interests of any Other Entity owned by the Corporation
appointing such person or persons as the officer executing the same shall deem
proper to represent and vote the shares or other ownership interests so owned at
any and all meetings of holders of shares or other ownership interests, whether
general or special, and/or to execute and deliver consents respecting such
shares or other ownership interests; or any of the aforesaid officers may attend
any meeting of the holders of shares or other ownership interests of such Other
Entity and thereat vote or exercise any or all other powers of the Corporation
as the holder of such shares or other ownership interests.

ARTICLE 13

EMERGENCY BY-LAWS

Unless the Certificate of Incorporation provides otherwise, the
following provisions of this Article 13 shall be effective during an emergency,
which is defined as when a quorum of the Corporation's Directors cannot be
readily assembled because of some catastrophic event. During such emergency:

13.1 Notice to Board Members. Any one member of the Board or any one of
the following officers: Chairman, President, any Vice President, Secretary, or
<PAGE> 40
40

Treasurer, may call a meeting of the Board. Notice of such meeting need be given
only to those Directors whom it is practicable to reach, and may be given in any
practical manner, including by publication and radio. Such notice shall be given
at least six hours prior to commencement of the meeting.

13.2 Temporary Directors and Quorum. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum.

13.3 Actions Permitted To Be Taken. The Board as constituted in Section
13.2, and after notice as set forth in Section 13.1 may:

13.3.1 prescribe emergency powers to any officer of the
Corporation;

13.3.2 delegate to any officer or Director, any of the powers
of the Board;

13.3.3 designate lines of succession of officers and agents,
in the event that any of them are unable to discharge their duties;

13.3.4 relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
<PAGE> 41
41

13.3.5 take any other convenient, helpful or necessary action
to carry on the business of the Corporation.

ARTICLE 14

AMENDMENTS

These By-laws may be amended or repealed and new By-laws may be adopted
by a vote of the holders of shares entitled to vote in the election of Directors
or by the Board. Any By-laws adopted or amended by the Board may be amended or
repealed by the Stockholders entitled to vote thereon.

<PAGE> 1
EXHIBIT 21.01

LIFE RE CORPORATION

LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
NAMES UNDER WHICH
NAME OF JURISDICTION OF THE SUBSIDIARY
SUBSIDIARY INCORPORATION DOES BUSINESS
- ---------- ------------- -------------
<S> <C> <C>
TexasRe Life Insurance Company Texas TexasRe Life Insurance Company

Life Reassurance Corporation Connecticut Life Reassurance Corporation
of America of America
Reassure America Life Insurance Illinois Reassure America Life Insurance
Company Company

Life Re International, Ltd. Bermuda Life Re International, Ltd.

AML Acquisition Company Delaware AML Acquisition Company

American Merchants Life Insurance Illinois American Merchants Life Insurance
Company Company

Mission Life Insurance Company Texas Mission Life Insurance Company

Capitol Bankers Life Insurance Michigan Capitol Bankers Life Insurance
Company Company

Assure America, Inc. Texas Assure America, Inc.

Life Re Capital Trust I Delaware Life Re Capital Trust I

Life Re Capital Trust II Delaware Life Re Capital Trust II
</TABLE>

<ARTICLE> 7
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 3,320,814
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 57,437
<MORTGAGE> 29,574
<REAL-ESTATE> 1,076
<TOTAL-INVEST> 3,775,461
<CASH> 26,408
<RECOVER-REINSURE> 365,460
<DEFERRED-ACQUISITION> 532,702
<TOTAL-ASSETS> 5,032,017
<POLICY-LOSSES> 3,728,270
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 0
<OTHER-SE> 816,147
<TOTAL-LIABILITY-AND-EQUITY> 5,032,017
709,590
<INVESTMENT-INCOME> 233,947
<INVESTMENT-GAINS> 3,101
<OTHER-INCOME> 0
<BENEFITS> 513,098
<UNDERWRITING-AMORTIZATION> 188,494
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> (8,418)
<INCOME-TAX> 24,003
<INCOME-CONTINUING> (32,421)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,421)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0

</TABLE>