FIRST FORTIS LIFE INSURANCE CO, 10-K405, 1997-03-31

FIRST FORTIS LIFE INSURANCE CO
10-K405, 1997-03-31

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549

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

FORM 10-K

(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE TRANSITION PERIOD FROM COMMISSION FILE NUMBER
33-71690

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

FIRST FORTIS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter

<TABLE>
<S> <C>
NEW YORK 13-2699219
State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)

220 SALINA MEADOWS PARKWAY, SUITE
255,
SYRACUSE, NEW YORK 13220
(Address of principal executive
offices)
</TABLE>

Registrant's telephone number: (315) 451-0066

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

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

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.

/X/ Yes / / No

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Form S-1 Amended Registration Statement to be filed by the
Registrant are incorporated by reference into Parts I, II and III.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I

ITEM 1. BUSINESS

"First Fortis Life Insurance Company" on page 8 and "Further Information
About First Fortis" on pages 18 through 22 of the prospectus attached hereto as
Exhibit No. 99 are incorporated herein.

The Company seeks to compete primarily on the basis of customer service,
product design, and, in the case of products funded through Fortis Series Fund,
Inc., the investment results achieved by Fortis Advisers, Inc. Many other
insurance companies compete with the Company in each of its markets, including
on the basis of price. Many of these companies, which include some of the
largest and best known insurance companies, have considerably greater resources
than the Company.

ITEM 2. PROPERTIES

The Company leases its home office building, consisting of 26,875 square
feet, in Syracuse, New York. It also leases space consisting of 9,471 square
feet for the maintenance of a sales office located in New York City and space
consisting of 1,076 square feet for a sales office in Rochester, NY. The Company
expects that this office space will be adequate for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

The Company is a defendant in various lawsuits, none of which, in the
opinion of the Company counsel, will result in a material liability.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.
<PAGE>
PART II

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

Not applicable.

ITEM 6. SELECTED FINANCIAL DATA

"Selected Financial Data" from page 19 of the prospectus attached hereto as
Exhibit No. 99, is incorporated herein by reference.

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

"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 19 of the prospectus attached hereto as Exhibit No. 99 is
incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's financial statements included in the prospectus attached
hereto as Exhibit No. 99 are incorporated by reference.

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

None.
<PAGE>
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

"Directors and Executive Officers of the Registrant" on Page 21 of the
prospectus attached hereto as Exhibit No. 99 is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

"Executive Compensation" on Page 22 of the prospectus attached hereto as
Exhibit No. 99 is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) Security Ownership of Certain Beneficial Owners

<TABLE>
<CAPTION>
PERCENTAGE
NAME & ADDRESS OF BENEFICIAL NUMBER OF OF OUTSTANDING
OWNER SHARES VOTING SHARES
- --------------------------------- ----------- ------------------
<S> <C> <C>
Fortis AMEV 100,000 100%
Archimedeslaan 10
3584 BA
Utrecht, The Netherlands
</TABLE>

(b) Security Ownership of Management

None.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.
<PAGE>
PART IV

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

(a)(1)The following financial statements of First Fortis Life Insurance Company
are included in Item 8:

Report of Independent Auditors

Balance Sheets at December 31, 1996 and 1995

Statements of Operations for the years ended December 31, 1996, 1995 and
1994

Statements of Changes in Shareholder's Equity for the years ended
December 31, 1996, 1995 and 1994

Statements of Cash Flows for the years ended December 31, 1996, 1995 and
1994.

Notes to Financial Statements

(a)(2) The information required by the following financial statement schedules
for First Fortis Life Insurance Company are included in Item 8:

I. Summary of Investments -- Other than Investments in Related Parties
-- Contained in the Notes to Financial Statements.

II. Condensed Financial Information of Registrant -- Contained in the
non-financial statement part of the prospectus.

IV. Reinsurance -- Contained in the Notes to Financial Statements.

V. Valuation and Qualifying Accounts -- Contained in the Financial
Statements and Notes to Financial Statements.

All other schedules to the financial statements required by Article 7 of the
Regulation S-X are not required under the related instructions or are
inapplicable and therefore have been omitted.

(a)(3) Listing of Exhibits

2. None.

3.(a) Articles of Incorporation of First Fortis Life Insurance Company --
Incorporated by reference from Form 10-K filed by registrant, File No.
33-71690, on March 29, 1996.

(b) By-laws of First Fortis Life Insurance Company (Incorporated by
reference from Form N-4 Registration Statement, File No. 33-71686, of
registrant and its Separate Account A filed on November 15, 1993);

4.(a) Form of Combination Fixed and Variable Group Annuity Contract;
(Incorporated by reference from Post-Effective Amendment No. 2 to Form
N-4 Registration Statement, File No. 33-71686, of registrant and its
Separate Account A filed on April 27, 1995);

(b) Form of Application to be used in connection with Contract filed as
Exhibit 4 (a) (Incorporated by reference from Post-Effective Amendment
No. 2 to Form N-4 Registration Statement, File No. 33-71686, of
registrant and its Separate Account A filed on April 27, 1995);

(c) Form of IRA Endorsement (Incorporated by reference from
Post-Effective Amendment No. 2 to Form N-4 Registration Statement, File
No. 33-71686, of registrant and its Separate Account A filed on April 27,
1995);

(d) Form of Section 403(b) Annuity Endorsement (Incor-porated by
reference from Post-Effective Amendment No. 2 to Form N-4 Registration
Statement, File No. 33-71686, of registrant and its Separate Account A
filed on April 27, 1995);

10. Administrative Service Agreement -- Incorporated by reference from
Form 10-K filed by registrant, File No. 33-71690, on March 29, 1996.
<PAGE>
24.(a) Power of Attorney for Messrs. Rutherford, Freedman and Madame
Gharib. (Incorporated by reference from Form N-4 Registration Statement,
File No. 33-71686, of registrant and its Separate Account A filed on
November 15, 1993).

(b) Power of Attorney for Messrs. Gardner, Nelson and Galston.
(Incorporated by reference from Form N-4 Registration Statement, File No.
33-71686, of registrant and its Separate Account A filed on February 28,
1995.)

99. Form of prospectus to be filed as part of Form S-1 Amended
Registration Statement of the Registrant.

(b) Reports on Form 8-K filed in the fourth quarter of 1996

None.

Included in 14 (a)(3) above.

(d) Financial Statement Schedules

Included in 14(a)(2) above.
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on this 26th day of
March, 1997.

FIRST FORTIS LIFE INSURANCE COMPANY
By: /s/ TERRY J. KRYSHAK
-----------------------------------
Terry J. Kryshak
SR. VICE PRESIDENT &
CHIEF ADMINISTRATIVE OFFICER

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been duly signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 26th day of March, 1997. The
following persons represent a majority of the Board of Directors of First Fortis
Life Insurance Company:

<TABLE>
<CAPTION>
SIGNATURE TITLE WITH FIRST FORTIS
- -------------------------------------------------------- --------------------------------------------------------

<C> <S>
/s/ TERRY J. KRYSHAK
-------------------------------------------- Sr. Vice President and Chief Administrative Officer and
Terry J. Kryshak Director (Principal Executive Officer)

/s/ LARRY M. CAINS
-------------------------------------------- Treasurer and Director (Principal Financial Officer)
Larry M. Cains

/s/ LEANNE F. HUGHES
-------------------------------------------- Assistant Treasurer and Director of Accounting
Leanne F. Hughes (Principal Accounting Officer)

*
-------------------------------------------- President and Director
Allen Royal Freedman

*
-------------------------------------------- Director
Susie Gharib

*
-------------------------------------------- Director
Guy Gerard Rutherfurd, Jr.

*
-------------------------------------------- Director
Dale Edward Gardner

*
-------------------------------------------- Director
Kenneth Warwick Nelson

-------------------------------------------- Director
Robert B. Pollack
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE WITH FIRST FORTIS
- -------------------------------------------------------- --------------------------------------------------------

<C> <S>
/s/ DEAN C. KOPPERUD
-------------------------------------------- Director
Dean C. Kopperud

-------------------------------------------- Director
Thomas M. Keller

--------------------------------------------
Clarence Elkus Galston Director
</TABLE>

<TABLE>
<S> <C>
*By /s/
-----------------------------------------------
Terry J. Kryshak
ATTORNEY-IN-FACT
</TABLE>

<PAGE>
EXHIBIT 99
<PAGE>
FIRST FORTIS MASTERS VARIABLE ANNUITY

Flexible Premium Deferred

Combination Variable and Fixed Annuity Contracts

PROSPECTUS DATED
May 1, 1997
FORTIS LOGO

FIRST FORTIS LIFE INSURANCE COMPANY
MAILING ADDRESS: STREET ADDRESS: PHONE: 1-800-745-8248
P.O. BOX 3249 220 SALINA MEADOWS PARKWAY
SYRACUSE SUITE 255
NEW YORK 13220 SYRACUSE
NEW YORK 13220

This Prospectus describes flexible premium deferred combination variable and
fixed annuity contracts (a "Contract") issued by First Fortis Life Insurance
Company ("First Fortis"). The minimum initial purchase payment is generally
$5,000 and is $1,000 for each subsequent purchase payment.

A Contract allows you to accumulate funds on a tax-deferred basis. You may elect
a guaranteed interest accumulation option through First Fortis' Fixed Account or
a variable return accumulation option through Separate Account A (the "Variable
Account") of First Fortis, or a combination of these two options. Under the
variable rate accumulation option, you can choose among one or more of the
following investment portfolios of Fortis Series Fund, Inc. (the "Series Fund"):
Money Market Series, U.S. Government Securities Series, Diversified Income
Series, Global Bond Series, High Yield Series, Asset Allocation Series, Global
Asset Allocation Series, Value Series, Growth & Income Series, S&P 500 Index
Series, Blue Chip Stock Series, Growth Stock Series, Global Growth Series,
International Stock Series and Aggressive Growth Series. The accompanying
Prospectus for Fortis Series Fund describes the investment objectives, policies
and risks of each of the Portfolios. Under the guaranteed interest accumulation
option, you can choose among ten different guarantee periods, each of which has
its own interest rate.

The Contract provides several different types of retirement and death benefits,
including fixed and variable annuity income options. Within limits, you may make
partial surrenders of the Contract Value or may totally surrender the Contract
for its Cash Surrender Value.

You have the right to examine a Contract for ten days from the time you receive
the Contract and return it for a refund of the full Contract Value.

This Prospectus gives prospective investors information about the Contracts that
they should know before investing. This Prospectus must be accompanied by a
current Prospectus of Fortis Series Fund, Inc. Both Prospectuses should be read
carefully and kept for future reference.

A Statement of Additional Information, dated May 1, 1997, about certain aspects
of the Contracts has been filed with the Securities and Exchange Commission and
is available without charge, from First Fortis at the address and phone number
printed above. The Table of Contents for the Statement of Additional Information
appears on page 23 of this Prospectus.

THESE CONTRACTS ARE NOT OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK,
CREDIT UNION, BROKER-DEALER OR OTHER FINANCIAL INSTITUTION. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY; AND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

97104 (Ed. 5/96)
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Special Terms Used in this Prospectus................................... 3
Information Concerning Fees and Charges................................. 4
Summary of Contract Features............................................ 7
First Fortis Life Insurance Company..................................... 8
The Variable Account.................................................... 8
Series Fund............................................................. 9
The Fixed Account....................................................... 9
- Guaranteed Interest Rates/Guarantee Periods....................... 9
- Market Value Adjustment........................................... 9
- Investments by First Fortis....................................... 10
Accumulation Period..................................................... 10
- Issuance of a Contract and Purchase Payments...................... 10
- Contract Value.................................................... 11
- Allocation of Purchase Payments and Contract Value................ 11
- Total and Partial Surrenders...................................... 12
- Benefit Payable on Death of Annuitant or Contract Owner........... 12
The Annuity Period...................................................... 13
- Annuity Commencement Date......................................... 13
- Commencement of Annuity Payments.................................. 13
- Relationship Between Subaccount Investment Performance and Amount
of Variable Annuity Payments...................................... 13
- Annuity Forms..................................................... 14
- Death of Annuitant or Other Payee................................. 14
Charges and Deductions.................................................. 14
- Premium Taxes..................................................... 14
- Charges Against the Variable Account.............................. 14
- Tax Charge........................................................ 15
- Surrender Charge.................................................. 15
- Miscellaneous..................................................... 15
- Reduction of Charges.............................................. 15
General Provisions...................................................... 15
- The Contracts..................................................... 15
- Postponement of Payment........................................... 15
- Misstatement of Age or Sex and Other Errors....................... 15
- Assignment........................................................ 16
- Beneficiary....................................................... 16
- Reports........................................................... 16
Rights Reserved By First Fortis......................................... 16
Distribution............................................................ 16
Federal Tax Matters..................................................... 17
Further Information about First Fortis.................................. 18
- General........................................................... 19
- Selected Financial Data........................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 19
Directors and Executive Officers........................................ 21
- Executive Compensation............................................ 22
- Ownership of Securities........................................... 22
Voting Privileges....................................................... 22
Legal Matters........................................................... 23
Other Information....................................................... 23
Contents of Statement of Additional Information......................... 23
First Fortis Financial Statements....................................... 23
Appendix A--Sample Market Value Adjustment Calculations................. A-1
Appendix B--Sample Death Benefit Calculations........................... B-1
Appendix C--Explanation of Expense Calculations......................... C-1
</TABLE>

THE CONTRACTS ARE NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. FIRST FORTIS DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATION REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS WHICH IS NOT
INCLUDED IN THIS PROSPECTUS, THE RELATED STATEMENT OF ADDITIONAL INFORMATION, OR
ANY SUPPLEMENTS THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY
FIRST FORTIS.
<PAGE>
SPECIAL TERMS USED IN THIS PROSPECTUS

<TABLE>
<S> <C>
ACCUMULATION PERIOD The time period under a Contract between the
Contract Issue Date and the Annuity Commencement
Date.
ACCUMULATION UNIT A unit of measure used to calculate a Contract
Owner's interest in the Variable Account during
the Accumulation Period.
ANNUITANT A person during whose life annuity payments are
to be made by First Fortis under the Contract.
ANNUITY COMMENCEMENT DATE The date on which the Annuity Period commences.
ANNUITY PERIOD The time period following the Accumulation
Period, during which annuity payments are made
by First Fortis.
ANNUITY UNIT A unit of measurement used to calculate variable
annuity payments.
BENEFICIARY The person entitled to receive benefits under
the terms of the Contract.
CASH SURRENDER VALUE The amount payable to the Contract Owner on
surrender of the Contract after all applicable
adjustments and deduction of all applicable
charges.
CONTRACT ISSUE DATE The date on which the Contract becomes effective
as shown on the Contract Data Page.
CONTRACT OWNER The person or company named in the application
for a Contract, who is entitled to exercise all
rights and privileges of ownership under the
Contract during the Accumulation Period.
CONTRACT VALUE The sum of the Fixed Account Value and the
Variable Account Value.
FIXED ACCOUNT The name of the alternative under which purchase
payments are allocated to First Fortis' General
Account.
FIXED ACCOUNT VALUE The amount of your Contract Value which is in
the Fixed Account.
FIXED ANNUITY OPTION An annuity option under which First Fortis
promises to pay the Annuitant or any other payee
that you designate one or more fixed payments.
GENERAL ACCOUNT All assets of First Fortis other than those in
the Variable Account, and other than those in
any other legally segregated separate account
established by First Fortis.
GUARANTEED INTEREST RATE The rate of interest we credit during any
Guarantee Period, on an effective annual basis.
GUARANTEE PERIOD The period for which a Guaranteed Interest Rate
is credited.
HOME OFFICE Our office at 220 Salina Meadows Parkway,
Syracuse, New York 13220; 1-800-745-8248;
Mailing address: P.O. Box 3249, Syracuse NY
13220.
MARKET VALUE ADJUSTMENT Positive or negative adjustment in Fixed Account
Value that we make if such value is paid out
more than fifteen days before or after the end
of a Guarantee Period in which it was being
held.
NET PURCHASE PAYMENT The gross amount of a purchase payment less any
applicable premium taxes or similar governmental
assessments.
NON-QUALIFIED CONTRACTS Contracts that do not qualify for the special
federal income tax treatment applicable in
connection with certain retirement plans.
PORTFOLIO Each separate investment portfolio of Series
Fund eligible for investment by the Variable
Account.
QUALIFIED CONTRACTS Contracts that are qualified for the special
federal income tax treatment applicable in
connection with certain retirement plans.
SERIES FUND Fortis Series Fund, Inc., a diversified,
open-end management investment company in which
the Variable Account invests.
SEVEN YEAR ANNIVERSARY The seventh anniversary of a Contract Issue
Date, and each subsequent seventh anniversary of
that date.
SUBACCOUNTS The several Subaccounts of the Variable Account,
each of which invests its assets in a different
Portfolio.
VALUATION DATE All business days except, with respect to any
Subaccount, days on which the related Portfolio
does not value its shares. Generally, the
Portfolios value their shares on each day the
New York Stock Exchange is open.
VALUATION PERIOD The period that starts at the close of regular
trading on the New York Stock Exchange on a
Valuation Date and ends at the close of regular
trading on the exchange on the next succeeding
Valuation Date.
VARIABLE ACCOUNT The segregated asset account referred to as
Separate Account A of First Fortis Life
Insurance Company established to receive and
invest purchase payments under Contracts.
VARIABLE ACCOUNT VALUE The amount of your Contract Value in the
Subaccounts of the Variable Account.
VARIABLE ANNUITY OPTION An annuity option under which First Fortis
promises to pay the Annuitant or any other payee
chosen by you one or more payments which vary in
amount in accordance with the net investment
experience of the Subaccounts selected by the
Annuitant.
WRITTEN REQUEST A written, signed and dated request, in form and
substance satisfactory to First Fortis and
received at our Home Office.
</TABLE>

3
<PAGE>
INFORMATION CONCERNING FEES AND CHARGES

CONTRACT OWNER TRANSACTION CHARGES

<TABLE>
<S> <C>
Front-End Sales Charge Imposed on Purchases................. 0%
Maximum Surrender Charge for Sales Expenses................. 7%(1)
</TABLE>

<TABLE>
<CAPTION>
SURRENDER CHARGE AS A
NUMBER OF YEARS SINCE PERCENTAGE OF PURCHASE
PURCHASE PAYMENT WAS CREDITED PAYMENT
- ------------------------------ -----------------------
<S> <C>
Less than 1 7%
At least 1 but less than 2 6%
At least 2 but less than 3 5%
At least 3 but less than 4 4%
At least 4 but less than 5 3%
At least 5 but less than 6 2%
At least 6 but less than 7 1%
7 or more 0%
</TABLE>

<TABLE>
<S> <C>
Other Surrender Fees................................. 0%
Exchange Fee......................................... 0%

ANNUAL CONTRACT ADMINISTRATION CHARGE....................... $ 0

VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
</TABLE>

<TABLE>
<S> <C>
Mortality and Expense Risk Charge.................... 1.25%
Variable Account Administrative Charge............... .10%
---
Total Variable Account Annual Expenses............. 1.35%

OPTIONAL VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
</TABLE>

<TABLE>
<S> <C>
Enhanced Death Benefit Current Charge................ .15%
</TABLE>

There is an Enhanced Death Benefit which can be selected at the time of
application. The current charge is a mortality risk charge as set forth above
and this change can be increased to a maximum of .30% of the average daily net
assets of the Variable Account. (See "Charges Against the Variable
Account--Enhanced Death Benefit Charge.") There are two sets of examples below.
One set has been calculated with the current Enhanced Death Benefit Charge and
the other set has been calculated without it.
- ------------------------
(1) This charge does not apply in certain cases such as partial surrenders each
year of up to 10% of "new purchase payments" as defined under the heading
"surrender charge," or payment of a death benefit.

MARKET VALUE ADJUSTMENT WITH RESPECT TO FIXED ACCOUNT

Surrenders and other withdrawals from the Fixed Account more than fifteen days
from the end of a Guarantee Period are subject to a Market Value Adjustment. The
Market Value Adjustment may increase or reduce the Fixed Account Value. It is
computed pursuant to a formula that is described in more detail under "Market
Value Adjustment."

SERIES FUND ANNUAL EXPENSES (A)
<TABLE>
<CAPTION>
GLOBAL
MONEY U.S. GOVERNMENT DIVERSIFIED GLOBAL HIGH ASSET ASSET
MARKET SECURITIES INCOME BOND YIELD ALLOCATION ALLOCATION VALUE
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
------- --------------- ------------ ------- ------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory and
Management Fee.................
Other Expenses..................
Total Series Fund Operating
Expenses.......................

<CAPTION>
GROWTH & S&P 500 BLUE CHIP GROWTH GLOBAL
INCOME INDEX STOCK STOCK GROWTH INTERNATIONAL AGGRESSIVE
SERIES SERIES SERIES SERIES SERIES STOCK SERIES GROWTH SERIES
-------- -------- ---------- ------- ------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Advisory and
Management Fee.................
Other Expenses..................
Total Series Fund Operating
Expenses.......................
</TABLE>

- ------------------------------
(a)As a percentage of Series average net assets based on 1996 historical data.

4
<PAGE>
EXAMPLES*

CALCULATED WITHOUT CURRENT ENHANCED DEATH BENEFIT CHARGE (SEE CHARGES AGAINST
THE SEPARATE ACCOUNT--DEDUCTION FOR ENHANCED DEATH BENEFIT CHARGE)

If you SURRENDER your Contract in full at the end of any of the time periods
shown below, you would pay the following cumulative expenses on a $1,000
investment, assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE
PORTFOLIO: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Series...............................
U.S. Government Securities Series.................
Diversified Income Series.........................
Global Bond Series................................
High Yield Series.................................
Asset Allocation Series...........................
Global Asset Allocation Series....................
Growth & Income Series............................
Growth Stock Series...............................
Global Growth Series..............................
Aggressive Growth Series..........................
International Stock Series........................
S&P 500 Index Series..............................
Blue Chip Stock Series............................
Value Series......................................
</TABLE>

If you COMMENCE AN ANNUITY PAYMENT OPTION, or do NOT surrender your Contract or
commence as annuity payment option, you would pay the following cumulative
expenses on a $1,000 investment, assuming a 5% annual return on assets:

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

* Does not include the effect of any Market Value Adjustment.

5
<PAGE>
CALCULATED WITH CURRENT ENHANCED DEATH BENEFIT CHARGE (SEE CHARGES AGAINST THE
SEPARATE ACCOUNT--DEDUCTION FOR ENHANCED DEATH BENEFIT CHARGE)

THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
------------------------

The foregoing tables and examples are included to assist you in understanding
the transaction and operating expenses imposed directly or indirectly under the
Contracts and Series Fund. Amounts for state premium taxes or similar
assessments will also be deducted, where applicable.

See Appendix C for an explanation of the calculation of the amounts set forth
above.

6
<PAGE>
SUMMARY OF CONTRACT FEATURES

The following summary should be read in conjunction with the detailed
information in this Prospectus.

The Contracts are designed to provide individuals with retirement benefits
through the accumulation of Net Purchase Payments on a fixed or variable basis,
and by the application of such accumulations to provide fixed or variable
annuity payments.

"We," "our," and "us" mean First Fortis Life Insurance Company. "You" and "your"
mean a reader of this Prospectus who is contemplating making purchase payments
or taking any other action in connection with a Contract.

PURCHASE PAYMENTS

The initial purchase payment under a Contract must be at least $5,000 ($2,000
for a Contract pursuant to a qualified contract). Additional purchase payments
under a Contract must be at least $1,000. See "Issuance of a Contract and
Purchase Payments."

On the Contract Issue Date, the initial purchase payment is allocated, as
specified by the Contract Owner in the Contract application, among one or more
of the Subaccounts of the Variable Account, or to one or more of the Guarantee
Periods in the Fixed Account, or to a combination thereof. Subsequent purchase
payments are allocated in the same way, or pursuant to different allocation
percentages that the Contract Owner may subsequently request In Writing.

VARIABLE ACCOUNT INVESTMENT OPTIONS

Each of the Subaccounts of the Variable Account invests in shares of a
corresponding Portfolio of Series Fund. Contract Value in each of the
Subaccounts of the Variable Account will vary to reflect the investment
experience of each of the corresponding Portfolios, as well as deductions for
certain charges.

Each Portfolio has a separate and distinct investment objective and is managed
by Fortis Advisers, Inc or a subadviser of Fortis Advisers, Inc. A full
description of the Portfolios and their investment objectives, policies, risks
and expenses can be found in the current Prospectus for Series Fund, which
accompanies this Prospectus, and Series Fund Statement of Additional Information
which is available upon request.

FIXED ACCOUNT INVESTMENT OPTIONS

Any amount allocated by the Contract Owner to the Fixed Account earns a
Guaranteed Interest Rate. The level of the Guaranteed Interest Rate depends on
the length of the Guarantee Period selected by the Contract Owner. We currently
make available ten different Guarantee Periods, ranging from one to ten years.

If amounts are transferred, surrendered or otherwise paid out more than fifteen
days before or after the end of the applicable Guarantee Period, a Market Value
Adjustment will be applied to increase or decrease the amount of Fixed Account
Value that is paid out. Accordingly, the Market Value Adjustment can result in
gains or losses to you.

For a more complete discussion of the Fixed Account investment options and the
Market Value Adjustment, see "The Fixed Account."

TRANSFERS

During the Accumulation Period, you can transfer all or part of your Contract
Value from one Subaccount to another or into the Fixed Account and, subject to
any Market Value Adjustment, from one Guarantee Period to another or into a
Subaccount. There is currently no charge for these transfers. We reserve the
right to restrict the frequency of or otherwise condition, terminate, or impose
charges upon, transfers from a Subaccount during the Accumulation Period. During
the Annuity Period the person receiving annuity payments may make up to four
transfers (but not from a Fixed Annuity Option) during each year of the Annuity
Period. For a description of certain limitations on transfer rights, see
"Allocations of Purchase Payments and Contract Value--Transfers."

TOTAL OR PARTIAL SURRENDERS

Subject to certain conditions, all or part of the Contract Value may be
surrendered by the Contract Owner before the earlier of the Annuitant's death or
the Annuity Commencement Date. Amounts surrendered may be subject to a surrender
charge and, in addition, amounts surrendered from the Fixed Account may be
subject to a Market Value Adjustment. See "Total and Partial Surrenders,"
"Surrender Charge" and "Market Value Adjustment." Particular attention should be
paid to the tax implications of any surrender, including possible penalties for
premature distributions. See "Federal Tax Matters."

ANNUITY PAYMENTS

The Contract provides several types of annuity benefits to Contract Owners or
other persons they properly designate to receive such payments, including Fixed
and Variable Annuity Options. The Contract Owner has considerable flexibility in
choosing the Annuity Commencement Date. However, the tax implications of an
Annuity Commencement Date must be carefully considered, including the
possibility of penalties for commencing benefits either too soon or too late.
See "Annuity Commencement Date," "Annuity Forms" and "Federal Tax Matters" in
this Prospectus and "Taxation Under Certain Retirement Plans" in the Statement
of Additional Information.

DEATH BENEFIT

In the event that the Annuitant or Contract Owner dies prior to the Annuity
Commencement Date, a death benefit is payable. See "Benefit Payable on Death of
Annuitant or Contract Owner."

RIGHT TO EXAMINE THE CONTRACT

The Contract Owner can cancel a Contract by delivering or mailing it, together
with a Written Request, to First Fortis' Home Office or to the sales
representative through whom it was purchased, before the close of business on
the tenth day after receipt of the Contract. If these items are sent by mail,
properly addressed and postage prepaid, they will be deemed to be received by
First Fortis on the date postmarked. First Fortis will pay you the then current
Contract Value.

LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS

Certain rights you would otherwise have under a Contract may be limited by the
terms of any applicable employee benefit plan. These limitations may restrict
such things as total and partial surrenders, the amount or timing of purchase
payments that may be made, when annuity payments must start and the type of
annuity options that may be selected. Accordingly, you should familiarize
yourself with these and all other aspects of any retirement plan in connection
with which a Contract is issued.

The record owner of Contracts may be an employer (or the employer's designee) in
connection with an employee benefit plan. In the latter cases, certain rights
that a Contract Owner otherwise would have under a Contract may be reserved
instead by the employer.

7
<PAGE>
TAX IMPLICATIONS

The tax implications for Contract Owners or any other persons who may receive
payments under a Contract, and those of any related employee benefit plan can be
quite important. A brief discussion of some of these is set out under "Federal
Tax Matters" in this Prospectus and "Taxation Under Certain Retirement Plans" in
the Statement of Additional Information, but such discussion is not
comprehensive. Therefore, you should consider these matters carefully and
consult a qualified tax adviser before making purchase payments or taking any
other action in connection with a Contract or any related employee benefit plan.
Failure to do so could result in serious adverse tax consequences which might
otherwise have been avoided.

QUESTIONS AND OTHER COMMUNICATIONS

Any question about procedures of the Contract should be directed to your sales
representative, or First Fortis' Home Office: P.O. Box 3249, Syracuse, NY 13220;
1-800-745-8248. Purchase payments and Written Requests should be mailed or
delivered to the same Home Office address. All communications should include the
Contract number, the Contract Owner's name and, if different, the Annuitant's
name. The number for telephone transfers is 1-800-745-8248.
Any purchase payment or other communication, except a 10-day cancellation
notice, is deemed received at First Fortis' Home Office on the actual date of
receipt there in proper form unless received (1) after the close of regular
trading on The New York Stock Exchange, or (2) on a date that is not a Valuation
Date. In either of these two cases, the date of receipt will be deemed to be the
next Valuation Date.

FINANCIAL AND PERFORMANCE INFORMATION

The information presented below reflects the Accumulation Unit Information for
subaccounts of the Variable Account through December 31, 1996. Accumulation
Units have been rounded to the nearest whole unit.
<TABLE>
<CAPTION>
U.S. GOV'T DIVERSIFIED ASSET
MONEY MARKET SECURITIES INCOME GLOBAL BOND HIGH YIELD ALLOCATION
------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Accumulation Units in Force...
Accumulation Unit Value.......
MAY 1, 1996*
Accumulation Unit Value.......

<CAPTION>
GLOBAL ASSET GROWTH & S&P BLUE GLOBAL
ALLOCATION VALUE INCOME 500 CHIP GROWTH
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C>
DECEMBER 31, 1996
Accumulation Units in Force... -- -- --
Accumulation Unit Value....... -- -- --
MAY 1, 1996*
Accumulation Unit Value....... 10.000 10.000 10.000

<CAPTION>
INTERNATIONAL AGGRESSIVE
GROWTH STOCK STOCK GROWTH
------------- ------------ ------------
DECEMBER 31, 1996
Accumulation Units in Force...
Accumulation Unit Value.......
MAY 1, 1996*
Accumulation Unit Value.......
</TABLE>

- ----------------------------------------
* Accumulation Unit Value at date of initial registration effectiveness.

Audited financial statements of the Variable Account are included in the
Statement of Additional Information.

Advertising and other sales materials may include yield and total return figures
for the Subaccounts of the Variable Account. These figures are based on
historical results and are not intended to indicate future performance. "Yield"
is the income generated by an investment in the Subaccount over a period of time
specified in the advertisement. This rate of return is assumed to be earned over
a full year and is shown as a percentage of the investment. "Total return" is
the total change in value of an investment in the Subaccount over a period of
time specified in the advertisement. The rate of return shown would produce that
change in value over the specified period, if compounded annually. Yield figures
do not reflect the surrender charge and yield and total return figures do not
reflect premium tax charges. This makes the performance shown more favorable.

Financial information concerning First Fortis is included in this Prospectus
under "Further Information About First Fortis" and "First Fortis Financial
Statements."

FIRST FORTIS LIFE INSURANCE COMPANY

First Fortis Life Insurance Company, the issuer of the Contracts, was founded in
1971. At the end of 1995, First Fortis had approximately $ billion of total
life insurance in force. First Fortis is a New York corporation and is qualified
to sell life insurance and annuity contracts in New York. First Fortis is a
wholly-owned subsidiary of Fortis, Inc., which is itself indirectly owned 50% by
Fortis AMEV and 50% by Fortis AG. Fortis, Inc. manages the United States
operations for these two companies.

First Fortis is affiliated with the Fortis Financial Group, a joint effort by
Fortis Benefits Insurance Company, Fortis Advisers, Inc., Fortis Investors,
Inc., and Time Insurance Company, offering financial products through the
management, marketing and servicing of mutual funds, annuities, life insurance
and disability income products.

Fortis AMEV is a diversified financial services company headquartered in
Utrecht, The Netherlands, where its insurance operations began in 1847. Fortis
AG is a diversified financial services company headquartered in Brussels,
Belgium, where its insurance operations began in 1824. Fortis AMEV and Fortis AG
have merged their operating companies under the trade name of Fortis. The Fortis
group of companies is active in insurance, banking and financial services, and
real estate development in The Netherlands, Belgium, the United States, Western
Europe, and the Pacific Rim. The Fortis group of companies has assets in excess
of $160 billion.

All of the guarantees and commitments under the Contracts are general
obligations of First Fortis, regardless of whether the Contract Value has been
allocated to the Separate Account or to the Fixed Account. None of First Fortis'
affiliated companies has any legal obligation to back First Fortis' obligations
under the Contracts.

THE VARIABLE ACCOUNT

The Variable Account, which is a segregated investment account of First Fortis,
was established as Variable Account A by First Fortis pursuant to the insurance
laws of New York as of October 1, 1993. Although the Variable Account is an
integral part of First Fortis, the Variable Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. Assets in the Variable Account representing
reserves and liabilities under Contracts and other variable annuity contracts
issued by First Fortis will not be chargeable with liabilities arising out of
any other business of First Fortis.

There are currently fifteen Subaccounts in the Variable Account. The assets in
each Subaccount are invested exclusively in a distinct class (or series) of
stock issued by Series Fund, each of which represents a separate investment
Portfolio within Series Fund. Income and both realized and unrealized gains or
losses from the assets of each Subaccount of the Variable Account are credited
to or charged against that Subaccount without regard to income, gains or losses
from any other

8
<PAGE>
Subaccount of the Variable Account or arising out of any other business we may
conduct. New Subaccounts may be added as new Portfolios are added to Series Fund
and made available. Correspondingly, if any Portfolios are eliminated from
Series Fund, Subaccounts may be eliminated from the Variable Account.

SERIES FUND

Series Fund is a "series" type of mutual fund which is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940.
Series Fund has served as the investment medium for the Variable Account since
the Variable Account commenced operations and has also served as the investment
media of other variable accounts of an affiliated company since 1987.

First Fortis purchases and redeems Series Fund' shares for the Variable Account
at their net asset value without the imposition of any sales or redemption
charges. Such shares represent interests in the Portfolios of Series Fund
available for investment by the Variable Account. Each Portfolio corresponds to
one of the Subaccounts of the Variable Account. The assets of each Portfolio are
separate from the others and each Portfolio operates as a separate investment
portfolio whose performance has no effect on the investment performance of any
other Portfolio.

Any dividend or capital gain distributions attributable to Contracts are
automatically reinvested in shares of the Portfolio from which they are received
at the Portfolio's net asset value on the date paid. Such dividends and
distributions will have the effect of reducing the net asset value of each share
of the corresponding Portfolio and increasing, by an equivalent value, the
number of shares outstanding of the Portfolio. However, the value of your
interest in the corresponding Subaccount will not change as a result of any such
dividends and distributions.

The Portfolios of Series Fund available for investment by the Variable Account
are the Money Market Series, the U.S. Government Securities Series, the
Diversified Income Series, the Global Bond Series, the High Yield Series, the
Asset Allocation Series, the Global Asset Allocation Series, the Growth & Income
Series, the Growth Stock Series, the Global Growth Series, the International
Stock Series and the Aggressive Growth Series. A full description of the
Portfolios, their investment policies and restrictions, the charges, the risks
attendant to investing in them, and other aspects of their operations is
contained in the Prospectus for Series Fund accompanying this Prospectus and in
the Statement of Additional Information for Series Fund referred to therein.
Additional copies of these documents may be obtained from your sales
representative or from our Home Office. The complete risk disclosure in the
Prospectus for the Diversified Income Series and Asset Allocation Series should
be read before selection of them for investment.

THE FIXED ACCOUNT

GUARANTEED INTEREST RATES/GUARANTEE PERIODS

Any amount allocated by the Contract Owner to the Fixed Account earns a
Guaranteed Interest Rate commencing with the date of such allocation. This
Guaranteed Interest Rate continues for a number of years (not to exceed ten)
selected by the Contract Owner. At the end of this Guarantee Period, the
Contract Owner's Contract Value in that Guarantee Period, including interest
accrued thereon, will be allocated to a new Guarantee Period of the same length
unless First Fortis has received a Written Request from the Contract Owner to
allocate this amount to a different Guarantee Period or periods or to one or
more of the Subaccounts. We must receive this Written Request at least three
business days prior to the end of the Guarantee Period. The first day of the new
Guarantee Period (or other reallocation) will be the day after the end of the
prior Guarantee Period. We will notify the Contract Owner at least 45 days and
not more than 60 days prior to the end of any Guarantee Period.

We currently make available ten different Guarantee Periods, ranging from one to
ten years. Each Guarantee Period has its own Guaranteed Interest Rate, which may
differ from those for other Guarantee Periods. From time to time we will, at our
discretion, change the Guaranteed Interest Rate for future Guarantee Periods of
various lengths. These changes will not affect the Guaranteed Interest Rates
being paid on Guarantee Periods that have already commenced. Each allocation or
transfer of an amount to a Guarantee Period commences the running of a new
Guarantee Period with respect to that amount, which will earn a Guaranteed
Interest Rate that will continue unchanged until the end of that period. The
Guaranteed Interest Rate will never be less than an effective annual rate of 4%.

First Fortis declares the Guaranteed Interest Rates from time to time as market
conditions dictate. First Fortis advises a Contract Owner of the Guaranteed
Interest Rate for a chosen Guarantee Period at the time a purchase payment is
received, a transfer is effectuated or a Guarantee Period is renewed.

First Fortis has no specific formula for establishing the Guaranteed Interest
Rates for the Guarantee Periods. The rate may be influenced by, but not
necessarily correspond to, interest rates generally available on the types of
investments acquired with amounts allocated to the Guarantee Period. See
"Investments by First Fortis." First Fortis in determining Guaranteed Interest
Rates, may also consider, among other factors, the duration of a Guarantee
Period, regulatory and tax requirements, sales and administrative expenses borne
by First Fortis, risks assumed by First Fortis, First Fortis' profitability
objectives, and general economic trends.

FIRST FORTIS' MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED
INTEREST RATES TO BE DECLARED. FIRST FORTIS CANNOT PREDICT OR ASSURE THE LEVEL
OF ANY FUTURE GUARANTEED INTEREST RATES IN EXCESS OF AN EFFECTIVE ANNUAL RATE OF
4%.

Information concerning the Guaranteed Interest Rates applicable to the various
Guarantee Periods at any time may be obtained from our Home Office or from your
sales representative.

MARKET VALUE ADJUSTMENT

If any Fixed Account Value is surrendered, transferred or otherwise paid out
before the end of the Guarantee Period in which it is being held, a Market Value
Adjustment will be applied. This generally includes amounts applied to an
annuity option and amounts paid as a single sum in lieu of an annuity. However,
NO Market Value Adjustment will be applied to amounts that are paid out during
the period beginning fifteen days before and ending fifteen days after the end
of a Guarantee Period in which it was being held or to amounts paid out as a
death benefit.

The Market Value Adjustment may increase or decrease the amount of Fixed Account
Value being withdrawn or transferred. The comparison of two Guaranteed Interest
Rates determines whether the Market Value Adjustment produces an increase or a
decrease. The first rate to compare is the Guaranteed Interest Rate for the
amount being transferred or withdrawn. The second rate is the Guaranteed
Interest Rate then being offered for new Guarantee Periods of the same duration
as that remaining in the Guarantee Period from which the funds are being
withdrawn or transferred. If the first rate exceeds the second by more

9
<PAGE>
than 1/4%, the Market Value Adjustment produces an increase. If the first rate
does not exceed the second by at least 1/4%, the Market Value Adjustment
produces a decrease. Sample calculations are shown in Appendix A.

The Market Value Adjustment will be determined by multiplying the amount being
withdrawn or transferred from the Guarantee Period (after deduction of any
applicable surrender charge) by the following factor:

1 + I n / 12
----------- - 1
( 1 + J + .0025 )

where,

- I is the Guaranteed Interest Rate being credited to the amount being
withdrawn from the existing Guarantee Period,

- J is the Guaranteed Interest Rate then being offered for new Guarantee
Periods with durations equal to the number of years remaining in the
existing Guarantee Period (rounded up to the next higher number of years),
and

- N is the number of months remaining in the existing Guarantee Period
(rounded up to the next higher number of months).

In the event that First Fortis discontinues offering a Guaranteed Interest Rate
for a Guarantee Period, I and J will not be determined as described above.
Instead they will be determined by use of the bond equivalent yield on the
applicable U.S. Treasury Bill or Note ("the yield") as determined on either the
1st or the 15th of the applicable month as follows:

- I will be equal to "the yield" at the beginning of the Guarantee Period
and assuming a maturity equal to the length of the Guarantee Period at
that time.

- J will be equal to "the yield" at the time the Market Value Adjustment is
being calculated and assuming a maturity equal to the length of the
Guarantee Period remaining at that time.

INVESTMENTS BY FIRST FORTIS

Our obligations with respect to the Fixed Account are legal obligations of First
Fortis and are supported by our General Account assets, which also support
obligations incurred by us under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of First Fortis, and Contract Owners have no legal rights in such
investments. Subject to applicable law, we have sole discretion over the
investment of assets in our General Account and in the Fixed Account, and
neither of such accounts is subject to registration under the Investment Company
Act of 1940.

Amounts in the First Fortis General Account and the Fixed Account will be
invested in compliance with applicable state insurance laws and regulations
concerning the nature and quality of investments for the General Account. Within
specified limits and subject to certain standards and limitations, these laws
generally permit investment in federal, state and municipal obligations,
preferred and common stocks, corporate bonds, real estate mortgages, real estate
and certain other investments. See "First Fortis Financial Statements" for
information on First Fortis' investments. Investment management for amounts in
the General Account and in the Fixed Account is provided to First Fortis by
Fortis Advisers, Inc.

First Fortis intends to consider the return available on the instruments in
which it intends to invest amounts allocated to the Fixed Account when it
establishes Guaranteed Interest Rates. Such return is only one of many factors
considered in establishing the Guaranteed Interest Rates. See "Guaranteed
Interest Rates/Guarantee Periods."

First Fortis expects that amounts allocated to the Fixed Account generally will
be invested in debt instruments that approximately match First Fortis'
liabilities with regard to the Guarantee Periods. First Fortis expects that
these will include primarily the following types of debt instruments: (1)
securities issued by the United States Government or its agencies or
instrumentalities, which securities may or may not be guaranteed by the United
States Government; (2) debt securities which have an investment grade, at the
time of purchase, within the four highest grades assigned by Moody's Investors
Services, Inc. ("Moody's") (Aaa, Aa, A or Baa), Standard & Poor's Corporation
("Standard & Poor's") (AAA, AA, A or BBB), or any other nationally recognized
rating service; (3) other debt instruments including, but not limited to, issues
of or guaranteed by banks or bank holding companies and corporations, which
obligations although not rated by Moody's or Standard & Poor's, are deemed by
First Fortis to have an investment quality comparable to securities which may be
purchased as stated above; and (4) other evidences of indebtedness secured by
mortgages or deeds of trust representing liens upon real estate. Notwithstanding
the foregoing, First Fortis is not obligated to invest amounts allocated to the
Fixed Account according to any particular strategy, except as may be required by
applicable state insurance laws and regulations. See "Regulation and Reserves."

ACCUMULATION PERIOD

ISSUANCE OF A CONTRACT AND PURCHASE PAYMENTS

First Fortis reserves the right to reject any application for a Contract for any
reason. If the application can be accepted in the form received, the initial
purchase payment will be credited within two Valuation Dates after the later of
receipt of the application or receipt of the initial purchase payment at First
Fortis' Home Office. If the initial purchase payment cannot be credited within
five Valuation Dates after receipt because the application or other issuing
requirements are incomplete, the initial purchase payment will be returned
unless the applicant consents to our retaining the initial purchase payment and
crediting it as of the end of the Valuation Period in which the necessary
requirements are fulfilled. Despite the consent of the applicant, if the initial
purchase payment still cannot be credited within thirty Valuation Dates after
receipt because the application or issuing instructions are incomplete, the
initial purchase payment will be returned to the applicant. The initial purchase
payment under a Contract must be at least $5,000 ($2,000 for a Contract issued
pursuant to a qualified plan).

The date that the initial purchase payment is applied to the purchase of the
Contract is also the Contract Issue Date. The Contract Issue Date is the date
used to determine Contract years, regardless of when the Contract is delivered.
The crediting of investment experience in the Variable Account, or a fixed rate
of return in the Fixed Account, begins as of the Contract Issue Date.

The Contract Owner may make additional purchase payments at any time after the
Contract Issue Date and prior to the Annuity Commencement Date, as long as the
Annuitant is living. Purchase payments (together with any required information
identifying the proper Contracts and account to be credited with purchase
payments) must be transmitted to our Home Office. Additional purchase payments
are credited to the Contract and added to the Contract Value as of the end of
the Valuation Period in which they are received in good order.

Each additional purchase payment under a Contract must be at least $1,000. The
total of all purchase payments for all First Fortis annuities having the same
owner or participant, or annuitant, may not exceed $1 million (not more than
$500,000 allocated to the Fixed Account) without First Fortis' prior approval,
and we reserve the right to modify this limitation at any time.

10
<PAGE>
Purchase payments in excess of the initial minimum may be made by monthly draft
against the bank account of any Contract Owner who has completed and returned to
us a special "Thrift-O-Matic" authorization form that may be obtained from your
sales representative or from our Home Office. Arrangements can also be made for
purchase payments by wire transfer, payroll deduction, military allotment,
direct deposit and billing. Purchase payments by check should be made payable to
First Fortis Life Insurance Company.

If the Contract Value is less than $1,000, we may cancel the Contract on any
Valuation Date. We will notify the Contract Owner at least 90 days in advance of
our intention to cancel the Contract. Upon such cancellation we will pay the
Contract Owner the full Contract Value.

CONTRACT VALUE

Contract Value is the total of any Variable Account Value in all the Subaccounts
of the Variable Account pursuant to the Contract, plus any Fixed Account Value
in all the Guarantee Periods.

There is no guaranteed minimum Variable Account Value. To the extent Contract
Value is allocated to the Variable Account, you bear the entire investment risk.

DETERMINATION OF VARIABLE ACCOUNT VALUE. A Contract's Variable Account Value is
based on Accumulation Unit values, which are determined on each Valuation Date.
The value of an Accumulation Unit for a Subaccount on any Valuation Date is
equal to the previous value of that Subaccount's Accumulation Unit multiplied by
that Subaccount's net investment factor (discussed directly below) for the
Valuation Period ending on that Valuation Date. At the end of any Valuation
Period, a Contract's Variable Account Value in a Subaccount is equal to the
number of Accumulation Units in the Subaccount times the value of one
Accumulation Unit for that Subaccount.

The number of Accumulation Units in each Subaccount is equal to:

- Accumulation Units purchased at the time that any Net Purchase Payments or
transferred amounts are allocated to the Subaccount; less

- Accumulation Units redeemed to pay for the portion of any transfers from
or partial surrenders allocated to the Subaccount; less

- Accumulation Units redeemed to pay charges under the Contract.

NET INVESTMENT FACTOR. If a Subaccount's net investment factor is greater than
one, the Subaccount's Accumulation Unit value has increased. If the net
investment factor is less than one, the Subaccount's Accumulation Unit value has
decreased. The net investment factor for a Subaccount is determined by dividing
(1) the net asset value per share of the Portfolio shares held by the
Subaccount, determined at the end of the current Valuation Period, plus the per
share amount of any dividend or capital gains distribution made with respect to
the Portfolio shares held by the Subaccount during the current Valuation Period,
minus a per share charge for the increase, plus a per share credit for the
decrease, in any income taxes assessed which we determine to have resulted from
the investment operation of the subaccount or any other taxes which are
attributable to this Contract, by (2) the net asset value per share of the
Portfolio shares held in the Subaccount as determined at the end of the previous
Valuation Period, and subtracting from that result a factor representing the
mortality risk, expense risk and administrative expense charge.

DETERMINATION OF FIXED ACCOUNT VALUE. A Contract's Fixed Account Value is
guaranteed by First Fortis. Therefore, First Fortis bears the investment risk
with respect to amounts allocated to the Fixed Account, except to the extent
that (a) First Fortis may vary the Guaranteed Interest Rate for future Guarantee
Periods (subject to the 4% effective annual minimum) and (b) the Market Value
Adjustment imposes investment risks on the Contract Owner.

The Contract's Fixed Account Value on any Valuation Date is the sum of its Fixed
Account Values in each Guarantee Period on that date. The Fixed Account Value in
a Guarantee Period is equal to the following amounts, in each case increased by
accrued interest at the applicable Guaranteed Interest Rate:

- The amount of Net Purchase Payments or transferred amounts allocated to
the Guarantee Period; less

- The amount of any transfers or surrenders out of the Guarantee Period.

ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE

ALLOCATION OF PURCHASE PAYMENTS. In the application for a Contract, the Contract
Owner can allocate Net Purchase Payments, or portions thereof, to the available
Subaccounts of the Variable Account or to the Guarantee Periods in the Fixed
Account, or a combination thereof. Percentages must be in whole numbers and the
total allocation must equal 100%. The percentage allocations for future Net
Purchase Payments may be changed, without charge, at any time by sending a
Written Request to First Fortis' Home Office. Changes in the allocation of
future Net Purchase Payments will be effective on the date we receive the
Contract Owner's Written Request.

TRANSFERS. Transfers of Contract Value from one available Subaccount to another
or into the Fixed Account, or from one Guarantee Period to another or to the
Subaccount, can be made by the Contract Owner in Written Request to First
Fortis' Home Office, or by telephone transfer as described below. There is no
charge for any transfer, although transfers from a Guarantee Period that are
more than 15 days before or after the expiration thereof are subject to a Market
Value Adjustment. See "Market Value Adjustment." The minimum transfer from a
Subaccount or Guarantee Period is the lesser of $1,000 or all of the Contract
Value in the Subaccount or Guarantee Period. Irrespective of the above we may
permit a continuing request for transfers of lesser specified amounts
automatically on a periodic basis. We will count all transfers between and among
the Subaccounts of the Variable Account and the Fixed Account as one transfer,
if all the transfer requests are made at the same time as part of one request.
We will execute the transfers and determine all values in connection with
transfers as of the end of the Valuation Period in which we receive the transfer
request. The amount of any positive or negative Market Value Adjustment,
respectively, will be added to or deducted from the transferred amount.

At the time an application for a Contract is completed, or at any subsequent
time, you may complete the Telephone Transfer Authorization Form. We will honor
telephone transfer instructions from any person who provides the correct
identifying information. First Fortis will not be responsible for, and you will
bear the risk of loss from, oral instructions, including fraudulent instructions
which are reasonably believed to be genuine. We will employ reasonable
procedures to confirm that telephone instructions are genuine, but if such
procedures are not deemed reasonable, we may be liable for any losses due to
unauthorized or fraudulent instructions. Our procedures are to verify address
and social security number, tape record the telephone call, and provide written
confirmation of the transaction. We may modify or terminate our telephone
transfer procedures at any time. The number for telephone transfers is
1-800-745-8248.

Certain restrictions on very substantial investments in any one Subaccount are
set forth under "Limitations on Allocations" in the Statement of Additional
Information.

11
<PAGE>
TOTAL AND PARTIAL SURRENDERS

TOTAL SURRENDERS. The Contract Owner may surrender all of the Cash Surrender
Value at any time during the life of the Annuitant and prior to the Annuity
Commencement Date by a Written Request sent to First Fortis' Home Office. We
reserve the right to require that the Contract be returned to us prior to making
payment, although this will not affect our determination of the amount of the
Cash Surrender Value. Cash Surrender Value is the Contract Value at the end of
the Valuation Period during which the Written Request for the total surrender is
received by First Fortis at its Home Office, less any applicable surrender
charge and after any Market Value Adjustment. See "Surrender Charge" and "Market
Value Adjustment."

The written consent of all collateral assignees and irrevocable beneficiaries
must be obtained prior to any total surrender. Surrenders from the Variable
Account will generally be paid within seven days of the date of receipt by First
Fortis' Home Office of the Written Request. Postponement of payments may occur,
however, in certain circumstances. See "Postponement of Payment."

The amount paid upon total surrender of the Cash Surrender Value (taking into
account any prior partial surrenders) may be more or less than the total Net
Purchase Payments made. After a surrender of the Cash Surrender Value or at any
time the Contract Value is zero, all rights of the Contract Owner, Annuitant, or
any other person will terminate.

PARTIAL SURRENDERS. At any time prior to the Annuity Commencement Date and
during the lifetime of the Annuitant, the Contract Owner may surrender a portion
of the Fixed Account Value and/or the Variable Account Value by sending to First
Fortis' Home Office a Written Request. We will not accept a partial surrender
request unless the net proceeds payable to you as a result of the request are at
least $1,000. If the total Contract Value in both the Variable Account and Fixed
Account would be less than $1,000 after the partial surrender, First Fortis will
surrender the entire Cash Surrender Value under the Contract.

In order for a request to be processed, the Contract Owner must specify from
which Subaccounts of the Variable Account or Guarantee Periods of the Fixed
Account a partial surrender should be made.

We will surrender Accumulation Units from the Variable Account and/ or dollar
amounts from the Fixed Account so that the total amount of the partial surrender
equals the dollar amount of the partial surrender request. The amount payable to
the Contract Owner will be reduced by any applicable surrender charge and any
negative Market Value Adjustment, or increased by any positive Market Value
Adjustment. The partial surrender will be effective at the end of the Valuation
Period in which First Fortis receives the Written Request for partial surrender
at its Home Office. Payments will generally be made within seven days of the
effective date of such request, although certain delays are permitted. See
"Postponement of Payment."

The Internal Revenue Code provides that a penalty tax will be imposed on certain
premature surrenders. For a discussion of this and other tax implications of
total and partial surrenders, including withholding requirements, see "Federal
Tax Matters." Also, under tax deferred annuity, Contracts pursuant to Section
403(b) of the Internal Revenue Code, no distributions of voluntary salary
reduction amounts will be permitted prior to one of the following events:
attainment of age 59 1/2 by the employee or the employee's separation from
service, death, disability or hardship. (Hardship distributions will be limited
to the lesser of the amount of the hardship or the amount of salary reduction
contributions, exclusive of earnings thereon.)

BENEFIT PAYABLE ON DEATH OF ANNUITANT OR CONTRACT OWNER

If the Annuitant or Contract Owner dies prior to the Annuity Commencement Date,
a death benefit will be paid. If more than one Annuitant has been named, the
death benefit payable upon the death of an Annuitant will only be paid upon the
death of the last survivor of the persons so named. The death benefit will equal
the greater of:

(1) the sum of all Net Purchase Payments made (less all prior surrenders and
previously-imposed surrender charges and prior negative Market Value
Adjustments),

(2) the Contract Value as of the date used for valuing the death benefit, or

(3) the Contract Value (less the amount of any subsequent surrenders and
surrender charges and negative Market Value Adjustments in connection
therewith), as of the Contract's Seven Year Anniversary immediately
preceding the earlier of a) the date of death of either the Contract
Owner or Annuitant or b) the date either first reaches his or her 75th
birthday. (See Appendix B for Sample Death Benefit Calculations).

ENHANCED DEATH BENEFIT. If the Contract Owner selects the Enhanced Death Benefit
and the Annuitant or a Contract Owner dies prior to the Annuity Commencement
Date, the death benefit will equal the greater of (1), (2) and (3) as follows:

(1) (a) If a Contract Owner or the Annuitant dies before the date any
Contract Owner or Annuitant first reaches age 75, the accumulation of
Net Purchase Payments made less all prior surrenders and less any
applicable prior negative Market Value Adjustments less previously
imposed surrender charges at an effective annual rate of 3.0%. This
amount may not exceed a maximum of two times the following: Net Purchase
Payments made less all prior surrenders and less any applicable prior
negative Market Value Adjustments and less previously imposed surrender
charges. This amount is referred to as the "roll-up amount."

(1) (b) If the Annuitant or a Contract Owner dies on or after the date any
Contract Owner or Annuitant first reaches age 75, the roll-up amount as
of the date that a Contract Owner or Annuitant first reaches age 75 plus
subsequent Net Purchase Payments made, less subsequent surrenders and
any subsequent negative Market Value Adjustments and less subsequently
imposed surrender charges.

and

(2) The Contract Value as of the date used for valuing the death benefit.

and

(3) The Contract Value (less the amount of any subsequent surrenders and
surrender charges and negative Market Value Adjustments in connection
therewith), as of the Contract's Seven Year Anniversary immediately
preceding the earlier of a) the date of death of either the Contract
Owner or Annuitant or b) the date either first reaches his or her 75th
birthday. (See Appendix B for Sample Death Benefit Calculations.)

The value of the death benefit is determined as of the end of the Valuation
Period in which we receive, at our Home Office, proof of death and the written
request as to the manner of payment. Upon receipt of these items, the death
benefit generally will be paid within seven days. Under certain circumstances,
payment of the death benefit

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may be postponed. See "Postponement of Payment." If we do not receive a Written
Request for a settlement method, we will pay the death benefit in a single sum,
based on values determined at that time.

The person entitled to the death benefit under the terms of the Contract may (a)
receive a single sum payment, which terminates the Contract, or (b) select an
annuity option. If the death benefit payee selects an annuity option, he or she
will have all the rights and privileges of a payee under the Contract. If the
death benefit payee desires an Annuity option, the election should be made
within 60 days of the date the death benefit becomes payable. Failure to make a
timely election can result in unfavorable tax consequences. For further
information, see "Federal Tax Matters."

We accept any of the following as proof of death: a copy of a certified death
certificate; a copy of a certified decree of a court of competent jurisdiction
as to the finding of death; or a written statement by a medical doctor who
attended the deceased at the time of death.

If the Contract Owner dies before the Annuitant and before the Annuity
Commencement Date with respect to a Non-Qualified Contract certain additional
requirements are mandated by the Internal Revenue Code, which are discussed
below under "Federal Tax Matters-- Required Distributions for Non-Qualified
Contracts." It is imperative that Written Notice of the death of the Contract
Owner be promptly transmitted to First Fortis at its Home Office, so that
arrangements can be made for distribution of the entire interest in the Contract
Owner in a manner that satisfies the Internal Revenue Code requirements. Failure
to satisfy these requirements may result in the Contract Owner not being treated
as an annuity contract for federal income tax purposes, which could have adverse
tax consequences.

THE ANNUITY PERIOD

ANNUITY COMMENCEMENT DATE

The Contract Owner may specify an Annuity Commencement Date in the application
not later than the Annuitant's 90th birthday. The Annuity Commencement Date
marks the beginning of the period during which an Annuitant or other payee
designated by the Contract Owner receives annuity payments under the Contract.
We may not permit an Annuity Commencement Date which is on or after the
Annuitant's 75th birthday, and you should consult your sales representative in
this regard. The Annuity Commencement Date must be at least two years after the
Contract Issue Date.

Depending on the type of retirement arrangement involved, amounts that are
distributed either too soon or too late may be subject to penalty taxes under
the Internal Revenue Code. See "Federal Tax Matters." You should consider this
carefully in selecting or changing an Annuity Commencement Date.

In order to advance or defer the Annuity Commencement Date, the Contract Owner
must submit a Written Request during the Annuitant's lifetime. The request must
be received at our Home Office at least 30 days before the then-scheduled
Annuity Commencement Date. The new Annuity Commencement Date must also be at
least 30 days after the Written Request is received. There is no right to make
any total or partial surrender during the Annuity Period.

COMMENCEMENT OF ANNUITY PAYMENTS

If the Contract Value at the end of the Valuation Period which contains the
Annuity Commencement Date is less than $1,000, we may pay the entire Contract
Value, without the imposition of any charges other than the premium tax charge,
if applicable, in a single sum payment to the Annuitant or other payee chosen by
the Contract Owner and cancel the Contract.

Otherwise, First Fortis will apply (1) the Fixed Account Value to provide a
Fixed Annuity Option and (2) the Variable Account Value in any Subaccount to
provide a Variable Annuity Option using the same Subaccount, unless the Contract
Owner has notified us by Written Request to apply the Fixed Account Value and
Variable Account Value in different proportions. Any such Written Request must
be received by us at our Home Office at least 30 days before the Annuity
Commencement Date.

Annuity payments under a Fixed or Variable Annuity Option will be made on a
monthly basis to the Annuitant or other properly-designated payee, unless we
agree to a different payment schedule. If more than one person is named as an
Annuitant, the Contract Owner may elect to name one of such persons to be the
sole Annuitant as of the Annuity Commencement Date. We reserve the right to
change the frequency of any annuity payment so that each payment will be at
least $50. There is no right to make any total or partial surrender during the
Annuity Period.

The amount of each annuity payment will depend on the amount of Contract Value
applied to an annuity option, the form of annuity selected and the age of the
Annuitant. Information concerning the relationship between the Annuitant's sex
and the amount of annuity payments, including special requirements in connection
with employee benefits plans, is set forth under "Calculations of Annuity
Payments" in the Statement of Additional Information. The Statement of
Additional Information also contains detailed information about how the amount
of each annuity payment is computed.

The dollar amount of any fixed annuity payments is specified during the entire
period of annuity payments according to the provisions of the annuity form
selected. The dollar amount of variable annuity payments varies during the
annuity period based on changes in Annuity Unit Values for the Subaccounts that
you choose to use in connection with your payments.

RELATIONSHIP BETWEEN SUBACCOUNT INVESTMENT PERFORMANCE AND AMOUNT OF VARIABLE
ANNUITY PAYMENTS

If a Subaccount on which a variable annuity payment is based has an average
effective net investment return higher than 4% per annum during the period
between two such annuity payments, the Annuity Unit Value will increase, and the
second payment will be higher than the first. Conversely, if the Subaccount's
average effective net investment return over the period between the annuity
payments is less than 4% per annum, the Annuity Unit Value will decrease, and
the second payment will be lower than the first. "Net investment return," for
this purpose, refers to the Subaccount's overall investment performance, net of
the mortality and expense risk and administrative expense charges, which are
assessed at a nominal aggregate annual rate of 1.35%. We guarantee that the
amount of each variable annuity payment after the first payment will not be
affected by variations in our mortality experience or our expenses.

TRANSFERS. During the Annuity Period, the person receiving annuity payments may
make up to four transfers a year among Subaccounts. The current procedures for
and conditions on these transfers are the same as described above under
"Allocation of Purchase Payments and Contract Value--Transfers." Transfers from
a Fixed Annuity Option are not permitted during the Annuity Period.

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ANNUITY FORMS

The Contract Owner may select an annuity form or change a previous selection by
Written Request, which must be received by us at least 30 days before the
Annuity Commencement Date. One annuity form may be selected, although as
discussed above, payments under that form may be received on a combination fixed
and variable basis. If no annuity form selection is in effect on the Annuity
Commencement Date, in most cases we automatically apply Option B (described
below), with payments guaranteed for 10 years. If the Contract is issued under
certain retirement plans, however, federal pension law may require any default
payments that payments be made pursuant to plan provisions and/or federal law.
Tax laws and regulations may impose further restrictions to assure that the
primary purpose of the plan is distribution of the accumulated funds to the
employee.

The following options are available for fixed annuity payments and for variable
annuity payments.

OPTION A, LIFE ANNUITY. Payments are made as of the first Valuation Date of each
monthly period during the Annuitant's life, starting with the Annuity
Commencement Date. No payments will be made after the Annuitant dies. It is
possible for the payee to receive only one payment under this option, if the
Annuitant dies before the second payment is due.

OPTION B, LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS TO 20
YEARS. Payments are made as of the first Valuation Date of each monthly period
starting on the Annuity Commencement Date. Payments will continue as long as the
Annuitant lives. If the Annuitant dies before all of the guaranteed payments
have been made, we will continue installments of the guaranteed payments to the
Beneficiary.

OPTION C, JOINT AND FULL SURVIVOR ANNUITY. Payments are made as of the first
Valuation Date of each monthly period starting with the Annuity Commencement
Date. Payments will continue as long as either the Annuitant or the joint
Annuitant is alive. Payments will stop when both the Annuitant and the joint
Annuitant have died. It is possible for the payee or payees under this option to
receive only one payment, if both Annuitants die before the second payment is
due.

OPTION D, JOINT AND ONE-HALF CONTINGENT SURVIVOR ANNUITY. Payments are made as
of the first Valuation Date of each monthly period starting with the Annuity
Commencement Date. Payments will continue as long as either the Annuitant or the
joint Annuitant is alive. If the Annuitant dies first, payments will continue to
the joint Annuitant at one-half the original amount. If the joint Annuitant dies
first, payments will continue to the Annuitant at the original full amount.
Payments will stop when both the Annuitant and the joint Annuitant have died. It
is possible for the payee or payees under this option to receive only one
payment if both Annuitants die before the second payment is due.

We also have other annuity forms available and information about them can be
obtained from your sales representative or by calling or writing to our Home
Office.

DEATH OF ANNUITANT OR OTHER PAYEE

Under most annuity forms offered by First Fortis, the amounts, if any, payable
on the death of the Annuitant during the Annuity Period are the continuation of
annuity payments for any remaining guarantee period or for the life of any joint
Annuitant. In all such cases, the person entitled to receive payments also
receives any rights and privileges under the annuity form in effect.

Additional rules applicable to such distributions under Non-Qualified Contracts
are described under "Federal Tax Matters--Required Distributions for
Non-Qualified Contracts." Though the rules there described do not apply to
Contracts issued in connection with qualified plans, similar rules apply to the
plans themselves.

CHARGES AND DEDUCTIONS

PREMIUM TAXES

First Fortis will deduct a charge for state premium taxes or similar assessments
from the Contract Value at the time that annuity payments begin. The charge will
be deducted on a pro-rata basis from the then-current Fixed Account Value and,
by redemption of Accumulation Units, the then-current Variable Account Value in
each Subaccount.

Applicable premium tax rates depend upon the Contract Owner's then-current place
of residence. Applicable rates are subject to change by legislation,
administrative interpretations or judicial acts.

CHARGES AGAINST THE VARIABLE ACCOUNT

MORTALITY AND EXPENSE RISK CHARGE. We will assess each Subaccount of the
Variable Account with a daily charge for mortality and expense risk at a nominal
annual rate of 1.25% of the average daily net assets of the Variable Account
(consisting of approximately .8% for mortality risk and approximately .45% for
expense risk). This charge is assessed during both the Accumulation Period and
the Annuity Period. We guarantee not to increase this charge for the duration of
the Contract.

The mortality risk borne by First Fortis arises from its obligation to make
annuity payments (determined in accordance with the annuity tables and other
provisions contained in the Contract) for the full life of all Annuitants
regardless of how long all Annuitants or any individual Annuitant might live. In
addition, First Fortis bears a mortality risk in that it guarantees to pay a
death benefit upon the death of an Annuitant or Contract Owner prior to the
Annuity Commencement Date. No surrender charge is imposed upon the payment of a
death benefit, which places a further mortality risk on First Fortis.

The expense risk assumed is that actual expenses incurred in connection with
issuing and administering the Contract will exceed the limits on administrative
charges set in the Contract.

If the administrative charges and the mortality and expense risk charge are
insufficient to cover the expenses and costs assumed, the loss will be borne by
First Fortis. Conversely, if the amount deducted proves more than sufficient,
the excess will be profit to First Fortis.

ADMINISTRATIVE EXPENSE CHARGE. We will assess each Subaccount of the Variable
Account with a daily charge at an annual rate of .10% of the average daily net
assets of the Subaccount. This charge is imposed during both the Accumulation
Period and the Annuity Period. This charge is to help cover administrative costs
such as those incurred in issuing Contracts, establishing and maintaining the
records relating to Contracts, making regulatory filings and furnishing
confirmation notices, voting materials and other communications, providing
computer, actuarial and accounting services, and processing Contract
transactions. There is no necessary relationship between the amount of
administrative charges imposed on a given Contract and the amount of expenses
actually attributable to that Contract.

ENHANCED DEATH BENEFIT CHARGE. If the Enhanced Death Benefit is elected, we will
assess the Subaccounts of the Variable Account in which the Contract has
allocations to with an additional charge for the mortality risk associated with
the Enhanced Death Benefit at a nominal annual current rate of .15% of the
average daily net assets of the

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Subaccounts. This charge is assessed only during the Accumulation Period and not
during the Annuity Period. The amount of the current charge is based upon First
Fortis' expectations of its future experience of its future costs in providing
this benefit. First Fortis reserves the right to increase the amount of the
charge to an amount not in excess of .30% of the average daily net assets of the
Subaccounts. (See "Benefit Payable on Death of Annuitant or
Participant--Enhanced Death Benefit.")

TAX CHARGE

We currently impose no charge for taxes payable by us in connection with the
Contract, other than for premium taxes and similar assessments when applicable.
We reserve the right to impose a charge for any other taxes that may become
payable by us in the future in connection with the Contracts or the Separate
Account.

The annual administrative charge and charges against the Variable Account
described above are for the purposes described and First Fortis may receive a
profit as a result of these charges.

SURRENDER CHARGE

No sales charge is collected or deducted at the time Net Purchase Payments are
applied under a Contract. A surrender charge will be assessed on certain total
or partial surrenders. The amounts obtained from the surrender charge will be
used to partially defray expenses incurred in the sale of the Contracts,
including commissions and other promotional or distribution expenses associated
with the marketing of the Contracts, and costs associated with the printing and
distribution of prospectuses and sales material.

FREE SURRENDERS. The following amounts can be withdrawn from the Contract
without a surrender charge:

- Any purchase payments received by us more than seven years prior to the
surrender date and that have not been previously surrendered;

- Any earnings that have not been previously surrendered;

- In any contract year, up to 10% of the purchase payments received by us
less than seven years prior to the surrender date (whether or not the
purchase payments have been previously surrendered).

Earnings are deemed to be withdrawn first. After all earnings have been
withdrawn, all purchase payments not subject to a surrender charge are deemed to
be withdrawn prior to purchase payments which are still subject to a surrender
charge.

No surrender charge is imposed on annuitization (or payment of a single sum
because less than the minimum required Contract Value is available to provide an
annuity at the Annuity Commencement Date). Nor is the surrender charge deducted
from the payment of any benefit upon the death of an Annuitant or Contract
Owner.

In addition, we have an administrative policy to waive surrender charges for
full surrenders of Contracts that have been in force for at least ten years
provided that the amount then subject to the surrender charge is less than 25%
of the Contract Value. Since the Contracts have only been offered since 1994, no
such waivers have yet been made. We reserve the right to change or terminate
this practice at any time, both for new and for previously issued Contracts.

AMOUNT OF SURRENDER CHARGE. Surrender charges apply only if the amount being
withdrawn exceeds the sum of the amounts listed above under Free Surrenders
(that is, if the amount being withdrawn includes purchase payments made less
than seven years prior to the surrender date). The surrender charges are:

NUMBER OF YEARS SURRENDER CHARGE
SINCE PURCHASE AS A PERCENTAGE OF
PAYMENT WAS CREDITED PURCHASE PAYMENT
- ------------------------------ ------------------
Less than 1 7%
At least 1 but less than 2 6%
At least 2 but less than 3 5%
At least 3 but less than 4 4%
At least 4 but less than 5 3%
At least 5 but less than 6 2%
At least 6 but less than 7 1%
7 or more 0%

We anticipate the surrender charge will not be sufficient to cover our
distribution expenses. To the extent that the surrender charge is insufficient
to cover the actual costs of distribution, such costs will be paid from First
Fortis' General Account assets, which will include profit, if any, derived from
the mortality and expense risk charge.

MISCELLANEOUS

Because the Variable Account invests in shares of the Portfolios of Series Fund,
the net assets of the Variable Account will reflect the investment advisory fees
and certain other expenses incurred by the Portfolios that are described in the
prospectus for Series Fund.

REDUCTION OF CHARGES

No surrender charge will be imposed under any Contract owned by (A) First
Fortis, and the following persons associated with First Fortis, if at the
Contract Issue date they are: (1) officers and directors; (2) employees; or (3)
spouses of any such persons or any of such persons' children.

GENERAL PROVISIONS

THE CONTRACTS

The Contract, copies of any applications, amendments, riders, or endorsements
attached to the Contract and copies of any supplemental applications,
amendments, endorsements, or revised Contract pages which are mailed to you are
the entire Contract. Only an officer of First Fortis can agree to change or
waive any provisions of a Contract. Any change or waiver must be in writing and
signed by an officer of First Fortis. The Contracts are non-participating and do
not share in dividends or earnings of First Fortis.

POSTPONEMENT OF PAYMENT

First Fortis may defer for up to 15 days the payment of any amount attributable
to a purchase payment made by check to allow the check reasonable time to clear.
For a description of other circumstances in which amounts payable out of
Variable Account assets could be deferred, see "Postponement of Payments" in the
Statement of Additional Information. First Fortis may also defer payment of
surrender proceeds payable out of the Fixed Account for a period of up to 6
months.

MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS

If the age or sex of the Annuitant has been misstated, any amount payable will
be that which the purchase payments paid would have purchased at the correct age
and sex. If we have made any overpayments because of incorrect information about
age or sex, or any other miscalculation, First Fortis will deduct the
overpayment from the next payment or payments due. We add underpayments to the
next payment. The amount of any adjustment will be credited or charged with
interest at the effective annual rate of 4% per year.

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ASSIGNMENT

Rights and interests under a Qualified Contract may be assigned only in certain
narrow circumstances referred to in the Contract. Contract Owners and other
payees may assign their rights and interests under Non-Qualified Contracts,
including their ownership rights.

We take no responsibility for the validity of any assignment. A change in
ownership rights must be made in writing and a copy must be sent to First
Fortis' Home Office. The change will be effective on the date it was made,
although we are not bound by a change until the date we record it. The rights
under a Contract are subject to any assignment of record at the Home Office of
First Fortis. An assignment or pledge of a Contract may have adverse tax
consequences. See below under "Federal Tax Matters."

BENEFICIARY

Before the Annuity Commencement Date and while the Annuitant is living, the
Contract Owner may name or change a beneficiary or a contingent beneficiary by
sending a Written Request of the change to First Fortis. Under certain
retirement programs, however, spousal consent may be required to name or change
a beneficiary, and the right to name a beneficiary other than the spouse may be
subject to applicable tax laws and regulations. We are not responsible for the
validity of any change. A change will take effect as of the date it is signed
but will not affect any payments we make or action we take before receiving the
Written Request. We also need the consent of any irrevocably named person before
making a requested change.

In the event of the death of a Contract Owner or Annuitant prior to the Annuity
Commencement date the Beneficiary will be determined as follows:

- If upon the death of a Contract Owner there is one or more surviving
Contract Owners, the surviving Contract Owner(s) will be the beneficiary
(these override any other beneficiary designations).

- If upon the death of a Contract Owner there are no surviving Contract
Owners, and upon the death of the Annuitant, the Beneficiary will be the
beneficiary designated by the Contract Owner. If there is no surviving
beneficiary who has been designated by the Contract Owner, then the
Contract Owner, or the Contract Owner's estate, will be the Beneficiary.

REPORTS

We will mail to the Contract Owner (or to the person receiving payments during
the annuity period), at the last known address of record, any reports and
communications required by any applicable law or regulation. You should
therefore give us prompt written notice of any address change. This will include
annual audited financial statements of the Series Fund, but not necessarily of
the Variable Account or First Fortis.

RIGHTS RESERVED BY FIRST FORTIS

First Fortis reserves the right to make certain changes if, in its judgment,
they would best serve the interests of Contract Owners and Annuitants or would
be appropriate in carrying out the purposes of the Contracts. Any changes will
be made only to the extent and in the manner permitted by applicable laws. Also,
when required by law, First Fortis will obtain your approval of the changes and
approval from any appropriate regulatory authority. Such approval may not be
required in all cases, however. Examples of the changes First Fortis may make
include:

- To operate the Variable Account in any form permitted under the Investment
Company Act of 1940 or in any other form permitted by law.

- To transfer any assets in any Subaccount to another Subaccount, or to one
or more separate accounts, or to the Fixed Account; or to add, combine or
remove Subaccounts in the Variable Account.

- To substitute, for the Portfolio shares held in any Subaccount, the shares
of another Portfolio of Series Fund or the shares of another investment
company or any other investment permitted by law.

- To make any changes required by the Internal Revenue Code or by any other
applicable law in order to continue treatment of the Contract as an
annuity.

- To change the time or time of day at which a Valuation Date is deemed to
have ended.

- To make any other necessary technical changes in the Contract in order to
conform with any action the above provisions permit First Fortis to take,
including to change the way First Fortis assesses charges, but without
increasing as to any then outstanding Contract the aggregate amount of the
types of charges which First Fortis has guaranteed.

DISTRIBUTION

The Contracts will be sold by individuals who, in addition to being licensed by
state insurance authorities to sell the Contracts of First Fortis, are also
registered representatives of Fortis Investors, Inc. ("Fortis Investors"), the
principal underwriter of the Contracts or registered representatives of other
broker-dealer firms or representatives of other firms that are exempt from
broker dealer regulation. Fortis Investors and any such other broker-dealer
firms are registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as broker-dealers and are members of the
National Association of Securities Dealers, Inc.

As compensation for distributing the Contracts, First Fortis pays Fortis
Investors a maximum of 7.0% of all purchase payments. Fortis Investors pays a
selling allowance not in excess of 7.0% of purchase payments to other
broker-dealer firms or exempt firms who sell the Contracts. First Fortis may,
under certain flexible compensation arrangements, pay Fortis Investors a lesser
selling allowance and a service fee, and Fortis Investors may in turn pay lesser
selling allowances and a service fee to its registered representatives and other
broker dealer firms. However, in such case, such flexible compensation
arrangements will have actuarially equivalent present values which are not in
excess of the amounts of the selling allowances set forth above.

Additionally, registered representatives, broker-dealer firms, and exempt firms
may be eligible for additional compensation based upon meeting certain
production standards. Fortis Investors may charge back commissions paid to
others if the Contract upon which the commission was paid is surrendered or
cancelled within certain specified time periods. In the distribution agreement,
First Fortis has agreed to indemnify Fortis Investors (and its agents,
employees, and controlling persons) for certain damages and expenses, including
those arising under federal securities laws. First Fortis paid a total of
$ to Fortis Investors for annuity contract distribution services during
1996, $ of which in 1996 was not reallowed to other broker dealers or
exempt firms.

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First Fortis or Fortis Investors may also provide additional compensation to
broker-dealers in connection with sales of Contracts. Compensation may include
financial assistance to broker-dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns regarding Contracts, and other broker-dealer sponsored programs
or events. Compensation may include payment for travel expenses incurred in
connection with trips taken by invited sales representatives and members of
their families to locations within or outside of the United States for meetings
or seminars of a business nature.

See Note 11 to the Notes to First Fortis' Financial Statements as to amounts it
has paid to Fortis, Inc. and Fortis Benefits Insurance Company, affiliates of
First Fortis for various services.

Fortis Investors is an indirect subsidiary of Fortis AMEV and Fortis AG and is
therefore under common control with First Fortis. Fortis Investors' principal
business address is 500 Bielenberg Drive, Woodbury, Minnesota 55125 and its
mailing address is P.O. Box 64284, St. Paul, MN 55164. Fortis Investors is not
obligated to sell any specific amount of interests under the Contracts.
$23,000,000 of interests in the Fixed Account and an indefinite amount of
interests in the Variable Account have been registered with the Securities and
Exchange Commission.

FEDERAL TAX MATTERS

The following description is a general summary of the tax rules, primarily
related to federal income taxes, which in the opinion of First Fortis are
currently in effect. These rules are based on laws, regulations and
interpretations which are subject to change at any time. This summary is not
comprehensive and is not intended as tax advice. Federal estate and gift tax
considerations, as well as state and local taxes, may also be material. You
should consult a qualified tax adviser as to the tax implications of taking any
action under a Contract or related retirement plan.

NON-QUALIFIED CONTRACTS

Section 72 of the Internal Revenue Code ("Code") governs the taxation of
annuities in general. Purchase payments made under Non-Qualified Contracts are
not excludible or deductible from the gross income of the Contract Owner or any
other person. However, any increase in the accumulated value of a Non-Qualified
Contract resulting from the investment performance of the Variable Account or
interest credited to the Fixed Account is generally not taxable to the Contract
Owner or other payee until received by him or her, as surrender proceeds, death
benefit proceeds, or otherwise. The exception to this rule is that, generally,
Contract Owners who are not natural persons ARE taxed annually on any increase
in the Contract Value. However, this exception does not apply in all cases, and
you may wish to discuss this with your tax adviser.

The following discussion applies generally to Contracts owned by natural
persons.

In general, surrenders or partial withdrawals under Contracts are taxed as
ordinary income to the extent of the accumulated income or gain under the
Contract. If a Contract Owner assigns or pledges any part of the value of a
Contract, the value so pledged or assigned is taxed to the Contract Owner as
ordinary income to the same extent as a partial withdrawal.

With respect to annuity payment options, although the tax consequences may vary
depending on the option elected under the Contract, until the investment in the
Contract is recovered, generally only the portion of the annuity payment that
represents the amount by which the Contract Value exceeds the "investment in the
Contract" will be taxed. In general, a person's "investment in the Contract" is
the aggregate amount of purchase payments made by him or her. After an
Annuitant's or other payee's "investment in the Contract" is recovered, the full
amount of any additional annuity payments is taxable. For variable annuity
payments, in general, the taxable portion of each annuity payment (prior to
recovery of the "investment in the Contract") is determined by a formula which
establishes the specific dollar amount of each annuity payment that is not
taxed. This dollar amount is determined by dividing the "investment in the
Contract" by the total number of expected annuity payments. For fixed annuity
payments, in general, prior to recovery of the "investment in the Contract,"
there is no tax on the amount of each payment which bears the same ratio to that
payment as the "investment in the Contract" bears to the total expected value of
the annuity payments for the term of the payments. However, the remainder of
each annuity payment is taxable. The taxable portion of a distribution (in the
form of an annuity or a single sum payment) is taxed as ordinary income.

For purposes of determining the amount of taxable income resulting from
distributions, all Contracts and other annuity contracts issued by us or our
affiliates to the Contract Owner within the same calendar year will be treated
as if they were a single Contract.

There is a 10% penalty under the Code on the taxable portion of a "premature
distribution." Generally, an amount is a "premature distribution" unless the
distribution is (1) made on or after the Contract Owner or other payee reaches
age 59 1/2, (2) made to a Beneficiary on or after death of the Contract Owner,
(3) made upon the disability of the Contract Owner or other payee, or (4) part
of a series of substantially equal annuity payments for the life or life
expectancy of the Contract Owner or the Contract Owner and Beneficiary.
Premature distributions may result, for example, from an early Annuity
Commencement Date, an early surrender, partial surrender or assignment of a
Contract or the early death of an Annuitant who is not also the Contract Owner
or other person receiving annuity payments under the Contract.

A transfer of ownership of a Contract, or designation of an Annuitant or other
payee who is not also the Contract Owner, may result in certain income or gift
tax consequences to the Contract Owner that are beyond the scope of this
discussion. A Contract Owner contemplating any transfer or assignment of a
Contract should contact a competent tax adviser with respect to the potential
tax effects of such transaction.

REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS

In order that a Non-Qualified Contract be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires (a) if any
person receiving annuity payments dies on or after the Annuity Commencement Date
but prior to the time the entire interest in the Contract has been distributed,
the remaining portion of such interest will be distributed at least as rapidly
as under the method of distribution being used as of the date of the person's
death; and (b) if any Contract Owner dies prior to the Annuity Commencement
Date, the entire interest in the Contract will be distributed (1) within five
years after the date of that person's death or (2) as annuity payments which
will begin within one year of that Contract Owner's death and which will be made
over the life of the Contract Owner's designated Beneficiary or over a period
not extending beyond the life expectancy of that Beneficiary. However, if the
Contract Owner's designated Beneficiary is the surviving spouse of the Contract
Owner, the Contract may be continued with the surviving spouse deemed to be the
new Contract Owner. Where the Contract Owner or other person receiving payments
is not a natural person, the required distributions provided by Section 72(s)
apply upon the death of the primary Annuitant.

17
<PAGE>
No regulations interpreting the requirements of Section 72(s) have yet been
issued (although proposed regulations have been issued interpreting similar
requirements for qualified plans). First Fortis intends to review and modify the
Contract if necessary to ensure that it complies with the requirements of
Section 72(s) when clarified by regulation or otherwise.

Generally, unless the Beneficiary elects otherwise, the above requirements will
be satisfied where the death occurs prior to the Annuity Commencement Date by
paying the death benefit in a single sum, subject to proof of the Contract
Owner's death. The Beneficiary, however, may elect by Written Request to receive
an annuity option instead of a lump sum payment. However, if the election is not
made within 60 days of the date the single sum death benefit otherwise becomes
payable, particularly where the annuitant dies and the annuitant is not the
Contract Owner, the IRS may disregard the election for tax purposes and tax the
Beneficiary as if a single sum payment had been made.

QUALIFIED CONTRACTS

The Contracts may be used with several types of tax-qualified plans. The tax
rules applicable to Contract Owners, Annuitants and other payees vary according
to the type of plan and the terms and conditions of the plan itself. In general,
purchase payments made under a retirement program recognized under the Code on
behalf of an individual are excludable from the individual's gross income for
tax purposes during the Accumulation Period. The portion, if any, of any
purchase payment made by or on behalf of an individual under a Contract that is
not excluded from the individual's gross income for tax purposes during the
Accumulation Period constitutes the individual's "investment in the Contract."
Aggregate deferrals under all plans at the employee's option may be subject to
limitations.

When annuity payments begin, the individual will receive back his or her
"investment in the Contract" if any, as a tax-free return of capital. The dollar
amount of annuity payments received in any year in excess of such return is
taxable as ordinary income. When payments are received as an annuity, the
tax-free return of capital is treated as if received ratably over the entire
period of the annuity until fully recovered (as described above with respect to
Non-Qualified Contracts).

The Contracts are available in connection with the following types of retirement
plans: Section 403(b) annuity plans for employees of certain tax-exempt
organizations and public educational institutions; Section 401 or 403(a)
qualified pension, profit-sharing or annuity plans; individual retirement
annuities ("IRAs") under Section 408(b); simplified employee pension plans
("SEPs") under Section 408(k); SIMPLE IRA Plans under Section 408(p); Section
457 unfunded deferred compensation plans of public employers and tax-exempt
organizations' and private employer unfunded deferred compensation plans. The
tax implications of these plans are further discussed in the Statement of
Additional Information under the heading "Taxation Under Certain Retirement
Plans."

WITHHOLDING

Annuity payments and other amounts received under Contracts are subject to
income tax withholding unless the recipient elects not to have taxes withheld.
The amounts withheld will vary among recipients depending on the tax status of
the individual and the type of payments from which taxes are withheld.

Notwithstanding the recipient's election, withholding may be required with
respect to certain payments to be delivered outside the United States and with
respect to certain distributions from certain types of qualified retirement
plans, unless the proceeds are transferred directly from the qualified plan to
another qualified retirement plan. Moreover, special "backup withholding" rules
may require First Fortis to disregard the recipient's election if the recipient
fails to supply First Fortis with a "TIN" or taxpayer identification number
(social security number for individuals), or if the Internal Revenue Service
notifies First Fortis that the TIN provided by the recipient is incorrect.

PORTFOLIO DIVERSIFICATION

The United States Treasury Department has adopted regulations under Section
817(h) of the Code which set standards of diversification for the investments
underlying the Contracts, in order for the Contracts to be treated as annuities.
First Fortis believes that these diversification standards will be satisfied.
Failure to do so would result in immediate taxation to Contract Owners or
persons receiving annuity payments of all returns credited to Contracts, except
in the case of certain Qualified Contracts. Also, current regulations do not
provide guidance as to any circumstances in which control over allocation of
values among different investment alternatives may cause Contract Owners or
persons receiving annuity payments to be treated as the owners of Variable
Account assets for tax purposes. First Fortis reserves the right to amend the
Contracts in any way necessary to avoid any such result. The Treasury Department
may establish standards in this regard through regulations or rulings. Such
standards may apply only prospectively, although retroactive application is
possible if such standards were considered not to embody a new position.

CERTAIN EXCHANGES

Section 1035 of the Code provides generally that no gain or loss will be
recognized under the exchange of a life insurance or annuity contract for an
annuity contract. Thus, a properly completed exchange from one of these types of
products into a Contract pursuant to the special annuity contract exchange form
we provide for this purpose is not generally a taxable event under the Code, and
your investment in the Contract will be the same as your investment in the
product you exchanged out of.

Because of the complexity of these and other tax aspects in connection with an
exchange, you should consult a tax adviser before making any exchange.

TAX LAW RESTRICTIONS AFFECTING SECTION 403(B) PLANS

Section 403(b)(12) of the Internal Revenue Code restricts the distribution under
Section 403(b) annuity contracts of:

(1) elective contributions made for years beginning after December 31, 1988;

(2) earnings on those contributions; and

(3) earnings on amounts held as of December 31, 1988.

Distribution of these amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions made after
December 31, 1988 may not be distributed in the case of hardship.

FURTHER INFORMATION ABOUT FIRST FORTIS

First Fortis Life Insurance Company is an affiliate of the worldwide Fortis
group of companies owned by Fortis AMEV of the Netherlands and Fortis AG of
Belgium. The Company was originally organized under New York Insurance Law on
August 12, 1971, and was acquired

18
<PAGE>
by the current owners on March 24, 1989, to enable the Fortis group of companies
the ability to distribute their products to the New York State marketplace.

On October 1, 1991, First Fortis Life Insurance Company and its affiliate Fortis
Benefits Insurance Company (the "Companies"), entered into an Asset Transfer and
Acquisition Agreement (the "Agreement") with Mutual Benefit Life Insurance
Company in Rehabilitation (MBL). Pursuant to the Agreement, the Companies
acquired certain assets and assumed certain liabilities of MBL relating to the
group life, accident and health, disability and dental insurance business of
MBL. That portion of the business conducted in New York was assumed by First
Fortis, while the remaining and more substantial portion of the business was
assumed by Fortis Benefits Insurance Company. N.V. AMEV contributed $25 million
in cash to the paid-in-capital of First Fortis on October 1, 1991 in connection
with the acquisition.

GENERAL
First Fortis is engaged in the offer and sale of insurance products, including
fixed and variable annuity contracts, and group life, accident and health
insurance policies. First Fortis markets its products to small business and
individuals through a network of independent agents, brokers, and financial
institutions.

SELECTED FINANCIAL DATA

The following is a summary of certain financial data of First Fortis. This
summary has been derived in part from, and should be read in conjunction with,
the financial statements of First Fortis included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Premiums........................................................ $ 67,517 $ 81,202 $ 92,056 $ 75,393 $ 58,209
Net investment income........................................... 7,891 7,466 6,261 6,074 6,245
Realized investment gains (losses).............................. (4) 2,683 (1,057) 3,062 1,773
Other income.................................................... 336 297 287 533 296
--------- --------- --------- --------- ---------
TOTAL REVENUES................................................ 75,740 91,648 97,547 85,062 66,523
--------- --------- --------- --------- ---------
Benefits and expenses........................................... 75,596 96,371 104,582 85,170 63,215
Income tax expense (benefit).................................... (39) (1,563) (999) (686) 1,058
--------- --------- --------- --------- ---------
Net income (loss)............................................... $ 183 $ (3,160) $ (6,036) $ 578 $ 2,250
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
BALANCE SHEET DATA
Total assets.................................................... $ 143,139 $ 139,913 $ 123,954 $ 132,077 $ 109,565
Total liabilities............................................... $ 107,447 $ 101,523 $ 97,913 $ 92,863 $ 73,209
Total shareholder's equity...................................... $ 35,692 $ 38,390 $ 26,041 $ 39,214 $ 36,356
</TABLE>

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

REVENUES

Life premiums of First Fortis (the "Company") are principally composed of group
life coverages. Total life premiums in 1996 increased 21% over 1995 due to
strong group life sales and premium rate increases on the group life line in
1996. Also, the Company began issuing variable annuity products in 1996.

Total accident and health premiums continued to decrease in 1996. Effective
January 1, 1996, the Company ceased new sales of group medical policies,
however, the Company continues to renew and service the existing group medical
business. On July 1, 1996, $5.4 million of group dental premium lapsed. The
historical benefit loss experience on the lapsed business was worse than the
experience on the remaining business. On-going marketing efforts have continued
to increase the Company's group disability income business. The group accident
and health premium mix continues to shift. In 1996, the premium mix was 35%
medical; 40% disability income; and, 25% dental compared to the 1995 mix of 54%
medical; 26% disability income; and 20% dental and the 1994 mix of 66% medical;
18% disability income; and 16% dental.

The Company continues to match investment portfolio composition to liquidity
needs and capital requirements. Changes in interest rates during 1996, 1995 and
1994 resulted in recognition of realized gains and losses.

BENEFITS

During 1995 and the first six months of 1996, the Company's group life claims
ratio was higher than expected as a result of increased mortality and larger
average claims amounts. During the last six months of 1996, mortality and
average claim amounts began to decrease. In 1994, the group life mortality
experience level was consistent with Management's expectations. Improved
accident and health benefit results from 1994 through 1996 are attributable to
actions taken by the Company on its medical and dental business along with
continuous improvement in recovery rates on existing group disability income
claimants.

EXPENSES

The Company continues to monitor its commission rate structures, and, as
indicated by market conditions, periodically adjusts rates paid. Rates paid vary
by product type, group size and duration. Changes in the mix of business has
resulted in an increase in the Company's average commission rate. During the
last six months of 1995, as the Company's inforce medical lives began to
decrease, the Company began to experience a reduction in medical related
expenses. This trend continued through 1996.

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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

The liquidity requirements of the Company have been met by funds provided from
operations, including investment income. Funds are principally used to provide
for policy benefits, operating expenses, commissions and investment purchases.
The impact of the declining inforce medical business has been considered in
evaluating the Company's future liquidity needs. The Company expects its
operating activities to continue to generate sufficient funds.

The NAIC has implemented risk-based capital standards to determine the capital
requirements of a life insurance company based upon the risks inherent in its
operations. These standards require the computation of a risk-based capital
amount which is then compared to a company's actual total adjusted capital.
Based upon current calculation using these risk-based capital standards, the
Company's percentage of total adjusted capital is in excess of ratios which
would require regulatory attention.

The Company has no long or short term debt. The Company's fixed maturity
investments consisted of 97% investment grade bonds as of December 31, 1996 and
the Company does not expect this percentage to change significantly in the
future.

REGULATION

The Company is subject to the laws and regulations established by the New York
State Insurance Department governing insurance business conducted in New York
State. Periodic audits are conducted by the New York Insurance Department
related to the Company's compliance with these laws and regulations. To date
there have been no adverse findings regarding the Company's operations.

As a small group (1-50 lives) medical insurer in the State of New York, First
Fortis was impacted by the passage in 1992 of Regulation 145, "Open Enrollment
and Community Rating of Individual and Small Group Health Insurance" and
Regulation 146, "Establishment and Operation on Market Stabilization Mechanisms
for Individuals and Small Group Health Insurance". The purpose of Regulation 145
is to promote competition among insurers and facilitate access to health
insurance by all New York residents. Beginning April 1, 1993, Regulation 145
required insurers to apply a rating methodology (community rate) in which the
premium for all persons covered by a policy or contract form is the same based
on the experience of the entire pool of risks covered by that policy or contract
form without regard to age, sex, health status or occupation. Regulation 146
established a market stabilization process to share among insurers substantive
cost variations attributable to significant differences in demographic
characteristics of the persons covered. During 1996, 1995, and 1994, demographic
characteristics of the Company's medical business resulted in payments to the
pools which have been reflected in accident and health benefits.

20
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS

Set forth is information concerning First Fortis' directors and executive
officers, together with their business experience and principal occupations for
the past five years:

<TABLE>
<S> <C>
Larry M. Cains, 50 Treasurer; Senior Vice President of Fortis,
Director since 1995 Inc.
Allen R. Freedman, 57 Chairman, Chief Executive Officer and
Director Since 1989 President; Chairman and Chief Executive
Officer of Fortis, Inc.
Thomas M. Keller, 49 President of Time Insurance Company;
Director Since 1994 President--Fortis Healthcare of Fortis
Benefits Insurance Company; before that Senior
Vice President of Fortis, Inc.
Dean C. Kopperud, 44 Chief Executive Officer of Fortis Advisers,
Director Since 1994 Inc. and President of Fortis Investors, Inc.;
President--Fortis Financial Group of Fortis
Benefits Insurance Company
Terry J. Kryshak, 46 Senior Vice President and Chief Administrative
Director Since 1991 Officer
Susie Gharib, 46 Anchorwoman, Cable NBC; before that,
Director Since 1991 Anchorwoman, Financial News Network
Guy Gerard Rutherfurd, Jr., 57 Senior Vice President, Dean Witter
Director Since 1989 Intercapital; before that Executive Vice
President and Chief Investment Officer of
Nomura Asset Management, Inc.
Dale Edward Gardner, 66 President, Gardner & Bull
Director Since 1989
Kenneth W. Nelson, 75 President, Tech Products, Inc.
Director Since 1989
Clarence Elkus Galston, 87 Attorney at Law
Director Since 1989
Robert B. Pollock, 42 President and Chief Executive Officer of
Director Since 1995 Fortis Benefits Insurance Company
Leanne F. Hughes, 36 Assistant Treasurer and Director of
Accounting; before that Senior Manager of
Ernst & Young LLP
Jerome A. Atkinson, 47 Secretary; Vice President, Secretary and
General Counsel of Fortis, Inc.; before that
Senior Vice President, Secretary and General
Counsel of American Security Insurance Company
</TABLE>

First Fortis' officers serve at the pleasure of the Board of Directors, and
members of the Board who are also officers or employees of First Fortis serve
without compensation. All Directors serve until their successors are duly
elected and qualified. The compensation of members of the Board who are not also
officers or employees of First Fortis or its affiliates is as follows. The
Director receives $1,000 for attendance at the annual Board meeting. If the
Director is also a member of the Audit Committee and/or the Investment
Committee, the Director also receives $1,000 for attending any meeting of such
committee unless the committee meeting date is the same as the annual meeting,
in which case the committee meeting compensation is $500.

Mr. Freedman is also a director of Systems and Computer Technology Corporation
and Genesis Health Ventures and the following registered investment companies:
Fortis Equity Portfolios, Inc.; Fortis Growth Fund, Inc.; Fortis Fiduciary Fund,
Inc.; Fortis Income Portfolios, Inc.; Fortis Securities, Inc.; Fortis Tax-Free
Portfolios, Inc.; Fortis Money Portfolios, Inc.; Fortis Advantage Portfolios,
Inc.; Fortis Worldwide Portfolios, Inc.; Fortis Series Fund, Inc.; Special
Portfolios, Inc.

21
<PAGE>
EXECUTIVE COMPENSATION

Set forth below is certain information concerning the compensation of the named
executive officers of First Fortis. Mr. Freedman is compensated by other
affiliates of First Fortis.

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

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION (1)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)
- ------------------------------------------------------- ---- -------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Allen R. Freedman 1996 $ 0 $ 0 $ 0 $ 0
President 1995 0 0 0 0
Terry J. Kryshak 1996 111,000 34,000 0 6,660
Senior Vice President and Chief Administrative Officer 1995 107,350 25,764 0 8,288
1994 95,000 30,780 0 1,535
Robert O. Blaber 1996 78,234 256,647 0 0
Senior Vice President 1995 75,000 263,654 0 14,852
1994 75,000 246,032 14,140
</TABLE>

- ------------------------
1 This column includes contributions made by First Fortis for the year for the
benefit for the named individual to defined contribution retirement plans.

As additional compensation to its employees and executive officers, First Fortis
has an Employees' Uniform Retirement Plan and an Executive Retirement Plan which
generally provide an annual annuity benefit upon retirement at age 65 (or a
reduced benefit upon early retirement) equal to: .9% of the employee's Average
Annual compensation up to the employee's social security covered compensation,
plus 1.3% of Average Annual compensation above the employee's social security
covered compensation up to $235,840, as adjusted by an index, multiplied by the
employee's years of credited services.

The following table illustrates the combined estimated life annuity benefit
payable from the Employees Uniform Retirement Plan and the Executive Retirement
Plan to employees with the specified Final Average Salary and Years of Service
upon retirement.

PENSION TABLE

<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------
FINAL AVERAGE EARNINGS 10 15 20 25 30 35
- ----------------------------------- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
125,000 15,147 22,720 30,294 37,867 45,441 53,014
150,000 18,397 27,595 36,794 45,992 55,191 64,389
175,000 21,647 32,470 43,294 54,117 64,941 75,764
200,000 24,897 37,345 49,794 62,242 74,691 87,139
225,000 28,147 42,220 56,294 70,367 84,441 98,514
250,000 30,214 45,321 60,428 75,536 90,643 105,750
275,000+ 30,352 45,528 60,704 75,880 91,056 106,232
</TABLE>

The table above excludes social security benefits. In general, for the purposes
of these plans compensation includes salary and bonuses. The credited years of
service with First Fortis for those individuals named in the Summary
Compensation Table above are as follows: 0, 6, and 10.

OWNERSHIP OF SECURITIES

All of First Fortis' outstanding shares are owned by Fortis, Inc., One Chase
Manhattan Plaza, New York, N.Y. 10005. Fortis, Inc., in turn is wholly owned by
Fortis International, Inc., which is wholly owned by AMEV/VSB 1990 N.V., both of
which share the same address with N.V. AMEV., Archimedeslaan 10, 3584 BA,
Utrecht, The Netherlands. AMEV/ VSB 1990 N.W. is 50% owned by Fortis AMEV and
50% owned, through certain subsidiaries, by Fortis AG, Boulevard Emile Jacqmain
53, 1000 Brussels, Belgium.

VOTING PRIVILEGES

In accordance with its view of current applicable law, First Fortis will vote
shares of each of the Portfolios which are attributable to a Contract at regular
and special meetings of the shareholders of Series Fund in proportion to
instructions received from the persons having the voting interest in the
Contract as of the record date for the corresponding Series Fund shareholders
meeting. Contract Owners have the voting interest during the Accumulation
Period, persons receiving annuity payments during the Annuity Period, and
Beneficiaries after the death of the Annuitant or Contract Owner. However, if
the Investment Company Act of 1940 or any rules thereunder should be amended or
if the present interpretation thereof should change, and as a result First
Fortis determines that it is permitted to vote shares of the Portfolios in its
own right, it may elect to do so.

During the Accumulation Period, the number of shares of a Portfolio attributable
to a Contract is determined by dividing the amount of Contract Value in the
corresponding Subaccount pursuant to the Contract as of the record date for the
shareholders meeting by the net asset value of one Portfolio share as of that
date. During the Annuity Period, or after the death of the Annuitant or Contract
Owner, the number of Portfolio shares deemed attributable to the Contract will
be computed in a comparable manner, based on the liability for future variable
annuity payments allocable to that Subaccount under the Contract as of the
record date. Such liability for future payments will be calculated on the basis
of the mortality assumptions and the assumed interest rate used in determining
the number of Annuity Units credited to the Contract and the applicable Annuity
Unit value on the record date. During the Annuity Period, the number of votes
attributable to a Contract will generally decrease since funds set aside to make
the annuity payments will decrease.

First Fortis will vote shares for which it has received no timely instructions,
and any shares attributable to excess amounts First Fortis has accumulated in
the related Subaccount, in proportion to the voting instructions which it
receives with respect to all Contracts and other variable annuity contracts
participating in a Portfolio. To the extent

22
<PAGE>
that First Fortis or any affiliated company holds any shares of a Portfolio,
they will be voted in the same proportion as instructions for that Portfolio
that are received from persons holding the voting interest with respect to all
First Fortis separate accounts participating in that Portfolio. Shares held by
separate accounts other than the Variable Account will in general be voted in
accordance with instructions of participants in such other separate accounts.
This diminishes the relative voting influence of the Contracts.

Each person having a voting interest in a Subaccount of the Separate Account
will receive proxy material, reports and other materials relating to the
appropriate Portfolio. Pursuant to the procedures described above, these persons
may give instructions regarding the election of the Board of Directors of Series
Fund, ratification of the selection of its independent auditors, the approval of
the investment managers of a Portfolio, changes in fundamental investment
policies of a Portfolio and all other matters that are put to a vote by Series
Fund shareholders.

LEGAL MATTERS

The legality of the Contracts described in this Prospectus has been passed upon
by Douglas R. Lowe, Esquire, Assistant General Counsel with the law department
of Fortis Benefits Insurance Company, an affiliate of First Fortis. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised First Fortis on
certain federal securities law matters.

OTHER INFORMATION

Registration Statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Prospectus. Not all of the information set forth in
the Registration Statement, amendments and exhibits thereto has been included in
this Prospectus. Statements contained in this Prospectus concerning the content
of the Contracts and other legal instruments are intended to be summaries. For a
complete statement of the terms of these documents, reference should be made to
the instruments filed with the Securities and Exchange Commission.

A Statement of Additional Information is available upon request. Its contents
are as follows:

CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
PAGE
<S> <C>
First Fortis and the Variable Account..................................... 2
Calculation of Annuity Payments........................................... 2
Postponement of Payments.................................................. 3
Services.................................................................. 3
- Safekeeping of Variable Account Assets................................ 3
- Experts............................................................... 3
- Principal Underwriter................................................. 3
Limitations on Allocations................................................ 4
Change of Investment Adviser or Investment Policy......................... 4
Taxation Under Certain Retirement Plans................................... 4
Withholding............................................................... 8
Terms of Exemptive Relief in Connection With Mortality and Expense Risk
Charge................................................................... 8
Variable Account Financial Statements..................................... 9
APPENDIX A--Performance Information....................................... A-1
</TABLE>

FIRST FORTIS FINANCIAL STATEMENTS

The financial statements of First Fortis that are included in this Prospectus
should be considered primarily as bearing on the ability of First Fortis to meet
its obligations under the Contracts. The Contracts are not entitled to
participate in earnings, dividends or surplus of First Fortis.

[to be filed by subsequent post effective amendment]

23
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
First Fortis Life Insurance Company

We have audited the accompanying balance sheets of First Fortis Life Insurance
Company (a wholly-owned subsidiary of Fortis AMEV) as of December 31, 1996 and
1995, and the related statements of operations, changes in shareholder's equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Fortis Life Insurance
Company at December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP
Syracuse, New York
February 21, 1997

F-1
<PAGE>
BALANCE SHEETS
FIRST FORTIS LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Investments--(Note 3):
Fixed maturities, at fair value (amortized cost 1996--$111,970,939;
1995--$106,648,754)................................................ $113,136,650 $112,183,452
Preferred stock at fair value (cost 1995--$92,029).................. -- 89,345
Short-term investments.............................................. -- 6,850,000
------------ ------------
113,136,650 119,122,797
Cash.................................................................. 1,544,745 1,145,131

Receivables:
Uncollected premiums, less allowance--$100,000...................... 3,890,111 4,440,446
Reinsurance recoverable on unpaid and paid losses................... 14,731,285 9,335,947
Prepaid federal income taxes and other assets....................... 4,311,855 2,255,199
------------ ------------
22,933,251 16,031,592
Accrued investment income............................................. 1,739,498 1,814,291
Property and equipment at cost, less accumulated depreciation
(1996--$1,395,517; 1995--$1,249,280)................................. 1,027,576 1,199,482
Goodwill.............................................................. 554,000 600,000
Assets held in separate accounts...................................... 2,203,109 --
------------ ------------
TOTAL ASSETS.......................................................... $143,138,829 $139,913,293
------------ ------------
------------ ------------

RESERVES, LIABILITIES, AND SHAREHOLDER'S EQUITY
POLICY RESERVES AND LIABILITIES
Future policy benefit reserves:
Life insurance.................................................... $ 25,225,095 $ 22,529,817
Accident and health............................................... 60,774,384 59,442,638
------------ ------------
85,999,479 81,972,455
Other policy claims and benefits payable............................ 14,798,802 13,561,740
Other liabilities................................................... 4,445,831 5,988,794
Liabilities related to separate accounts............................ 2,203,109 --
------------ ------------
TOTAL POLICY RESERVES AND LIABILITIES................................. 107,447,221 101,522,989

SHAREHOLDER'S EQUITY (Notes 1, 8, 9, and 10):
Common stock, $20 par value 100,000 shares authorized, issued, and
outstanding........................................................ 2,000,000 2,000,000
Additional paid-in capital.......................................... 37,440,000 37,440,000
Retained earnings (deficit)......................................... (4,517,761) (4,700,825)
Unrealized appreciation of investment securities, net of tax (Note
3)................................................................. 769,369 3,651,129
------------ ------------
TOTAL SHAREHOLDER'S EQUITY............................................ 35,691,608 38,390,304
------------ ------------
TOTAL RESERVES, LIABILITIES, AND SHAREHOLDER'S EQUITY................. $143,138,829 $139,913,293
------------ ------------
------------ ------------
</TABLE>

See accompanying notes.

F-2
<PAGE>
STATEMENTS OF OPERATIONS
FIRST FORTIS LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1996 1995 1994
----------- ------------ -----------
<S> <C> <C> <C>
REVENUES
Insurance operations (NOTE 7):
Life insurance premiums........................................... $22,850,286 $ 18,879,246 $19,431,130
Accident and health premiums...................................... 44,666,246 62,322,484 72,624,559
Net investment income (NOTE 3)...................................... 7,891,048 7,465,751 6,261,593
Realized (losses) gains on investments (NOTE 3)..................... (3,650) 2,683,100 (1,057,438)
Other income........................................................ 335,934 297,767 287,426
----------- ------------ -----------
TOTAL REVENUES.................................................. 75,739,864 91,648,348 97,547,270

BENEFITS AND EXPENSES
Benefits to policyholders:
Life insurance.................................................... 19,792,653 16,206,930 15,345,645
Accident and health............................................... 37,987,686 56,592,227 68,115,512
Amortization of deferred policy acquisition costs (NOTE 2).......... - 4,595,000 1,838,000
Insurance commissions............................................... 5,213,744 5,070,934 5,768,504
General and administrative expenses................................. 12,601,939 13,906,043 13,514,820
----------- ------------ -----------
TOTAL BENEFITS AND EXPENSES..................................... 75,596,022 96,371,134 104,582,481
----------- ------------ -----------
Income (loss) before federal income taxes........................... 143,842 (4,722,786) (7,035,211)
Federal income tax benefit (NOTE 6)................................. (39,222) (1,562,943) (999,671)
----------- ------------ -----------
NET INCOME (LOSS)................................................... $ 183,064 $ (3,159,843) (6,035,540)
----------- ------------ -----------
----------- ------------ -----------
</TABLE>

See accompanying notes.

F-3
<PAGE>
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
FIRST FORTIS LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
ADDITIONAL RETAINED (DEPRECIATION)
COMMON PAID-IN EARNINGS OF INVESTMENT
STOCK CAPITAL (DEFICIT) SECURITIES, NET TOTAL
---------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1994........................... $2,000,000 $30,440,000 $ 4,494,558 $ 2,280,000 $39,214,558
Net loss.......................................... -- -- (6,035,540) -- (6,035,540)
Unrealized depreciation of investment securities,
net.............................................. -- -- -- (5,486,586) (5,486,586)
Change in deferred tax valuation allowance for
unrealized depreciation on investment
securities....................................... -- -- -- (1,651,877) (1,651,877)
---------- ----------- ----------- --------------- -----------
Balance December 31, 1994......................... 2,000,000 30,440,000 (1,540,982) (4,858,463) 26,040,555
Additional paid-in capital from Fortis AMEV....... -- 7,000,000 -- -- 7,000,000
Net loss.......................................... -- -- (3,159,843) -- (3,159,843)
Unrealized appreciation of investment securities,
net.............................................. -- -- -- 6,857,715 6,857,715
Change in deferred tax valuation allowance for
unrealized depreciation on investment
securities....................................... -- -- -- 1,651,877 1,651,877
---------- ----------- ----------- --------------- -----------
Balance December 31, 1995 2,000,000 37,440,000 (4,700,825) 3,651,129 38,390,304
Net income...................................... -- -- 183,064 -- 183,064
Unrealized depreciation of investment securities.
net.............................................. -- -- -- (2,881,760) (2,881,760)
---------- ----------- ----------- --------------- -----------
Balance December 31, 1996......................... $2,000,000 $37,440,000 $(4,517,761) $ 769,369 $35,691,608
---------- ----------- ----------- --------------- -----------
---------- ----------- ----------- --------------- -----------
</TABLE>

See accompanying notes.

F-4
<PAGE>
STATEMENTS OF CASH FLOWS
FIRST FORTIS LIFE INSURANCE COMPANY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................... $ 183,064 $ (3,159,843) $ (6,035,540)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Non-cash transactions:
Change in deferred tax valuation allowance....... -- (177,708) 1,515,531
Depreciation, amortization and accretion......... 803,858 750,029 716,129
Net realized losses (gains) on investments....... 3,650 (2,683,100) 1,057,438
Changes in assets and liabilities:
(Increase) decrease in uncollected premiums,
accrued investment income and other............. (1,322,446) 112,767 2,258,061
(Increase) decrease in reinsurance recoverable... (5,395,338) (460,598) 333,480
Increase (decrease) in income taxes.............. 1,771,804 (1,569,235) (2,903,210)
Amortization of policy acquisition costs......... -- 4,595,000 1,838,000
Policy acquisition costs deferred................ -- -- (432,000)
Increase in future policy benefit reserves and
other policy claims and benefits................ 5,264,086 3,481,220 7,835,342
(Decrease) increase in other liabilities......... (1,939,303) 128,321 (2,118,752)
-------------- -------------- --------------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES.................................... (630,625) 1,016,853 4,064,479

INVESTING ACTIVITIES
Purchases of fixed maturity investments.............. (140,954,176) (122,289,460) (77,995,025)
Sales and maturities of fixed maturity investments... 135,352,498 120,298,152 69,440,809
Decrease (increase) in equity securities and
short-term investments.............................. 6,942,029 (5,042,029) 3,731,866
Purchase of property and equipment................... (310,112) (321,460) (562,438)
-------------- -------------- --------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES.................................... 1,030,239 (7,354,797) (5,384,788)
FINANCING ACTIVITIES
Proceeds from additional paid-in capital............. -- 7,000,000 --
-------------- -------------- --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES...... -- 7,000,000 --
-------------- -------------- --------------
Increase (decrease) in cash.......................... 399,614 662,056 (1,320,309)
CASH AT BEGINNING OF YEAR...................... 1,145,131 483,075 1,803,384
-------------- -------------- --------------
CASH AT END OF YEAR............................ $ 1,544,745 $ 1,145,131 $ 483,075
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FIRST FORTIS LIFE INSURANCE COMPANY

DECEMBER 31, 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS

First Fortis Life Insurance Company ("First Fortis" or "the Company") is an
affiliate of the worldwide Fortis group of companies owned by Fortis AMEV of the
Netherlands and Fortis AG of Belgium. First Fortis is wholly-owned by Fortis
AMEV. The other U.S. subsidiaries of Fortis AREV and Fortis AG operate under the
holding company name Fortis, Inc. Subject to regulatory approval by the New York
State Insurance Department, the Company will become a wholly-owned subsidiary of
Fortis, Inc. in 1997. The Company was organized to enable the Fortis group of
companies to distribute their products to the New York State marketplace. To
date, the Company's revenues have been derived primarily from group employee
benefits products. During 1996, the Company had $11,425,000 of direct premium
written principally by two third party administrators ("TPA's"). Effective
January 1, 1996, the Company stopped offering its group medical products;
however, the Company will continue to renew and service existing medical
business, which represented $17,871,000 and $34,011,000 of 1996 and 1995
accident and health premiums, respectively. During 1996, $250,000 of related
termination benefits were paid, which were accrued for and included in general
and administrative expenses in 1995.

BASIS OF STATEMENT PRESENTATION

The financial statements are presented in conformity with generally accepted
accounting principles which differ in certain respects from statutory accounting
practices prescribed or permitted by the New York State Insurance Department.
Significant accounting policies followed by the Company are:

POLICY REVENUES

For group life, medical, disability, and credit life products, amounts
collected from policyholders are recognized as premium income over the
premium paying period and are reported net of experience rating refunds and
unearned premiums.

CLAIMS AND BENEFITS PAYABLE

Claims and benefits payable for reported and incurred but not reported
losses are determined using case base estimates and prior experience. These
estimates are subject to the effects of trends in claim severity and
frequency and represent the estimates of the ultimate cost of all unpaid
losses incurred through December 31 of each year. Although considerable
variability is inherent in such estimates, management believes that the
reserve for claims and benefits payable is adequate. The methods of making
such estimates and establishing the related liabilities are continually
reviewed and updated, and any adjustments resulting therefrom are reflected
in operations currently.

RESERVES FOR FUTURE POLICY BENEFITS

Active life reserves for future policy and contract benefits on life and
accident and health products are provided on the net level premium method.
The reserves are calculated based upon assumptions as to interest,
withdrawal, mortality, and morbidity that were appropriate at the date of
issue. Interest rate assumptions range principally from 3.0% to 5.5% for
traditional life products and 4.0% to 10.0% for annuity products. Withdrawal
assumptions are based on actual Company experience. Mortality and morbidity
assumptions are based upon industry standards adjusted as appropriate to
reflect actual Company experience. The assumptions vary by plan, year of
issue, and policy duration and include a provision for adverse deviation.

Disabled lives reserves for future policy and contract benefits on
disability income policies are calculated based upon assumptions as to
interest and claim termination rates that are currently appropriate.
Disabled lives reserves for group life policies are based on a 3.5% interest
rate assumption. For group long-term disability income policies, the
interest rate assumption on claims is 6.0%. Termination rate assumptions are
based upon industry standards adjusted as appropriate to reflect actual
Company experience. The assumptions vary by year of claim incurred.

INVESTMENTS

The Company's investment strategy is developed based on many factors
including insurance liability matching, rate of return, maturity, credit
risk, tax considerations, and regulatory requirements.

All fixed maturities are considered available-for-sale and are reported at
fair value; short-term investments are reported at cost, which approximates
fair value. Changes in the fair values of available-for-sale securities, net
of deferred income taxes, are reported as unrealized appreciation or
depreciation directly in shareholder's equity and, accordingly, have no
effect on net income. Realized gains and losses on sales of investments, and
declines in value judged to be other-than-temporary, are recognized on the
specific identification basis.

PROPERTY AND DEPRECIATION

The Company provides depreciation (principally on the straight-line method)
over the estimated useful life of the related property.

INCOME TAXES

Income taxes have been provided using the liability method. Deferred tax
assets and liabilities are determined based on the differences between their
financial reporting and tax bases, and are measured using the enacted tax
rates.

F-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SEPARATE ACCOUNTS

The Company began selling variable annuity products July 1, 1996. Assets and
liabilities associated with separate accounts relate to premium and annuity
considerations for which the policyholder, rather than the Company, bears
the investment risk. Separate account assets are reported at fair value.
Revenues and expenses related to the separate account assets and
liabilities, to the extent of benefits paid or provided to the separate
account policyholders, are excluded from the amounts reported in the
accompanying statements of operations.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

2. DEFERRED POLICY ACQUISITION COSTS
On October 1, 1991, First Fortis Life Insurance Company and an affiliate, Fortis
Benefits Insurance Company, (the "Companies") entered into an Asset Transfer and
Acquisition Agreement (the "Agreement") with Mutual Benefit Life Insurance
Company in Rehabilitation ("MBL). Pursuant to the Agreement, the Companies
acquired certain assets and assumed certain liabilities of MBL relating to the
group life, disability, dental and medical insurance business (the "Business")
of MBL. That portion of the Business conducted in New York was assumed by First
Fortis, while the most substantial portion of the Business was assumed by Fortis
Benefits Insurance Company. First Fortis paid $10,166,000 for its portion of the
Business acquired including contingent Promissory Note ("Note") payments
aggregating $1,366,000 from 1992 to 1994 which were based on the persistency of
the acquired Business through September 30, 1994. No additional payments will be
made. Note payments were added to deferred policy acquisition costs ("DPAC")
when made. The DPAC amortization period, which was originally scheduled through
September 30, 1997, was completed December 31, 1995 (an acceleration of
$2,749,000 into 1995), based on the overall experience of the acquired block of
business.

3. INVESTMENTS
FIXED MATURITIES

The following is a summary of the amortized cost and fair value of fixed
maturity securities:

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAIN LOSS FAIR VALUE
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
December 31, 1996:
Governments.......................................... $ 13,463,189 $ 92,446 $ (44,103) $ 13,511,532
Public utilities..................................... 6,445,882 66,809 (24,710) 6,487,981
Industrial and miscellaneous......................... 92,061,868 1,425,693 (350,424) 93,137,137
------------ ------------ ----------- ------------
Total.............................................. $111,970,939 $ 1,584,948 $ (419,237) $113,136,650
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C>
December 31, 1995:
Governments.......................................... $ 17,068,216 $ 1,025,440 $ -- $ 18,093,656
Public utilities..................................... 4,906,703 262,773 -- 5,169,476
Industrial and miscellaneous......................... 84,673,835 4,272,901 (26,416) 88,920,320
------------ ------------ ----------- ------------
Total.............................................. $106,648,754 $ 5,561,114 $ (26,416) $112,183,452
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
</TABLE>

The fair values for fixed maturity securities are based on quoted market prices,
where available. For fixed maturity securities not actively traded, fair values
are estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality, and
maturity of the investments.

The amortized cost and fair value of fixed maturity securities at December 31,
1996, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
------------ ------------
<S> <C> <C>
Due in one year or less................................ $ 502,354 $ 503,010
Due after one year through five years.................. 38,588,214 39,067,289
Due after five years through ten years................. 39,780,501 40,023,689
Due after ten years.................................... 33,099,870 33,542,662
------------ ------------
$111,970,939 $113,136,650
------------ ------------
------------ ------------
</TABLE>

Proceeds from sales and maturities of fixed maturity securities were
$135,352,498, $120,298,152 and $69,440,809 in 1996, 1995, and 1994,
respectively. Gross gains of $1,551,135, $3,373,880 and $510,242 and gross
losses of $1,554,785, $690,780 and $1,572,163 were realized on the sales in
1996, 1995, and 1994 respectively.

F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

3. INVESTMENTS (CONTINUED)
NET INVESTMENT INCOME AND NET REALIZED GAINS (LOSSES) ON INVESTMENTS

Major categories of net investment income and realized gains (losses) on
investments for each year were as follows:

<TABLE>
<CAPTION>
NET REALIZED GAINS (LOSSES) ON
NET INVESTMENT INCOME INVESTMENTS
---------------------------------- -----------------------------------
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities........................ $7,940,703 $7,578,652 $6,341,978 $ (3,650) $ 2,683,100 $(1,061,921)
Short-term investments.................. 231,448 152,211 200,274 -- -- 4,483
---------- ---------- ---------- ---------- ----------- ----------
8,172,151 7,730,863 6,542,252 $ (3,650) $ 2,683,100 $(1,057,438)
---------- ----------- ----------
---------- ----------- ----------
Expenses................................ (281,103) (265,112) (280,659)
---------- ---------- ----------
Net investment income................... $7,891,048 $7,465,751 $6,261,593
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

4. LEASES
The Company leases office space under operating lease arrangements that have
various renewal options and are subject to escalation clauses for real estate
taxes and operating expenses. Rent expense was $691,588, $673,407 and $597,365
in 1996, 1995, and 1994, respectively. Future minimum payments required under
operating lease arrangements that have initial or noncancelable terms in excess
of one year or more are: 1997--$715,797, 1998--$739,352, 1999--$569,049,
2000--$18,830, and 2001--$15,691.

5. UNPAID LOSSES AND LOSS EXPENSE ALLOWANCE
Activity for the liability for unpaid accident and health losses and related
loss expense allowance is summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance as of January 1, net of reinsurance
recoverable........................................... $65,764,070 $66,136,369 $58,646,889
Add: Incurred losses related to:
Current year......................................... 38,798,085 57,400,613 66,066,609
Prior years.......................................... (810,399) (808,386) 2,048,903
----------- ----------- -----------
Total incurred losses.............................. 37,987,686 56,592,227 68,115,512
----------- ----------- -----------
Deduct: Paid losses related to:
Current year......................................... 23,727,017 35,779,078 40,882,341
Prior years.......................................... 18,543,303 21,185,448 19,743,691
----------- ----------- -----------
Total paid losses.................................. 42,270,320 56,964,526 60,626,032
----------- ----------- -----------
Balance as of December 31, net of reinsurance
recoverable........................................... $61,481,436 $65,764,070 $66,136,369
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

As discussed in Note 1, the Company stopped offering group medical products in
1996 but continues to service and renew existing business, resulting in lower
incurred and paid loss activity for the year ended December 31, 1996.

The total balance of unpaid losses and loss expense allowances are reported in
the balance sheets gross of reinsurance as components of future accident and
health policy benefit reserves, other policy claims and benefits payable and
other liabilities.

In 1994, lower than anticipated recovery rates on existing long-term disability
income claimants, offset by a favorable refinement in the claims reserve
estimates contributed to the "incurred losses related to prior years" result.
The liability for unpaid accident and health losses and loss expense allowance
includes $55,152,000, $53,953,000 and $47,489,000 of long-term disability income
reserves as of December 31, 1996, 1995, and 1994, respectively, which were
discounted for anticipated interest earnings assuming a 6.0% interest rate.

F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

6. FEDERAL INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the basis of assets and liabilities for financial statement purposes and
for income tax purposes. The significant components of the Company's deferred
tax assets and liabilities as of December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Reserves............................................................ $ 2,006 $ 2,104
Deferred policy acquisition costs................................... 555 470
Alternative minimum tax credit carryforward......................... 392 191
Net operating loss carryforward..................................... 216 --
Other............................................................... 299 485
--------- ---------
Total gross deferred tax assets................................... 3,468 3,250
Valuation allowance................................................... (1,338) (1,338)
--------- ---------
Net deferred tax assets............................................... 2,130 1,912
Deferred tax liabilities:
Unrealized gains.................................................... 396 1,881
Other............................................................... 206 31
--------- ---------
Total gross deferred tax liabilities.............................. 602 1,912
--------- ---------
Net deferred tax asset............................................ $ 1,528 $ --
--------- ---------
--------- ---------
</TABLE>

The net deferred tax asset is reported as a component of "prepaid federal income
taxes and other assets" in the balance sheet.

As of December 31, 1996 and 1995, respectively, the Company had a deferred tax
asset valuation allowance of $1,337,823. The valuation allowance decrease of
$1,829,585 in 1995 was recognized as a $1,651,877 increase to the "unrealized
appreciation (depreciation) of investment securities, net" component of
shareholder's equity and a $177,708 tax benefit in the statement of operations
in 1995.

The income tax provision is summarized as follows (in thousands):

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current........................................... $ (131) $ 393 $(1,775)
Deferred.......................................... 92 (1,778) (740)
Valuation allowance............................... -- (178) 1,516
------- ------- -------
Federal income tax benefit........................ $ (39) $(1,563) $ (999)
------- ------- -------
------- ------- -------
</TABLE>

Tax payments of $32,000, $251,591 and $1,442,818 were made in 1996, 1995, and
1994, respectively.

The differences between the provision (benefit) for income taxes at the federal
statutory income tax rate and the tax benefit were as follows (in thousands):

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Federal statutory rate............................ (34.0)% (34.0)% (34.0)%
------- ------- -------
------- ------- -------
Tax provision (benefit) at statutory rate......... $ 49 $(1,606) $(2,392)
Tax exempt interest............................... -- (188) (406)
Other, net........................................ (88) 409 283
Valuation allowance............................... -- (178) 1,516
------- ------- -------
Tax benefit as reported........................... $ (39) $(1,563) $ (999)
------- ------- -------
------- ------- -------
</TABLE>

At December 31, 1996, the Company has net operating loss carryforwards for
federal income tax purposes of $636,000 which are available to offset future
federal taxable income, if any, through 2011. The Company also has alternative
minimum tax credit carryforwards of $392,000, which are available to reduce
future federal regular income taxes, if any, over an indefinite period of time.

F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

7. REINSURANCE
The maximum amounts that the Company retains on any one life are $500,000 for
group life; $250,000 for group accidental death; $2,000 net monthly benefit for
long-term disability; from 10% to 50% of possible benefits payable under credit
life and credit disability insurance; and 0% of a closed block of individual
life business. Amounts in excess of these limits are reinsured with various
insurance companies on a yearly renewable term, coinsurance or other basis.

In the second quarter of 1996, the Company received approval from the New York
State Insurance Department for a reinsurance agreement with Fortis Benefits
Insurance Company ("Fortis Benefits"), an affiliate. The agreement, which became
effective as of January 1, 1996, decreased the Company's long-term disability
reinsurance retention from a $10,000 net monthly benefit to a $2,000 net monthly
benefit for claims incurred on and after January 1, 1996. Through December 31,
1996, the Company has ceded $6,144,000 of premium to Fortis Benefits and Fortis
Benefits has assumed $3,599,000 of reserves from the Company. In the future, the
agreement is expected to reduce the variability of financial results for this
product line.

Future policy benefits and other policy claims and benefits payable are reported
gross of reinsurance. The reinsured portion of future policy benefits and other
policy claims and benefits payable are $14,731,285 and $9,335,947 in 1996 and
1995, respectively. The Company remains contingently liable in the event the
reinsuring companies are unable to meet their obligations under such reinsurance
agreements.

Additional information regarding the Company's reinsurance activity for the
years ended December 31, 1996, 1995, and 1994 is as follows:

<TABLE>
<CAPTION>
GROSS AMOUNT CEDED NET AMOUNT
-------------- ------------ --------------
<S> <C> <C> <C>
1996
Life insurance in force........... $6,576,692,000 $238,628,000 $6,338,064,000
-------------- ------------ --------------
-------------- ------------ --------------
Premiums:
Group and individual life....... $ 24,216,176 $ 1,365,890 $ 22,850,286
Accident and health............. 51,751,740 7,085,494 44,666,246
-------------- ------------ --------------
Total premiums.................... $ 75,967,916 $ 8,451,384 $ 67,516,532
-------------- ------------ --------------
-------------- ------------ --------------
1995
Life insurance in force........... $6,864,625,000 $321,785,000 $6,542,840,000
-------------- ------------ --------------
-------------- ------------ --------------
Premiums:
Group and individual life....... $ 20,376,696 $ 1,497,450 $ 18,879,246
Accident and health............. 63,696,935 1,374,451 62,322,484
-------------- ------------ --------------
Total premiums.................... $ 84,073,631 $ 2,871,901 81,201,730
-------------- ------------ --------------
-------------- ------------ --------------
1994
Life insurance in force........... $5,116,384,000 $297,027,000 $4,819,357,000
-------------- ------------ --------------
-------------- ------------ --------------
Premiums:
Group and individual life....... $ 20,508,492 $ 1,077,362 $ 19,431,130
Accident and health............. 72,835,490 210,931 72,624,559
-------------- ------------ --------------
Total premiums.................... $ 93,343,982 $ 1,288,293 $ 92,055,689
-------------- ------------ --------------
-------------- ------------ --------------
</TABLE>

8. DIVIDEND RESTRICTIONS
The Company is subject to insurance regulatory restrictions that limit cash
dividends which can be paid from the Company to its Parent. All dividends
require prior approval by the New York State Insurance Department.

9. TRANSACTIONS WITH AFFILIATED COMPANIES
Affiliates of the Company provide services, such as information systems,
actuarial and investment management, in return for payment representing the
costs incurred for such services. In 1996, 1995, and 1994, the Company incurred
$1,648,000, $1,581,000 and $1,443,000, respectively, in service fees under the
arrangements with the affiliates. In 1995, the Company received cash of
$7,000,000 representing additional paid-in capital from Fortis AMEV.

The Company participates in the Fortis, Inc. noncontributory defined benefit
pension plan and a contributory profit sharing plan covering substantially all
of its employees. Amounts expensed under these plans were $253,609, $232,252 and
$171,519 in 1996, 1995, and 1994, respectively.

10. STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory-basis financial statements in accordance with
accounting practices prescribed or permitted by insurance regulatory
authorities. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed; such practices may differ from state to state, may differ from
company to company within a state, and

F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

10. STATUTORY ACCOUNTING PRACTICES (CONTINUED)
may change in the future. The NAIC is currently in the process of recodifying
statutory accounting practices. This project, which is expected to be completed
in 1998, may result in changes to the accounting practices that insurance
enterprises use to prepare their statutory-basis financial statements.

Insurance enterprises are required by state insurance departments to adhere to
minimum risk-based capital ("RBC") requirements developed by the NAIC. The
Company exceeds minimum RBC requirements.

Reconciliations of net income or loss and shareholder's equity on the basis of
statutory accounting to the related amounts presented in the accompanying
statements were as follows:

<TABLE>
<CAPTION>
NET INCOME (LOSS) SHAREHOLDER'S EQUITY
------------------------------------- ------------------------
1996 1995 1994 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Based on statutory accounting practices........... $ (427,557) $(1,627,624) $(2,004,993) $27,466,966 $27,773,005
Deferred policy acquisition costs................. -- (4,595,000) (1,838,000) -- --
Deferred and uncollected premiums................. 76,233 -- (100,000) 358,155 149,066
Property and equipment............................ -- -- -- 481,875 583,613
Policy reserves................................... 476,177 68,018 (16,872) 658,723 182,546
Investment valuation difference................... -- -- -- 1,165,710 5,532,013
Realized gains (losses) on investments............ (3,650) 2,683,736 (1,060,352) -- --
Amortization of goodwill.......................... (46,000) (46,000) (46,000) 554,000 600,000
Income taxes...................................... 115,009 674,642 1,035,479 2,865,246 1,337,823
Deferred tax valuation allowance.................. -- 177,708 (1,515,531) (1,337,823) (1,337,823)
Interest maintenance reserve ("IMR").............. -- -- -- 2,001,250 2,430,093
Amortization of IMR............................... (426,200) (432,656) (451,286) -- --
Asset valuation reserve........................... -- -- -- 997,799 881,150
Other............................................. 419,052 (62,667) (37,985) 479,707 258,818
----------- ----------- ----------- ----------- -----------
$ 183,064 $(3,159,843) $(6,035,540) $35,691,608 $38,390,304
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

11. COMMITMENTS AND CONTINGENCIES
The Company is party to various legal actions arising in the normal course of
its operations. The Company does not believe that the eventual outcome of any
such litigation will have a materially adverse effect on its financial condition
or future operations.

F-11
<PAGE>
APPENDIX A--SAMPLE MARKET VALUE ADJUSTMENT CALCULATIONS

The formula which will be used to determine the Market Value Adjustment is:

Sample Calculation 1: Positive Adjustment

<TABLE>
<S> <C>
Amount withdrawn or transferred $10,000
Existing Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Existing
Guarantee Period
Guaranteed Interest Rate (I) 8%*
Guaranteed Interest Rate for
new 5-year guarantee (J) 7%*
Remaining Guarantee Period (N) 60 months
Market Value Adjustment
</TABLE>

Amount transferred or withdrawn (adjusted for Market Value
Adjustment): $10,354.57

Sample Calculation 2: Negative Adjustment

<TABLE>
<S> <C>
Amount withdrawn or transferred $10,000
Existing Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Existing
Guarantee Period
Guaranteed Interest Rate (I) 8%*
Guaranteed Interest Rate for
new 5-year guarantee (J) 9%*
Remaining Guarantee Period (N) 60 months
Market Value Adjustment:
</TABLE>

Amount transferred or withdrawn (adjusted for Market Value
Adjustment): $9,440.86

Sample Calculation 3: Negative Adjustment

<TABLE>
<S> <C>
Amount withdrawn or transferred $10,000
Guarantee Period 7 years
Time of withdrawal or transfer beginning of 3rd year of Existing
Guarantee Period
Guaranteed Interest Rate (I) 8%*
Guaranteed Interest Rate for
new 5-year guarantee (J) 7.75%*
Remaining Guarantee Period (N) 60 months
Market Value Adjustment:
</TABLE>

Amount transferred or withdrawn (adjusted for Market Value
Adjustment): $10,000
- ------------------------
* Assumed for illustrative purposes only.

A-1
<PAGE>
APPENDIX B--SAMPLE DEATH BENEFIT CALCULATIONS
(WITHOUT ENHANCED DEATH BENEFIT)

DATE OF DEATH IS THE 3RD CONTRACT ANNIVERSARY

<TABLE>
<CAPTION>
EXAMPLE 1 EXAMPLE 2
----------- -----------
<S> <C> <C> <C>
a. Net Purchase Payments Made Prior to Date of
Death............................................. $ 20,000 $ 20,000

b. Contract Value on Date of Death................... $ 17,000 $ 25,000

Death Benefit is larger of a, and b..................... $ 20,000 $ 25,000
</TABLE>

DATE OF DEATH IS THE 8TH CONTRACT ANNIVERSARY

<TABLE>
<CAPTION>
EXAMPLE 3 EXAMPLE 4 EXAMPLE 5
----------- ----------- -----------
<S> <C> <C> <C> <C>
a. Net Purchase Payments Made Prior to Date of
Death............................................. $ 20,000 $ 20,000 $ 20,000

b. Contract Value on 7th Contract Anniversary........ $ 15,000 $ 30,000 $ 30,000

c. Contract Value on Date of Death................... $ 17,000 $ 25,000 $ 35,000

Death Benefit is larger of a, b, and c.................. $ 20,000 $ 30,000 $ 35,000
</TABLE>

DATE OF DEATH IS THE 15TH CONTRACT ANNIVERSARY

<TABLE>
<CAPTION>
EXAMPLE 6 EXAMPLE 7 EXAMPLE 8
----------- ----------- -----------
<S> <C> <C> <C> <C>
a. Net Purchase Payments Made Prior to Date of
Death............................................. $ 20,000 $ 20,000 $ 20,000

b. Contract Value on 14th Contract Anniversary....... $ 15,000 $ 40,000 $ 40,000

c. Contract Value on Date of Death................... $ 17,000 $ 30,000 $ 50,000

Death Benefit is larger of a, b, and c.................. $ 20,000 $ 40,000 $ 50,000
</TABLE>

B-1
<PAGE>
APPENDIX C--EXPLANATION OF EXPENSE CALCULATIONS

The expense for a given year is calculated by multiplying the projected
beginning of the year policy value by the total expense rate. The total expense
rate is the sum of the variable account expense rate plus the total Series Fund
expense rate plus The annual administrative charge rate.

The policy values are projected by assuming a single payment of $1,000 grows at
an annual rate equal to 5% reduced by the total expense rate described above.

For example, the 3 year expense for the Growth Stock Series as a part of a
Contract that has not elected the Enhanced Death Benefit, is calculated as
follows:

<TABLE>
<S> <C> <C>
Total Variable Account Annual Expenses 1.35%
+ Total Series Fund Operating Expenses
= Total Expense Rate
</TABLE>

<TABLE>
<S> <C> <C>
Year 1 Beginning Policy Value = $1000.00
Year 1 Expense =
1000.00 x = $

Year 2 Beginning Policy Value = $
Year 2 Expense = x = $

Year 3 Beginning Policy Value = $
Year 3 Expense = x = $
</TABLE>

So the cumulative expenses for years 1-3 for the Growth Stock Series are equal
to + + = $ .

If the contract is surrendered, the surrender charge is the surrender charge
percentage times the purchase payment minus the 10% free withdrawal amount:

<TABLE>
<S> <C> <C> <C>
Surrender
Surrender Charge Percentage x (Initial Premium - 10% Free Withdrawal) = Charge
0.05 x ( 1000.00 - 100.00 ) = 4
</TABLE>

So the total expense if surrendered is + 45.00 = $ .

C-1
<PAGE>
This page left blank intentionally.

B-2

<PAGE>
<ARTICLE> 7
<CIK> 0000914804
<NAME> FIRST FORTIS LIFE INSURANCE COMPANY

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 113,136,650
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 113,136,650
<CASH> 1,544,745
<RECOVER-REINSURE> 14,731,285
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 143,138,829
<POLICY-LOSSES> 85,999,479
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 14,798,802
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,000,000
<OTHER-SE> 33,691,608
<TOTAL-LIABILITY-AND-EQUITY> 143,138,829
67,516,532
<INVESTMENT-INCOME> 7,891,048
<INVESTMENT-GAINS> (3,650)
<OTHER-INCOME> 335,934
<BENEFITS> 57,780,339
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 143,842
<INCOME-TAX> (39,222)
<INCOME-CONTINUING> 183,064
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,064
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 65,764,070
<PROVISION-CURRENT> 38,798,085
<PROVISION-PRIOR> (810,399)
<PAYMENTS-CURRENT> 23,727,017
<PAYMENTS-PRIOR> 18,543,303
<RESERVE-CLOSE> 61,481,436
<CUMULATIVE-DEFICIENCY> (810,399)

</TABLE>