UNITED COMPANIES SEPARATE ACCOUNT ONE, 497, 1996-02-06

UNITED COMPANIES SEPARATE ACCOUNT ONE
497, 1996-02-06

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[LOGO]

<TABLE>
<S> <C>
Home Office: Annuity Service Center:
III United Plaza United Companies Life Insurance Company
8545 United Plaza Blvd. Variable Annuity Processing Center
Baton Rouge, Louisiana 70809-2251 P.O. Box 365
(800) 825-7568 Haddam, CT 06438-0365
(800) 566-1509
</TABLE>

INDIVIDUAL AND GROUP FIXED AND VARIABLE
DEFERRED ANNUITY CONTRACTS AND CERTIFICATES

ISSUED BY

UNITED COMPANIES SEPARATE ACCOUNT ONE

AND

UNITED COMPANIES LIFE INSURANCE COMPANY

The Individual and Group Fixed and Variable Deferred Annuity Contracts and
Certificates (collectively, the "Contracts") described in this Prospectus
provide for accumulation of values on a fixed and variable basis and payment of
annuity payments on a fixed basis. The Contracts are designed for use by
individuals in retirement plans on a Qualified or Non-Qualified basis. (See
"Definitions.")

Purchase Payments for the Contracts will be allocated to a segregated
investment account of United Companies Life Insurance Company (the "Company")
which account has been designated United Companies Separate Account One (the
"Separate Account") or to the Company's Fixed Account or Market Value Adjustment
Account ("MVA Account"). Under certain circumstances, however, Purchase Payments
may initially be allocated to the Scudder Money Market Sub-Account of the
Separate Account. Currently, an Owner or Certificate Holder may not be invested
in more than ten investment options at any time (an investment option is each
Sub-Account of the Separate Account, the Fixed Account, and each MVA Account
Guarantee Period). The Separate Account invests in shares of the following: MFS
Variable Insurance Trust (MFS Emerging Growth Series and MFS Total Return
Series); Insurance Management Series (Corporate Bond Fund, Utility Fund and U.S.
Government Bond Fund); Dreyfus Stock Index Fund; Dreyfus Variable Investment
Fund (Growth and Income Portfolio); Scudder Variable Life Investment Fund (Money
Market Portfolio and International Portfolio); Van Eck Worldwide Insurance Trust
(Gold and Natural Resources Fund); and The Alger American Fund (Alger American
Growth Portfolio).

The Contracts and Certificates are not deposits or obligations of, or
guaranteed or endorsed by, any financial institution, and are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other agency. Investment in the Contracts is subject to risk that may
cause the value of the Owner's or Certificate Holder's investment to fluctuate,
and when the Contracts/Certificates are surrendered, the value may be higher or
lower than the Purchase Payment.

This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts and
Certificates is contained in the Statement of Additional Information which is
available at no charge. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The Table of Contents of the Statement of Additional Information can
be found on the last page of this Prospectus. For the Statement of Additional
Information, call (800) 825-7568 or write to the Company's Annuity Service
Center at the address listed above.

INQUIRIES: Any inquiries can be made by telephone or in writing to the Annuity
Service Center listed above.

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.

This Prospectus and the Statement of Additional Information are dated October
13, 1995.

This Prospectus should be kept for future reference.
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TABLE OF CONTENTS

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PAGE
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Definitions.............................. 1
Highlights............................... 4
General................................ 4
Separate Account....................... 4
MVA Account............................ 4
Right to Examine Period................ 5
Charges................................ 5
Contingent Deferred Sales Charge.... 5
Free Withdrawal..................... 5
Mortality and Expense Risk Charge... 6
Administrative Charge............... 6
Transfer Fee........................ 6
Premium Taxes....................... 6
Income Tax Penalty..................... 6
Fixed Account and MVA Account.......... 6
Fee Table................................ 7
The Company.............................. 10
The Separate Account..................... 10
Eligible Funds and Portfolios............ 10
MFS Variable Insurance Trust........... 10
MFS Emerging Growth Series.......... 10
MFS Total Return Series............. 11
Insurance Management Series............ 11
Corporate Bond Fund................. 11
Utility Fund........................ 11
U.S. Government Bond Fund........... 11
Dreyfus Stock Index Fund............... 11
Dreyfus Variable Investment Fund....... 11
Growth and Income Portfolio......... 11
Scudder Variable Life Investment
Fund................................ 12
Money Market Portfolio.............. 12
International Portfolio............. 12
Van Eck Worldwide Insurance Trust...... 12
Gold and Natural Resources Fund..... 12
The Alger American Fund................ 12
Alger American Growth Portfolio..... 12
Voting Rights.......................... 12
Substitution of Securities............. 12
</TABLE>

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TABLE OF CONTENTS -- (CONTINUED)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fixed Account Options.................... 13
General................................ 13
Fixed Account Option................... 13
MVA Account............................ 13
Charges and Deductions................... 15
Deduction for Contingent Deferred Sales
Charge (Sales Load)................. 15
Reduction or Elimination of the
Contingent Deferred Sales Charge.... 16
Deduction for Mortality and Expense
Risk Charge......................... 16
Deduction for Administrative Charge.... 17
Deduction for Transfer Fee............. 17
Deduction for Premium and Other
Taxes............................... 17
Deduction for Expenses of the Eligible
Funds............................... 18
The Contracts and Certificates........... 18
Owner/Certificate Holder............... 18
Joint Owners/Joint Certificate
Holders............................. 18
Contract Owner......................... 18
Annuitant.............................. 19
Assignment............................. 19
Purchase Payments, Contract Value and
Certificate Holder's Account Value..... 19
Purchase Payment....................... 19
Allocation of Purchase Payments........ 19
Dollar Cost Averaging.................. 20
Rebalancing............................ 20
Contract Value......................... 21
Certificate Holder's Account Value..... 21
Accumulation Units..................... 21
Accumulation Unit Value................ 21
Transfers................................ 22
Transfers During the Accumulation
Period.............................. 22
Withdrawals.............................. 22
Systematic Withdrawal Program.......... 23
Suspension or Deferral of Payments..... 24
</TABLE>

ii
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TABLE OF CONTENTS -- (CONTINUED)

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PAGE
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Proceeds Payable on Death................ 24
Death of Owner or Certificate Holder
During the Accumulation Period...... 24
Death Benefit Amount During the
Accumulation Period................. 24
Death Benefit Options During the
Accumulation Period................. 25
Death of Owner/Certificate Holder
During the Annuity Period........... 25
Death of Annuitant..................... 26
Payment of Death Benefit............... 26
Beneficiary............................ 26
Change of Beneficiary.................. 26
Annuity Provisions....................... 26
General................................ 26
Annuity Date........................... 27
Selection or Change of an Annuity
Option.............................. 27
Frequency and Amount of Annuity
Payments............................ 27
Fixed Annuity.......................... 27
Annuity Options........................ 27
Option A. Life Annuity.............. 27
Option B. Life Annuity With Period
Certain of 60, 120, 180 or 240
Months........................... 27
Option C. Joint and Survivor
Annuity.......................... 27
Distributor.............................. 28
Administration of the Contracts and
Certificates........................... 28
Performance Information.................. 28
Money Market Sub-Account............... 28
Other Sub-Accounts..................... 28
Tax Status............................... 29
General................................ 29
Diversification........................ 30
Multiple Contracts/Certificates........ 31
Tax Treatment of Assignments........... 31
Income Tax Withholding................. 31
Tax Treatment of Withdrawals -- Non-
Qualified Contracts and
Certificates........................ 32
Qualified Contracts and Certificates... 32
Tax Treatment of
Withdrawals -- Qualified Contracts
and Certificates.................... 33
Contracts and Certificates Owned by
Other than Natural Persons.......... 33
</TABLE>

iii
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TABLE OF CONTENTS -- (CONTINUED)

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Additional Information About the
Company................................ 34
Selected Financial and Other Data...... 34
Business............................... 35
Overview............................ 35
Principal Products.................. 35
Distribution........................ 36
Reinsurance......................... 36
Life Insurance and Annuity
Reserves......................... 37
Investments......................... 37
Fixed Maturity Investments.......... 38
Mortgage Loans on Real Estate....... 39
Insurance Ratings................... 40
Government Regulation and
Legislation......................... 41
General Regulation.................. 41
Regulation of Dividends and Other
Payments......................... 41
Insurance Regulatory Changes........ 42
Insurance Regulatory Information
System........................... 42
Risk-Based Capital Requirements..... 43
Assessments Against Insurers........ 43
Regulation at Federal Level......... 43
Competition......................... 44
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.......................... 44
Overview............................ 44
Results of Operations.................. 46
Three Months Ended March 31, 1995
Compared To Three Months Ended
March 31, 1994................... 46
Revenues............................ 46
Expenses............................ 47
Year Ended December 31, 1994
Compared To Year Ended December
31, 1993......................... 48
Revenues............................ 48
Expenses............................ 50
Year Ended December 31, 1993
Compared To Year Ended December
31, 1992......................... 51
Revenues............................ 51
Expenses............................ 52
</TABLE>

iv
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TABLE OF CONTENTS -- (CONTINUED)

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Asset Quality and Reserves............. 53
Liquidity and Capital Resources..... 54
Accounting Standards................ 55
Ratings............................. 56
Properties.......................... 56
The Company's Directors and Executive
Officers............................... 56
Executive Compensation................... 58
Aggregate Option Exercises in Last
Fiscal Year and Fiscal Year-End
1994 Option Values............... 59
Legal Proceedings........................ 59
Experts.................................. 59
Registration Statement................... 59
Legal Opinions........................... 60
Financial Statements..................... 60
Appendix................................. A-1
Table of Contents of the Statement of
Additional Information................. S-5
</TABLE>

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<PAGE> 7

DEFINITIONS

ACCUMULATION PERIOD -- The period prior to the Annuity Date during which
Purchase Payments may be made.

ACCUMULATION UNIT -- A unit of measure used to determine the value of the
Owner's or Certificate Holder's interest in a Sub-Account of the Separate
Account during the Accumulation Period.

ADJUSTED CONTRACT VALUE -- The Contract Value less any applicable Premium Tax.
This amount is applied to the applicable Annuity Tables to determine Annuity
Payments under an individual Contract.

AGE -- The age of any Owner, Certificate Holder or Annuitant on his/her last
birthday.

ANNUITANT -- The natural person on whose life Annuity Payments to an Owner or
Certificate Holder are based. On or after the Annuity Date, the Annuitant shall
also include any Joint Annuitant.

ANNUITY DATE -- The date on which Annuity Payments begin.

ANNUITY OPTIONS -- Options available for Annuity Payments.

ANNUITY PAYMENTS -- The series of payments made to the Owner or Certificate
Holder or any named payee after the Annuity Date under the Annuity Option
selected.

ANNUITY PERIOD -- The period of time beginning with the Annuity Date during
which Annuity Payments are made.

ANNUITY SERVICE CENTER -- The office indicated on the Cover Page of this
Prospectus to which notices, requests and Purchase Payments must be sent. All
sums payable to the Company under a Contract or any Certificate are payable only
at the Annuity Service Center.

BENEFICIARY -- The person(s) or entity(ies) who will receive the death benefit
payable under a Contract or Certificate.

CERTIFICATE -- The document issued to a Certificate Holder to evidence a
Certificate Holder's Account established under a group Contract.

CERTIFICATE ANNIVERSARY -- An anniversary of the Certificate Issue Date.

CERTIFICATE ISSUE DATE -- The date a Certificate is issued to a Certificate
Holder.

CERTIFICATE HOLDER -- A person who has established a Certificate Holder's
Account under a group Contract.

CERTIFICATE HOLDER'S ACCOUNT -- A record established for each Certificate Holder
to maintain values under a group Contract.

CERTIFICATE HOLDER'S ACCOUNT VALUE -- The dollar value as of any Valuation
Period of all amounts accumulated in a Certificate Holder's Account.

CERTIFICATE HOLDER'S ADJUSTED ACCOUNT VALUE -- A Certificate Holder's Account
Value less any applicable Premium Tax. This amount is applied to the applicable
Annuity Tables to determine Annuity Payments under a Certificate.

CERTIFICATE WITHDRAWAL VALUE -- The Certificate Holder's Account Value less any
applicable Premium Tax, less any Contingent Deferred Sales Charge, and plus or
minus any Market Value Adjustment.

CERTIFICATE YEAR -- The first Certificate Year is the annual period which begins
on the Certificate Issue Date. Subsequent Certificate Years begin on each
anniversary of the Certificate Issue Date.

COMPANY -- United Companies Life Insurance Company.

CONTRACT ANNIVERSARY -- An anniversary of the Issue Date.

CONTRACT ISSUE DATE -- The date on which an individual Contract became
effective.

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CONTRACT OWNER -- The person or entity to which a group Contract is issued.

CONTRACT VALUE -- The dollar value as of any Valuation Period of all amounts
accumulated in an individual Contract.

CONTRACT WITHDRAWAL VALUE -- The Contract Value of an individual Contract less
any applicable Premium Tax, less any Contingent Deferred Sales Charge, and plus
or minus any Market Value Adjustment.

CONTRACT YEAR -- The first Contract Year is the annual period which begins on
the Issue Date. Subsequent Contract Years begin on each anniversary of the Issue
Date.

CURRENT INTEREST RATE: -- The interest rate credited to an Owner's Contract
Value or a Certificate Holder's Account Value by the Company for any given
Guarantee Period in the MVA Account or the Fixed Account.

EFFECTIVE DATE -- The Effective Date of a Guarantee Period with a Current
Interest Rate.

ELIGIBLE FUND -- An investment entity into which assets of the Separate Account
will be invested.

FIXED ACCOUNT -- An investment option within the General Account.

FIXED ANNUITY -- A series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company.

GENERAL ACCOUNT -- The Company's general investment account which contains all
the assets of the Company with the exception of the Separate Account and other
segregated asset accounts.

GUARANTEE PERIOD -- The period for which the Current Interest Rate is credited
in either the MVA Account or the Fixed Account.

GUARANTEED INTEREST RATE -- The interest rate credited to the Contract Value or
Certificate Holder's Account Value by the Company for any given Guarantee
Period.

INTEREST RATES -- All stated interest rates are effective annual yields.

MARKET VALUE ADJUSTMENT -- An adjustment to the amount withdrawn or transferred
from the MVA Account prior to the end of the applicable Guarantee Period. The
adjustment reflects the change in the value of the funds withdrawn or
transferred due to the change in the interest rates since the beginning of the
Guarantee Period.

MVA ACCOUNT -- An investment option where the Company guarantees the rate of
interest for a specified period and where withdrawals or transfers may be
subject to a Market Value Adjustment.

NET PURCHASE PAYMENT -- A Purchase Payment less any applicable Premium Tax.

NON-QUALIFIED CONTRACTS AND CERTIFICATES -- Contracts and Certificates issued
under non-qualified plans which do not receive favorable tax treatment under
Section 408 of the Internal Revenue Code of 1986, as amended (the "Code").

OWNER -- The person or entity entitled to the ownership rights stated in an
individual Contract.

PORTFOLIO -- A segment of an Eligible Fund which constitutes a separate and
distinct class of shares which may also sometimes be referred to herein as a
Series or a Fund.

PREMIUM TAX -- Any Premium Taxes paid to any governmental entity assessed
against Purchase Payments, Contract Values under individual Contracts or
Certificate Holders' Account Values.

QUALIFIED CONTRACTS AND CERTIFICATES -- Contracts and Certificates issued under
qualified plans which receive favorable tax treatment under Section 408 of the
Code.

SEPARATE ACCOUNT -- The Company's Separate Account designated as United
Companies Separate Account One.

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SUB-ACCOUNT -- Separate Account assets are divided into Sub-Accounts. Assets of
each Sub-Account will be invested in shares of an Eligible Fund or a Portfolio
of an Eligible Fund.

VALUATION DATE -- Each day on which the Company and the New York Stock Exchange
("NYSE") are open for business.

VALUATION PERIOD -- The period of time beginning at the close of business of the
NYSE on each Valuation Date and ending at the close of business for the next
succeeding Valuation Date.

WRITTEN REQUEST -- A request in writing, in a form satisfactory to the Company,
which is received by the Annuity Service Center.

3
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HIGHLIGHTS

GENERAL

The Contracts and Certificates offered by this Prospectus are combined
fixed and variable deferred annuity contracts and certificates issued by the
Company. Pursuant to selections made by the Owner or Certificate Holder, Net
Purchase Payments are allocated to (i) the Separate Account, (ii) the Fixed
Account, which is an investment option within the General Account of the
Company; and (iii) the MVA Account, which is an investment option within the
General Account where the Company guarantees the rate of interest for a
specified period and where withdrawals or transfers may be subject to a Market
Value Adjustment. Under certain circumstances, however, Net Purchase Payments
may initially be allocated to the Scudder Money Market Sub-Account of the
Separate Account (see "Right to Examine Period" below).

SEPARATE ACCOUNT

The Separate Account is divided into Sub-Accounts. The Sub-Accounts invest
in the following:

MFS(R) Variable Insurance Trust(SM)
MFS Emerging Growth Series
MFS Total Return Series
Insurance Management Series
Corporate Bond Fund
Utility Fund
U.S. Government Bond Fund
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund
Growth and Income Portfolio
Scudder Variable Life Investment Fund
Money Market Portfolio
International Portfolio
Van Eck Worldwide Insurance Trust
Gold and Natural Resources Fund
The Alger American Fund
Alger American Growth Portfolio

Owners and Certificate Holders bear the investment risk for all amounts
allocated to the Separate Account.

MVA ACCOUNT

The MVA Account offers investment options which pay fixed rates of interest
declared by the Company for specified periods (currently, 3 years, 5 years and 7
years) from the date amounts are allocated to the MVA Account. Please contact
the Company or the agent from whom this Prospectus was obtained for information
as to currently available options.

Such declared rates will vary from time to time but will not be less than
3% per annum, and, once established for a particular allocation, will not change
during the Guarantee Period. However, withdrawals, transfers or annuitization
prior to the end of the Guarantee Period may be subject to a Market Value
Adjustment. Owners and Certificate Holders bear the risk that amounts
reallocated within, or prematurely withdrawn, transferred or annuitized from the
MVA Account prior to the end of their respective Guarantee Period could result
in the Owner or Certificate Holder receiving less than the Purchase Payments or
amounts so allocated.

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RIGHT TO EXAMINE PERIOD

The individual Contract or Certificate may be returned to the Company for
any reason within ten (10) calendar days, or longer in states where required
(thirty (30) calendar days if purchased by individuals who are 60 years of age
or older in California or twenty (20) calendar days from the date of receipt
with respect to the circumstances described in (c) below) after its receipt by
the Owner or Certificate Holder ("Right to Examine Period"). It may be returned
to the Company at its Annuity Service Center. When the Contract or Certificate
is received by the Company at its Annuity Service Center, it will be voided as
if it had never been in force. Upon its return, the Company will refund the
Contract Value or Certificate Holder's Account Value next computed after receipt
of the Contract or Certificate by the Company at its Annuity Service Center
except in the following circumstances: (a) where the Contract or Certificate is
purchased pursuant to an Individual Retirement Annuity; (b) in those states
which require the Company to refund Purchase Payments, less withdrawals; or (c)
in the case of Contracts or Certificates which are deemed by certain states to
be replacing an existing annuity or insurance contract and which require the
Company to refund Purchase Payments, less withdrawals. With respect to the
circumstances described in (a), (b) and (c) above, the Company will refund the
greater of Purchase Payments, less any withdrawals, or the Contract Value or
Certificate Holder's Account Value, and will allocate initial Purchase Payments
to the Scudder Money Market Sub-Account until the expiration of fifteen days
from the Issue Date or Certificate Issue Date (or twenty-five days in the case
of Contracts or Certificates described under (c) above). Upon the expiration of
the fifteen day period (or twenty-five day period with respect to Contracts or
Certificates described under (c)), the Sub-Account value of the Scudder Money
Market Sub-Account will be allocated to the Separate Account, the Fixed Account
and the MVA Account in accordance with the election made by the Owner or
Certificate Holder at the time the Contract or Certificate is issued.

CHARGES

CONTINGENT DEFERRED SALES CHARGE -- A Contingent Deferred Sales Charge is
assessed against Purchase Payments withdrawn. The Charge is calculated at the
time of each withdrawal and will be deducted from the account value remaining in
an individual Contract or Certificate. The Contingent Deferred Sales Charge is
based upon the length of time from receipt of Purchase Payments to the date of
withdrawal. Each Purchase Payment is tracked as to its date of receipt and
withdrawals thereof are determined in accordance with the following:

CONTINGENT DEFERRED SALES CHARGE:

<TABLE>
<CAPTION>
NUMBER OF COMPLETE
YEARS SINCE RECEIPT OF
PURCHASE PAYMENTS CHARGE
- ----------------------- ------
<S> <C>
0 years............................................................ 7.0%
1 years............................................................ 6.0%
2 years............................................................ 5.0%
3 years............................................................ 4.0%
4 years............................................................ 3.0%
5 years............................................................ 2.0%
6 years............................................................ 1.0%
7 years or more.................................................... 0.0%
</TABLE>

FREE WITHDRAWAL -- On each Contract or Certificate Anniversary, the Free
Withdrawal amount is equal to the greater of: (a) the cumulative earnings in the
Owner's Contract Value or the Certificate Holder's Account Value or (b) 10% of
Purchase Payments as of the beginning of the current Contract or Certificate
Year. On other than Contract and Certificate Anniversaries, the Free Withdrawal
amount is equal to the Free Withdrawal amount at the beginning of the Contract
or Certificate Year less amounts withdrawn without deduction of Contingent
Deferred Sales Charges during the current Contract or Certificate Year. (See
"Charges and Deductions -- Deduction for Contingent Deferred Sales Charge.")

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MORTALITY AND EXPENSE RISK CHARGE -- Each Valuation Period, the Company
deducts a Mortality and Expense Risk Charge from the Separate Account which is
equal, on an annual basis, to 1.45% of the average daily net asset value of each
Sub-Account of the Separate Account. This Charge compensates the Company for
assuming the mortality and expense risks under the Contracts and Certificates.
(See "Charges and Deductions -- Deduction for Mortality and Expense Risk
Charge.")

ADMINISTRATIVE CHARGE -- Each Valuation Period, the Company deducts an
Administrative Charge from the Separate Account which is equal, on an annual
basis, to .15% of the average daily net asset value of each Sub-Account of the
Separate Account. This Charge compensates the Company for costs associated with
the administration of the Contracts, Certificates and the Separate Account. (See
"Charges and Deductions -- Deduction for Administrative Charge.")

TRANSFER FEE -- Under certain circumstances, a Transfer Fee may be assessed
when an Owner or Certificate Holder transfers Contract Values or Certificate
Holder's Account Values between Sub-Accounts or to or from the Fixed Account and
MVA Account. (See "Charges and Deductions -- Deduction for Transfer Fee.")

PREMIUM TAXES -- Some states and other jurisdictions assess Premium Taxes
at the time Purchase Payments are made; others assess Premium Taxes at the time
annuity payments begin. The Company currently deducts Premium Taxes when they
are due. (See "Charges and Deductions -- Deduction for Premium and Other
Taxes.")

INCOME TAX PENALTY

There is a ten percent (10%) federal income tax penalty applied to the
taxable income portion of any distribution from the individual Contracts and
Certificates. However, the penalty is not imposed on amounts received: (a) after
the taxpayer reaches age 59 1/2; (b) after the death of the Owner or Certificate
Holder; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer and his or her Beneficiary; (e) under an
immediate annuity; or (f) which are allocable to Purchase Payments made prior to
August 14, 1982. For federal income tax purposes, withdrawals are deemed to be
on a last-in, first-out basis. For a further discussion of the taxation of the
Contracts and Certificates, see "Tax Status."

See "Tax Status -- Diversification" for a discussion of owner control of
the underlying investments in a variable annuity contract.

FIXED ACCOUNT AND MVA ACCOUNT

Because of certain exemptive and exclusionary provisions, interests in the
Fixed Account are not registered under the Securities Act of 1933 and the Fixed
Account and the MVA Account are not registered as investment companies under the
Investment Company Act of 1940, as amended ("1940 Act"). Accordingly, neither
the Fixed Account nor any interests therein are subject to the provisions of
these Acts, and the MVA Account is not registered under the 1940 Act, and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in the Prospectus relating to the
Fixed Account. Disclosures regarding the Fixed Account may, however, be subject
to certain generally applicable provisions of the federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.

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UNITED COMPANIES SEPARATE ACCOUNT ONE
FEE TABLE

OWNER AND CERTIFICATE HOLDER TRANSACTION EXPENSES

Contingent Deferred Sales Charge
(see Note 1 below)
<TABLE>
<CAPTION>
NUMBER OF COMPLETE
YEARS SINCE RECEIPT OF
PURCHASE PAYMENT CHARGE
----------------------- ------
<S> <C> <C>
0 years 7.0%
1 years 6.0%
2 years 5.0%
3 years 4.0%
4 years 3.0%
5 years 2.0%
6 years 1.0%
7 years or more 0.0%

Transfer Fee (see Note 2 below) No charge for first 12 transfers in a
Contract or Certificate Year;
thereafter the fee is the lesser of
$25 or 2% of the amount transferred.

SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)

Mortality and Expense Risk Charge 1.45%
Administrative Charge .15%
----
Total Separate Account Annual Expenses 1.60%

ELIGIBLE FUND ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
</TABLE>

<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL
FEES EXPENSES ANNUAL EXPENSES
---------- -------- ---------------
<S> <C> <C> <C>
MFS VARIABLE INSURANCE TRUST
MFS Emerging Growth Series(a)................... .75% .25% 1.00%
MFS Total Return Series(a)...................... .75% .25% 1.00%
INSURANCE MANAGEMENT SERIES
Corporate Bond Fund(b).......................... .00% .80% .80%
Utility Fund(c)................................. .00% .85% .85%
U.S. Government Bond Fund(d).................... .00% .80% .80%
DREYFUS STOCK INDEX FUND(e)....................... .14% .26% .40%
DREYFUS VARIABLE INVESTMENT FUND
Growth and Income Portfolio(f).................. .75% 1.00% 1.75%
SCUDDER VARIABLE LIFE INVESTMENT FUND
Money Market Portfolio.......................... .37% .19% .56%
International Portfolio......................... .875% .205% 1.08%
VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund(g).............. 1.00% .15% 1.15%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio................. .75% .11% .86%
</TABLE>

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

(a) The adviser has agreed to bear expenses for the MFS Emerging Growth Series
and the MFS Total Return Series such that a Series' aggregate operating
expenses shall not exceed, on an annualized basis, 1.00% of the average
daily net assets of the Series from November 2, 1994 through December 31,
1996, 1.25% of the average daily net assets of the Series from January 1,
1997 through December 31,

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1998, and 1.50% of the average daily net assets of the Series from January
1, 1999 through December 31, 2004; provided, however, that this obligation
may be terminated or revised at any time. Absent this expense arrangement,
"Other Expenses" and "Total Annual Expenses" would be 1.00% and 1.75%,
respectively for the MFS Emerging Growth Series and .62% and 1.37%,
respectively for the MFS Total Return Series.

(b) The adviser has voluntarily agreed to waive all or a portion of its
advisory fee and reimburse expenses for the Fund so that "Total Annual
Expenses" for the Corporate Bond Fund will not exceed .80% of assets.
Without this waiver and reimbursement, the maximum "Management Fees" and
"Total Annual Expenses" would have been .60% and 10.42%, respectively.

(c) The adviser has voluntarily agreed to waive all or a portion of its
advisory fee and reimburse expenses for the Fund so that "Total Annual
Expenses" for the Utility Fund will not exceed .85% of assets. Without this
waiver and reimbursement, the maximum "Management Fees" and "Total Annual
Expenses" would have been .75% and 55.43%, respectively.

(d) The adviser has voluntarily agreed to waive all or a portion of its
advisory fee and reimburse expenses for the Fund so that "Total Annual
Expenses" for the U.S. Government Bond Fund will not exceed .80% of assets.
Without such waiver, the maximum "Management Fees" and "Total Annual
Expenses" would have been .60% and 33.35%, respectively.

(e) The fees and expenses shown above take into account an arrangement pursuant
to which the manager and/or administrator for the Dreyfus Stock Index Fund
waive fees and/or assume expenses so that aggregate expenses for a fiscal
year (excluding brokerage commissions, transaction fees and extraordinary
expenses) do not exceed .40%. This arrangement is in effect until the
manager and the administrator give Dreyfus Stock Index Fund at least 180
days' prior notice to the contrary. Absent such arrangements, the
"Management Fees," "Other Expenses" and "Total Annual Expenses" would be
.15%, .41% and .56%, respectively.

(f) The Growth and Income Portfolio commenced operations during 1994. The
"Management Fee" shown in the table has been annualized. Fees and expenses
shown for this Portfolio do not reflect waivers and expense reimbursements
in effect during 1994. As of the date of this Prospectus, no waivers or
expense reimbursement arrangements were in effect for this Portfolio.

(g) The expenses for the Gold and Natural Resources Fund have been restated to
reflect a new advisory fee and expense reimbursement arrangement approved
by the shareholders of the Fund on September 28, 1995.

EXAMPLES (SEE NOTE 4 BELOW)

An Owner/Certificate Holder would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets: (a) if the
Contract/Certificate is surrendered at the end of each time period; (b) if the
Contract/Certificate is not surrendered or if the Contract/Certificate is
annuitized.

8
<PAGE> 15

<TABLE>
<CAPTION>
TIME PERIODS
--------------------------
1 YEAR 3 YEARS
------ -------
<S> <C> <C> <C> <C>
MFS(R) VARIABLE INSURANCE TRUST(SM)
MFS Emerging Growth Series............................... a) $ 96 a) $ 131
b) $ 26 b) $ 81
MFS Total Return Series.................................. a) $ 96 a) $ 131
b) $ 26 b) $ 81
INSURANCE MANAGEMENT SERIES
Corporate Bond Fund...................................... a) $ 94 a) $ 125
b) $ 24 b) $ 75
Utility Fund............................................. a) $ 95 a) $ 126
b) $ 25 b) $ 76
U.S. Government Bond Fund................................ a) $ 94 a) $ 125
b) $ 24 b) $ 75
DREYFUS STOCK INDEX FUND
a) $ 90 a) $ 113
b) $ 20 b) $ 63
DREYFUS VARIABLE INVESTMENT FUND
Growth and Income Portfolio.............................. a) $ 104 a) $ 153
b) $ 34 b) $ 103
SCUDDER VARIABLE LIFE INVESTMENT FUND
Money Market Portfolio................................... a) $ 92 a) $ 118
b) $ 22 b) $ 68
International Portfolio.................................. a) $ 97 a) $ 133
b) $ 27 b) $ 83
VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund.......................... a) $ 98 a) $ 135
b) $ 28 b) $ 85
THE ALGER AMERICAN FUND
Alger American Growth Portfolio.......................... a) $ 95 a) $ 127
b) $ 25 b) $ 77
</TABLE>

THE ANNUAL EXPENSES OF THE ELIGIBLE FUNDS AND THE EXAMPLES ARE BASED ON
DATA PROVIDED BY THE RESPECTIVE ELIGIBLE FUNDS. THE COMPANY HAS NOT
INDEPENDENTLY VERIFIED SUCH DATA.

NOTES TO FEE TABLE AND EXAMPLES

The Fee Table is provided to assist Owners and Certificate Holders in
understanding the various costs and expenses that they will bear directly or
indirectly. The Fee Table reflects expenses of both the Separate Account and the
Eligible Funds. For more complete descriptions of the various costs and expenses
involved, see "Charges and Deductions" in this Prospectus and the Prospectuses
for each of the Eligible Funds. Premium Taxes may also be applicable, although
they do not appear in this table.

1. Under certain circumstances a Free Withdrawal can be made which is not
subject to a Contingent Deferred Sales Charge.

2. Transfers made at the end of the Right to Examine Contract period and
any transfers made pursuant to an approved Dollar Cost Averaging Program and/or
Rebalancing Program will not be counted in determining the application of the
Transfer Fee.

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

9
<PAGE> 16

THE COMPANY

United Companies Life Insurance Company (the "Company") is a stock life
insurance company domiciled in Louisiana and organized in 1955. It is currently
authorized to conduct business in 47 states, the District of Columbia and Puerto
Rico. The Company is a wholly-owned subsidiary of United Companies Financial
Corporation. For more detailed information about the Company, see "Additional
Information About the Company."

THE SEPARATE ACCOUNT

The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to Louisiana insurance law on November 2,
1994. This segregated asset account has been designated United Companies
Separate Account One (the "Separate Account"). The Company has caused the
Separate Account to be registered with the Securities and Exchange Commission as
a unit investment trust pursuant to the provisions of the Investment Company Act
of 1940.

The assets of the Separate Account are the property of the Company.
However, the assets of the Separate Account, equal to the reserves and other
contract liabilities with respect to the Separate Account, are not chargeable
with liabilities arising out of any other business the Company may conduct.
Income, gains and losses, whether or not realized, are, in accordance with the
Contracts and Certificates, credited to or charged against the Separate Account
without regard to other income, gains or losses of the Company. The Company's
obligations arising under the Contracts and Certificates are general
obligations.

The Separate Account meets the definition of a "separate account" under
federal securities laws.

The Separate Account is divided into Sub-Accounts. Each Sub-Account invests
in one Eligible Fund or a Portfolio of an Eligible Fund.

ELIGIBLE FUNDS AND PORTFOLIOS

The Separate Account invests in the shares of the Eligible Funds and
Portfolios as described below. The descriptions below contain a short discussion
of the investment objective(s) and the investment advisers. See the Prospectuses
for the Eligible Funds for more complete discussions.

There is no assurance that the investment objective of any of the Eligible
Funds or Portfolios will be met. Owners and Certificate Holders bear the
complete investment risk for Purchase Payments allocated to an Eligible Fund or
Portfolio. Contract Values and Certificate Holder's Account Values will
fluctuate in accordance with the investment performance of the Sub-Accounts to
which Purchase Payments are allocated, and in accordance with the imposition of
the fees and charges assessed under the Contracts and Certificates.

DETAILED INFORMATION ABOUT THE ELIGIBLE FUNDS IS CONTAINED IN THE
ACCOMPANYING CURRENT PROSPECTUSES OF THE ELIGIBLE FUNDS. THE PROSPECTUSES OF THE
ELIGIBLE FUNDS MAY CONTAIN PORTFOLIOS NOT CURRENTLY AVAILABLE IN CONNECTION WITH
THE CONTRACTS AND CERTIFICATES. AN INVESTOR SHOULD CAREFULLY READ THESE
PROSPECTUSES BEFORE ALLOCATING AMOUNTS TO BE INVESTED IN THE SEPARATE ACCOUNT.

MFS VARIABLE INSURANCE TRUST -- The Trust is comprised of twelve Series, of
which only the MFS Emerging Growth Series and the MFS Total Return Series are
available under the Contracts and Certificates. Massachusetts Financial Services
Company is the investment adviser to each Series.

MFS EMERGING GROWTH SERIES -- The investment objective of the MFS
Emerging Growth Series is to provide long-term growth of capital. Dividend
and interest income from portfolio securities, if any, is incidental to the
Series' investment objective of long-term growth of capital. The Series'
policy is to invest primarily (at least 80% of its assets under normal
circumstances) in common stocks of small

10
<PAGE> 17

and medium-sized companies that are early in their life cycle but which
have the potential to become major enterprises (emerging growth companies).

MFS TOTAL RETURN SERIES -- The MFS Total Return Series' primary
investment objective is to obtain above-average income (compared to a
portfolio entirely invested in equity securities) consistent with the
prudent employment of capital and its secondary objective is to provide a
reasonable opportunity for growth of capital and income, since many
securities offering better than average yield may also possess growth
potential. Generally, at least 40% of the Series' assets are invested in
equity securities.

INSURANCE MANAGEMENT SERIES -- The Trust has six separate Funds, of which
only the Corporate Bond Fund, Utility Fund and U.S. Government Bond Fund are
available under the Contracts and Certificates. Federated Advisers is the
investment adviser to each Series.

CORPORATE BOND FUND -- The investment objective of the Corporate Bond
Fund is to seek high current income. The Fund endeavors to achieve its
objective by investing primarily in a professionally managed, diversified
portfolio of fixed income securities. The fixed income securities in which
the Fund intends to invest are lower-rated corporate debt obligations,
which are commonly referred to as "junk bonds," and involve a significant
degree of risk. Some of these fixed income securities may involve equity
features. Capital growth will be considered, but only when consistent with
the investment objective of high current income. Prior to investing in this
Fund, purchasers are cautioned to read the sections entitled "INVESTMENT
RISKS" and "REDUCING RISKS OF LOWER-RATED SECURITIES" in the Corporate Bond
Fund Prospectus for information regarding the risks associated with an
investment in this Fund.

UTILITY FUND -- The investment objective of the Utility Fund is to
achieve high current income and moderate capital appreciation. The Fund
endeavors to achieve its objective by investing primarily in a
professionally managed and diversified portfolio of equity and debt
securities of utility companies. Under normal market conditions, the Fund
will invest at least 65% of its total assets in securities of utility
companies.

U.S. GOVERNMENT BOND FUND -- The investment objective of the U.S.
Government Bond Fund is to provide current income. Under normal
circumstances, the Fund pursues its investment objective by investing at
least 65% of the value of its total assets in securities issued or
guaranteed as to payment of principal and interest by the U.S. Government,
its agencies or instrumentalities.

DREYFUS STOCK INDEX FUND -- The investment objective of the Dreyfus Stock
Index Fund is to provide investment results that correspond to the price and
yield performance of publicly traded common stocks in the aggregate, as
represented by the Standard & Poor's 500 Composite Stock Price Index (the
"Index"). The Dreyfus Stock Index Fund is neither sponsored by nor affiliated
with Standard & Poor's Corporation. The Fund attempts to duplicate the
investment results of the Index, which is comprised of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The Fund
attempts to be fully invested at all times in the stocks that comprise the Index
and stock index futures and, in any event, at least 80% of the Fund's net assets
will be so invested. Wells Fargo Nikko Investment Advisors serves as the Fund's
index fund manager.

DREYFUS VARIABLE INVESTMENT FUND -- The Fund is comprised of eight
Portfolios, of which only the Growth and Income Portfolio is available under the
Contracts and Certificates. The Dreyfus Corporation serves as the investment
adviser.

GROWTH AND INCOME PORTFOLIO -- The Growth and Income Portfolio is a
nondiversified portfolio, the goal of which is long-term capital growth,
current income and growth of income, consistent with reasonable investment
risk. The Portfolio invests in equity and debt securities and money market
instruments of domestic and foreign issuers.

11
<PAGE> 18

SCUDDER VARIABLE LIFE INVESTMENT FUND -- The Fund is comprised of six
Portfolios, of which only the Money Market Portfolio and the International
Portfolio are available under the Contracts and Certificates. Scudder, Stevens &
Clark, Inc. is the investment adviser to the Portfolios.

MONEY MARKET PORTFOLIO -- The investment objective of the Money Market
Portfolio is to maintain the stability of capital and, consistent
therewith, to maintain the liquidity of capital and to provide current
income. The Money Market Portfolio seeks to maintain a constant net asset
value of $1.00 per share, although there can be no assurance that this will
be achieved. An investment in the Money Market Portfolio is neither insured
nor guaranteed by the U.S. Government.

INTERNATIONAL PORTFOLIO -- The investment objective of the
International Portfolio is long-term growth of capital primarily through
diversified holdings of marketable foreign equity investments. The
Portfolio invests in companies, wherever organized, which do business
primarily outside the United States. The Portfolio intends to diversify
investments among several countries and to have represented in its holdings
business activities in not less than three different countries. The
Portfolio does not intend to concentrate investments in any particular
industry. Investing in foreign securities generally involves risks not
ordinarily associated with investing in securities of domestic issuers.
Purchasers are cautioned to read "POLICIES AND TECHNIQUES APPLICABLE TO THE
PORTFOLIOS -- FOREIGN SECURITIES" in the Prospectus of Scudder Variable
Life Investment Fund.

VAN ECK WORLDWIDE INSURANCE TRUST -- The Trust is comprised of seven
separate funds, of which only the Gold and Natural Resources Fund is available
under the Contracts and Certificates. Van Eck Associates Corporation is the
investment adviser to the Fund.

GOLD AND NATURAL RESOURCES FUND -- The investment objective of the
Gold and Natural Resources Fund is to seek long-term capital appreciation
by investing in equity and debt securities of companies engaged in the
exploration, development, production and distribution of gold and other
natural resources, such as strategic and other metals, minerals, forest
products, oil, natural gas and coal. Current income is not an investment
objective.

THE ALGER AMERICAN FUND -- The Trust is comprised of six portfolios, of
which only the Alger American Growth Portfolio is available under the Contracts
and Certificates. Fred Alger Management, Inc. is the investment manager.

ALGER AMERICAN GROWTH PORTFOLIO -- The investment objective of the
Alger American Growth Portfolio is long-term capital appreciation. Except
during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of
purchase of the securities, have total market capitalization of $1 billion
or greater.

VOTING RIGHTS

In accordance with its view of present applicable law, the Company will
vote the shares of the Eligible Funds held in the Separate Account at special
meetings of the shareholders in accordance with instructions received from
persons having the voting interest in the Separate Account attributable to that
option. The Company will vote shares for which it has not received instructions,
as well as shares attributable to it, in the same proportion as it votes shares
for which it has received instructions. None of the Eligible Funds holds regular
meetings of shareholders.

The number of shares which a person has a right to vote will be determined
as of a date to be chosen by the Company. Voting instructions will be solicited
by written communication prior to the meeting.

SUBSTITUTION OF SECURITIES

If the shares of an Eligible Fund (or any Portfolio within an Eligible Fund
or any other Eligible Fund or Portfolio), are no longer available for investment
by the Separate Account or, if in the judgment of the Company's Board of
Directors, further investment in the shares should become inappropriate in view
of

12
<PAGE> 19

the purpose of the Contracts or Certificates, the Company may limit further
purchase of such shares or may substitute shares of another Eligible Fund or
Portfolio for shares already purchased under the Contracts and Certificates. No
substitution of securities may take place without prior approval of the
Securities and Exchange Commission and under the requirements it may impose.

Shares of the Eligible Funds are issued and redeemed in connection with
investments in and payments under certain variable annuity contracts and (with
respect to certain of the Eligible Funds) variable life insurance policies of
various life insurance companies which may or may not be affiliated. The
Eligible Funds do not foresee any disadvantage to Owners and Certificate Holders
arising out of the fact that the Eligible Funds offer their shares for products
offered by life insurance companies which are not affiliated. Nevertheless, the
Boards of Trustees or the Boards of Directors, as applicable, of the Eligible
Funds intend to monitor events in order to identify any material irreconcilable
conflicts which may possibly arise and to determine what action, if any, should
be taken in response thereto. If such a conflict were to occur, one or more
insurance company separate accounts might withdraw its investments in an
Eligible Fund. An irreconcilable conflict might result in the withdrawal of a
substantial amount of a Portfolio's assets which could adversely affect such
Portfolio's net asset value per share.

FIXED ACCOUNT OPTIONS
GENERAL

In addition to the Sub-Accounts of the Separate Account, Owners and
Certificate Holders may also allocate Net Purchase Payments or transfer values
to the Fixed Account or to the MVA Account, which are investment options within
the General Account. An Owner or Certificate Holder may not be invested in more
than ten investment options at any time (an investment option is each
Sub-Account of the Separate Account, the Fixed Account, and each MVA Account
Guarantee Period).

FIXED ACCOUNT OPTION

There is a one year Guarantee Period available as a Fixed Account Option.
An Owner or Certificate Holder may elect to allocate Net Purchase Payments to
the Fixed Account. Each such allocation (to the extent it is not withdrawn,
transferred or annuitized prior to the end of the one year Guarantee Period),
will earn interest, compounded daily, at the Guaranteed Interest Rate. The
Guaranteed Interest Rate is the interest rate credited to the Contract Value or
the Certificate Holder's Account Value by the Company for the Guarantee Period.
The Guaranteed Interest Rate is based on the Current Interest Rate established
for the Guarantee Period. The Current Interest Rates are set at the sole
discretion of the Company. Interest Rates after the first year will not change
more frequently than once per Contract or Certificate Year. OWNERS BEAR THE RISK
THAT CURRENT INTEREST RATES AVAILABLE AT FUTURE TIMES MAY BE MORE OR LESS THAN
THOSE CURRENTLY OR INITIALLY AVAILABLE. THEY ALSO BEAR THE RISK THAT SUCH RATES
MAY NOT EXCEED THE GUARANTEED MINIMUM INTEREST RATE OF 3%. Additional payments
made during the Guarantee Period will all be credited with the same interest
rate as the initial payment for the Guarantee Period.

The Owner or Certificate Holder may transfer up to 25% of the Owner's
Contract Value or the Certificate Holder's Account Value in the Fixed Account to
the Separate Account during the Accumulation Period in any one
Contract/Certificate Year.

MVA ACCOUNT

Net Purchase Payments may be allocated to one or more of the MVA Account
Guarantee Period Options. Currently, the Company offers three MVA Account
Guarantee Periods -- 3 years, 5 years and 7 years. In addition, during the
Accumulation Period, Contract Values and Certificate Holder's Account Values can
be transferred from the Separate Account and/or the Fixed Account to one or more
of the MVA Account Guarantee Period Options on the next Contract or Certificate
Anniversary. There will be an initial Current Interest Rate for the initial
Guarantee Period of the MVA Account. After the initial

13
<PAGE> 20

Guarantee Period, the Current Interest Rate for any subsequent Guarantee Period
of the MVA Account may change. All interest payable under a Contract or
Certificate is compounded daily. In no event will the Current Interest Rate be
less than the Minimum Guaranteed Rate, prior to the application of the Market
Value Adjustment.

During the thirty (30) days prior to the end of a current Guarantee Period,
the Owner or Certificate Holder may elect to renew for the same or any other
Guarantee Period at the then Current Interest Rate or may elect to transfer all
or a portion of the amount to the Fixed Account or to the Separate Account. Any
transfer elected will be made as of the last Valuation Date of a current
Guarantee Period and will not be subject to the Market Value Adjustment.

If the Owner or Certificate Holder does not specify a Guarantee Period at
the time of renewal, the Company will select the same Guarantee Period as has
just expired, so long as such Guarantee Period does not extend beyond the latest
Annuity Date that can be selected by an Owner or Certificate Holder. If such
Guarantee Period does extend beyond the latest Annuity Date, the Company will
choose the longest period that will not extend beyond such date. If a renewal
occurs within one year of the latest Annuity Date, the Company will choose the
1-year Fixed Account Option and will credit interest up to the Annuity Date at
the Current Interest Rate for the one year Guarantee Period as of the renewal
date.

The Owner or Certificate Holder may elect one or more Guarantee Periods
subject to the Company's underwriting rules. Multiple Guarantee Periods are
treated separately for purposes of applying the Market Value Adjustment. The
Company reserves the right to credit different Current Interest Rates to the
Contract Value or the Certificate Holder's Account Value attributable:

1. to different Guarantee Periods; and

2. to Guarantee Periods of the same duration with different Effective
Dates.

The Owner or Certificate Holder may upon Written Request change to any
Guarantee Period then being offered by the Company with respect to the Contracts
and Certificates. The Market Value Adjustment will apply to a change made at any
time other than at the end of a Guarantee Period. The Market Value Adjustment
will not apply to a change made at the end of a Guarantee Period if a Written
Request is received by the Company within thirty (30) days prior to the end of
the Guarantee Period. The Market Value Adjustment will be an addition to or
deduction from the remaining amount of Contract Value or the Certificate
Holder's Account Value except in the case of a full surrender.

Except on the latest Annuity Date, any amount withdrawn, transferred or
annuitized prior to the end of that Guarantee Period may be subject to a Market
Value Adjustment. Owners and Certificate Holders bear the risk that amounts
reallocated within, or prematurely withdrawn, transferred or annuitized from the
MVA Account prior to the end of their respective Guarantee Period could result
in the Owner or Certificate Holder receiving less than the Purchase Payments or
amounts so allocated. The Market Value Adjustment will be calculated by
multiplying the amount withdrawn, transferred or annuitized by the formula set
forth below. (See the "Appendix" for examples of how the Market Value Adjustment
is computed.)

There will be no Market Value Adjustment on withdrawals from the MVA
Account in the following situations: (1) payment of a death benefit under the
Contract or Certificate; (2) amounts withdrawn to pay fees or charges; and (3)
amounts withdrawn or transferred from the MVA Account at the end of the
Guarantee Period.

The Market Value Adjustment factor is equal to:

n/12
(1 + i)
[ -------------- ] - 1
(1 + j + .005)

14
<PAGE> 21

where i = Current Interest Rate credited to the Owner's Contract Value
or the Certificate Holder's Account Value allocated to a
Guarantee Period as of the beginning of the Guarantee Period.
j = Current Interpolated U.S. Constant Maturity Treasury Rate
("CITR") for the time remaining in the current Guarantee
Period plus the difference between i and the corresponding
CITR at the time of purchase.
n = Number of full months remaining in the Guarantee Period.

WITHDRAWALS, TRANSFERS OR ANNUITIZATION OF AMOUNTS FROM A GUARANTEE PERIOD PRIOR
TO THE END OF THAT GUARANTEE PERIOD MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT.
THE MARKET VALUE ADJUSTMENT MAY BE POSITIVE OR NEGATIVE AND MAY RESULT IN THE
OWNER OR CERTIFICATE HOLDER RECEIVING LESS THAN HIS OR HER PURCHASE PAYMENT OR
CONTRACT VALUE/CERTIFICATE HOLDER'S ACCOUNT VALUE ALLOCATED TO THE MVA ACCOUNT.

CHARGES AND DEDUCTIONS

Various charges and deductions are made from an Owner's Contract Value and
a Certificate Holder's Account Value, the Separate Account and the MVA Account.
These charges and deductions are:

DEDUCTION FOR CONTINGENT DEFERRED SALES CHARGE (SALES LOAD)

The Contracts and Certificates do not provide for a front-end sales charge.
However, if all or a portion of an Owner's Contract Value or a Certificate
Holder's Account Value is withdrawn within the first seven Contract or
Certificate Years, a Contingent Deferred Sales Charge (sales load) will be
assessed. This charge reimburses the Company for expenses incurred in connection
with the promotion, sale and distribution of the Contracts and Certificates. The
Charge is calculated at the time of each withdrawal and will be deducted from
the account value remaining in the Contract or Certificate. The Contingent
Deferred Sales Charge is based upon the length of time from receipt of each
Purchase Payment to the date of withdrawal. Each Purchase Payment is tracked as
to its date of receipt and withdrawals thereof are determined in accordance with
the following:

CONTINGENT DEFERRED SALES CHARGE:

<TABLE>
<CAPTION>
Number of Complete
Years Since
Receipt
of Purchase
Payment Charge
- ------------------ ------
<S> <C>
0 years.............................................................. 7.0%
1 years.............................................................. 6.0%
2 years.............................................................. 5.0%
3 years.............................................................. 4.0%
4 years.............................................................. 3.0%
5 years.............................................................. 2.0%
6 years.............................................................. 1.0%
7 years or more...................................................... 0.0%
</TABLE>

15
<PAGE> 22

Certificate Year. In the event than an Owner/Certificate Holder makes a full
withdrawal, the Free Withdrawal provision is not available.

In addition, in certain states, after the first Contract/Certificate Year,
the Owner/Certificate Holder is permitted to make a total or partial withdrawal
without the imposition of the Contingent Deferred Sales Charge if the
Owner/Certificate Holder is confined to a skilled nursing home facility for 90
consecutive days.

REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE

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

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

2. The total amount of Purchase Payments to be received will be
considered. Per Contract or Certificate sales expenses are likely to be
less on larger Purchase Payments than on smaller ones.

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

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

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

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

DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE

Each Valuation Period, the Company deducts an aggregate Mortality and
Expense Risk Charge from the Separate Account which is equal, on an annual
basis, to 1.45% of the average daily net asset value of each Sub-Account of the
Separate Account. Approximately 1.25% of the Mortality and Expense Risk Charge
is for the standard death benefit and approximately .20% is for the enhanced
death benefit. See "Proceeds Payable on Death -- Death Benefit Amount During the
Accumulation Period." The portion of the Mortality and Expense Risk Charge
attributable to the enhanced death benefit (.20%) will be assessed against
Separate Account allocations pursuant to all Contracts and Certificates issued,
whether or not applicable state law permits the Contract/Certificate to offer
the enhanced death benefit. Therefore, purchasers of Contracts/Certificates in
states where the enhanced death benefit is not permitted and who allocate
Contract Value or Certificate Holder's Account Value to the Separate Account
will be paying for a benefit they will not receive. The standard death benefit
is available in all states where the Contract/Certificate is approved. The
mortality risks assumed by the Company arise from its contractual obligation to
make Annuity Payments after the Annuity Date (determined in accordance with the
Annuity Option chosen by the Owner or Certificate Holder) regardless of how long
all Annuitants live. This assures that neither an Annuitant's own longevity, nor
an improvement in life expectancy greater than that anticipated in the mortality
tables, will have any adverse effect on the Annuity Payments the Annuitant will
receive under the Contract/Certificate. Further, the Company bears a mortality
risk in that it guarantees

16
<PAGE> 23

the annuity purchase rates for the Annuity Options under the Contracts and
Certificates. Also, the Company bears a mortality risk with respect to the death
benefit and with respect to the waiver of the Contingent Deferred Sales Charge
if Purchase Payments have been held in the Contract or Certificate less than
seven (7) years. The expense risk assumed by the Company is that all actual
expenses involved in administering the Contracts and Certificates, including
Contract and Certificate maintenance costs, administrative costs, mailing costs,
data processing costs, legal fees, accounting fees, filing fees and the costs of
other services may exceed the amount recovered from the Administrative Charge.

If the Mortality and Expense Risk Charge is insufficient to cover the
actual costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge.

The Mortality and Expense Risk Charge is guaranteed by the Company and
cannot be increased.

To the extent that the Contingent Deferred Sales Charge is insufficient to
cover the actual costs of distribution, the Company may use any of its corporate
assets, including potential profit which may arise from the Mortality and
Expense Risk Charge, to provide for any difference.

DEDUCTION FOR ADMINISTRATIVE CHARGE

Each Valuation Period, the Company deducts an Administrative Charge from
the Separate Account which is equal, on an annual basis, to .15% of the average
daily net asset value of each Sub-Account of the Separate Account. This charge
is to reimburse the Company for the expenses it incurs in the establishment and
maintenance of the Contracts, Certificates and the Separate Account. These
expenses include but are not limited to: preparation of the Contracts and
Certificates, confirmations, annual reports and statements, maintenance of Owner
and Certificate Holder records, maintenance of Separate Account records,
administrative personnel costs, mailing costs, data processing costs, legal
fees, accounting fees, filing fees, the costs of other services necessary for
Owner and Certificate Holder servicing and all accounting, valuation, regulatory
and reporting requirements. Since this charge is an asset-based charge, the
amount of the charge attributable to a particular Contract or Certificate may
have no relationship to the administrative costs actually incurred by that
Contract or Certificate. The Company does not intend to profit from this charge.
This charge will be reduced to the extent that the amount of this charge is in
excess of that necessary to reimburse the Company for its administrative
expenses. Should this charge prove to be insufficient, the Company will not
increase this charge and will incur the loss.

DEDUCTION FOR TRANSFER FEE

An Owner or Certificate Holder may transfer all or part of the Owner's or
Certificate Holder's interest in a Sub-Account, the Fixed Account or the MVA
Account (subject to Fixed Account and MVA Account provisions) after the
expiration of any Right to Examine Period, without the imposition of any fee or
charge if there have been no more than twelve transfers made in a Contract or
Certificate Year. A transfer made at the end of the Right to Examine Period from
the Scudder Money Market Sub-Account will not count in determining the
application of the Transfer Fee. If more than twelve transfers have been made in
a Contract or Certificate Year, the Company will deduct a Transfer Fee which is
equal to the lesser of $25 or 2% of the amount transferred. However, if the
Owner or Certificate Holder is participating in an approved Dollar Cost
Averaging Program or Rebalancing Program, such transfers are not counted toward
the number of transfers for the year and are not taken into account in
determining any Transfer Fee.

DEDUCTION FOR PREMIUM AND OTHER TAXES

Any taxes, including any Premium Taxes, paid to any governmental entity
relating to the Contracts and Certificates may be deducted from the Purchase
Payment or Contract Value or Certificate Holder's Account Value when incurred.
The Company will, in its sole discretion, determine when taxes have resulted
from: the investment experience of the Separate Account; receipt by the Company
of the Purchase Payments; or commencement of Annuity Payments. The Company may,
at its sole discretion, pay taxes

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<PAGE> 24

when due and deduct that amount from the Contract Value or Certificate Holder's
Account Value at a later date. Payment at an earlier date does not waive any
right the Company may have to deduct amounts at a later date. The Company's
current practice is to pay any Premium Taxes when they become due and payable to
the states. Premium taxes generally range from 0% to 4%.

While the Company is not currently maintaining a provision for federal
income taxes with respect to the Separate Account, the Company has reserved the
right to establish a provision for income taxes if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of the
Separate Account. Currently, the Company does not incur any federal income taxes
as a result of the operation of the Separate Account. However, the Company
reserves the right to provide for the deduction from the Separate Account for
any income taxes which may be incurred as a result of the operation of the
Separate Account.

The Company will deduct any withholding taxes required by applicable law.

DEDUCTION FOR EXPENSES OF THE ELIGIBLE FUNDS

There are other deductions from and expenses (including management fees
paid to the investment advisers) paid out of the assets of the Eligible Funds
which are described in the Prospectuses for the Eligible Funds.

THE CONTRACTS AND CERTIFICATES

OWNER/CERTIFICATE HOLDER

The Owner or Certificate Holder has all interest and rights to amounts held
in his or her Contract or amounts held in his or her Certificate Holder's
Account. The Owner or Certificate Holder is the person designated as such on the
Issue Date or Certificate Issue Date, unless changed.

The Owner may change owners of the Contract at any time prior to the
Annuity Date by Written Request. The Certificate Holder may change holders of
the Certificate at any time prior to the Annuity Date by Written Request. A
change of Owner or Certificate Holder will automatically revoke any prior
designation of Owner or Certificate Holder. The change will become effective as
of the date the Written Request is signed. A new designation of Owner or
Certificate Holder will not apply to any payment made or action taken by the
Company prior to the time it was received.

JOINT OWNERS/JOINT CERTIFICATE HOLDERS

The Contract can be owned by Joint Owners. A Certificate may be owned by
Joint Certificate Holders. If Joint Owners or Joint Certificate Holders are
named, any Joint Owner or Joint Certificate Holder must be the spouse of the
other Owner or Certificate Holder. Upon the death of either Owner/ Certificate
Holder, the surviving Joint Owner/surviving Joint Certificate Holder will be the
Primary Beneficiary. Any other Beneficiary designation will be treated as a
Contingent Beneficiary unless otherwise indicated in a Written Request. Unless
otherwise specified in the application for the Contract or Certificate, if there
are Joint Owners/Joint Certificate Holders both signatures will be required for
all Owner/ Certificate Holder transactions except telephone transfers. If the
telephone transfer option is elected and there are Joint Owners or Joint
Certificate Holders, either Joint Owner or Joint Certificate Holder can give
telephone instructions.

CONTRACT OWNER (GROUP CONTRACTS ONLY)

The Contract Owner has title to the group Contract. The Contract and any
amounts accumulated thereunder are not subject to the claims of the Contract
Owner nor any of its creditors. The Contract Owner may transfer ownership of the
group Contract. Any transfer of ownership terminates the interest of any
existing Contract Owner. It does not change the rights of any Certificate
Holder.

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<PAGE> 25

ANNUITANT

The Annuitant is the person on whose life Annuity Payments are based. The
Annuitant is the person designated by the Owner or Certificate Holder at the
Issue Date or Certificate Issue Date, unless changed prior to the Annuity Date.
The Annuitant may not be changed on or after the Annuity Date or in a Contract
or Certificate which is owned by a non-natural person. Any change of Annuitant
is subject to the Company's underwriting rules then in effect.

ASSIGNMENT

A Written Request specifying the terms of an assignment of the Contract or
Certificate must be provided to the Annuity Service Center. Until the Written
Request is received, the Company will not be required to take notice of or be
responsible for any transfer of interest in the Contract or Certificate by
assignment, agreement, or otherwise.

The Company will not be responsible for the validity or tax consequences of
any assignment. Any assignment made after the death benefit has become payable
will be valid only with the Company's consent.

If the Contract or Certificate is assigned, the Owner's or Certificate
Holder's rights may only be exercised with the consent of the assignee of
record.

If the Contract or Certificate is issued pursuant to a retirement plan
which receives favorable tax treatment under the provisions of Section 408 of
the Code, it may not be assigned, pledged or otherwise transferred except as may
be allowed under applicable law.

PURCHASE PAYMENTS, CONTRACT VALUE AND
CERTIFICATE HOLDER'S ACCOUNT VALUE

PURCHASE PAYMENT

The initial Purchase Payment is due on the Issue Date/Certificate Issue
Date. The minimum initial Purchase Payment is $5,000 (except for Qualified
Contracts and Certificates, the minimum initial Purchase Payment is $2,000). The
minimum subsequent Purchase Payment is $500, or if the automatic premium check
option is elected $100. The maximum total Purchase Payments the Company will
accept without Company approval are $250,000. The Company reserves the right to
reject any application or Purchase Payment.

ALLOCATION OF PURCHASE PAYMENTS

Net Purchase Payments are allocated to the Fixed Account and/or the MVA
Account Guarantee Period and/or to one or more Sub-Accounts of the Separate
Account in accordance with the selections made by the Owner or Certificate
Holder. However, under certain circumstances, the Company will allocate initial
Net Purchase Payments to the Scudder Money Market Sub-Account until the
expiration of the Right to Examine Period. (See "Highlights -- Right to Examine
Period.") The allocation of the initial Net Purchase Payment is made in
accordance with the selection made by the Owner or Certificate Holder at the
Issue Date or Certificate Issue Date. Unless otherwise changed by the Owner or
Certificate Holder, subsequent Net Purchase Payments are allocated in the same
manner as the initial Net Purchase Payment. Allocation of the Net Purchase
Payment is subject to the terms and conditions imposed by the Company.
CURRENTLY, THE OWNER OR CERTIFICATE HOLDER CAN SELECT UP TO TEN INVESTMENT
OPTIONS, INCLUDING SUB-ACCOUNTS, THE FIXED ACCOUNT AND EACH MVA ACCOUNT
GUARANTEE PERIOD. Allocations must be in whole percentages with a minimum
allocation of 5% of each Purchase Payment or transfer or $500, whichever is
greater.

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<PAGE> 26

For initial Net Purchase Payments, if the forms required to issue a
Contract or Certificate are in good order, the Company will apply the Net
Purchase Payment to the Separate Account and credit the Contract or Certificate
with Accumulation Units and/or to the Fixed Account or MVA Account and credit
the Contract or Certificate with dollars within two business days of receipt.

In addition to the underwriting requirements of the Company, good order
means that the Company has received federal funds (monies credited to a bank's
account with its regional Federal Reserve Bank). If the forms required to issue
a Contract or Certificate are not in good order, the Company will attempt to get
them in good order or the Company will return the forms and the Purchase Payment
within five business days. The Company will not retain the Purchase Payment for
more than five business days while processing incomplete forms unless it has
been so authorized by the purchaser. For subsequent Net Purchase Payments, the
Company will apply Net Purchase Payments to the Separate Account and credit the
Contract or Certificate with Accumulation Units and/or to the Fixed Account or
MVA Account and credit the Contract or Certificate with dollars as of the end of
the Valuation Period during which the Purchase Payment was received in good
order.

DOLLAR COST AVERAGING

Dollar Cost Averaging is a program which, if elected, permits an Owner or
Certificate Holder to systematically transfer amounts monthly, quarterly or
semi-annually from the Scudder Money Market Sub-Account or the Fixed Account to
one or more Sub-Accounts. By allocating amounts on a regularly scheduled basis
as opposed to allocating the total amount at one particular time, an Owner or
Certificate Holder may be less susceptible to the impact of market fluctuations.
The minimum amount which may be transferred is $50 per transfer (per
Sub-Account). Transfers to the Fixed Account are not permitted. If at any time
the value in the Scudder Money Market Sub-Account or the Fixed Account is
insufficient to make the transfer requested, the Owner or Certificate Holder
will be notified for specific instructions. The Company reserves the right, at
any time and without prior notice to any party, to terminate, suspend or modify
its Dollar Cost Averaging Program.

There is no current charge for participating in the Dollar Cost Averaging
Program. However, the Company reserves the right to charge for Dollar Cost
Averaging in the future. Transfers are made anytime prior to the 29th of a
calendar month. Dollar Cost Averaging will begin on the first transfer date
elected by the Owner or Certificate Holder following the expiration of the Right
to Examine Period (if the program has been selected on the Issue
Date/Certificate Issue Date). The minimum duration of participation in the
Dollar Cost Averaging Program is currently at least one year. Transfers made
pursuant to the Dollar Cost Averaging Program are not taken into account in
determining any Transfer Fee. An Owner or Certificate Holder participating in
the Dollar Cost Averaging Program may not also participate in the Rebalancing
Program.

REBALANCING

Rebalancing is a program, which if elected, provides for periodic
pre-authorized automatic transfers among the Sub-Accounts pursuant to written
instructions from the Owner or Certificate Holder. Such transfers are made to
maintain a particular percentage allocation among the Sub-Accounts as selected
by the Owner or Certificate Holder. Any amounts in the Fixed Account or the MVA
Account will not be transferred pursuant to the Rebalancing Program. The
Contract Value must be at least $5,000 to have transfers made pursuant to the
Program. An Owner or Certificate Holder may select that Rebalancing occur on a
quarterly, semi-annual or annual basis. Transfers made pursuant to the
Rebalancing Program are not taken into account in determining the number of
transfers per year and therefore are not counted in determining any Transfer
Fee. An Owner or Certificate Holder participating in the Rebalancing Program may
not also participate in the Dollar Cost Averaging Program.

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<PAGE> 27

CONTRACT VALUE

The Contract Value for any Valuation Period is the sum of the Contract
Value in each of the Sub-Accounts of the Separate Account and the Contract Value
in the Fixed Account and the MVA Account.

The Contract Value in a Sub-Account of the Separate Account is determined
by multiplying the number of Accumulation Units allocated to the Contract Value
for the Sub-Account by the Accumulation Unit Value. Withdrawals will result in
the cancellation of Accumulation Units in a Sub-Account or a reduction in the
value of the Fixed Account or the MVA Account, as applicable.

CERTIFICATE HOLDER'S ACCOUNT VALUE

The Certificate Holder's Account Value for any Valuation Period is the sum
of the Certificate Holder's Account Value in each of the Sub-Accounts of the
Separate Account, the Certificate Holder's Account Value in the MVA Account and
the Certificate Holder's Account Value in the Fixed Account.

The Certificate Holder's Account Value in a Sub-Account of the Separate
Account is determined by multiplying the number of Accumulation Units allocated
to the Certificate Holder's Account Value for the Sub-Account by the
Accumulation Unit Value.

Withdrawals will result in the cancellation of Accumulation Units in a
Sub-Account or a reduction in the value of the Fixed Account or the MVA Account,
as applicable.

ACCUMULATION UNITS

Accumulation Units will be used to account for all amounts allocated to or
withdrawn from the Sub-Accounts of the Separate Account as a result of Net
Purchase Payments, withdrawals, transfers, or fees and charges. The Company will
determine the number of Accumulation Units of a Sub-Account purchased or
cancelled. This will be done by dividing the amount allocated to (or the amount
withdrawn from) the Sub-Account by the dollar value of one Accumulation Unit of
the Sub-Account as of the end of the Valuation Period during which the request
for the transaction is received at the Annuity Service Center.

ACCUMULATION UNIT VALUE

The Accumulation Unit Value for each Sub-Account was arbitrarily set
initially at $10. Subsequent Accumulation Unit Values for each Sub-Account are
determined by multiplying the Accumulation Unit Value for the immediately
preceding Valuation Period by the Net Investment Factor for the Sub-Account for
the current period.

The Net Investment Factor for each Sub-Account is determined by dividing A
by B and subtracting C where:

A is (I) the net asset value per share of the Eligible Fund or Portfolios
of an Eligible Fund held by the Sub-Account for the current
Valuation Period; plus

(ii) any dividend or capital gains per share declared on behalf of
such Eligible Fund or Portfolio that has an ex-dividend date within
the current Valuation Period; plus or minus

(iii) the cumulative per share charge or credit for taxes reserved
which is determined by the Company to have resulted from the
operation or maintenance of the Sub-Account.

B is the net asset value per share of the Eligible Fund or Portfolio
held by the Sub-Account for the immediately preceding Valuation
Period; plus or minus the cumulative per share charge or credit for
taxes reserved for the immediately preceding Valuation Date.

C is the factor representing the cumulative unpaid charge for the
Mortality and Expense Risk Charge and for the Administrative Charge.

The Accumulation Unit Value may increase or decrease from Valuation Period
to Valuation Period.

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<PAGE> 28

TRANSFERS

TRANSFERS DURING THE ACCUMULATION PERIOD

Subject to any limitation imposed by the Company on the number of transfers
(currently, unlimited) that can be made during the Accumulation Period, the
Owner or Certificate Holder may, after the expiration of the Right to Examine
Period, transfer all or part of the Contract Value or Certificate Holder's
Account Value in a Sub-Account, the Fixed Account or the MVA Account by Written
Request without the imposition of any Transfer Fee if there have been no more
than the number of free transfers (currently, twelve). All transfers are subject
to the following:

1. If more than the number of free transfers have been made in a
Contract or Certificate Year, the Company will deduct a Transfer Fee for
each subsequent transfer permitted. The Transfer Fee is the lesser of $25
or 2% of the amount transferred. However, if the Owner or Certificate
Holder is participating in an approved Dollar Cost Averaging Program or
Rebalancing Program, such transfers currently are not counted toward the
number of transfers for the year and are not taken into account in
determining any Transfer Fee. The Transfer Fee will be deducted from the
amount which is transferred.

2. The minimum amount which can be transferred is $250 (from any
Account) or the Owner's or Certificate Holder's entire interest in any
Account, if less. This requirement is waived if the transfer is made
pursuant to the Dollar Cost Averaging Program. The minimum amount which
must remain in each Account after a transfer is $500 per Account, or $0 if
the entire amount in any Account is transferred. The maximum amount which
can be transferred from the Fixed Account to the Separate Account during
the Accumulation Period is 25% of the Contract Value or the Certificate
Holder's Account Value in the Fixed Account in any one Contract or
Certificate Year. This requirement is waived if the remaining balance in
the Fixed Account is less than 25% of the original deposit to the Fixed
Account and is made pursuant to the Dollar Cost Averaging Program.

3. The Company reserves the right, at any time and without prior
notice to any party, to terminate, suspend or modify the transfer privilege
described above.

Owners and Certificate Holders can elect to make transfers by telephone. To
do so, Owners and Certificate Holders must complete a Written Request. The
Company will use reasonable procedures to confirm that instructions communicated
by telephone are genuine. If it does not, the Company may be liable for any
losses due to unauthorized or fraudulent instructions. The Company may tape
record all telephone instructions. The Company will not be liable for any loss,
liability, cost or expense incurred by the Owner or Certificate Holder for
acting in accordance with such telephone instructions believed to be genuine.
The telephone transfer privilege may be discontinued at any time by the Company.

If there are Joint Owners or Joint Certificate Holders, unless the Company
is informed to the contrary, telephone instructions will be accepted from either
of the Joint Owners or Joint Certificate Holders.

Neither the Separate Account nor the Eligible Funds are designed for
professional market timing organizations or other entities using programmed and
frequent transfers. A pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to a Portfolio. The Company reserves the right to
restrict the transfer privilege or reject any specific Purchase Payment
allocation request for any person whose transactions seem to follow a timing
pattern.

WITHDRAWALS

During the Accumulation Period, the Owner or Certificate Holder may, upon a
Written Request, make a total or partial withdrawal of the Contract/Certificate
Withdrawal Value.

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<PAGE> 29

Unless the Owner or Certificate Holder instructs the Company otherwise, a
partial withdrawal will be made from the Separate Account. A partial withdrawal
will result in the cancellation of Accumulation Units from each applicable
Sub-Account in the ratio that the Owner's Contract Value or Certificate Holder's
Account Value in the Sub-Account bears to the total Contract Value or
Certificate Holder's Account Value in all Sub-Accounts. The Owner or Certificate
Holder must specify by Written Request in advance which Sub-Account Accumulation
Units are to be cancelled if other than the above method is desired.

A partial withdrawal from the Fixed Account or the MVA Account is made for
a Contract or Certificate with Multiple Guarantee Periods by a withdrawal first
from the one year Fixed Account and next from the Guarantee Period of the
shortest remaining duration and then from the Guarantee Period with the earliest
Effective Date where the Guarantee Periods are of the same duration. A partial
withdrawal is taken first from the Contract Withdrawal Value or the Certificate
Withdrawal Value for which the Free Withdrawal Provision applies and then from
the Withdrawal Value for which there is no waiver. A withdrawal from the MVA
Account may be subject to a Market Value Adjustment.

The Company will pay the amount of any withdrawal from the Separate Account
within seven (7) days of receipt of a request in good order unless the
Suspension or Deferral of Payments provision is in effect.

Each partial withdrawal must be for at least $500 (unless the withdrawal is
made pursuant to the Systematic Withdrawal Option). The minimum Contract Value
or Certificate Holder's Account Value which must remain in the Contract or
Certificate after a partial withdrawal is $2,000. The minimum Contract Value or
Certificate Holder's Account Value which must remain in any Account after a
partial withdrawal is $500.

Certain tax withdrawal penalties and restrictions may apply to withdrawals
from the Contracts and Certificates. (See "Tax Status"). Owners and Certificate
Holders should consult their own tax counsel or other tax adviser regarding any
distributions.

SYSTEMATIC WITHDRAWAL PROGRAM

The Company offers a Systematic Withdrawal Program which enables an Owner
or Certificate Holder to pre-authorize a periodic exercise of the contractual
withdrawal rights described above. The Systematic Withdrawal Program is
available if the Owner's Contract Value or Certificate Holder's Account Value is
at least $12,000 as of the Valuation Date this option is requested. The Owner,
the Certificate Holder or the Company may terminate systematic withdrawals upon
30 days' prior written notice. There is currently no charge for systematic
withdrawals. However, the Company reserves the right to charge for systematic
withdrawals in the future. The total permitted systematic withdrawals in a
Contract or Certificate Year are limited to not more than twelve. The Systematic
Withdrawal Option can be exercised at any time, including during the first
Contract/Certificate Year. The Systematic Withdrawal Program may not be elected
if an Owner or Certificate Holder has made a prior withdrawal during the same
Contract or Certificate Year. The total systematic withdrawal in a Contract or
Certificate Year which can be made without incurring a Contingent Deferred Sales
Charge is limited to the Free Withdrawal amount (see "Charges and
Deductions -- Deduction for Contingent Deferred Sales Charge - Free
Withdrawal"). However, the Free Withdrawal amount may be increased to allow
systematic withdrawals to meet applicable minimum distribution requirements for
Qualified Contracts and Certificates. The exercise of the systematic withdrawal
plan in any Contract/Certificate Year replaces the Free Withdrawal amount which
is allowable per year without incurring a Contingent Deferred Sales Charge. Any
other withdrawal in a year when the Systematic Withdrawal Option has been
utilized will be subject to the Contingent Deferred Sales Charge.

Systematic withdrawals are available for Qualified and Non-Qualified
Contracts and Certificates. (See "Tax Status -- Tax Treatment of
Withdrawals -- Non-Qualified Contracts and Certificates.") Certain tax penalties
and restrictions may apply to systematic withdrawals from the Contracts. (See
"Tax Status -- Tax

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<PAGE> 30

Treatment of Withdrawals -- Qualified Contracts and Certificates".) Owners and
Certificate Holders entering into such a program instruct the Company to
withdraw an amount specified in dollars. The minimum withdrawal amount is $100
per payment.

SUSPENSION OR DEFERRAL OF PAYMENTS

The Company reserves the right to suspend or postpone payments from the
Separate Account for a withdrawal or transfer for any period when:

1. The New York Stock Exchange is closed (other than customary weekend and
holiday closings);

2. Trading on the New York Stock Exchange is restricted;

3. An emergency exists as a result of which disposal of securities held in
the Separate Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's
net assets; or

4. During any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Owners or Certificate Holders;
provided that applicable rules and regulations of the Securities and
Exchange Commission will govern as to whether the conditions described
in (2) and (3) exist.

The Company further reserves the right to postpone payments from the Fixed
Account and the MVA Account for a period of up to six months.

PROCEEDS PAYABLE ON DEATH

DEATH OF OWNER OR CERTIFICATE HOLDER DURING THE ACCUMULATION PERIOD

Upon the death of the Owner or Certificate Holder or Joint Owner or Joint
Certificate Holder prior to the Annuity Date, the death benefit will be paid to
the Beneficiary(ies) designated by the Owner or Certificate Holder. Upon the
death of a Joint Owner or Joint Certificate Holder, the surviving Joint Owner or
Joint Certificate Holder, if any, will be treated as the primary Beneficiary.
Any other Beneficiary designation on record at the time of death will be treated
as a contingent Beneficiary.

A Beneficiary may request that the death benefit be paid under one of the
Death Benefit Options below. If the Beneficiary is the spouse of the Owner or
Certificate Holder, he or she may elect to continue the Contract or Certificate
at the then current Contract Value or Certificate Holder's Account Value in his
or her own name and exercise all the Owner's or Certificate Holder's rights
under the Contract or Certificate.

DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD

In states where the death benefit endorsement to the Contract/Certificate
is approved, the death benefit will be the Contract Value or the Certificate
Holder's Account Value in the Fixed Account and in the MVA Account plus the
greater of (a), (b) or (c) where:

(a) is the Contract Value or the Certificate Holder's Account Value in the
Separate Account as of the end of the Valuation Period during which the
Company receives at the Annuity Service Center both due proof of death
and an election of the payment.

(b) is the Purchase Payments allocated to the Separate Account, less any
withdrawals and transfers from the Separate Account and any related
Contingent Deferred Sales Charge and Transfer Fees, accumulated at 4%
per annum up to the first Contract/Certificate Anniversary after the
Owner/Certificate Holder attains age 75.

(c) is the highest Reset Value up to the date of death. The Reset Value is
equal to the Contract Value or the Certificate Holder's Account Value
in the Separate Account on each Contract or Certificate

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<PAGE> 31

Anniversary prior to the Owner or Certificate Holder attaining age 80,
plus Purchase Payments made after such Contract or Certificate
Anniversary and allocated to the Separate Account less any withdrawals
and transfers from the Separate Account and any related Contingent
Deferred Sales Charges and Transfer Fees.

In states where the death benefit endorsement (enhanced death benefit) to
the Contract/Certificate is not approved, the death benefit during the
Accumulation Period will be the greater of (i) the Purchase Payments, less any
withdrawals and related Contingent Deferred Sales Charges; or (ii) the Owner's
Contract Value or the Certificate Holder's Account Value determined as of the
end of the Valuation Period during which the Company receives both due proof of
death and an election for the payment method.

Owners/Certificate Holders should refer to their Contract/Certificate for
the applicable death benefit provision.

The portion of the Mortality and Expense Risk Charge attributable to the
benefit provided by the death benefit endorsement (.20%) will be assessed
against Separate Account allocations pursuant to all Contracts and Certificates
issued, whether or not applicable state law permits the Contract/Certificate to
offer the enhanced death benefit. Therefore, purchasers of
Contracts/Certificates in states where the enhanced death benefit is not
permitted and who allocate Contract Value or Certificate Holder's Account Value
to the Separate Account will be paying for a benefit they will not receive. The
standard death benefit provided for in the Contract/Certificate is available in
all states where the Contract/Certificate is approved.

DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD

A non-spousal Beneficiary must elect the death benefit to be paid under one
of the following options in the event of the death of the Owner or Certificate
Holder during the Accumulation Period:

OPTION 1 -- lump sum payment of the death benefit; or

OPTION 2 -- the payment of the entire death benefit within 5 years of the
date of the death of the Owner or Certificate Holder; or

OPTION 3 -- payment of the death benefit under an Annuity Option over the
lifetime of the Beneficiary or over a period not extending beyond the life
expectancy of the Beneficiary with distribution beginning within one year
of the date of death of the Owner/Certificate Holder or any Joint
Owner/Joint Certificate Holder.

Any portion of the death benefit not applied under Option 3 within one year
of the date of the Owner's or Certificate Holder's death, must be distributed
within five years of the date of death.

A spousal Beneficiary may elect to continue the Contract or Certificate in
his or her own name at the then current Contract Value or Certificate Holder's
Account Value, elect a lump sum payment of the death benefit or apply the death
benefit to an Annuity Option.

If a lump sum payment is requested, the amount will be paid within seven
(7) days of receipt of proof of death and the election, unless the Suspension or
Deferral of Payments provision is in effect.

Payment to the Beneficiary, other than in a lump sum, may only be elected
during the sixty-day period beginning with the date of receipt of proof of
death.

DEATH OF OWNER/CERTIFICATE HOLDER DURING THE ANNUITY PERIOD

If the Owner/Certificate Holder or a Joint Owner/Joint Certificate Holder,
who is not the Annuitant, dies during the Annuity Period, any remaining payments
under the Annuity Option elected will continue at least as rapidly as under the
method of distribution in effect at such Owner's/Certificate Holder's death.
Upon the death of the Owner/Certificate Holder during the Annuity Period, the
Beneficiary becomes the Owner/Certificate Holder.

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<PAGE> 32

DEATH OF ANNUITANT

Upon the death of the Annuitant, who is not the Owner/Certificate Holder,
during the Accumulation Period, the Owner/Certificate Holder may designate a new
Annuitant, subject to the Company's underwriting rules then in effect. If no
designation is made within 30 days of the death of the Annuitant, the Owner or
Certificate Holder, as applicable will become the Annuitant. If the Owner or
Certificate Holder is a non-natural person, the death of the Annuitant will be
treated as the death of the Owner or Certificate Holder and a new Annuitant may
not be designated.

Upon the death of the Annuitant during the Annuity Period, the death
benefit, if any, will be as specified in the Annuity Option elected. Death
benefits will be paid at least as rapidly as under the method of distribution in
effect at the Annuitant's death.

PAYMENT OF DEATH BENEFIT

The Company will require due proof of death before any death benefit is
paid. Due proof of death will be:

1. a certified death certificate;

2. a certified decree of a court of competent jurisdiction as to the
finding of death; or

3. any other proof satisfactory to the Company.

All death benefits will be paid in accordance with applicable law or
regulations governing death benefit payments.

BENEFICIARY

The Beneficiary designation in effect on the Issue Date or Certificate
Issue Date will remain in effect until changed. The Beneficiary is entitled to
receive the benefits to be paid at the death of the Owner or Certificate Holder.
Unless the Owner or Certificate Holder provides otherwise, the death benefit
will be paid in equal shares to the survivor(s) as follows:

1. to the Primary Beneficiary(ies) who survive the Owner's/Certificate
Holder's and/or the Annuitant's death, as applicable; or if there are
none

2. to the Contingent Beneficiary(ies) who survive the Owner's/Certificate
Holder's and/or the Annuitant's death, as applicable; or if there are
none

3. to the estate of the Owner/Certificate Holder.

CHANGE OF BENEFICIARY

Subject to the rights of any irrevocable Beneficiary(ies), the Owner or
Certificate Holder may change the Primary Beneficiary(ies) or Contingent
Beneficiary(ies). Any change must be made by Written Request received by the
Company. The change will take effect as of the date the Written Request is
signed. The Company will not be liable for any payment made or action taken
before it records the change.

ANNUITY PROVISIONS

GENERAL

On the Annuity Date, the Adjusted Contract Value or Adjusted Certificate
Holder's Account Value, as applicable, will be applied under the Annuity Option
selected by the Owner or Certificate Holder. Annuity Payments will be made on a
fixed basis only.

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<PAGE> 33

ANNUITY DATE

The Annuity Date is selected by the Owner/Certificate Holder on the Issue
Date/Certificate Issue Date. The Annuity Date must be at least three years after
the Issue Date/Certificate Issue Date. The Annuity Date may not be later than
when the Annuitant reaches Age 85 or 10 years after the Issue Date/Certificate
Issue Date for Annuitant issue ages after Age 75.

Prior to the Annuity Date, the Owner/Certificate Holder, subject to the
above, may change the Annuity Date by Written Request. Any change must be
requested at least thirty (30) days prior to the previously selected Annuity
Date and thirty (30) days prior to the new Annuity Date.

SELECTION OR CHANGE OF AN ANNUITY OPTION

An Annuity Option is selected by Written Request by the Owner/Certificate
Holder. If no Annuity Option is selected, Option B with 120 Month Guarantee will
automatically be applied. Prior to the Annuity Date, the Owner or Certificate
Holder can change the Annuity Option selected by Written Request. Any change
must be requested at least thirty (30) days prior to the Annuity Date.

FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS

Annuity Payments are paid in monthly installments. The Adjusted Contract
Value or the Certificate Holder's Adjusted Account Value is applied to the
Annuity Table for the Annuity Options selected. If the Adjusted Contract Value
or the Certificate Holder's Adjusted Account Value to be applied under an
Annuity Option is less than $2,000, the Company reserves the right to make a
lump sum payment in lieu of Annuity Payments. If the Annuity Payment would be or
become less than $200, the Company reserves the right to reduce the frequency of
payments to an interval which will result in each payment being at least $200.

FIXED ANNUITY

The Adjusted Contract Value or the Adjusted Certificate Holder's Account
Value is allocated to the General Account and the Annuity is paid as a Fixed
Annuity. Unless the Owner or Certificate Holder specifies otherwise, the payee
of the Annuity Payments will be the Owner or Certificate Holder.

The Adjusted Contract Value or the Adjusted Certificate Holder's Account
Value will be applied to the applicable Annuity Table contained in the Contract
or Certificate based upon the Annuity Option selected by the Owner or
Certificate Holder. The amount of the first payment for each $1,000 of Adjusted
Contract Value or Adjusted Certificate Holder's Account Value is shown in the
Annuity Tables. The dollar amount of each Fixed Annuity Payment shall be
determined in accordance with Annuity Tables contained in the Contract or
Certificate.

ANNUITY OPTIONS

The following Annuity Options or any other Annuity Option acceptable to the
Company may be selected:

OPTION A. LIFE ANNUITY -- Monthly Annuity Payments during the life of the
Annuitant.

OPTION B. LIFE ANNUITY WITH PERIOD CERTAIN OF 60, 120, 180 OR 240
MONTHS -- Monthly Annuity Payments during the lifetime of the Annuitant and
in any event for sixty (60), one hundred twenty (120), one hundred eighty
(180) or two hundred forty (240) months as selected.

OPTION C. JOINT AND SURVIVOR ANNUITY -- Monthly Annuity Payments payable
during the joint lifetime of the Annuitant and a Joint Annuitant and then
during the lifetime of the survivor.

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<PAGE> 34

DISTRIBUTOR

United Variable Services, Inc. ("UVS"), a wholly-owned subsidiary of the
Company, is the distributor of the Contracts. UVS is registered as a
broker-dealer with the Securities and Exchange Commission and is a member of the
National Association of Securities Dealers, Inc.

ADMINISTRATION OF THE CONTRACTS AND CERTIFICATES

While the Company has primary responsibility for all administration of the
Contracts and Certificates, it has retained the services of Financial
Administrative Services, Inc. ("FAS") pursuant to a Service Agreement. Such
administrative services include issuance of the Contracts and Certificates and
maintenance of Owner's and Certificate Holder's records. The Company pays all
fees and charges of FAS. FAS serves as the administrator to various insurance
companies. The Company's ability to administer the Contracts and Certificates
could be adversely affected should FAS elect to terminate the Agreement.

PERFORMANCE INFORMATION

MONEY MARKET SUB-ACCOUNT

From time to time, the Money Market Sub-Account of the Separate Account may
advertise its "current yield" and "effective yield." Both yield figures are
based on historical earnings and are not intended to indicate future
performance. The "current yield" of the Money Market Sub-Account refers to the
income generated by Contract Values or Certificate Holder's Account Values in
the Money Market Sub-Account over a seven-day period ending on the date of
calculation (which period will be stated in the advertisement). This income is
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the Contract Value or Certificate Holder's Account
Value in the Money Market Sub-Account. The "effective yield" is calculated
similarly. However, when annualized, the income earned by Contract Value or
Certificate Holder's Account Value is assumed to be reinvested. This results in
the "effective yield" being slightly higher than the "current yield" because of
the compounding effect of the assumed reinvestment. The yield figure will
reflect the deduction of any asset-based charges.

OTHER SUB-ACCOUNTS

From time to time, the Company may advertise performance data for the
various other Sub-Accounts. Such data will show the percentage change in the
value of an Accumulation Unit based on the performance of an investment medium
over a period of time, usually a calendar year, determined by dividing the
increase (decrease) in value for that Unit by the Accumulation Unit value at the
beginning of the period. This percentage figure will reflect the deduction of
any asset-based charges.

Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return figures
reflect the deduction of any asset-based charges.

The Company may make available yield information with respect to some of
the Sub-Accounts. Such yield information will be calculated as described in the
Statement of Additional Information. The yield information will reflect the
deduction of any asset-based charges.

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

In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the Sub-Accounts
against established market indices such as the Standard & Poor's 500 Composite
Stock Price Index, the Dow Jones Industrial Average or other management
investment companies which have investment objectives similar to the underlying
Portfolio being compared. The Standard & Poor's 500 Composite Stock Price Index
is an unmanaged, unweighted

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<PAGE> 35

average of 500 stocks, the majority of which are listed on the New York Stock
Exchange. The Dow Jones Industrial Average is an unmanaged, weighted average of
thirty blue chip industrial corporations listed on the New York Stock Exchange.
Both the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones
Industrial Average assume quarterly reinvestment of dividends.

In addition, the Company may, as appropriate, compare each Sub-Account's or
Portfolio's performance to that of other types of investments such as
certificates of deposit, savings accounts and U.S. Treasuries, or to certain
interest rate and inflation indices, such as the Consumer Price Index, which is
published by the U.S. Department of Labor and measures the average change in
prices over time of a fixed "market basket" of certain specified goods and
services. Similar comparisons of Sub-Account and/or Portfolio performance may
also be made with appropriate indices measuring the performance of a defined
group of securities widely recognized by investors as representing a particular
segment of the securities markets. For example, Sub-Account and/or Portfolio
performance may be compared with Donoghue Money Market Institutional Averages
(money market rates), Lehman Brothers Corporate Bond Index (corporate bond
interest rates) or Lehman Brothers Government Bond Index (long-term U.S.
Government obligation interest rates).

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

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

The VARDS Report is a monthly variable annuity industry analysis compiled
by Variable Annuity Research & Data Service of Atlanta and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. Where the charges have not been
deducted, the sales literature will indicate that if the charges had been
deducted, the rankings might have been lower.

Morningstar rates a variable annuity Sub-Account against its peers with
similar investment objectives. Morningstar does not rate any Sub-Account that
has less than three years of performance data. The Morningstar rankings may or
may not reflect the deduction of charges. Where charges have not been deducted,
the sales literature will indicate that if the charges had been deducted, the
rankings might have been lower.

TAX STATUS

GENERAL

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

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<PAGE> 36

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

For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments based
on a Fixed Annuity Option is determined by multiplying the payment by the ratio
that the cost basis of the Contract (adjusted for any period certain or refund
feature) bears to the expected return under the Contract or Certificate. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract or Certificate within
the meaning of Section 72 of the Code. Owners, Certificate Holders, Annuitants
and Beneficiaries under the Contracts and Certificates should seek competent
financial advice about the tax consequences of any distributions.

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

DIVERSIFICATION

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

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

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

The Company intends that the Eligible Funds underlying the Contracts and
Certificates will be managed by the investment adviser(s) for the Eligible Funds
in such a manner as to comply with these diversification requirements.

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<PAGE> 37

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

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

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

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

MULTIPLE CONTRACTS/CERTIFICATES

Section 72(e)(11) of the Code provides that multiple non-qualified annuity
contracts and/or certificates which are issued within a calendar year to the
same contract owner or certificate holder by one company or its affiliates are
treated as one annuity contract and/or certificate for purposes of determining
the tax consequences of any distribution. Such treatment may result in adverse
tax consequences including more rapid taxation of the distributed amounts from
such combination of contracts and/or certificates. Owners and Certificate
Holders should consult a tax adviser prior to purchasing more than one non-
qualified annuity contract and/or certificate in any calendar year.

TAX TREATMENT OF ASSIGNMENTS

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

INCOME TAX WITHHOLDING

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

Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a mandatory
20% withholding for federal income tax. The 20% withholding requirement does not
apply to: a) distributions for the life or life expectancy of the participant or
joint and last survivor expectancy of the participant and a designated
beneficiary; or b) distributions for a specified period of 10 years or more; or
c) distributions which are required minimum distributions. Participants under
such plans should consult their own tax counsel or other tax advisor regarding
withholding.

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TAX TREATMENT OF WITHDRAWALS -- NON-QUALIFIED CONTRACTS AND CERTIFICATES

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

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

QUALIFIED CONTRACTS AND CERTIFICATES

The Contracts and Certificates offered by this Prospectus are designed to
be suitable for use as Individual Retirement Annuities (Qualified Contracts).
Taxation of participants under a Qualified Contract varies with the type of plan
and terms and conditions of each specific plan. Owners, Certificate Holders,
Annuitants and Beneficiaries are cautioned that benefits under a qualified plan
may be subject to the terms and conditions of the plan regardless of the terms
and conditions of the Contracts or Certificates issued pursuant to the plan.
Some retirement plans are subject to distribution and other requirements that
are not incorporated into the Company's administrative procedures. Owners,
Certificate Holders, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts and Certificates comply with applicable law. The
following discussion of Qualified Contracts and Certificates is not exhaustive
and is for general informational purposes only. The tax rules regarding
Qualified Contracts and Certificates are very complex and will have differing
applications depending on individual facts and circumstances. Each purchaser
should obtain competent tax advice prior to purchasing a Qualified Contract or
Certificate.

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

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

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

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<PAGE> 39

desiring to establish an IRA. Purchasers of Contracts and Certificates to be
qualified as Individual Retirement Annuities should obtain competent tax advice
as to the tax treatment and suitability of such an investment.

TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS AND CERTIFICATES

In the case of a withdrawal under a Qualified Contract or Certificate, a
ratable portion of the amount received is taxable, generally based on the ratio
of the individual's cost basis to the individual's total accrued benefit under
the retirement plan. Special tax rules may be available for certain
distributions from a Qualified Contract/Certificate. Section 72(t) of the Code
imposes a 10% penalty tax on the taxable portion of any distribution from
qualified retirement plans, including Contracts and Certificates issued and
qualified under Code Section 408(b) (Individual Retirement Annuities). To the
extent amounts are not includible in gross income because they have been rolled
over to an IRA or to another eligible qualified plan, no tax penalty will be
imposed. The tax penalty will not apply to the following distributions: (a) if
distribution is made on or after the date on which the Owner/Certificate Holder
or Annuitant (as applicable) reaches age 59 1/2; (b) distributions following the
death or disability of the Owner/Certificate Holder or Annuitant (as applicable)
(for this purpose disability is as defined in Section 72(m)(7) of the Code); (c)
distributions that are part of substantially equal periodic payments made not
less frequently than annually for the life (or life expectancy) of the
Owner/Certificate Holder or Annuitant (as applicable) or the joint lives (or
joint life expectancies) of such Owner/Certificate Holder or Annuitant (as
applicable) and his or her designated Beneficiary.

Generally, distributions from a Qualified Contract/Certificate must
commence no later than April 1 of the calendar year, following the year in which
the Owner/Certificate Holder attains age 70 1/2. Required distributions must be
over a period not exceeding the life expectancy of the individual or the joint
lives or life expectancies of the individual and his or her designated
beneficiary. If the required minimum distributions are not made, a 50% penalty
tax is imposed as to the amount not distributed. In addition, distributions in
excess of $150,000 per year may be subject to an additional 15% excise tax
unless an exemption applies.

CONTRACTS AND CERTIFICATES OWNED BY OTHER THAN NATURAL PERSONS

Generally, investment earnings on premiums for Contracts and Certificates
will be taxed currently to the Owner or Certificate Holder if the Owner or
Certificate Holder is a non-natural person, e.g., a corporation, or certain
other entities other than tax-qualified trusts. Such Contracts or Certificates
generally will not be treated as annuities for federal income tax purposes.

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<PAGE> 40

ADDITIONAL INFORMATION ABOUT THE COMPANY

SELECTED FINANCIAL AND OTHER DATA

The selected financial data set forth below is derived from the Company's
Financial Statements. The Company's Balance Sheets at December 31, 1994 and
1993, and Statements of Income, Stockholder's Equity and Cash Flows for the
years ended December 31, 1994, 1993 and 1992, and notes thereto were audited by
Deloitte & Touche LLP, independent certified public accountants, and are
incorporated by reference herein. The Company's Financial Statements should be
read in conjunction with this table and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The financial information and
other data set forth for the three months ended March 31, 1995 and 1994, are
unaudited; however, in the opinion of the Company's management, the accompanying
financial information contains all adjustments, consisting only of normal
accruals necessary to present fairly the financial information for such periods.
The results of operations for the three months ended March 31, 1995, may not be
indicative of results of operations to be expected for the full year.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net investment income.......... $ 30,362 $ 27,149 $ 114,380 $ 109,661 $ 104,814 $ 103,894 $ 91,472
Net insurance premiums......... 2,102 3,068 11,373 18,684 22,860 36,269 39,820
Realized investment gains
(losses)..................... (428) (1,391) (4,811) (19,393) 1,486 (2,349) 1,329
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues........... 32,036 28,826 120,942 108,952 129,160 137,814 132,621
Total expenses........... 28,866 27,247 111,862 121,317 123,695 135,737 119,468
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income
taxes........................ 3,170 1,579 9,080 (12,365) 5,465 2,077 13,153
Provision (benefit) for income
taxes........................ 904 555 3,194 (4,107) 1,438 173 4,384
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........ $ 2,266 $ 1,024 $ 5,886 $ (8,258) $ 4,027 $ 1,904 $ 8,769
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance Sheet Data -- Period End:
Total investments(1)........... $1,510,201 $1,434,803 $1,444,987 $1,421,130 $1,303,523 $1,164,486 $1,040,462
Due from reinsurance........... 34,537 36,020 34,985 36,577 37,716 38,600 35,036
Deferred policy acquisition
costs........................ 92,803 83,584 91,915 83,495 80,007 78,599 77,602
Total assets................... 1,701,346 1,606,093 1,658,154 1,625,718 1,464,475 1,343,076 1,208,136
Annuity reserves............... 1,440,233 1,317,878 1,425,973 1,294,983 1,147,555 1,014,649 875,346
Policy benefit reserves........ 114,413 120,777 116,501 123,328 125,177 125,908 121,324
Total liabilities.............. 1,571,172 1,470,887 1,555,975 1,482,591 1,327,610 1,211,080 1,077,202
Stockholder's equity(1)........ 130,174 135,206 102,179 143,127 136,385 132,358 130,933
---------- ---------- ---------- ---------- ---------- ---------- ----------
Other Data:
Annuity sales.................. $ 48,563 $ 45,029 $ 249,737 $ 207,682 $ 187,050 $ 175,796 $ 102,391
Net interest spread on
annuities.................... 2.38% 2.61% 2.73% 2.20% 1.84% 1.88% 2.18%
Investment grade bonds as % of
invested assets.............. 72.0% 64.3% 69.6% 59.6% 54.3% 25.1% 45.5%
========= ========= ========= ========= ========= ========= =========
</TABLE>

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

(1) During the first quarter of 1994, the Company implemented the provisions of
FASB Statement of Financial Accounting Standards No. 115 ("SFAS 115"), which
revised the method of accounting for certain of the Company's investments.
Prior to adoption of SFAS 115, the Company reported its investments in fixed
income investments at amortized cost, adjusted for declines in value
considered to be other than temporary, SFAS 115 requires the classification
of securities in one of three categories: "available-for-sale,"
"held-to-maturity" or "trading securities." Securities classified as
held-to-maturity are carried at amortized cost, whereas securities
classified as trading securities or available-for-sale are recorded at fair
value. Effective with the adoption of SFAS 115, the Company determined the
appropriate classification of its investments and, if necessary, adjusted
the carrying value of such securities accordingly as if the unrealized gains
or losses had been realized. The adjustment, net of applicable income taxes,
for investments classified as available-for-sale is recorded in "Net
unrealized loss on securities" and is included in Stockholder's equity. In
accordance with the provisions of SFAS 115, prior year investments were not
restated.

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<PAGE> 41

BUSINESS

OVERVIEW

United Companies Life Insurance Company ("the Company"), domiciled in
Louisiana and organized in 1955, is authorized to conduct business in 47 states,
the District of Columbia and Puerto Rico at July 1, 1995. The primary products
of the Company are deferred annuities marketed on a commission basis principally
through financial institutions and independent general agents and generally sold
to middle income customers seeking tax deferred insurance products, primarily to
provide savings for retirement. The Company produced $250 million, $208 million
and $48.6 million in sales of annuity products during the years ended December
31, 1994, and 1993 and in the three months ended March 31, 1995, respectively.
At March 31, 1995, total annuity reserves were $1.4 billion. The Company intends
to add variable annuity products to its annuity line of business during 1995.
The Company has also focused its efforts on improving the quality and liquidity
of its investment portfolio. At March 31, 1995, the invested assets of the
Company consisted of $1.1 billion in investment grade fixed maturity securities
(at amortized cost), $152 million of home equity first mortgage loans (which
were primarily originated by its affiliate, United Companies Lending Corporation
("UC Lending")) and $155 million of commercial mortgage loans (also primarily
originated by UC Lending). At March 31, 1995, the weighted average rating of its
publicly traded bond portfolio was "AA," the assets allocated to investments in
mortgage-backed securities were $789 million and the amount of non-investment
grade publicly traded bonds in the portfolio was $21.1 million or 1.8% of the
portfolio. During the first three months of 1995, the net interest spread on the
Company's annuity business was 2.38% compared to 2.61% for the same period in
1994.

Reserves for annuity policies constitute the Company's primary liabilities.
The duration of these liabilities is affected by a number of factors, including
interest rates, surrender penalties, ratings, public confidence in the insurance
industry generally and in the Company specifically, governmental regulations and
tax laws. Since insurance commissions incurred at the origination of annuity
policies are generally deferred and recognized over the estimated life of the
policies, any unexpected increase in surrenders of annuity contracts would
require more rapid recognition of these expenses, thereby adversely impacting
profitability.

In June 1994, A.M. Best Company ("Best") reaffirmed its "A-" (Excellent)
rating of the Company. Best's ratings depend in part on its analysis of an
insurance company's financial strength, operating performance and claims paying
ability. In addition, the Company's claims paying ability has been rated "A+" by
Duff & Phelps, Inc. During 1994, Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, Inc., revised the formula used in assigning its
qualified solvency ratings of insurance companies and, as a result, revised its
rating assigned to the Company from "BBBq" to "BBq." The Company believes that
its ratings will enable it to continue to compete successfully.

PRINCIPAL PRODUCTS

The principal products marketed by the Company since 1978 have been
deferred annuities. The average premium received during the first three months
of 1995 on the sale of these policies was $22,000. The annuities typically
guarantee an interest crediting rate for the first policy year. Thereafter, the
interest crediting rate generally may be adjusted by the Company at any time
(subject to certain minimum crediting rates stated in the policy). A
policyholder is permitted at any time to withdraw all or part of the accumulated
premium plus the amount of interest credited on the policy, less a surrender
charge if applicable. The initial surrender charge typically ranges from
8% - 10% of the initial premium and decreases to zero during a penalty period of
from five to ten years. Approximately 78% of the Company's annuity policies at
March 31, 1995, were subject to a surrender penalty.

35
<PAGE> 42

The interest earned on the annuity policy accumulates on a tax-deferred
basis until withdrawal by the policyholder. The deferred annuity policies
written by the Company generally provide a death benefit equal to the amount of
the accumulated premium plus accumulated interest earned less the amount of any
prior withdrawals. The following table presents the Company's annuity sales by
state by percent of total premiums for the periods indicated:

THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
STATE 1995 1994
----- ----------- ------------
<S> <C> <C>
Florida............................................... 28.5% 28.9%
Missouri.............................................. 17.5 10.3
Louisiana............................................. 9.0 13.7
Illinois.............................................. 8.5 8.6
Texas................................................. 6.6 5.8
Oklahoma.............................................. 3.9 6.2
All Others............................................ 26.0 26.5
----- -----
Total...................................... 100.0% 100.0%
===== =====
</TABLE>

No other state individually accounted for more than 3.9% of premium income
during the period indicated.

The increase in annuity sales in Missouri, as well as the decreases in
Louisiana and Oklahoma in the first quarter of 1995 can be primarily attributed
to sales results for financial institutions selling the Company's annuities in
those states.

Prior to 1992, the Company was underwriting and marketing pre-need funeral
insurance products through funeral directors by an independent insurance agency
but discontinued this line of business in early 1992. Credit related insurance
products were underwritten and marketed primarily through financial institutions
and automobile dealerships. In order to focus its operations and management on
underwriting and marketing its annuity policies, the Company de-emphasized the
credit insurance products and discontinued underwriting this line of business in
1993.

DISTRIBUTION

The Company's strategy of marketing through financial institutions and
independent general agents allows it to avoid substantial sales management
office expense and to expand its sales efforts without significant development
expense. Because financial institutions and independent general agents usually
offer the products of several insurance companies, the Company must continue to
provide products with competitive terms, interest crediting rates, commissions
and service to both policyholders and the selling institutions and independent
general agents. During 1994 and the first three months of 1995, the Company
focused on expanding the independent general agent share of its distribution
network. Of the annuity policies sold during 1994 and the first three months of
1995, approximately 46% and 54%, respectively, of the total dollar amount were
attributable to sales by independent general agents.

REINSURANCE

The Company generally limits the amount of insurance risk that it assumes
with respect to any one insured to $100,000 and for larger policies follows
industry practice of reinsuring that portion of the risk in excess of
established retention limits. The Company, however, remains contingently liable
for insurance ceded to reinsurers and remains liable to the policyholder in the
event the reinsurer is unable to meet the obligations assumed under the
reinsurance agreement. Reinsurance is currently ceded primarily to the following
companies: First Capital Life Insurance Company of Louisiana (not affiliated
with First Capital Holding Company of California), Aetna Life Insurance Company,
Continental Assurance Company, American United Life Insurance Company and
Transamerica Occidental Life Insurance Company. Each of the foregoing companies
is currently rated "A+" (Superior) by Best, except Aetna Life Insurance

36
<PAGE> 43

Company, which is rated "A" (Excellent), and First Capital Life Insurance
Company of Louisiana, which is rated "B-" (Good). In the case of First Capital
Life Insurance Company, the dollar amount of reserve credit taken by the Company
is held in trust for the benefit of the Company.

LIFE INSURANCE AND ANNUITY RESERVES

In accordance with applicable insurance regulations, the Company records as
liabilities in its statutory financial statements actuarially determined
reserves that are calculated to meet future obligations under outstanding
insurance. The reserves are based on statutorily recognized methods using
prescribed morbidity and mortality tables and interest rates. Reserves include
unearned premiums, premium deposits, claims that have been reported but are not
yet paid, claims that have been incurred but have not been reported, and claims
in the process of settlement. The Company's reserves satisfy minimum statutory
requirements.

The annuity reserves reflected in the financial statements are calculated
based on generally accepted accounting principles ("GAAP"). As of March 31,
1995, annuity reserves were $1.4 billion, policy benefit reserves were $114.4
million, and unearned premium reserves related to credit insurance were $3.5
million. These reserves are based upon the Company's best estimates of
mortality, persistency, expenses and investment income, with appropriate
provisions for adverse statistical deviation and the use of the net level
premium method for all non-interest sensitive products and the retrospective
deposit method for interest-sensitive products. GAAP reserves differ from
statutory reserves due to the use of different assumptions regarding mortality
and interest rates and the introduction of lapse assumptions into the GAAP
reserve calculation. See Note 1 of Notes to Financial Statements for the years
ended December 31, 1994, 1993 and 1992 for additional information regarding
reserve assumptions under GAAP.

INVESTMENTS

The investment function of the Company is overseen by an investment
committee comprised of senior management, with the assistance of an outside
investment advisor in the management of certain assets. The Company's investment
policy seeks to achieve attractive returns on low to moderate risk portfolio of
investments. These investments, primarily bonds and mortgage loans, must be
within regulatory constraints to qualify as permitted assets, and within the
yield, risk and maturity limitations established by the Company as necessary for
meeting its objectives.

The investment strategy continues to focus on maintaining the percentage of
the Company's invested assets committed to commercial and residential mortgages
and to investment grade corporate bonds and mortgage-backed securities.

The following table sets forth, at March 31, 1995, certain information
regarding the Company's invested assets:

<TABLE>
<CAPTION>
AMORTIZED PERCENT OF
COST TOTAL
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Fixed Maturity Securities(1)
U.S. Government, government agencies &
authorities...................................... $ 10,720 0.7%
Foreign governments & other......................... 17,896 1.2
Corporate bonds..................................... 329,291 21.3
Mortgage-backed..................................... 789,333 51.2
---------- -----
Total...................................... 1,147,240 74.4
---------- -----
Mortgage loans on real estate......................... 337,476 21.9
Short-term investments................................ 10,179 0.7
Investment in limited partnership..................... 26,757 1.7
Policy loans.......................................... 19,763 1.3
Common and preferred stocks........................... 833 --
---------- -----
Total...................................... $1,542,248 100.0%
========== =====
</TABLE>

37
<PAGE> 44

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

(1) Generally stated at amortized cost adjusted for permanent impairment in
value. Total fair value of fixed maturities at March 31, 1995, was
approximately $1.1 billion, representing net unrealized losses of $34
million.

As reflected in the following table, the carrying value of the Company's
investments classified as investment grade at March 31, 1995, was $1.1 billion
or 98.1% of the fixed maturity portfolio:

<TABLE>
<CAPTION>
PERCENT OF
AMORTIZED FAIR CARRYING CARRYING
COST VALUE VALUE VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Investment Quality(1)
Aaa.................................. $ 750,129 $ 720,950 $ 720,950 64.6%
Aa................................... 20,279 20,104 20,104 1.8
A.................................... 211,457 209,545 209,425 18.8
Baa.................................. 144,286 143,310 143,919 12.9
---------- ---------- ---------- --------
Total Investment Grade................. 1,126,151 1,093,909 1,094,398 98.1
Ba and below........................... 21,089 20,595 20,795 1.9
---------- ---------- ---------- --------
Total Fixed Maturity
Securities................ $1,147,240 $1,114,504 $1,115,193 100.0%
========== ========== ========== ========
</TABLE>

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

(1) Fixed maturity investments are classified according to the ratings assigned
by Moody's Investors Service, Inc., or, in the absence of such rating, by
the National Association of Insurance Commissioners ("NAIC") whose ratings
operate as follows: NAIC Class 1 was assumed equivalent to an "A" rating;
NAIC Class 2, "BBB/Baa;" and NAIC Classes 3-6, "BB/Ba" and below.

As a significant percentage of the Company's investment portfolio is
invested in fixed rate, fixed maturity investments, the fair value of these
investments is sensitive to changes in market rates of interest. In a rising
interest rate environment, the fair value of these investments would be expected
to decrease in value. An unanticipated increase in policy surrenders or claims
could impact the Company's liquidity and require the sale of certain assets,
such as bonds prior to their maturity at a loss.

FIXED MATURITY INVESTMENTS

As of March 31, 1995, the amortized cost of the Company's fixed maturity
investments totaled $1.1 billion or approximately 74.4% of the Company's
invested assets. The amortized cost of fixed maturity investments at that date
exceeded its fair value by approximately $34 million. During the first quarter
of 1994, the Company implemented the provisions of Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards No. 115
("SFAS 115"), which revised the method of accounting for certain of the
Company's investments. Prior to adoption of SFAS 115, the Company reported its
investments in bonds at amortized cost, adjusted for declines in value
considered to be other than temporary. SFAS 115 requires the classification of
securities in one of three categories: "available-for-sale," "held-to-maturity"
or "trading." Securities classified as held-to maturity are carried at amortized
cost, whereas securities classified as trading securities or available-for-sale
are recorded at fair value. Effective with the adoption of SFAS 115, the Company
determined the appropriate classification of its investments and, if necessary,
adjusted the carrying value of such securities accordingly, as if the unrealized
gains or losses had been realized. The adjustment, net of applicable income
taxes, for investments classified as available-for-sale is recorded in "Net
unrealized loss on securities" and is included in stockholder's equity on the
balance sheet and the adjustment for investments classified as trading is
recorded in "Investment income" in the statement of income. In accordance with
the provisions of SFAS 115, prior year investments were not restated. The
Company may for business or regulatory reasons be required to sell certain of
its investments prior to maturity, and in some cases these sales may be made at
times when the fair value is less than carrying value, thereby resulting in a
loss in the statements of income for financial and statutory reporting purposes.

38
<PAGE> 45

At March 31, 1995, 46% of the Company's total invested assets were invested
in mortgage-backed securities. These mortgage-backed securities consist
principally of collateralized mortgage obligations and mortgage-backed
pass-through securities. Mortgage-backed securities generally are collateralized
by mortgages backed by GNMA, FNMA and FHLMC. Only GNMA mortgages are backed by
the full faith and credit of the United States Government. Certain
mortgage-backed securities are subject to significant prepayment risk. In
periods of declining interest rates, mortgages may be repaid more rapidly than
scheduled as individuals refinance higher-rate mortgages to take advantage of
lower interest rates. As a result, holders of mortgage-backed securities may
receive large prepayments on their investments that cannot be reinvested at an
interest rate comparable to the rate on the prepaid mortgage. In addition to
decreased investment yields, earnings could also be affected by capital gains or
losses realized on these prepayments since the carrying value of securities
purchased at a discount or premium may be different than the amount received
upon prepayment. The Company has reduced the prepayment risk associated with
mortgage-backed securities by investing in planned amortization class ("PAC")
instruments. These instruments are designed to amortize in a predictable manner
by shifting the primary risk of prepayment of the underlying collateral to other
investors. PAC instruments represented approximately 57% of the Company's
investments in mortgage-backed securities at March 31, 1995.

MORTGAGE LOANS ON REAL ESTATE

At March 31, 1995, the Company's portfolio of loans was comprised of $170
million in first mortgage residential home equity loans and $158 million in
first mortgage commercial real estate loans substantially all of which were
originated by UC Lending. Since 1991, the Company has limited its investment in
commercial real estate mortgage loans but will from time to time consider
refinancing commercial mortgage loans sold in commercial mortgage loan
securitization transactions in 1990. The principal balance of loans sold in
these transactions which are scheduled to mature in 1995 is $25 million. In
addition, the Company has decided to invest on a limited basis in new commercial
real estate loans, substantially all of which will be originated by UC Lending.
The mortgage loan portfolio of the Company is serviced by UC Lending. The
Company has full credit recourse to UC Lending with respect to all home equity
mortgage loans acquired from UC Lending except $2.7 million in loans that UC
Lending acquired from financial institutions under the conservatorship of the
Resolution Trust Corporation (the "RTC") or from the RTC as receiver of failed
institutions.

The Company purchases on an interim basis a substantial portion of the
first mortgage home equity loans originated by UC Lending. These loans are
typically held by the Company for short time periods (typically no longer than
90 days) and then sold back to UC Lending prior to their sale in securitization
transactions. UC Lending, not the Company, retains the contingent credit risk in
connection with these transactions.

Mortgage loans are carried at amortized cost less valuation adjustments for
permanently impaired value where appropriate. Commercial mortgages range in size
up to approximately $2 million with an average loan size of approximately $.6
million (excluding one loan of approximately $7.5 million to a related entity).
At origination, substantially all of the mortgages were on existing leased
properties rather than on properties in construction or on start-up properties.
The origination of commercial mortgages was, and will in the future be, subject
to underwriting procedures, including: (i) maximum loan to value ratio of 75% of
the property's appraised value; (ii) conservative debt coverage requirements;
(iii) on-site inspections; (iv) third-party appraisals; and (v) personal
guarantees of borrowers. For these reasons, the Company does not consider its
commercial loans to be high risk. The weighted average interest rate on the
Company's commercial mortgage loan portfolio was 10.7% and 10.1% at March 31,
1995, and December 31, 1994, respectively.

39
<PAGE> 46

The Company's commercial mortgage portfolio is diversified by property
type, location and borrower. The following table provides information at March
31, 1995, regarding the Company's commercial mortgage loans on real estate by
property type, state and contractual maturity:

<TABLE>
<CAPTION>
PERCENT OF
AMOUNT TOTAL
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Commercial Mortgage Loans by Property Type
Retail................................................ $ 65,031 41.1%
Office and warehouse.................................. 38,750 24.5
Office................................................ 47,502 30.0
Other................................................. 6,983 4.4
-------- -----
Total........................................ $158,266 100.0%
======== =====
Commercial Mortgage Loans by State
Florida............................................... $ 33,798 21.3%
Georgia............................................... 27,087 17.1
Colorado.............................................. 14,807 9.3
Louisiana............................................. 16,719 10.7
Texas................................................. 10,575 6.7
Tennessee............................................. 9,166 5.8
All others............................................ 46,114 29.1
-------- -----
Total........................................ $158,266 100.0%
======== =====
Commercial Mortgage Loans by Contractual Maturity
1995.................................................. $ 12,417 7.9%
1996.................................................. 27,074 17.1
1997.................................................. 19,930 12.6
1998.................................................. 20,131 12.7
After 1998............................................ 78,714 49.7
-------- -----
Total........................................ $158,266 100.0%
======== =====
</TABLE>

At March 31, 1995, the Company owned $18.5 million of commercial properties
obtained through foreclosure. For substantially all commercial mortgages which
the Company has foreclosed, an independent appraisal was obtained and, if
warranted, the Company established a specific reserve based on its judgment as
to the amount which may not be recoverable. As of March 31, 1995, the specific
reserve amounted to $4.1 million.

The Company also establishes a general reserve for all commercial mortgages
where a specific reserve or write-down has not been established. As of March 31,
1995, the general reserve amounted to $4.9 million.

INSURANCE RATINGS

The ability of an insurance company to compete successfully depends in part
on its financial strength, operating performance and claims-paying ability as
rated by A.M. Best Company ("Best") and other rating agencies. As of July 1,
1995, the Company is rated "A-" (Excellent) by Best. Best's 15 categories or
ratings for insurance companies currently range from "A++" (Superior) to "F" (In
Liquidation). According to Best, an "A" or "A-" rating is assigned to companies
which, in Best's opinion, have achieved excellent overall performance when
compared to the standards of the life insurance industry and generally have
demonstrated a strong ability to meet their obligations to policyholders over a
long period of time. In evaluating a company's statutory financial and operating
performance, Best reviews the company's statutory profitability, leverage and
liquidity, as well as the company's spread of risk, quality and appropriateness
of its reinsurance program, quality and diversification of assets, the adequacy
of its policy reserves and surplus, capital structure and the experience and
competency of its management. Best ratings are based

40
<PAGE> 47

upon factors of concern to policyholders, agents and intermediaries and are not
directed toward the protection of investors.

In addition, Duff & Phelps, Inc., another nationally recognized rating
agency, has rated the Company's claim paying ability "A+." During 1994, Standard
& Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc., revised
the formula used in assigning its qualified solvency ratings of insurance
companies and, as a result, revised its rating assigned to the Company from
"BBBq" to "BBq." The Company believes that its ratings will enable it to
continue to compete successfully. Ratings held by the Company are important to
maintaining public confidence in its ability to market its annuity products. A
lower rating could materially and adversely affect the Company's ability to
market its products, particularly the sale of annuities through financial
institutions and could increase the surrender of its annuity policies. Both of
these consequences could, depending upon the extent thereof, have a materially
adverse effect on the Company's liquidity and, under certain circumstances, net
income.

GOVERNMENT REGULATION AND LEGISLATION

GENERAL REGULATION

The Company is subject to regulation by the State of Louisiana, its state
of domicile, and the other states in which it transacts business. The laws of
such states are designed for the protection of policyholders rather than
securityholders. The Company is a member of a holding company system in
Louisiana. All transactions within a holding company system affecting insurers
must be both reasonable in relation to its outstanding liabilities and adequate
for its needs. State laws also require prior notice or regulatory agency
approval of changes in control of an insurer or its holding company and of
material intercorporate transfers of assets within the holding company
structure. Generally, under insurance holding company statutes, a state
insurance authority must approve in advance the direct or indirect acquisition
of 10% or more of the voting securities of an insurance company chartered in its
state.

The laws of the various states establish regulatory agencies with broad
administrative powers to approve policy forms, grant and revoke licenses to
transact business, regulate trade practices, license agents, and prescribe the
type and amount of investments permitted. Insurance companies are required to
file detailed annual statements with the state insurance regulators in each of
the states in which they do business, and their business and accounts are
subject to examination by such agencies at any time. In addition, insurance
regulators periodically examine the insurer's financial condition, adherence to
statutory account practices, and compliance with insurance department rules and
regulations.

As part of their routine regulatory oversight process, state insurance
departments conduct detailed examinations periodically (generally once every
three years) of the books, records and accounts of insurance companies domiciled
in their states. Such examinations are generally conducted in cooperation with
the departments of two or three other states under guidelines promulgated by the
National Association of Insurance Commissioners ("NAIC"). The Company's last
examination occurred during 1994 for the three year period ended December 31,
1993. Final reports issued by the Louisiana Commissioner of Insurance did not
raise any significant issues or adjustments.

A substantial amount of the Company's annuity policies are marketed through
financial institutions. In a recent decision, the United States Supreme Court
upheld the United States Comptroller of the Currency's decision to permit
national banks to sell annuities in towns with more than 5,000 inhabitants.

REGULATION OF DIVIDENDS AND OTHER PAYMENTS

As a Louisiana domiciled insurance company, the Company is subject to
Louisiana requirements relating to dividends and restrictions on payments to
affiliates. The Louisiana Insurance Code (the "Code") provides that no Louisiana
stock insurance company shall declare and pay any dividends to its stockholders
unless (i) its capital is fully paid in cash and is unimpaired and (ii) it has a
surplus beyond its capital stock and the initial minimum surplus required and
all other liabilities equal to 15% of its capital stock, provided that this
restriction shall not apply to an insurance company when its paid-in capital and

41
<PAGE> 48

surplus exceed the minimum required by the Code by 100% or more. Additional
dividend restrictions are imposed by the Louisiana Insurance Holding Company
System Regulatory Law (the "Insurance Holding Company Law"). Specifically,
extraordinary dividends by insurance companies are subject to a prior approval
requirement by the Louisiana Commissioner of Insurance (the "Louisiana
Commissioner") and an insurance company's surplus as regards policyholders
following any dividends or distributions to affiliates must be reasonable to the
insurance company's outstanding liabilities and adequate to its financial needs.
Effective October 31, 1993, an extraordinary dividend is defined as an amount in
excess of the lesser of (a) 10% of surplus as of the preceding December 31, or
(b) the net gain from operations for the preceding calendar year. The Insurance
Holding Company Law also subjects all transactions between a Louisiana insurance
company and its affiliates to certain fairness and reasonableness standards,
and, furthermore, certain types of transactions with its affiliates are subject
to prior notice to the Louisiana Insurance Commissioner who may disapprove the
transaction if it is determined that such transaction does not meet certain
fairness and reasonableness standards or if it may adversely affect the
interests of policyholders. If insurance regulators determine that payment of a
dividend or any other payment to an affiliate (such as a payment under a tax
allocation agreement or for employee or other services or pursuant to a surplus
debenture) would, because of the financial condition of the paying insurance
company or otherwise, be hazardous to such insurance company's policyholders or
creditors, the regulators may block payment of such dividend or such other
payment to the affiliate that would otherwise be permitted without prior
approval. Under the current statutory and regulatory scheme in Louisiana, the
Company has, as of March 31, 1995, the capacity to pay dividends of $8.2
million. No dividends were paid during 1992, 1993, or 1994 in order to retain
capital in the Company.

INSURANCE REGULATORY CHANGES

The NAIC and insurance regulators have undertaken a process of re-examining
existing laws and regulations and their application to insurance companies. In
particular, this re-examination has focused on insurance company investment and
solvency issues and, in some instances, has resulted in new interpretations of
existing law, the development of new laws and the implementation of
non-statutory guidelines. The NAIC has formed committees to study and formulate
regulatory proposals on such diverse issues as the use of surplus debentures,
accounting for reinsurance transactions and the adoption of risk-based capital
rules. It is not possible to predict the future impact of changing state and
federal regulation on the operations of the Company.

Statutory filings require classifications of investments and, for periods
ended prior to January 1, 1992, required the establishment of a Mandatory
Securities Valuation Reserve ("MSVR"), an account designed to stabilize a
company's statutory surplus against fluctuations in the market value of stocks
and bonds, according to regulations prescribed by the NAIC. In December 1991,
the NAIC adopted changes to its rules for establishing and maintaining reserve
accounts for assets of insurance companies in financial statements prepared
under statutory accounting practices. These changes became effective as of
January 1, 1992, for annual statements to be filed for the year ended December
31, 1992, and thereafter. Under the revised rules, the MSVR account was replaced
by an Asset Valuation Reserve ("AVR") account which consists of two main
components: a "default component" to provide for future credit-related losses on
fixed income investments and an "equity component" to provide for losses on all
types of equity investments, including real estate. The AVR at March 31, 1995,
was $21.6 million. The changes also require the establishment of a new reserve
called the Interest Maintenance Reserve ("IMR"), which is a reserve for fixed
income realized capital gains and losses, net of taxes, related to changes in
interest rates. The IMR is required to be amortized into statutory earnings on a
basis reflecting the remaining period to maturity of the fixed income securities
sold. The deferred realized gains and losses included in the IMR at March 31,
1995, was $2.6 million, net of taxes.

INSURANCE REGULATORY INFORMATION SYSTEM

The NAIC has developed the Insurance Regulatory Information System ("IRIS")
which involves calculation of ratios covering eleven (11) categories of
financial data with defined "usual ranges" for each

42
<PAGE> 49

category. The ratios are designed to provide regulators "early warnings" as to
when a given company might warrant special attention. The Company had only one
ratio outside the usual range in 1994.

RISK-BASED CAPITAL REQUIREMENTS

The NAIC has developed risk-based capital ("RBC") requirements for life
insurance companies. The formula, which is set forth in instructions adopted by
the NAIC, is designed to take into account asset risks, insurance risks,
interest rate risks and other relevant risks with respect to the insurer's
business. The NAIC has further provided for categorization of life insurance
companies according to the extent to which they meet specified RBC thresholds,
with increasing degrees of regulatory scrutiny or intervention provided for
companies in categories of lesser RBC compliance. The following degrees or
levels of regulatory action are triggered by certain events with respect to an
insurer's RBC compliance as follows: (i) a "company action level event"
(requiring the insurer to file and obtain approval of a comprehensive financial
plan for the improvement of its RBC compliance); (ii) a "regulatory action level
event" (resulting in, in addition to the requirement of a financial plan,
regulatory actions including examination of the insurer's assets, liabilities
and operations followed by an order specifying such corrective actions as are
determined to be required); (iii) an "authorized control level event" (resulting
in, in addition to the regulatory actions specified above, such actions as are
necessary to cause the insurer to be placed under regulatory control under the
applicable rehabilitation and/or liquidation statutes if deemed to be in the
best interests of policyholders, creditors and the public); and (iv) a
"mandatory control level event" (resulting in, on a mandatory basis, such
actions as are necessary to cause the insurer to be placed under regulatory
control under the applicable rehabilitation and/or liquidation statutes). The
Company is adequately capitalized under the RBC requirements and believes that
the thresholds will not have any significant regulatory effect on it. However,
should the Company's RBC position decline in the future, its continued ability
to pay dividends and the degree of regulatory supervision or control to which it
is subject may be affected. At March 31, 1995, the Company's risk-based capital
ratio was approximately 239%. Substantial conformance to the NAIC model
legislation is necessary for a state insurance department to meet the minimum
standards for accreditation by the NAIC.

ASSESSMENTS AGAINST INSURERS

Guaranty laws exist in all states, the District of Columbia and Puerto
Rico. Life insurers doing business in any of these regions can be assessed for
policyholder losses incurred by insolvent life insurance companies. The amount
and timing of any future assessment on the Company under these laws cannot be
reasonably estimated and are beyond its control. Regulatory actions against life
insurers encountering financial difficulty have prompted the various state
guaranty associations to assess life insurance companies for the deemed loss. A
large part of the assessments paid by the Company pursuant to these laws may be
used as credits for a portion of premium taxes.

REGULATION AT FEDERAL LEVEL

Although the federal government generally does not directly regulate the
insurance business, federal initiatives often have an impact on the business in
a variety of ways. Current and proposed federal measures that may significantly
affect the insurance business include limitations on antitrust immunity, minimum
solvency requirements and the removal of barriers restricting banks from
engaging in the insurance and mutual fund business.

Congress has from time to time in the past considered possible legislation
that would adversely affect the federal income tax treatment of certain annuity
products offered by the Company. There can be no assurance that future tax
legislation will not contain provisions that may result in adverse effects on
the Company's products.

43
<PAGE> 50

COMPETITION

As a marketer of annuity products, the Company faces intense competition.
Competitors include an increasing number of insurance companies which have
recently began to offer annuity products. Many of the Company's competitors are
substantially larger and have more capital and other resources than the Company.
Competition can take many forms including convenience in obtaining an annuity,
customer service, marketing and distribution channels as well as crediting
rates.

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

The following analysis should be read in conjunction with the Company's
financial statements and accompanying notes presented elsewhere herein.

OVERVIEW

United Companies Life Insurance Company ("the Company") is a wholly owned
subsidiary of United Companies Financial Corporation ("UCFC"), a financial
services holding company founded in 1946. UCFC focuses on its mortgage
operations on the origination, sale and servicing of first mortgage,
nonconventional, home equity loans; and in its insurance operations, principally
on the sale of deferred annuities.

The Company, a life insurance company domiciled in Louisiana and organized
in 1955, was, as of July 1, 1995, authorized to conduct business in 47 states,
the District of Columbia and Puerto Rico. The primary products of the Company
are deferred annuities, marketed on a commission basis principally through
financial institutions and independent agents. As of July 1, 1995, premiums for
these annuities averaged approximately $22,000 per policy and are generally sold
to middle income customers seeking tax deferred insurance products, primarily to
provide savings for retirement.

The Company's deferred annuity policies typically guarantee an interest
crediting rate for the first policy year. Thereafter, the interest crediting
rate generally may be adjusted by the Company at any time (subject to certain
minimum crediting rates stated in the policy). A policyholder is permitted at
any time to withdraw all or part of the accumulated premiums plus the amount of
interest credited on the policy, less a surrender charge if applicable. The
initial surrender charge is typically 8% - 10% of accumulated premium or
accumulated value, depending on the particular contract, and decreases to zero
during a penalty period of from five to ten years. Approximately 78% of the
Company's deferred annuity policies at March 31, 1995, were subject to a
surrender penalty.

The interest earned on the annuity policies accumulates on a tax-deferred
basis until withdrawal by the policyholder. The deferred annuity contracts
written by the Company provide a death benefit equal to the amount of the
accumulated premium and interest earned less the amount of any prior
withdrawals.

The Company has focused its efforts on increased annuity sales by expanding
its distribution network of financial institutions and independent general
agents. Expansion of the independent general agents share of its distribution
network was a primary goal in 1994. As a result, those agents sold approximately
46% of the total dollar amount of annuities written in 1994 compared to 20% in
1993. Annuity sales for the first quarter of 1995 were $48.6 million compared to
$45.0 million for the first quarter of 1994. In 1994, annuity sales were $250
million, compared to $208 million in 1993 and $187 million in 1992.

Fluctuations in and the level of interest rates directly impact the
operations of the Company. The average spread on the annuity business was 1.84%
in 1992, and increased to 2.20% and to 2.73% during 1993 and 1994, respectively.
This spread declined to 2.38% for the first quarter of 1995. This decrease can
be attributed to the more favorable interest rate environment that existed in
1994 compared to the first quarter of 1995. Measures taken to improve this
margin include the reduction in interest crediting rates on existing annuity
contracts. Surrenders of annuity policies increased in 1994 compared to prior
years and in

44
<PAGE> 51

the first quarter of 1995 compared to the first quarter of 1994 due in part to
the reduction in interest rates on new and existing annuity contracts and to a
rising interest rate environment and an increase in the number of annuity
contracts which were beyond the surrender penalty period.

The Company has continued its efforts to improve the quality and liquidity
of its investment portfolio as the weighted average rating of the publicly
traded bond portfolio was improved from "A" to "AA" in 1992, the amount of
non-investment grade publicly traded bonds in the portfolio was reduced from
$86.7 million or 14.7% of the bond portfolio at the end of 1990 to $18.1 million
or 1.7% of the portfolio at December 31, 1994, and the assets allocated to
investments in mortgage-backed securities have increased from $218 million at
year-end 1990 to $790 million at December 31, 1994. At March 31, 1995, the
weighted average rating of the publicly traded bond portfolio was "AA," the
amortized cost of assets allocated to investments in investment grade fixed
maturity securities was $337 million or 29.4% of the portfolio and in investment
grade mortgage-backed securities was $789 million or 68.8% of the portfolio. At
March 31, 1995, the amortized cost of the Company's holdings of non-investment
grade publicly traded bonds was $21.1 million or 1.8% of the portfolio. Invested
assets of the Company also include residential and commercial real estate
mortgages originated and serviced by United Companies Lending Corporation ("UC
Lending"), an affiliate; however, the percentage of assets invested in mortgage
loans in recent years has been reduced primarily as the result of their disfavor
with insurance regulatory authorities and rating agencies.

The annuities sold by the Company are monetary in nature and therefore
sensitive to changes in the interest rate environment. Profitability of the
Company is directly affected by its ability to invest annuity premiums at yields
above the interest crediting rates on the related policy liabilities. One of the
primary financial objectives is to effectively manage this interest spread over
time in changing interest rate environments. This is accomplished, in part, by
adjusting the interest crediting rate paid on its existing and new annuity
policies. During periods of declining interest rates, the fair value of the
Company's investments, primarily fixed maturity investments, increases; however,
yields earned on investments made during such periods decline. In contrast,
during periods of rising interest rates, the fair value of the investment
portfolio declines and the risk of policy surrenders increases. An unanticipated
increase in surrenders would impact the Company's liquidity, potentially
requiring the sale of certain investments prior to their maturities, which may
be at a loss.

Reserves for annuity policies constitute the Company's primary liabilities.
The duration of these liabilities is affected by a number of factors, including
interest rates, surrender penalties, ratings, public confidence in the insurance
industry, generally, and in the Company, specifically, governmental regulations
and tax laws. Since insurance commissions incurred at the origination of annuity
policies are generally deferred and recognized over the estimated life of the
policies, any unexpected increase in surrenders of annuity contracts would
require more rapid recognition of these expenses, thereby adversely impacting
profitability.

45
<PAGE> 52

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994

Net income for the three months ended March 31, 1995 was $2.3 million,
compared to $1.0 million for the first three months of 1994. The increase in net
income during the first three months of 1995 resulted primarily from improved
investment results from the Company's interest in a limited partnership.

The following table sets forth certain financial data for the periods
indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Total revenues...................................... $32,036 $28,826
Total expenses...................................... 28,866 27,247
Income before income taxes.......................... 3,170 1,579
Net income.......................................... 2,266 1,024
</TABLE>

REVENUES

The following table sets forth information regarding the components of the
Company's revenues for the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net investment income............................... $30,362 $27,149
Net insurance premiums.............................. 2,102 3,068
Realized investment losses.......................... (428) (1,391)
------- -------
Total.................................... $32,036 $28,826
======= =======
</TABLE>

Net investment income totaled $30.3 million on average investments of
approximately $1.48 billion for the first quarter of 1995, compared to net
investment income of $27.1 million on average investments of approximately $1.43
billion during the same period of 1994. At March 31, 1995, the amortized cost of
the fixed income portfolio totaled $1.2 billion and was comprised principally of
$789 million in investment grade mortgage-backed securities and $347 million in
investment grade bonds. At March 31, 1995, the weighted average rating of the
publicly traded bond portfolio, according to nationally recognized statistical
rating agencies, was "AA." During 1994, the Company established a trading
account for a portion of its investment portfolio invested in common stocks. At
March 31, 1995, the carrying value of investments in the Company's trading
account was $764,000 reflecting a $88,138 unrealized gain, which is included in
investment income for the first three months of 1995.

Interest, charges and fees on loans decreased $2.2 million in the first
three months of 1995 compared to the same period of 1994. A reduction in the
volume and related holding periods for home equity loans acquired by the Company
from UC Lending contributed to the reduction in interest, charges, and fees on
loans in 1995. At March 31, 1995, the Company's portfolio of loans was comprised
of $170.3 million in first mortgage home equity loans and $176.8 million in
first mortgage commercial real estate loans (including properties obtained
through foreclosure), compared to $159.1 million and $175.6 million,
respectively at December 31, 1994. The mortgage loan portfolio of the Company is
serviced by UC Lending. The Company has full credit recourse to UC Lending with
respect to all home equity mortgage loans acquired by it from UC Lending with
the exception of $2.7 million in loans which UC Lending acquired from the
financial institutions under conservatorship by the Resolution Trust Corporation
(the "RTC") or from the RTC as receiver of failed financial institutions.
Although the Company, since 1991, had limited its investment in commercial real
estate loans, the Company has now decided to invest on a limited basis in new
commercial real estate loans, substantially all of which will be originated by
UC Lending.

46
<PAGE> 53

The Company estimates that non-accrual loans reduced mortgage loan interest
by approximately $140,000 and $206,000 during the first three months of 1995 and
1994, respectively. During the three months ended March 31, 1995, the average
amount of non-accrual loans owned by the Company was $2.7 million, compared to
approximately $4.2 million during the first quarter of 1994. At March 31, 1995,
the Company owned approximately $10.4 million of commercial loans which were on
an accrual status, but which the Company considers as potential problem loans,
compared to $8.2 million at March 31, 1994. The Company evaluates each of these
commercial loans to estimate its risk of loss in the investment and provides for
such loss through a charge to earnings.

Net insurance premiums declined $1.0 million for the first three months of
1995 compared with the same period of 1994. Net insurance premiums reflect
revenues associated primarily with sales of pre-need life insurance and credit
insurance. Management has chosen to focus on deferred annuities, its primary
product line, and on developing a variable annuity product to be introduced in
1995, and thus new sales of pre-need life insurance and credit insurance have
been discontinued. The decrease in premium income reflects that decision.

Realized investment gains and losses may vary significantly from year to
year since the decision to sell investments is determined principally by
considerations of investment timing and tax consequences. Realized investment
gains and losses can also result from early redemption of securities at the
election of the issuer (calls) and changes in write-downs and reserves.

Realized gains and (losses) were as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1994
----- -------
(IN THOUSANDS)
<S> <C> <C>
From:
Sales of fixed maturity securities................... $ -- $ 13
Calls and maturities of fixed maturity securities.... 86 77
Sales of equity securities........................... (13) --
Write-downs/reserve changes.......................... (501) (1,481)
----- -------
Realized investment losses............................. $(428) $(1,391)
===== =======
</TABLE>

EXPENSES

The following table presents the components of the Company's expenses for
the periods indicated:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest on annuity policies........................ $19,526 $17,793
Amortization of deferred policy acquisition costs... 3,331 3,424
Insurance commissions............................... 157 (18)
Insurance benefits.................................. 2,429 3,008
Other operating..................................... 3,423 3,040
------- -------
Total.................................... $28,866 $27,247
======= =======
</TABLE>

Interest on annuity policies increased $1.7 million in the first three
months of 1995 compared to the same period of 1994, primarily as the result of
an increase in annuity reserves. Average annuity reserves were $1.4 billion
during the first three months of 1995; an increase of approximately $127 million
from the same period of 1994. As expected, annuity surrenders increased in
comparison with 1994.

Net insurance commissions for the first quarter of 1995 increased by
approximately $175,000 from the same period of 1994. Commissions paid upon
issuance of the Company's deferred annuity products are generally capitalized as
deferred policy acquisition costs ("DPAC") and amortized over the estimated

47
<PAGE> 54

life of the policy. The accounting method prescribed for determining the
cumulative amount of DPAC requires a regular re-evaluation of the estimated
present value of gross profits to be earned on a block of policies. If, based on
actual experience and other information, the estimate of the present value of
gross profits significantly changes, either positively or negatively, the
cumulative amount of DPAC is redetermined and the resulting adjustment is
charged against or credited to income. Factors used in determining DPAC include
policy surrender levels, policy crediting rates and investment yields. During
the quarter ended March 31, 1995, the Company capitalized as DPAC approximately
$3.9 million in commissions paid on sales of annuities, compared to $3.5 million
during the same period of 1994. Amortization of commission expense on annuities
capitalized in prior periods was $2.6 million during the first three months of
1995, compared to $2.2 million during the same period of 1994. Refunds of
commissions on the unearned premiums of the Company's credit life business
exceeded the net commissions after capitalization in the first quarter of 1994.

Amortization of DPAC decreased slightly in the three months ended March 31,
1995, compared to 1994, which reflects the decreased unamortized balances on the
run-off of the credit life business.

Insurance benefits for the first quarter of 1995 decreased $579,000,
compared to the comparable period of 1994, generally reflecting the run-off of
credit life insurance.

Other operating expenses which include general insurance and taxes,
licenses and fees, increased approximately $383,000 in the first quarter of
1995, compared to the comparable period in 1994. Personnel expenses increased
approximately $113,000, primarily because of an increase in the cost of the
Company's employee benefit and incentive plans. In addition, state income taxes
increased by $260,000.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Net income for 1994 was $5.9 million, compared to a net loss of $8.3
million for 1993. The increase in net income in 1994 resulted primarily from an
improved interest margin earned on annuities and a non-recurring $15.0 million
pre-tax investment loss on the preferred stock of Foster Mortgage Corporation,
an affiliate, in 1993.

The following table sets forth certain financial data for the periods
indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Total revenues........................................ $120,942 $108,952
Total expenses........................................ 111,862 121,317
Income (loss) before income taxes..................... 9,080 (12,365)
Net income (loss)..................................... 5,886 (8,258)
</TABLE>

REVENUES

The following table sets forth information regarding the components of the
Company's revenues for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net investment income................................. $114,380 $109,661
Net insurance premiums................................ 11,373 18,684
Realized investment losses............................ (4,811) (19,393)
-------- --------
Total...................................... $120,942 $108,952
======== ========
</TABLE>

Net investment income totaled $114.4 million on average investments of
approximately $1.4 billion for 1994, compared to net investment income of $109.7
million on average investments of approximately

48
<PAGE> 55

$1.4 billion during the same period of 1993. Annuity sales of $250 million in
1994 set a Company annual sales record, was an increase of 20.2% over 1993, and
contributed to the increase in funds available for investment. At December 31,
1994, the amortized cost of the fixed income portfolio totaled $1.1 billion and
was comprised principally of $790 million in investment grade mortgage-backed
securities and $291 million in investment grade bonds. At December 31, 1994, the
weighted average rating of the publicly traded bond portfolio, according to
nationally recognized statistical rating agencies, was "AA." During 1994, the
Company established a trading account for a portion of its investment portfolio
invested in common stocks. At December 31, 1994, the carrying value of
investments in the Company's trading account was $679,000 reflecting a $22,751
unrealized gain, which is included in investment income for 1994.

Interest, charges and fees on loans decreased $2.1 million in 1994 compared
to 1993. Management believes that the ability of the Company to rely on the
first mortgage home equity loans originated by UC Lending as a source of
investments with attractive yields is a significant advantage. At December 31,
1994, the Company's portfolio of loans was comprised of $159.1 million in first
mortgage home equity loans and $175.6 million in first mortgage commercial real
estate loans, compared to $263.6 million and $209.3 million, respectively, in
1993. Since 1991, the Company has chosen to limit its investment in commercial
real estate mortgage loans. The mortgage loan portfolio of the Company is
serviced by UC Lending. The Company has full credit recourse to UC Lending with
respect to all home equity mortgage loans acquired by it from UC Lending with
the exception of $2.9 million in loans which UC Lending acquired from the RTC. A
reduction in the volume of and related holding periods for home equity loans
acquired by the Company from UC Lending contributed to the reduction in
interest, charges and fees on loans in 1994.

The Company estimates that non-accrual loans reduced mortgage loan interest
for 1994 and 1993 by approximately $124,000 and $420,000, respectively. During
1994, the average amount of non-accrual loans owned by the Company was
approximately $2.6 million, compared to approximately $8.1 million during 1993.
At December 31, 1994, the Company owned approximately $7.8 million of commercial
loans which were on an accrual status, but which the Company considers as
potential problem loans, compared to $8.1 million at December 31, 1993. The
Company evaluates each of these commercial loans to estimate its risk of loss in
the investment and provides for such loss through a charge to earnings.

Net insurance premiums reflect revenues associated primarily with sales of
pre-need life insurance and credit insurance. Management has chosen to focus on
deferred annuities, its primary product line, and on developing a variable
annuity product to be introduced in 1995. Therefore, the sale of credit life
insurance was discontinued in 1993. The decrease in premium income reflects that
decision.

Realized gains and (losses) were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1993
------- --------
(IN THOUSANDS)
<S> <C> <C>
From:
Sales of fixed maturity securities.................... $ (121) $ (701)
Calls and maturities of fixed maturity securities..... 98 1,187
Sales of equity securities............................ (8) 62
Sales of mortgage loans on real estate................ -- 1,018
Sales of investment real estate....................... 279 195
Sales of other investments............................ -- --
Write-downs/reserve changes........................... (5,059) (21,154)
------- --------
Realized investment losses.............................. $(4,811) $(19,393)
======= ========
</TABLE>

49
<PAGE> 56

The write-downs in 1993 include a $15.0 million loss associated with the
preferred stock of Foster Mortgage Corporation, an affiliate.

EXPENSES

The following table presents the components of the Company's expenses for
the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Interest on annuity policies.......................... $ 73,065 $ 76,086
Amortization of deferred policy acquisition costs..... 13,528 10,229
Insurance commissions................................. 328 3,116
Insurance benefits.................................... 12,654 18,200
Other operating....................................... 12,287 13,686
-------- --------
Total...................................... $111,862 $121,317
======== ========
</TABLE>

Interest on annuity policies declined $3.0 million in 1994 compared to
1993, as the result of a reduction in the average interest crediting rate on the
Company's annuity policies, offset by the impact of an increase in annuity
reserves. Average annuity reserves were $1.4 billion during 1994, an increase of
approximately $117 million from 1993. In comparison with 1993, annuity
surrenders increased in 1994, but were managed to a level less than expected,
notwithstanding the aggressive policy crediting rate strategy in the midst of an
unfavorable interest rate environment.

Insurance commissions for 1994 decreased by approximately $2.8 million from
the same period of 1993. This decrease was primarily attributable to the
discontinuation of credit life insurance sales by the Company in 1993.
Commissions paid on issuance of the Company's deferred annuity products are
generally capitalized as DPAC and amortized over the estimated life of the
policy. The accounting method prescribed for determining the cumulative amount
of DPAC requires a regular reevaluation of the estimated present value of gross
profits to be earned on a block of policies. If, based on actual experience and
other information, the estimate of the present value of gross profits
significantly changes, either positively or negatively, the cumulative amount of
DPAC is redetermined and the resulting adjustment is charged against or credited
to income. Factors used in determining DPAC include policy surrender levels,
policy crediting rates and investment yields. During 1994, the Company
capitalized as DPAC approximately $20.7 million in commissions paid on sales of
annuities, compared to $13.7 million during 1993. Amortization of commission
expense on annuities capitalized in prior periods was $9.5 million during 1994,
compared to $5.6 million during 1993.

Amortization of DPAC increased $3.3 million in 1994, compared to 1993. In
1994, total amortization was impacted by the amortization of the large increase
in production from 1993. In addition, the Company adjusted its assumptions and
related factors to bring them in line with current company experience during its
annual review and update.

Insurance benefits for 1994 decreased $5.5 million, compared to 1993,
generally reflecting the run-off of credit life insurance, which the Company
discontinued in 1993.

Other operating expenses for 1994 decreased approximately $1.4 million,
compared to 1993. Other operating expenses in 1993 included a non-recurring $2.1
million estimated loss in connection with the termination of a third party
administrative contract for credit life insurance. Personnel expenses increased
approximately $1.1 million in 1994 compared to 1993 primarily because of an
increase in the cost of the Company's employee benefit and incentive plans. A
$1.2 million reduction in expenses in 1994 compared to 1993 also resulted from
an increase in acquisition expenses deferred as DPAC in 1994 over 1993.
Assessments by state guaranty associations also increased approximately $920,000
in 1994 over 1993.

50
<PAGE> 57

YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992

Net loss for 1993 was $8.3 million, compared to net income of $4.0 million
for 1992. A $15.0 million pre-tax investment loss on preferred stock of Foster
Mortgage Company, an affiliate, was incurred in 1993.

Operations in 1993 were positively affected by an increase in the interest
margin earned on annuities offset by a $2.1 million pre-tax estimated loss in
connection with the termination of a third party administrative contract for
credit life business.

The following table sets forth certain financial data for the periods
indicated.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Total revenues.......................................... $108,952 $129,160
Total expenses.......................................... 121,317 123,695
Income (loss) before income taxes....................... (12,365) 5,465
Net income (loss)....................................... (8,258) 4,027
</TABLE>

REVENUES

The following table sets forth information regarding the components of the
Company's revenues for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net investment income................................... $109,661 $104,814
Net insurance premiums.................................. 18,684 22,860
Realized investment gains (losses)...................... (19,393) 1,486
-------- --------
Total................................................. $108,952 $129,160
========= =========
</TABLE>

Net investment income totaled $109.7 million on average investments of
approximately $1.4 billion for 1993, compared to net investment income of $104.8
million on average investments of approximately $1.3 billion during 1992.
Annuity sales were $208 million in 1993 compared to $187 million in 1992. At
December 31, 1993, the amortized cost of the fixed income portfolio totaled $875
million and was comprised principally of $598 million in investment grade
mortgage-backed securities and $248 million in investment grade corporate bonds.
At December 31, 1993, the weighted average rating of the publicly traded bond
portfolio, according to nationally recognized statistical rating agencies, was
"AA."

Interest, charges and fees on loans decreased $6.0 million for 1993
compared to 1992. A reduction in the volume and related holding periods for home
equity loans acquired by the Company from UC Lending contributed to a reduction
in interest, charges and fees on loans in 1993. At December 31, 1993, the
Company's portfolio of loans was comprised of $263.6 million in first mortgage
home equity loans and $209.3 million in first mortgage commercial real estate
loans, compared to $220.1 million and $230.3 million, respectively, in 1992.

The Company estimates that non-accrual loans reduced mortgage loan interest
for 1993 and 1992 by approximately $420,000 and $534,000, respectively. During
1993, the average amount of non-accrual loans owned by the Company was
approximately $8.1 million, compared to approximately $10.2 million during 1992.
At December 31, 1993, the Company owned approximately $8.1 million of commercial
loans which were on an accrual status, but which the Company considers as
potential problem loans, compared to $13.8 million at December 31, 1992. The
Company evaluates each of these commercial loans to estimate its risk of loss in
the investment and provides for such loss through a charge to earnings.

51
<PAGE> 58

Net insurance premiums decreased $4.2 million during 1993 compared to 1992.
The decrease in premium income was primarily the result of management's decision
to focus on deferred annuities, its principal product, and to discontinue the
sale of credit life insurance in 1993.

Realized gains and (losses) were as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1993 1992
-------- -------
(IN THOUSANDS)
<S> <C> <C>
From:
Sales of fixed maturity securities.................... $ (701) $ 2,284
Calls and maturities of fixed maturity securities..... 1,187 251
Sales of equity securities............................ 62 (78)
Sales of mortgage loans on real estate................ 1,018 3,310
Sales of investment real estate....................... 195 320
Sales of other investments............................ -- 274
Write-downs/reserve changes........................... (21,154) (4,875)
-------- -------
Realized investment gains (losses)...................... $(19,393) $ 1,486
======== =======
</TABLE>

The write-downs in 1993 include a $15.0 million loss associated with the
preferred stock of Foster Mortgage Corporation, an affiliate.

EXPENSES

The following table presents the components of the Company's expenses for
the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Interest on annuity policies.......................... $ 76,086 $ 77,268
Amortization of deferred policy acquisition costs..... 10,229 10,648
Insurance commissions................................. 3,116 4,031
Insurance benefits.................................... 18,200 20,843
Other operating....................................... 13,686 10,905
-------- --------
Total...................................... $121,317 $123,695
======== ========
</TABLE>

Interest on annuity policies declined $1.2 million during 1993 compared to
1992. Due to the sustained lower interest rate environment, the average interest
crediting rate on these annuity policies was reduced in 1993, which offset the
impact of an increase in average annuity reserves of approximately $156 million
during 1993 compared to 1992. In addition, by comparison with 1992, the rate of
annuity surrenders declined during 1993 notwithstanding reductions in renewal
crediting rates on existing policies.

Insurance commissions for 1993 decreased by approximately $.9 million from
commissions for 1992. This change was primarily attributable to the
discontinuation of credit life insurance sales by the Company in 1993 and
pre-need life insurance in 1992. Commissions paid on issuance of the Company's
single premium deferred annuity products are generally capitalized as DPAC and
amortized over the estimated life of the policy. The accounting method
prescribed for determining the cumulative amount of DPAC requires a regular
re-evaluation of the estimated present value of gross profits to be earned on a
block of policies. If, based on actual experience and other information, the
estimate of the present value of gross

52
<PAGE> 59

profits significantly changes, either positively or negatively, the cumulative
amount of DPAC is redetermined and the resulting adjustment is charged against
or credited to income. Factors used in determining DPAC include policy surrender
levels, policy crediting rates and investments yields. During 1993, the Company
capitalized approximately $13.7 million in commissions paid on sales of
annuities, compared to $11.6 million during 1992. Amortization of commission
expense on annuities capitalized in prior periods was $5.6 million during 1993,
compared to $4.1 million during 1992.

Other operating expenses for 1993 were approximately $2.8 million higher
than 1992, primarily attributable to a $2.1 million estimated loss recognized in
connection with the termination of a third party administrative contract for
credit life business.

ASSET QUALITY AND RESERVES

The quality of the Company's commercial loan and bond portfolios
significantly affects the profitability of the Company. The values of and
markets for these assets are dependent on a number of factors, including general
economic conditions, interest rates and governmental regulations. Adverse
changes in such factors, which become more pronounced in periods of economic
decline, may affect the quality of these assets and the Company's resulting
ability to sell these assets for acceptable prices. General economic
deterioration can result in increased delinquencies on existing loans,
reductions in collateral values and declines in the value of investments
resulting from a reduced capacity of issuers to repay the bonds. The Company has
full credit recourse to UC Lending for principal and interest on its home equity
loans which were originated by UC Lending.

Substantially all of the loans owned by the Company were originated by UC
Lending with the home equity loans being originated primarily through branch
(i.e., retail) network or wholesale loan programs. The Company's loan portfolio
at March 31, 1995, was comprised primarily of $170.3 million in home equity
loans and $176.8 million in commercial loans (including properties obtained
through foreclosure).

At March 31, 1995, the contractual balance of loans serviced by UC Lending
for the Company was approximately $320.7 million. Included in the serviced
portfolio are the Company's commercial loans, a substantial portion of which
were originated in Florida (22.4%), Georgia (18.0%), Colorado (9.8%), Virginia
(8.2%), Texas (7.1%), Tennessee (6.2%) and Louisiana (6.1%). No other state
accounted for more than 6.1% by outstanding principal balance of the Company's
commercial loan portfolio. The risk inherent in such concentrations is dependent
not only upon regional and general economic stability which affects property
values, but also the financial well-being and creditworthiness of the borrower.
The Company serviced itself approximately $7.5 million of its commercial
portfolio.

Management continues to emphasize reducing the level of non-earning assets
owned by focusing on expediting the foreclosure process on its commercial loans.
As the result of being aggressive in liquidating foreclosed property, the
Company's charge-offs during the first quarter of 1995 increased, compared to
prior periods. The balance of foreclosed loans totaled $18.8 million at March
31, 1995, compared to $19.3 million at December 31, 1994. The Company can
neither quantify the impact of property value declines, if any, on its loans nor
predict whether, to what extent, or how long such declines may exist. In a
period of such declines, the rates of delinquencies, foreclosures and losses on
loans could be higher than those previously experienced. Adverse economic
conditions (which may or may not affect real property values) may affect the
timely payment by borrowers of scheduled payments of principal and interest on
the home equity loans, and, accordingly the actual rates of delinquencies,
foreclosures and losses.

53
<PAGE> 60

The following table provides a summary of loans owned by the Company which
are past due 30 days or more, foreclosed properties and loans charged-off as of
the dates indicated:

<TABLE>
<CAPTION>
CONTRACTUAL DELINQUENCIES % OF % OF
BALANCE CONTRACTUAL CONTRACTUAL FORECLOSED NET LOANS AVERAGE
YEAR ENDED OF LOANS BALANCE BALANCE PROPERTIES CHARGED-OFF LOANS
- ------------------------------------------------ ----------- ------------- ----------- ---------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1994
Home equity................................... $158,525 $ 1,516 .96% $ 151 $ 12 .005%
Commercial.................................... 154,239 2,335 1.51 19,019 5,959 3.430
-------- ------- ------- ------
Total................................... $312,764 $ 3,851 1.23% $19,170 $5,971 1.552%
-------- ------- ------- ------
December 31, 1993
Home equity................................... $263,360 $ 1,304 0.50% $ 148 $ 80 .033%
Commercial.................................... 193,181 9,692 5.02 18,750 3,435 1.737
-------- ------- ------- ------
Total................................... $456,541 $10,996 2.41% $18,898 $3,515 .800%
-------- ------- ------- ------
December 31, 1992
Home equity................................... $219,914 $ 927 0.42% $ 291 $ 92 .036%
Commercial.................................... 202,407 16,637 8.2 18,483 4,639 2.162
-------- ------- ------- ------
Total................................... $422,321 $17,564 4.16% $18,774 $4,731 1.002%
======== ======= ==== ======= ====== =====
</TABLE>

The above delinquencies of home equity loans are covered by full credit
recourse to UC Lending. The Company, however, retains the entire risk associated
with its commercial loans.

A summary analysis of the changes in the Company's allowance for loan
losses and the allowance for loss on loans serviced is shown in Note 2 of the
Notes to Financial Statements for the Years Ended December 31, 1994, 1993 and
1992.

The Company's investment portfolio consists primarily of mortgage-backed
securities and corporate bonds, comprising 66% and 29% of the portfolio at March
31, 1995, respectively. Investment purchases are made with the intention of
holding fixed income securities until maturity. Prior to January 1, 1994,
securities were generally carried at cost adjusted for discount accretion and
premium amortization. At March 31, 1995, the amortized cost of the Company's
fixed maturity portfolio was $1.1 billion, consisting primarily of $789 million
in mortgage-backed securities and $329 million in corporate bonds. At March 31,
1995 (in connection with the adoption of SFAS 115 as of January 1, 1994, (see
Note 1 of the Notes to Financial Statements for the Years Ended December 31,
1994, 1993 and 1992)) bonds, with an amortized cost of approximately $1.1
billion or 95% of the Company's portfolio of investment securities, were
classified in an available-for-sale category and the carrying value adjusted to
fair value by means of an adjustment to stockholder's equity. The remainder of
the portfolio consists primarily of private placements traded either directly or
through an investment partnership and are classified as held-to-maturity and
valued at cost. At March 31, 1995, the Company owned $.8 million in equity
securities classified as trading securities. The net unrealized loss in the
fixed maturity portfolio (amortized cost over fair value) at March 31, 1995, was
$32.7 million, compared to an unrealized loss of $73.9 million at December 31,
1994.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal cash requirements consist of funding the payment of
policyholder claims and surrenders. Liquidity requirements for the Company's
operations are generally met by funds provided from the sale of annuities and
cash flow from its investments in fixed income securities and mortgage loans.

Net cash flow from annuity operations is used to build the Company's
investment portfolio, which in turn produces future cash flows from investment
income and provides a secondary source of liquidity. Net cash provided by
operating activities in 1994 and 1993 was approximately $64 million and $78
million, respectively and in the three months ended March 31, 1995 and 1994 was
approximately $24.2 million and $19.5 million, respectively, resulting primarily
from cash earnings on investments. The Company monitors available cash and cash
equivalents to maintain adequate balances for current payments while maximizing
cash available for longer term investment activities. The Company's financing
activities during 1994 and 1993 reflect cash received primarily from sales by
the Company of its annuity products of

54
<PAGE> 61

approximately $250 million and $208 million, respectively, and in the first
quarter of 1995 and 1994 of approximately $48.6 million and $45 million,
respectively. As reflected in the net cash used by investing activities during
the same periods, investment purchases were approximately $300 million, $293
million, $81.6 million and $106.5 million, respectively, reflecting the
investment of these funds and the reinvestment of proceeds from maturities of
investments. Cash used by financing activities during these and the first
quarter of 1995 periods also reflects payments of $192 million, $136 million,
$53.8 million and $39.9 million, respectively, primarily on annuity products
resulting from policyholder surrenders and claims. The increase in annuity
surrenders during 1994 and the first quarter of 1995 was expected, due in part
to an increase in the amount of annuity policies which were beyond the surrender
penalty period and to a planned widening of the interest margin on the Company's
annuity products by reducing annuity crediting rates in a rising interest rate
environment. The interest margin on the Company's annuity liabilities during the
first quarter of 1995 was 2.38%, compared to 2.61% during the same period of
1994. Investments at March 31, 1995, included approximately $337 million in home
equity and commercial mortgage loans, and the amortized cost of its bond
portfolio included $358 million in corporate and government bonds and private
debt placements and $789 million in mortgage-backed securities.

The investment portfolio is also managed to provide a secondary source of
liquidity as investments can be sold, if necessary to fund abnormal levels of
policy surrenders, claims and expenses. An unanticipated increase in surrenders
would impact the Company's liquidity, potentially requiring the sale of certain
assets, such as bonds and loans prior to their maturities, which may be at a
loss.

Reserves for annuity policies comprise the primary liabilities of the
Company. The Company believes it has established adequate reserves on these
products as well as on its other insurance products. The effective life of these
liabilities is influenced by a number of factors, including interest rates,
surrender penalties, ratings, public confidence in the insurance industry
generally, and in the Company specifically, governmental regulations and tax
laws. The Company employs an actuarial model to measure the interest rate
sensitivity of these liabilities to assist in the selection of assets with
appropriate characteristics.

The Company is a Louisiana domiciled insurance company, and, as such, is
subject to certain regulatory restrictions on the payment of dividends. The
Company had the capacity at March 31, 1995, to pay dividends of $8.2 million. No
dividends were paid by the Company during 1992, 1993 or 1994 in order to retain
capital in the Company.

ACCOUNTING STANDARDS

The financial statements reflect the implementation during the first
quarter of 1993 of Statements of Financial Accounting Standards Nos. 109 and 113
("SFAS 109" and "SFAS 113," respectively) issued by the Financial Accounting
Standards Board ("FASB").

Under the provisions of SFAS 109, "Accounting for Income Taxes," deferred
income taxes are recognized using the liability method whereby enacted statutory
rates are applied to cumulative temporary differences based on when and how they
are expected to affect the tax return. Implementation of the provisions of SFAS
109 did not have a material effect on each of the three years ended December 31,
1994.

The provisions of SFAS 113 revised the method of reporting reinsurance
contracts by a ceding enterprise. Prior to implementation of SFAS 113, the
Company reported reinsurance receivables net of the related reserve liabilities.
As the result of application of the provisions of SFAS 113, these assets and
liabilities are required to be reported gross, and therefore, for comparative
purposes, the Company has elected to restate prior years financial statements.
Implementation of the provisions of SFAS 113 had no effect on previously
reported net income.

In May, 1993 and in October, 1994, the FASB issued Statements of Financial
Accounting Standards Nos. 114 and 118, respectively, ("SFAS 114" and "SFAS 118")
which address the accounting by creditors for impairment of loans and specify
how allowances for credit losses related to certain loans should be determined.
The statements also address the accounting by creditors for all loans that are
restructured in a troubled debt restructuring involving modification of terms of
a receivable. SFAS 114 and SFAS 118 are

55
<PAGE> 62
effective for financial statements for fiscal years beginning after December 15,
1994. Management believes that the adoption of these statements will not have a
material effect on the financial statements of the Company.

RATINGS

In June, 1994, A.M. Best Company ("Best"), an independent rating
organization, reaffirmed its "A-" (Excellent) rating of the Company. Best's
ratings depend in part on its analysis of an insurance company's financial
strength, operating performance and claims paying ability. In addition, the
Company's claims paying ability has been rated "A+" by Duff & Phelps, Inc. In
1994, Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies,
Inc., revised the formula used in assigning its qualified solvency ratings of
insurance companies, and, as a result, in October of 1994, revised its rating
assigned to the Company from "BBBq" to "BBq." On June 1, 1993, Best, based on
its then current opinion of the Company's financial condition and operating
performance, lowered the rating from "A" (Excellent) to "A-" (Excellent).
Ratings such as those held by the Company can affect the Company's ability to
market its annuity products. The Company did not experience a material reduction
in the level of annuity sales or an increase in the rate of annuity surrenders
following this action by Best. Any further lowering of the Company's rating
could materially and adversely affect the Company's ability to market its
products, particularly the sale of annuities through financial institutions, and
could increase the surrender of its annuity policies. Both of these consequences
could, depending upon the extent thereof, have a materially adverse effect on
the Company's liquidity and, under certain circumstances, net income. The
Company believes that its ratings will enable it to continue to compete
successfully.

PROPERTIES

The Company owns two office buildings in Baton Rouge, Louisiana. All of one
and part of the other building are leased to affiliates of the Company. The
Company's executive offices are located in a third building owned by an
affiliate, from which the Company leases approximately 25,000 square feet.
Management believes that the properties are adequately maintained and insured
and satisfactorily meet the requirements of the business conducted therein.

THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company as of July 21, 1995 are
listed below, together with information as to their ages, dates of election and
principal business occupation during the last five years (if other than their
present business occupation).

<TABLE>
<CAPTION>
PRINCIPAL BUSINESS OCCUPATION
NAME DURING LAST FIVE YEARS
- -------------------------------- ---------------------------------------------------
<S> <C>
J. Terrell Brown................ Mr. Brown is a director and is Chief Executive
(Age 50) Officer of the Company, is Chairman of the Board
and Chief Executive Officer of the Company's
parent, United Companies Financial Corporation
("UCFC") and is Chief Executive Officer of each
of UCFC's subsidiaries. Mr. Brown has served as a
director and executive officer of the Company
since 1964. Mr. Brown is also a director of
Hibernia Corporation and Sizeler Property
Investors, Inc.

Robert B. Thomas, Jr............ Mr. Thomas is Chairman of the Board and President
(Age 49) of the Company and is an Executive Vice President
of UCFC. Mr. Thomas joined the Company in
February 1993 as Chairman of the Board and was
named President of the Company in 1994. Prior to
his employment with the Company, Mr. Thomas
served as a principal of Lewis and Ellis, Inc., a
Dallas, Texas actuarial consulting firm and,
through Lewis and Ellis, served as consulting
actuary to the Company for approximately 15
years.
</TABLE>

56
<PAGE> 63

<TABLE>
<CAPTION>
PRINCIPAL BUSINESS OCCUPATION
NAME DURING LAST FIVE YEARS
- -------------------------------- ---------------------------------------------------
<S> <C>
John D. Dienes.................. Mr. Dienes was named a director of the Company in
(Age 53) 1995 and is President and Chief Operating Officer
of UCFC. He is also President of United Companies
Lending Group, Inc., Southern Mortgage
Acquisition, Inc., Ginger Mae(R), Inc., UNICOR
Mortgage(R), Inc., affiliates of the Company. Mr.
Dienes joined UCFC in 1994 as Executive Vice
President and Chief Operating Officer. Prior to
his employment with UCFC, Mr. Dienes served as
Executive Vice President and director of Western
Corporate Banking for NationsBank Corporation,
Dallas, Texas, his employer since 1988. At the
time Mr. Dienes joined UCFC, he had over 30 years
of experience in the financial industry.

Dale E. Redman.................. Mr. Redman has served as a director of the Company
(Age 47) since 1983. He is Executive Vice President, Chief
Financial Officer and Assistant Secretary of UCFC
and is Vice Chairman of each of the subsidiaries
of UCFC. Prior to his appointment as Chief
Financial Officer and Executive Vice President in
1988, Mr. Redman served as Secretary and
Treasurer of UCFC.

Gary L. Warrington.............. Mr. Warrington has served as a director of the
(Age 56) Company since 1988 and serves as Executive Vice
President of the Company and Senior Vice
President of UCFC. Mr. Warrington joined the
Company as Vice President and Controller in 1982
and served as President of the Company from 1988
to 1994.

Lindsay C. Seals................ Mr. Seals has served as a director of the Company
(Age 59) since 1988 and serves as Executive Vice President
of the Company and Senior Vice President of UCFC.
Mr. Seals joined the Company in 1971 and since
that time has served in various management
positions with the Company.

Kitty S. Kennedy................ Ms. Kennedy has served as Executive Vice President,
(Age 46) Chief Actuary and Chief Administrative Officer
since 1993 and serves as Senior Vice President of
UCFC. Ms. Kennedy joined the Company in 1984, was
named Senior Vice President in 1991 and has
served in various management positions with the
Company.

Donald M. Woodard............... Mr. Woodard is Senior Vice President and Controller
(Age 47) of the Company. Mr. Woodard joined the Company in
June 1994. Prior to his employment with the
Company, Mr. Woodard served as Chief Financial
Officer of National Financial Insurance Company
and American Insurance Company of Texas, both of
Dallas, Texas.
</TABLE>

57
<PAGE> 64

EXECUTIVE COMPENSATION

The following table sets forth certain information on the annual and
long-term Compensation paid by the Company and its affiliates for the Chief
Executive Officer and each of the other four most highly compensated executive
officers of the Company for the three years ended December 31, 1994, 1993 and
1992. The salary and bonus of each of the executive officers, except that of Mr.
Brown, were paid by the Company. Mr. Brown's salary and bonus were paid by UCFC,
a portion of which was allocated to the Company.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------- ------------
OTHER
ANNUAL
NAME AND COMPENSATION OPTIONS(3)/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS($)(1) ($)(2) SARS(#) COMPENSATION(4)
- -------------------------------- ---- -------- ----------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrell Brown................ 1994 $378,304 $ 297,205 -- $41,240
Chief Executive Officer 1993 375,625 76,395 55,000 32,114
1992 373,437 69,677 -- 43,498
Robert B. Thomas, Jr............ 1994 209,366 168,116 -- 21,882
Chairman of the Board and 1993 175,269 49,732 22,000 --
President 1992 -- -- -- --

Lindsay C. Seals................ 1994 103,333 41,600 -- 16,474
Executive Vice President 1993 99,773 9,000 2,200 6,680
1992 99,035 8,927 -- 4,694
Kitty S. Kennedy................ 1994 100,320 40,800 -- --
Executive Vice President, 1993 -- -- -- 15,280
Chief Actuary and 1992 -- -- -- --
Chief Administrative Officer

Gary L. Warrington.............. 1994 158,980 63,592 -- 21,939
Executive Vice President 1993 158,208 14,308 3,300 10,849
1992 153,125 32,856 -- 4,364
</TABLE>

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

NOTES:

(1) Amounts awarded under the United Companies Financial Corporation Management
Incentive Plan for the respective years, even if deferred. Included in the
amount awards to J. Terrell Brown in 1994, 1993 and 1992 were $16,729,
$16,998 and $17,134, respectively, which were deferred pursuant to an
unfunded salary deferral agreement entered into between UCFC and Mr. Brown
in 1989. The aggregate amount payable by UCFC to Mr. Brown at March 31,
1995 was $119,461.

(2) No personal benefits, which are non-cash compensation, are disclosed in the
"Other Annual Compensation" column since they did not exceed the lesser of
either $50,000 or 10% of the total annual salary and bonus for any of the
named executive officers.

(3) Represents options granted under the United Companies Financial Corporation
stock option plans for employees after giving effect to stock dividends.
All options have been granted at an exercise price equal to 100% of the
fair market value of the Common Stock on the date of the grant. For
additional information regarding current holdings of options, see table
below entitled "Aggregate Option Exercises in Last Fiscal Year and Year-End
1994 Option Values."

(4) Amount reported include amounts contributed or accrued for 1994, 1993 and
1992 for the named officers under the United Companies Financial
Corporation Employee Stock Ownership Plan ("ESOP") and Employees' Savings
Plan and Trust. Amounts for J. Terrell Brown for 1994, 1993 and 1992
include $16,998, $17,134 and $17,259, respectively, in loans to Mr. Brown
made by UCFC for payment of a portion of the premium on a life insurance
policy. The loans were made without interest and are secured by an
assignment of the policy.

58
<PAGE> 65

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END 1994 OPTION VALUES

The following table sets forth information as of December 31, 1994,
regarding the number and value of exercisable and unexercisable options to
purchase Common Stock of UCFC held by the Company's Chief Executive Officer and
the other four most highly compensated officers.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR END($)(1)(2)(3)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- -------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Terrell Brown....... 76,912 55,000 $1,563,927 $ 785,626
Robert B. Thomas,Jr. .. 22,000 364,875
Lindsay C. Seals....... 2,200 31,425
Kitty S. Kennedy....... 4,400 62,850
Gary L. Warrington..... 18,341 3,300 368,508 47,138
</TABLE>

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

(1) All options were awarded under the United Companies Financial Corporation
Stock Options Plans for Employees and were awarded at the fair market value
of the shares of Common Stock on the date of the grant.

(2) Values in each column are based on the closing price, as reported on the
National Association of Securities Dealers Quotations National Stock Market
of the Company's Common Stock on December 31, 1994 ($27.125).

(3) The exercise prices of the reported options range from $5.53 to $12.84 per
share (as adjusted for stock dividends).

Directors of the Company receive no fees for their services as members of
the Board of Directors. No shares of capital stock of the Company are owned by
any executive officer or director. The Company is a wholly-owned subsidiary of
UCFC.

LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Separate
Account or the Distributor is a party. The nature of the Company's business is
such that it is routinely involved in litigation or subject to other items of
pending or threatened litigation. Although the outcome of certain of these
matters cannot be predicted, management of the Company believes, based upon
information currently available, that the resolution of these matters will not
result in any material adverse effect on its financial condition.

EXPERTS

The financial statements as of December 31, 1994 and 1993 and for each of
the three years in the period ended December 31, 1994 included in this
Prospectus and the related financial statement schedules included elsewhere in
the registration statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein and elsewhere
in the registration statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.

REGISTRATION STATEMENT

A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Contracts and Certificates offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement and amendments thereto
and exhibits filed as a part thereof, to all of which reference is hereby made
for further information

59
<PAGE> 66

concerning the Company and the Contracts and Certificates offered hereby.
Statements contained in this Prospectus as to the content of Contracts and
Certificates and other legal instruments are summaries. For a complete statement
of the terms thereof, reference is made to such instruments as filed.

LEGAL OPINIONS

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

FINANCIAL STATEMENTS

Financial statements of the Company are included in this Prospectus. No
financial statements for the Separate Account have been included because, as of
the date of this Prospectus, the Separate Account had no assets. The financial
statements of the Company included herein should be considered only as bearing
upon the ability of the Company to meet its obligations under the Conracts and
Certificates.

60
<PAGE> 67

UNITED COMPANIES LIFE INSURANCE COMPANY

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
MARCH 31,
1995 DECEMBER 31,
(UNAUDITED) 1994*
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Investments:
Fixed maturity securities:
Available-for-sale at fair value...................... $1,058,103 $ 959,857
Held-to-maturity at amortized cost.................... 57,091 57,391
Equity securities at fair value.......................... 833 721
Mortgage loans on real estate............................ 337,476 325,439
Policy loans............................................. 19,763 20,243
Investment in limited partnerships....................... 26,757 26,672
Short-term investments................................... 10,179 54,664
---------- ----------
Total investments............................... 1,510,202 1,444,987
---------- ----------
Cash....................................................... 5,146 13,169
Investment in indebtedness of affiliate.................... 10,000 10,000
Accrued investment income.................................. 15,922 15,032
Due from reinsurers........................................ 34,537 34,985
Deferred policy acquisition costs.......................... 92,803 91,915
Property -- net............................................ 23,230 23,372
Deferred income tax benefit................................ 3,058 17,128
Other assets............................................... 6,449 7,566
---------- ----------
Total assets.................................... $1,701,347 $1,658,154
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Policy benefit reserves.................................... $ 114,413 $ 116,501
Annuity reserves........................................... 1,440,233 1,425,973
Unearned premium reserves.................................. 3,537 4,491
Other liabilities.......................................... 12,990 9,010
---------- ----------
Total liabilities............................... 1,571,173 1,555,975
========== ==========
Stockholder's equity:
Common Stock, $2 par value;
Authorized -- 4,200,528 shares;
Issued -- 4,200,528 shares............................... 8,401 8,401
Additional paid-in capital................................. 28,980 28,980
Retained earnings.......................................... 113,898 111,632
Net unrealized losses on securities........................ (21,105) (46,834)
---------- ----------
Total stockholder's equity...................... 130,174 102,179
---------- ----------
Total liabilities and stockholder's equity...... $1,701,347 $1,658,154
========== ==========
</TABLE>

See notes to financial statements
- ---------------

* Amounts were derived from audited financial statements included elsewhere in
this filing.

61
<PAGE> 68

UNITED COMPANIES LIFE INSURANCE COMPANY

STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
QUARTER ENDED MARCH
31,
-------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Net investment income......................................... $30,362 $27,149
Net insurance premiums........................................ 2,102 3,068
Realized investment gains (losses)............................ (428) (1,391)
------- -------
Total................................................ 32,036 28,826
======= =======
Expenses:
Interest on annuity policies.................................. 19,526 17,793
Amortization of deferred policy acquisition cost.............. 3,331 3,424
Insurance commissions......................................... 157 (18)
Insurance benefits............................................ 2,429 3,008
Other operating expenses...................................... 3,423 3,040
------- -------
Total................................................ 28,866 27,247
======= =======
Income before income taxes...................................... 3,170 1,579
Provision for income taxes...................................... 904 555
------- -------
Net income...................................................... $ 2,266 $ 1,024
======= =======
</TABLE>

See notes to financial statements

62
<PAGE> 69

UNITED COMPANIES LIFE INSURANCE COMPANY

STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
-----------------------
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income from operations................................. $ 2,266 $ 1,024
Adjustments to reconcile net income to net cash provided by
operating activities:
Increase in deferred policy acquisition................. (888) (89)
Decrease in policy loans................................ 479 175
(Increase) decrease in accrued interest and accounts
receivable............................................ (890) 1,301
Decrease in due from reinsurers......................... 447 538
Decrease (increase) in other assets..................... 384 (310)
Decrease in policy benefit reserves..................... (2,088) (2,551)
Interest on annuity policies............................ 19,526 17,793
Decrease in unearned premium reserves................... (954) (1,384)
Deferred income taxes................................... 215 (1,570)
Increase in other liabilities........................... 4,289 2,401
Provision for loan losses............................... 567 1,332
Provision for bond losses............................... -- 150
Amortization and depreciation........................... 417 311
Amortization of prior loan sale gains................... 625 468
Investment gains........................................ (85) (90)
Net cash flows from trading investment securities....... (85) --
--------- ---------
Net cash provided by operating activities......... 24,225 19,499
--------- ---------
Cash flows from investing activities:
Proceeds from sales of loans held for investment........... 271,493 194,251
Principal collected on loans............................... 15,047 18,521
Loan originations and acquisitions......................... (4,840) --
Loans purchased from affiliates............................ (294,266) (176,584)
Proceeds from sales, calls or maturities of
available-for-sale securities........................... 17,606 --
Proceeds from maturities or calls of held-to-maturity
securities.............................................. 5,584 33,449
Purchase of available-for-sale securities.................. (81,553) (106,525)
Purchase of held-to-maturity securities.................... (25) --
Change in short-term investments........................... 44,485 30,712
Capital expenditures....................................... (163) (556)
--------- ---------
Net cash used by investing activities............. (26,632) (6,732)
--------- ---------
Cash flows from financing activities:
Deposits received from annuities and interest sensitive
products................................................ 48,563 45,029
Payments on annuities and interest sensitive products...... (53,829) (39,927)
Decrease in repurchase agreement........................... -- (24,968)
Other...................................................... (350) 388
--------- ---------
Net cash provided by financing activities......... (5,616) (19,478)
--------- ---------
Increase (decrease) in cash.................................. (8,023) (6,711)
Cash at beginning of period.................................. 13,169 22,716
--------- ---------
Cash at end of period........................................ $ 5,146 $ 16,005
========= =========
</TABLE>

See notes to financial statements.

63
<PAGE> 70

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)

1. BASIS OF PRESENTATION

In the opinion of the Company's management, the accompanying unaudited
financial statements contain all adjustments, consisting of only normal accruals
necessary to present fairly the financial position, the results of operations
and the cash flows for the interim periods presented.

The results of operations for the three months ended March 31, 1995 and
1994, are not necessarily indicative of the results to be expected for the full
year.

2. INVESTMENTS

FIXED MATURITY SECURITIES

The Company's portfolio of fixed maturity securities consisted of the
following:

<TABLE>
<CAPTION>
MARCH 31, 1995
--------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for-Sale:
U.S. Government................. $ 10,720 $ 39 $ 97 $ 10,662
Municipal....................... 425 20 -- 445
Foreign......................... 17,471 487 283 17,675
Corporate....................... 318,803 3,165 5,944 316,024
Mortgage-backed................. 742,730 997 30,430 713,297
---------- ------ ------- ----------
Total.................. $1,090,149 $4,708 $36,754 $1,058,103
---------- ------ ------- ----------
Held-to-Maturity:
Corporate....................... $ 10,488 $ 354 $ 200 $ 10,642
Mortgage-backed................. 46,603 709 1,565 45,747
---------- ------ ------- ----------
Total.................. $ 57,091 $1,063 $ 1,765 $ 56,389
========== ====== ======= ==========
</TABLE>

Net unrealized losses on available-for-sale securities of $21.1 million
included in Stockholders' equity at March 31, 1995, are presented net of
deferred income taxes of $11.3 million.

A summary of the Company's investment in the commercial loan pass-through
certificates for which an election under the provisions of the Internal Revenue
Code has been made at March 31, 1995, included in the category Held-to-Maturity,
Mortgage-backed is as follows:

REMAINING
DATE OF PRINCIPAL INTEREST MATURITY
ISSUE BALANCE RATE DATE
------------- -------------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
United Companies Life
REMIC:
Series 90-1, Class
B-1.................. Mar 29, 1990 $ 10,793 10.05% Sep 25, 2009
Series 90-2, Class
A-3.................. Dec 18, 1990 19,946 9.88% May 25, 2000
Series 90-2, Class
B-1.................. Dec 18, 1990 15,863 9.88% Jan 25, 2009
</TABLE>

64
<PAGE> 71

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)

EQUITY SECURITIES

The net unrealized capital gains and losses on common stocks are as
follows:

<TABLE>
<CAPTION>
MARCH 31, 1995
-------------------------------------------
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ---------- ---------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Trading................................... $ 676 $109 $ 21 $ 764
Available-for-Sale........................ 492 -- 423 69
------ ---- ---- -----
Total.......................... $1,168 $109 $444 $ 833
====== ==== ==== =====
</TABLE>

MORTGAGE LOANS ON REAL ESTATE

The following schedule summarizes the composition of mortgage loans on real
estate:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Residential.......................................... $ 169,981 $158,943
Residential foreclosed............................... 285 151
Commercial........................................... 158,266 156,428
Commercial foreclosed................................ 18,528 19,187
--------- --------
347,060 334,709
Allowance for loan losses............................ (9,203) (8,852)
Unearned loan charges................................ (381) (418)
--------- --------
Total..................................... $ 337,476 $325,439
========= ========
</TABLE>

Included in the loans owned at March 31, 1995 and December 31, 1994, were
nonaccrual loans of $2.7 million and $2.6 million, respectively.

INVESTMENT IN LIMITED PARTNERSHIPS

Following is an analysis of the Company's investment in limited
partnerships:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Balance, beginning of year.......................... $ 26,672 $ 26,698
Contributions and capitalized costs................. 3,050 5,168
Net partnership income.............................. 590 1,480
Distributions....................................... (3,555) (6,674)
-------- --------
Balance, end of year................................ $ 26,757 $ 26,672
======== ========
</TABLE>

The limited partnerships are formed for the purpose of participating in
privately placed mezzanine investments. These investments, acquired in leveraged
investment transactions, generally include higher risk subordinated debt
combined with equity securities.

65
<PAGE> 72

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)

INVESTMENT INCOME

Investment income by type that exceeds five percent of total investment
income was as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Fixed maturity securities........................... $20,927 $16,917
Mortgage loans on real estate....................... 8,810 11,541
All other investment income......................... 3,081 1,340
------- -------
32,818 29,798
Less: Investment expenses........................... 2,456 2,649
------- -------
Net investment income.................... $30,362 $27,149
======= =======
</TABLE>

3. CASH PAID FOR INTEREST AND INCOME TAXES

During the three months ended March 31, 1995 and 1994, the Company paid
interest on repurchase agreements in the approximate amount of $396,000 and
$248,000, respectively. During the three months ended March 31, 1995, the
Company paid income taxes in the amount of $1.7 million. There were no payments
made for income taxes during the three months ended March 31, 1994.

4. CONTINGENCIES

The Company is subject to various litigation arising during the ordinary
course of business. While the outcome of such litigation cannot be predicted
with certainty, management does not expect the resolution of these matters to
have a material adverse effect on the financial condition or results of
operations of the Company.

5. ACCOUNTING STANDARDS

In May, 1993 and in October, 1994 the FASB issued Statements of Financial
Accounting Standards Nos. 114 and 118 ("SFAS 114" and "SFAS 118") which address
the accounting by creditors for impairment of loans and specify how allowances
for credit losses related to certain loans should be determined. The statements
also address the accounting by creditors for all loans that are restructured in
a troubled debt restructuring involving modification of the terms of a
receivable. The implementation of the provisions of SFAS 114 and SFAS 118 in the
first quarter of 1995 did not have a material effect on the financial statements
of the Company.

66
<PAGE> 73

INDEPENDENT AUDITORS' REPORT

United Companies Life Insurance Company:

We have audited the accompanying balance sheets of United Companies Life
Insurance Company (a wholly-owned subsidiary of United Companies Financial
Corporation) as of December 31, 1994 and 1993, and the related statements of
income, stockholder's equity, and cash flows for each of the three years in the
period ended December 31, 1994. Our audits also included the financial statement
schedules, appearing on pages 113 through 116, accompanying the above indicated
financial statements. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on the financial statements and financial statement
schedules 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, such financial statements present fairly, in all material
respects, the financial position of United Companies Life Insurance Company at
December 31, 1994 and 1993, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1994 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.

As discussed in Note 1 of the Notes to Financial Statements, in 1994 the
Company changed its method of accounting for investments to conform with
Statement of Financial Accounting Standards No. 115.

/S/ [ILLEGIBLE]
Baton Rouge, Louisiana
February 28, 1995

67
<PAGE> 74

UNITED COMPANIES LIFE INSURANCE COMPANY

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Investments:
Fixed maturity securities:
Available-for-sale at fair value...................... $ 959,857 $ --
Held-to-maturity at amortized cost.................... 57,391 875,393
Equity securities at fair value.......................... 721 --
Mortgage loans on real estate............................ 325,439 462,555
Policy loans............................................. 20,243 19,633
Investment in limited partnerships....................... 26,672 26,698
Short-term investments................................... 54,664 36,851
---------- ----------
Total investments............................... 1,444,987 1,421,130
---------- ----------
Cash....................................................... 13,169 22,716
Investment in indebtedness of affiliate.................... 10,000 10,000
Accrued investment income.................................. 15,032 14,534
Due from reinsurers........................................ 34,985 36,577
Deferred policy acquisition costs.......................... 91,915 83,495
Property -- net............................................ 23,372 24,318
Deferred income tax benefit................................ 17,128 --
Other assets............................................... 7,566 12,948
---------- ----------
Total assets.................................... $1,658,154 $1,625,718
========== ==========

LIABILITIES AND STOCKHOLDER'S EQUITY

Policy benefit reserves.................................... $ 116,501 $ 123,328
Annuity reserves........................................... 1,425,973 1,294,983
Unearned premium reserves.................................. 4,491 10,260
Repurchase agreements...................................... -- 30,000
Deferred income tax payable................................ -- 10,812
Other liabilities.......................................... 9,010 13,208
---------- ----------
Total liabilities............................... 1,555,975 1,482,591
========== ==========
Stockholder's equity:
Common Stock, $2 par value;
Authorized -- 4,200,528 shares;
Issued -- 4,200,528 shares............................... 8,401 8,401
Additional paid-in capital................................. 28,980 28,980
Retained earnings.......................................... 111,632 105,746
Net unrealized losses on securities........................ (46,834) --
---------- ----------
Total stockholder's equity...................... 102,179 143,127
---------- ----------
Total liabilities and stockholder's equity...... $1,658,154 $1,625,718
========== ==========
</TABLE>

See notes to financial statements

68
<PAGE> 75

UNITED COMPANIES LIFE INSURANCE COMPANY

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Net investment income.............................. $114,380 $109,661 $104,814
Net insurance premiums............................. 11,373 18,684 22,860
Realized investment gains (losses)................. (4,811) (19,393) 1,486
-------- -------- --------
Total..................................... 120,942 108,952 129,160
======== ======== ========
Expenses:
Interest on annuity policies....................... 73,065 76,086 77,268
Amortization of deferred policy acquisition cost... 13,528 10,229 10,648
Insurance commissions.............................. 328 3,116 4,031
Insurance benefits................................. 12,654 18,200 20,843
Other operating expenses........................... 12,287 13,686 10,905
-------- -------- --------
Total..................................... 111,862 121,317 123,695
======== ======== ========
Income (loss) before income taxes.................... 9,080 (12,365) 5,465
Provision (benefit) for income taxes................. 3,194 (4,107) 1,438
-------- -------- --------
Net income (loss).................................... $ 5,886 $ (8,258) $ 4,027
======== ======== ========
</TABLE>

See notes to financial statements

69
<PAGE> 76

UNITED COMPANIES LIFE INSURANCE COMPANY

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) from operations............... $ 5,886 $ (8,258) $ 4,027
Adjustments to reconcile net income to net cash
provided by operating activities:
(Increase) in deferred policy acquisition.... (8,419) (3,488) (1,409)
(Increase) decrease in policy loans.......... (609) 332 532
(Increase) in accrued interest and accounts
receivable................................ (498) (129) (2,055)
Decrease in due from reinsurers.............. 1,574 1,158 1,039
Decrease in other assets..................... 317 46 423
(Decrease) in policy benefit reserves........ (6,827) (1,699) (1,198)
Interest on annuity policies................. 73,065 76,086 77,268
(Decrease) in unearned premium reserves...... (5,769) (6,878) (10,549)
(Deferred) income taxes...................... (2,721) (1,844) (2,964)
Increase (decrease) in other liabilities..... (1,404) 813 1,429
Provision for loan losses.................... 5,059 4,994 4,875
Amortization and depreciation................ 1,883 1,914 2,011
(Gains) on loans sold........................ -- -- (3,310)
Amortization of prior loan sale gains........ 2,012 735 917
Investment (gains) losses.................... (256) 14,400 (3,051)
Net cash flows from trading investment
securities................................ (679) -- --
--------- --------- ---------
Net cash provided by operating
activities............................. 62,614 78,182 67,985
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sales of loans held for
investment................................... 940,099 457,945 322,269
Principal collected on loans.................... 94,084 95,752 80,381
Loan originations and acquisitions.............. (8,799) (4,560) (967)
Loans purchased from affiliates................. (893,099) (572,576) (314,811)
Proceeds from sales, calls or maturities of
available-for-sale securities................ 84,155 -- --
Proceeds from maturities or calls of
held-to-maturity securities.................. 2,282 142,555 251,447
Purchase of available-for-sale securities....... (300,384) -- --
Purchase of held-to-maturity securities......... -- (293,816) (631,184)
Change in short-term investments................ (17,813) (20,926) 193,474
Capital expenditures............................ (656) (133) (809)
--------- --------- ---------
Net cash used by investing activities..... (100,131) (195,759) (100,200)
--------- --------- ---------
Cash flows from financing activities:
Deposits received from annuities and interest
sensitive products........................... 249,738 207,681 187,050
Payments on annuities and interest sensitive.... (191,812) (136,489) (130,944)
Increase (decrease) in repurchase agreement..... (30,000) 30,000 --
(Decrease) in debt with maturities of three
months or less............................... -- (15,750) --
Payments on mortgage loans...................... -- -- (2,697)
Proceeds from capital contribution.............. -- 15,000 --
Other........................................... 44 242 (23)
--------- --------- ---------
Net cash provided by financing
activities............................. 27,970 100,684 53,386
--------- --------- ---------
Increase (decrease) in cash....................... (9,547) (16,893) 21,171
Cash at beginning of period....................... 22,716 39,609 18,438
--------- --------- ---------
Cash at end of period............................. $ 13,169 $ 22,716 $ 39,609
========= ========= =========
</TABLE>

See notes to financial statements.

70
<PAGE> 77

UNITED COMPANIES LIFE INSURANCE COMPANY

STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
NET
ADDITIONAL UNREALIZED TOTAL
COMMON PAID-IN RETAINED (LOSSES) STOCKHOLDER'S
STOCK CAPITAL EARNINGS ON SECURITIES EQUITY
------ ---------- -------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991............. $8,401 $ 13,980 $109,977 $ -- $ 132,358
Net income............................. 4,027 4,027
------ --------- -------- --------- ---------
Balance, December 31, 1992............. 8,401 13,980 114,004 136,385
Net (loss)............................. (8,258) (8,258)
Capital Contribution................... 15,000 15,000
------ --------- -------- --------- ---------
Balance, December 31, 1993............. 8,401 28,980 105,746 143,127
Net income............................. 5,886 5,886
Mark-to-market adjustment on
investments.......................... (46,834) (46,834)
------ --------- -------- --------- ---------
Balance, December 31, 1994............. $8,401 $ 28,980 $111,632 $ (46,834) $ 102,179
====== ========= ======== ========= =========
</TABLE>

See notes to financial statements

71
<PAGE> 78

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

United Companies Life Insurance Company (the "Company") is a wholly owned
subsidiary of United Companies Financial Corporation ("UCFC" or the "Parent"), a
financial services holding company founded in 1946. UCFC focuses on the
origination, sale and servicing of first mortgages, nonconventional, home equity
loans and insurance.

The Company, a life insurance company domiciled in Louisiana and organized
in 1955, is currently authorized to conduct business in 47 states, the District
of Columbia and Puerto Rico. The primary products of the Company are tax
deferred annuity contracts marketed to individuals principally through financial
institutions and independent agents.

INVESTMENTS

FIXED MATURITY AND EQUITY SECURITIES

During the first quarter of 1994, the Company implemented the provisions of
Financial Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards No. 115 ("SFAS 115"), which revised the method of accounting for
certain of the Company's investments. Prior to adoption of SFAS 115, the Company
reported its investments in fixed income investments at amortized cost, adjusted
for declines in value considered to be other than temporary. SFAS 115 requires
the classification of securities in one of three categories:
"available-for-sale," "held-to-maturity" or "trading." Securities classified as
held-to-maturity are carried at amortized cost, whereas securities classified as
trading securities or available-for-sale are recorded at fair value. Effective
with the adoption of SFAS 115, the Company determined the appropriate
classification of its investments and, if necessary, adjusted the carrying value
of such securities, accordingly, as if the unrealized gains or losses had been
realized. The adjustment, net of applicable income taxes, for investments
classified as available-for-sale is recorded in "Net unrealized loss on
securities" and is included in Stockholder's equity on the balance sheet and the
adjustment for investments classified as trading is recorded in "Investment
income" in the statement of income. In accordance with the provisions of SFAS
115, prior year investments were not restated.

MORTGAGE LOANS ON REAL ESTATE

Loans are carried at amortized cost, net of an allowance for losses. The
Company records properties received in settlement of loans ("foreclosed
property") at the lower of their market value less estimated costs to sell
("market") or the outstanding loan amount plus accrued interest ("cost"). The
Company accomplishes this by providing a specific reserve, on a property by
property basis, for the difference between market and cost. Market value is
determined by property appraisals performed either by its affiliate, United
Companies Lending Corporation ("UCLC"), or independent appraisers. The related
adjustments are included in the Company's provision for loan losses.

The Company provides for estimated loan losses on loans owned by the
Company by establishing an allowance for loan losses through a charge to
earnings. The Company conducts periodic reviews of the quality of the loan
portfolio and estimates the risk of loss based upon historical loss experience,
prevailing economic conditions, estimated collateral value and such other
factors which, in management's judgment, are relevant in estimating the adequacy
of the Company's allowance for loan losses. While management uses the best
information available in conducting its evaluation, future adjustments to the
allowance may be necessary if there are significant changes in economic
conditions, collateral value or other elements used in conducting the review.

72
<PAGE> 79

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

POLICY LOANS

Policy loans are reported at unpaid principal balance.

INVESTMENT IN LIMITED PARTNERSHIPS

The Company's investment in limited partnerships, whose affairs are not
controlled by the Company, is reflected on the equity method.

SHORT-TERM INVESTMENTS

At December 31, 1994, short-term investments totaled $54.7 million bearing
interest rates ranging from 4.0% to 5.7% per annum.

INVESTMENT IN INDEBTEDNESS OF AFFILIATE

The Company has invested in three subordinated debentures of an affiliate,
which are carried at cost.

DEFERRED POLICY ACQUISITION COSTS

Commissions and other costs related to the production of new and renewal
business have been deferred. The deferred costs related to traditional life
insurance are amortized over the premium payment period using assumptions
consistent with those used in computing policy benefit reserves. Deferred costs
related to annuities and interest sensitive products are amortized over the
estimated life of the policy in relation to the present value of estimated gross
profits on the contract. The Company periodically reviews the appropriateness of
assumptions used in calculating the estimated gross profits on annuity
contracts. Any change required in these assumptions may result in an adjustment
to deferred policy acquisition costs which would affect income.

PROPERTY-NET

Property is stated at cost less accumulated depreciation. Depreciation is
computed on the straight-line and accelerated methods over the estimated useful
lives on the assets.

POLICY BENEFIT RESERVES

Policy benefit reserves for traditional life insurance policies have been
provided on a net level premium method including assumptions as to investment
yield, mortality and withdrawals based on the Company's experience and industry
standards with provisions for possible adverse deviation. Investment yield
assumptions range from 5.5% to 8.5% per annum. Policy benefit reserves include
certain deferred profits on limited payment policies. These profits are being
recognized in income over the policy term.

Reserves for annuity policies and interest sensitive life policies
represent the policy account balance, or accumulated fund value, before
applicable surrender charges. Benefit claims incurred in excess of related
policy account balances and interest credited during the period to policy
account balances are charged to expense.

INCOME TAXES

The Company files a consolidated federal income tax return with its Parent
and other affiliated companies. The Parent allocates to the Company its
proportionate share of the consolidated tax liability under a tax allocation
agreement whereby each affiliate's federal income tax provision is computed on a

73
<PAGE> 80

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

separate return basis. Deferred income taxes are provided for the effect of
revenues and expenses which are reported in different periods for financial
reporting purposes than for tax purposes. Such differences result primarily from
deferring policy acquisition costs, providing for bond and loan losses,
differences in the methods of computing reserves, loan income, loan sale gains
and depreciation.

PREMIUMS

Income on short duration single premium contracts, primarily credit
insurance products, is recognized over the contract period. Premiums on other
insurance contracts principally traditional life insurance and limited payment
life insurance policies, are recognized as revenue when due.

REINSURANCE

The Company generally reinsures with other insurance companies the portion
of any one risk which exceeds $100,000. On certain types of policies this limit
is $25,000. The Company is contingently liable for insurance ceded to
reinsurers. Premiums ceded under reinsurance agreements were $2.1 million, $3.6
million and $7.5 million in 1994, 1993 and 1992, respectively. Reserve credit
taken under reinsurance agreements totaled $34.0 million, $35.2 million, and
$30.4 million at December 31, 1994, 1993 and 1992, respectively.

The Company has assumed the following reinsurance from other insurers:

<TABLE>
<CAPTION>
INSURANCE
IN FORCE PREMIUMS
---------- --------
(IN THOUSANDS)
<S> <C> <C>
1994.................................................. $1,106,148 $2,966
1993.................................................. 1,106,721 3,039
1992.................................................. 963,449 3,111
</TABLE>

The Company has a receivable at December 31, 1994 of approximately $35.1
million from one reinsurer; however, the funds supporting the receivable are
escrowed in a separate trust account for the benefit of the Company by the
reinsurer. The following table reflects the effect of reinsurance agreements on
premiums and the amounts earned for the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums................................. $10,537 $19,310 $27,338
Reinsurance assumed............................. 2,966 3,039 3,111
Reinsurance ceded............................... (2,130) (3,665) (7,589)
------- ------- -------
Net insurance premiums........................ $11,373 $18,684 $22,860
======= ======= =======
</TABLE>

PARTICIPATING POLICIES

Participating business, primarily related to the Company's pre-need funeral
policies, represented 6.0%, 5.3% and 4.3% of the life insurance in force as of
December 31, 1994, 1993 and 1992, respectively. The amount of dividends paid on
participating policies is based on published dividend scales and totaled $1.0
million, $1.5 million and $1.8 million for the years ended December 31, 1994,
1993 and 1992, respectively.

74
<PAGE> 81

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

ACCOUNTING STANDARDS

In May, 1993 and in October, 1994, the FASB issued Statements of Financial
Accounting Standards Nos. 114 and 118 ("SFAS 114" and "SFAS 118") which address
the accounting by creditors for impairment of loans and specify how allowances
for credit losses related to certain loans should be determined. The statements
also address the accounting by creditors for all loans that are restructured in
a troubled debt restructuring involving modification of terms of a receivable.
SFAS 114 and SFAS 118 are effective for financial statements for fiscal years
beginning after December 15, 1994. Management believes that the adoption of
these statements will not have a material effect on the financial statements of
the Company.

2. INVESTMENTS

FIXED MATURITY SECURITIES

The Company's portfolio of fixed maturity securities consisted of the
following:

<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Available-for-Sale:
U.S. Government............... $ 10,720 $ 31 $ 238 $ 10,513
Municipal..................... 425 13 -- 438
Foreign....................... 18,433 190 603 18,020
Corporate..................... 258,549 321 13,148 245,722
Mortgage-backed............... 743,359 22 58,217 685,164
---------- --------- --------- --------
Total................ $1,031,486 $ 577 $ 72,206 $959,857
---------- --------- --------- --------
Held-to-Maturity:
Corporate..................... $ 10,828 $ 300 $ 211 $ 10,917
Mortgage-backed............... 46,563 110 2,505 44,168
---------- --------- --------- --------
Total................ $ 57,391 $ 410 $ 2,716 $ 55,085
========== ========= ========= ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Held-to-Maturity:
U.S. Government............... $ 10,572 $ 635 $ -- $ 11,207
Municipal..................... 425 43 -- 468
Foreign....................... 18,519 1,835 -- 20,354
Corporate..................... 248,133 17,218 379 264,972
Mortgage-backed............... 597,744 14,464 2,481 609,727
---------- --------- --------- --------
Total................ $ 875,393 $ 34,195 $ 2,860 $906,728
========== ========= ========= ========
</TABLE>

75
<PAGE> 82

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

The cost and estimated fair value of fixed maturity securities by
contractual maturity are shown below. Expected maturities may differ from
contractual maturities because certain issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------
AVAILABLE-FOR-SALE HELD-TO-MATURITY
--------------------- --------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- -------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1 year or less..................... $ 11,039 $ 11,085 $ 2,700 $ 2,506
Over 1 year through 5 years........ 69,692 68,677 3,424 3,444
Over 5 years through 10 years...... 194,472 182,408 4,704 4,967
After 10 years..................... 12,924 12,523 -- --
Mortgage-backed securities......... 743,359 685,164 46,563 44,168
--------- -------- ------- -------
Total................... $1,031,486 $959,857 $ 57,391 $55,085
========= ======== ======= =======
</TABLE>

Net unrealized losses on available-for-sale securities of $46.8 million
included in Stockholders' equity at December 31, 1994, are presented net of
deferred income taxes of $25.2 million.

Proceeds from the sales of investments in debt securities during 1994
totaled $84.2 million and resulted in realized investment gains of approximately
$303,000 and realized investment losses of approximately $326,000. During 1993
and 1992, proceeds totaled $142.5 million and $251.4 million, respectively;
resulting in realized capital gains of $1.5 million and $4.9 million,
respectively. Realized losses for 1993 and 1992 were $1.8 million and $2.3
million, respectively. In addition to losses incurred in connection with the
sale of investments during 1993, the Company reduced the carrying value of a
corporate bond by $.5 million to reflect the Company's estimate of a permanent
decline in the value of this investment. At December 31, 1994, securities with a
cost of $8.8 million were on deposit with insurance regulatory authorities.

In 1990, the Company securitized pools of commercial real estate loans
owned by it in two transactions and in connection therewith sold pass-through
certificates for which an election under the real estate mortgage investment
conduit provisions ("REMIC") of the Internal Revenue Code were made. The Company
retained as an investment subordinated junior certificates in both issues, as
well as a senior certificate interest in the second issue.

Included in "Held-to-maturity," fixed maturity securities are investments
in the two REMIC's of approximately $46.6 million at December 31, 1994 and $48.9
million at December 31, 1993.

A summary of the Company's investment in the REMIC's is as follows:

<TABLE>
<CAPTION>
REMAINING
DATE OF PRINCIPAL INTEREST MATURITY
ISSUE BALANCE RATE DATE
------------- -------------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
United Companies Life
REMIC:
Series 90-1, Class B-1... Mar 29, 1990 $ 10,786 10.05% Sep 25, 2009
Series 90-2, Class A-3... Dec 18, 1990 19,937 9.88% May 25, 2000
Series 90-2, Class B-1... Dec 18, 1990 15,839 9.88% Jan 25, 2009
</TABLE>

76
<PAGE> 83

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

EQUITY SECURITIES

The net unrealized capital gains and losses on common stocks are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------------------------
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------ ---------- ---------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Trading................................ $ 656 $ 51 $ 28 $ 679
Available-for-Sale..................... 467 -- 425 42
------ --- ---- ----
Total....................... $1,123 $ 51 $453 $ 721
====== === ==== ====
</TABLE>

MORTGAGE LOANS ON REAL ESTATE

The following schedule summarizes the composition of mortgage loans on real
estate:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Residential......................................... $158,943 $263,456
Residential foreclosed.............................. 151 148
Commercial.......................................... 156,428 190,338
Commercial foreclosed............................... 19,187 18,969
-------- --------
334,709 472,911
Allowance for loan losses........................... (8,852) (9,764)
Unearned loan charges............................... (418) (592)
-------- --------
Total............................................. $325,439 $462,555
======== ========
</TABLE>

Included in the loans owned at December 31, 1994 and 1993 were nonaccrual
loans of $1.6 million and $6.1 million, respectively.

The Company provides an estimate for future credit losses in an Allowance
for Loan Losses. A summary analysis of the changes in the Company's allowance
for loan losses is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of year.................. $ 9,764 $ 8,286 $ 8,142
------- ------- -------
Loans charged to allowance.................... (5,986) (3,515) (4,731)
Recoveries on loans previously charged to
allowance................................... 15 -- --
------- ------- -------
Net loans charged off......................... (5,971) (3,515) (4,731)
Loan loss provision........................... 5,059 4,993 4,875
------- ------- -------
Balance at end of year........................ $ 8,852 $ 9,764 $ 8,286
------- ------- -------
Specific reserves............................. $ 4,084 $ 3,452 $ 3,048
Unallocated reserves.......................... 4,768 6,312 5,238
------- ------- -------
Total reserves..................... $ 8,852 $ 9,764 $ 8,286
======= ======= =======
</TABLE>

At December 31, 1994 and 1993, the Company owned $19.2 million and $18.9
million, respectively, of property acquired in settlement of loans, excluding
the specific reserves attributed to these

77
<PAGE> 84

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

properties, which is included in the Company's allowance for loan losses to
reduce the carrying value of these properties to their market value.

INVESTMENT IN LIMITED PARTNERSHIPS

Following is an analysis of the Company's investment in limited
partnerships:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year...................... $26,698 $32,824 $28,026
Contributions and capitalized costs............. 5,168 4,326 6,140
Net partnership income.......................... 1,480 2,944 2,016
Distributions................................... (6,674) (13,396) (3,358)
------- ------- -------
Balance, end of year............................ $26,672 $26,698 $32,824
======= ======= =======
</TABLE>

The limited partnerships were formed for the purpose of participating in
privately placed mezzanine investments. These investments, acquired in leveraged
investment transactions, generally include higher risk subordinated debt
combined with equity securities.

INVESTMENT INCOME

Investment income by type that exceeds five percent of total investment
income was as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturity securities.................... $ 74,443 $ 63,751 $ 48,579
Mortgage loans on real estate................ 43,269 45,369 51,323
Short-term investments....................... 1,023 1,788 6,039
All other investment income.................. 7,396 9,795 10,292
-------- -------- --------
126,131 120,703 116,233
Less: Investment expenses.................... (11,751) (11,042) (11,419)
-------- -------- --------
Net investment income............. $114,380 $109,661 $104,814
======== ======== ========
</TABLE>

78
<PAGE> 85

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

REALIZED INVESTMENT GAINS (LOSSES)

Net realized investment gains (losses) were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturity securities:
Gross gains................................. $ 303 $ 1,536 $ 4,872
Gross losses................................ (326) (1,816) (2,337)
Loss provision.............................. -- (500) --
------- -------- ------
Total fixed maturity securities.... (23) (780) 2,535
------- -------- ------
Equity securities:
Gross gains................................. -- 62 9
Gross losses................................ (8) (14,895) (87)
------- -------- ------
Total equity securities............ (8) (14,833) (78)
------- -------- ------
Mortgage loans on real estate:
Gains (losses) on sale...................... -- 1,018 3,310
Loss provision.............................. (5,059) (4,993) (4,875)
------- -------- ------
Total mortgage loans on real
estate........................... (5,059) (3,975) (1,565)
------- -------- ------
Investment real estate:
Gains (losses) on sale...................... 279 195 320
------- -------- ------
Other:
Gains (losses) on sale...................... -- -- 274
------- -------- ------
Realized investment gains
(losses)......................... $(4,811) $(19,393) $ 1,486
======= ======== ======
</TABLE>

3. PROPERTY-NET

Property is summarized as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1993
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land and buildings....................................... $30,516 $30,800
Furniture, fixtures and equipment........................ 2,084 2,041
------- -------
Total......................................... 32,600 32,841
Less accumulated depreciation............................ (9,228) (8,523)
------- -------
Total......................................... $23,372 $24,318
======= =======
</TABLE>

79
<PAGE> 86

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

Rental expense on operating leases, including real estate, computer
equipment and automobiles, totaled $.3 million, $.3 million and $.4 million
during 1994, 1993 and 1992, respectively. Minimum annual commitments under
noncancellable operating leases are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
1995..................................................... $ 445
1996..................................................... 538
1997..................................................... 532
1998..................................................... 533
1999..................................................... 514
------
Total......................................... $2,562
======
</TABLE>

4. INCOME TAXES

The provision (benefit) for income taxes attributable to operations is as
follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current......................................... $ 5,915 $(2,263) $ 4,402
Deferred........................................ (2,721) (1,844) (2,964)
------- ------- -------
Total................................ $ 3,194 $(4,107) $ 1,438
======= ======= =======
</TABLE>

Deferred income taxes attributable to operations were provided for
temporary differences as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992
--------------
(IN THOUSANDS)
<S> <C>
Reserves for future policy benefits.............................. $ (4,363)
Policy acquisition costs......................................... 335
Loan income...................................................... (60)
Accelerated depreciation......................................... 281
Loan servicing income............................................ (102)
Bond valuation adjustments....................................... 506
Other............................................................ 439
--------
Total................................................. $ (2,964)
========
</TABLE>

80
<PAGE> 87

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

Reported income tax expense attributable to operations differs from the
amount computed by applying the statutory federal income tax rate to income from
operations before income taxes for the following reasons:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income tax (benefit) at statutory rate.... $3,178 $(4,328) $1,858
Differences resulting from:
Reversal of temporary differences at prior tax
rates........................................ -- 48 26
State income taxes.............................. -- -- 170
Dividends from affiliate........................ -- -- (561)
Other........................................... 16 173 (55)
------ ------- ------
Reported income tax provision (benefit)........... $3,194 $(4,107) $1,438
====== ======= ======
</TABLE>

The significant components of the Company's net deferred income tax benefit
and liability are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-------------------
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax benefit:
Policy reserves....................................... $ 21,457 $16,166
Investment securities................................. 27,263 1,137
Loan income........................................... 1,956 2,355
Other................................................. 4 5
-------- -------
Total........................................ $ 50,680 $19,663
-------- -------
Deferred income tax liabilities:
Real estate........................................... $ 3,926 $ 3,675
Deferred policy acquisition costs..................... 29,626 26,800
-------- -------
Total........................................ $ 33,552 $30,475
-------- -------
Net deferred income tax (benefit) liability............. $(17,128) $10,812
======== =======
</TABLE>

Payments made for income taxes during the years ended December 31, 1994,
1993 and 1992 were $1.4 million, $.6 million and $4.2 million, respectively.

Retained earnings at December 31, 1994 include approximately $5.2 million
of "Policyholders' Surplus" on which no federal income tax payment will be
required unless it is distributed as a dividend or exceeds the limits prescribed
by tax laws applicable to life insurance companies. A deferred income tax
liability has not been recognized for this amount. The maximum federal income
tax provision possibly required based on the current federal income tax rate
would be $1.8 million.

The Company had a current income tax payable in the amount of $1.7 million
at December 31, 1994, which is included in "Other liabilities;" and a $2.8
million current income tax receivable at December 31, 1993, which is included in
"Other assets."

5. TRANSACTIONS WITH AFFILIATES

The Company has an agreement with UCLC to purchase qualifying residential
home equity mortgage loans originated or purchased and underwritten by UCLC.
These loans are usually held three to six months

81
<PAGE> 88

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

until resold to UCLC for sale by UCLC in loan securitizations. Also, under an
agreement, UCLC is obligated to repurchase these home-equity loans previously
sold to the Company when such loans are foreclosed upon. At December 31, 1994,
approximately $136.5 million of home-equity loans originated by UCLC were owned
by the Company. During the years ended December 31, 1994, 1993 and 1992 the
Company purchased home-equity loans of approximately $893.0 million, $569.9
million and $310.0 million, respectively, from UCLC. Sales of these home-equity
loans to UCLC by the Company were $932.7 million in 1994, $457.3 million in
1993, and $323.7 million in 1992. No gain or loss was recorded by the Company in
these transactions.

As of December 31, 1994, 1993 and 1992 UCLC serviced loans owned by UCLIC
having aggregate unpaid principal balances of approximately $296.9 million,
$338.7 million and $376.5 million, respectively. The Company paid servicing fees
relative to these loans of approximately $1.1 million in 1994, $1.3 million in
1993 and $1.4 million in 1992.

The Company leases Home Office space to its Parent and other affiliates.
Rent income attributable to these affiliates was approximately $1.0 million in
each of the years ended December 31, 1994, 1993 and 1992.

United Companies Realty and Development ("UCRD"), an affiliate, managed the
Company's Home Office buildings under a real estate management contract in 1994
and 1993. The Company paid approximately $306,000 and $312,000 to UCRD in
management fees in 1994 and 1993, respectively.

The Company is allocated certain costs from its Parent and affiliates under
a cost sharing agreement. Amounts allocated to the Company from UCFC and
affiliates were as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1993 1992
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Personnel expense.................................. $1,776 $ 937 $1,176
Data processing expenses........................... (271) 226 1,091
Other operating expenses........................... 1,803 1,226 867
------ ------ ------
Total................................... $3,308 $2,389 $3,134
====== ====== ======
</TABLE>

During 1993 the Company assumed responsibility for the data processing
operations. Therefore, by 1994 its data processing expenses became almost
entirely direct expenses, whereas, in 1992 they were all allocated.

In May 1993, the Company purchased three subordinated debentures from UCLC.
Listed below is summarized information on the subordinated debentures that were
issued by UCLC:

<TABLE>
<CAPTION>
DATE OF PRINCIPAL INTEREST MATURITY
SERIES ISSUE BALANCE RATE DATE
- ------ ------------- ----------- -------- -------------
<S> <C> <C> <C> <C>
A-1 May 14, 1993 $ 3,000,000 6.05% May 20, 1998
B May 14, 1993 3,000,000 6.64% May 20, 2000
C May 14, 1993 4,000,000 7.18% May 20, 2003
-----------
Total $10,000,000
===========
</TABLE>

Interest income received from UCLC with respect to those subordinated
debentures totaled approximately $668,000 and $345,000 during 1994 and 1993,
respectively. All principal is payable upon maturity.

The Company is a participant in UCFC's consolidated income tax agreement.
See Note 1.

82
<PAGE> 89

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

6. EMPLOYEE BENEFIT PLANS

All employees who meet minimum age and service requirements participate in
UCFC's Employee Stock Ownership Plan ("ESOP"). Under the ESOP, UCFC makes tax
deductible contributions of its common stock (or cash which is used to purchase
its common stock or to repay debt used by the ESOP to purchase such stock) to a
trust for the benefit of participating employees. Contributions are allocated
among participants based on years of service and compensation. Upon retirement,
death or disability, the employee or a beneficiary receives the designated
common stock.

Contributions to the ESOP are determined on an annual basis. The Company's
contributions to the ESOP were $189,000, $74,000 and $58,000 for the years ended
December 31, 1994, 1993 and 1992, respectively.

Eligible employees may elect to participate in the UCFC Employees' Savings
Plan and Trust which is designed to be a qualified plan under Sections 401(a)
and 401(k) of the Internal Revenue Code. Under the plan, employees are allowed
to defer income on a pre-tax basis through contributions to the plan and the
Company matches a portion of such contributions. The Company's matching
contributions totaled $138,000, $49,000 and $47,000 during 1994, 1993 and 1992,
respectively. Employees have five investment options, one of which is to invest
in the Parent's common stock.

7. REGULATORY ACCOUNTING

Accounting records of the Company are also maintained in accordance with
practices prescribed or authorized by insurance regulatory authorities.
Prescribed statutory accounting principles include a variety of publications of
the National Association of Insurance Commissioners, as well as state laws,
regulations, and general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed. The Company's
capital and surplus pursuant to the regulatory accounting basis as of December
31, 1994 and 1993 was $90.0 million and $84.8 million, respectively. On a
regulatory accounting basis, net gain from operations for the years ended
December 31, 1994, 1993 and 1992 was $9.7 million, $13.0 million, and $14.0
million, respectively. Net income (loss) on a regulatory accounting basis, which
includes realized capital gains and losses, was $5.8 million, $(1.7) million,
and $11.0 million for the years ended December 31, 1994, 1993 and 1992,
respectively. As a Louisiana domiciled insurance company, the Company is subject
to certain regulatory restrictions on the payment of dividends. At December 31,
1994, dividends of $8.2 million may be paid without prior regulatory approval.
The Company did not pay any dividends during 1992, 1993 or 1994 in order to
retain capital.

The Company received written approval from the Louisiana Department of
Insurance to invest in first lien residential mortgage loans originated by UCLC
on a short-term basis without recording the assignment of the mortgage loans to
the Company, which differs from prescribed statutory accounting practices.
Statutory accounting practices prescribed by the State of Louisiana require that
investments in mortgage loans be secured by unrestricted first liens on the
underlying property. As of December 31, 1994, statutory surplus was increased by
approximately $46 million as a result of this permitted practice.

8. DISCLOSURE ABOUT FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107 ("SFAS 107") requires
that the Company disclose the estimated fair values of its financial
instruments, both assets and liabilities recognized and not recognized in its
financial statements.

SFAS 107 defines financial instruments as cash and contractual rights and
obligations that require settlement in cash or by exchange of financial
instruments. Fair value is defined as the amount at which the

83
<PAGE> 90

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

instrument could be exchanged in a current transaction between willing parties
other than in a forced or liquidation sale.

The carrying value and fair value of the Company's financial assets and
liabilities were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1994
------------------------
CARRYING FAIR
VALUE VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
Financial assets:
Investments:
Fixed maturity securities:
Available-for-sale......................... $ 959,857 $ 959,857
Held-to-maturity........................... 57,391 55,085
Equity securities:
Trading.................................... 679 679
Available-for-sale......................... 42 42
Mortgage loans on real estate................. 325,439 322,954
Policy loans.................................. 20,243 20,243
Investment in limited partnership............. 26,672 26,672
Short-term investments........................ 54,664 54,664
Cash.......................................... 13,169 13,169
Financial liabilities:
Annuity reserves................................. 1,425,973 1,354,944
Other liabilities................................ 9,010 9,010
</TABLE>

The above values do not reflect any premium or discount from offering for
sale at one time the Company's entire holdings of a particular financial
instrument. Fair value estimates are made at a specific point in time based on
relevant market information, if available. Because no market exists for certain
of the Company's financial instruments, fair value estimates for these assets
and liabilities were based on subjective estimates of market conditions and
perceived risks of the financial instruments. Fair value estimates were also
based on judgments regarding future loss and prepayment experience and were
influenced by the Company's historical information.

The following methods and assumptions were used to estimate the fair value
of the Company's financial instruments.

INVESTMENTS

FIXED MATURITY AND EQUITY SECURITIES

The estimated fair value for the Company's investment portfolio was
generally determined from quoted market prices for publicly traded securities.
Certain of the securities owned by the Company may trade infrequently or not at
all; therefore, fair value for these securities was determined by management by
evaluating the relationship between quoted market values and carrying value and
assigning a liquidity factor to this segment of the investment portfolio.

MORTGAGE LOANS ON REAL ESTATE

The fair value of the Company's loan portfolio was determined by
segregating the portfolio by type of loan and further by its performing and
non-performing components. Performing loans were further segregated based on the
due date of their payments, an analysis of credit risk by category was performed

84
<PAGE> 91

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

and a matrix of pricing by category was developed. Loans which had been
identified for sale were valued at their estimated sales price, which includes
the estimated value of the portion of the interest and fees which are not sold
with the securities backed by the loans. Loans which were current but not
identified for sale were valued at remaining principal balance which is believed
to represent an estimate of market discount from similar loans identified for
sale. The fair value of delinquent loans was estimated by using the Company's
historical recoverable amount on defaulted loans.

POLICY LOANS

Policy loans are generally settled at the loan amount plus accrued
interest; therefore, the carrying value of these assets is a reasonable estimate
of their fair values.

SHORT-TERM INVESTMENTS

The carrying amount of short-term investments approximates their fair
values because these assets generally mature in 90 days or less and do not
present any significant credit concerns.

INVESTMENT IN LIMITED PARTNERSHIPS

The fair value of the Company's investment in limited partnerships
approximated their carrying value at December 31, 1994.

ANNUITY RESERVE

The Company's annuity contracts generally do not have a defined maturity
and are considered as deposits under SFAS 97. SFAS 107 states that the fair
value to be disclosed for deposit liabilities with no defined maturities is the
amount payable on demand at the reporting date. Accordingly, the Company has
estimated the fair value of its annuity reserves as the cash surrender value of
these contracts at December 31, 1994.

OTHER LIABILITIES

Other liabilities are comprised primarily of accrued interest payable and
current income taxes payable. In estimating the fair value of these assets and
liabilities, the Company scheduled the timing of their estimated cash flows and
discounted these cash flows based on a market rate of interest.

85
<PAGE> 92

UNITED COMPANIES LIFE INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

9. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial date is as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1994
Total Revenues................... $ 32,806 $34,512 $35,554 $ 34,880
Income from operations before
income taxes................... 1,579 2,925 2,703 1,873
Net income....................... 1,024 1,897 1,753 1,212
-------- ------- ------- -------
1993
Total revenues................... $ 20,459 $34,695 $34,440 $ 35,393
Income from operations before
income taxes................... (15,493) (878) 1,829 2,177
Net income (loss)................ (10,227) (613) 1,121 1,461
======== ======= ======= =======
</TABLE>

The loss from operations before income taxes in the quarter ended March 31,
1993, included a $15.0 million realized loss on the disposal of Foster Mortgage
preferred stock.

10. CONTINGENCIES

86
<PAGE> 93

FINANCIAL STATEMENT SCHEDULES

87
<PAGE> 94

SCHEDULE I

UNITED COMPANIES LIFE INSURANCE COMPANY

SUMMARY OF INVESTMENTS
DECEMBER 31, 1994

<TABLE>
<CAPTION>
AMOUNT SHOWN
TYPE OF INVESTMENT COST VALUE ON BALANCE SHEET
- ----------------------------------------------- --------- --------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturity securities available for sale:
U.S. Government and agencies and
authorities............................... $ 706,815 $ 652,102 $ 652,102
Municipal.................................... 425 438 438
Foreign...................................... 18,433 18,020 18,020
Public utilities............................. 18,678 18,039 18,039
All other corporate bonds.................... 287,135 271,258 271,258
---------- ---------- ----------
Total fixed maturity securities
available
for sale.......................... $1,031,486 $ 959,857 $ 959,857
---------- ---------- ----------
Fixed maturity securities held to maturity:
All other corporate bonds.................... 57,391 55,085 57,391
---------- ---------- ----------
Total fixed maturity securities..... $1,088,877 $1,014,942 $1,017,248
---------- ---------- ----------
Equity securities:
Common stocks
Banks, trust and insurance companies...... $ 19 $ 17 $ 17
Industrial and miscellaneous.............. 1,104 704 704
---------- ---------- ----------
Total equity securities............. $ 1,123 $ 721 $ 721
---------- ---------- ----------
Mortgage loans on real estate.................. $ 325,439 XXXXXX $ 325,439
Policy loans................................... $ 20,243 XXXXXX $ 20,243
Other long-term investments.................... $ 26,672 XXXXXX $ 26,672
Short-term investments......................... $ 54,664 XXXXXX $ 54,664
---------- ---------- ----------
Total investments................... $1,517,018 XXXXXX $1,444,987
========== ========== ==========
</TABLE>

S-1
<PAGE> 95

SCHEDULE III

UNITED COMPANIES LIFE INSURANCE COMPANY

SUPPLEMENTARY INSURANCE INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
COLUMN B COLUMN C COLUMN D COLUMN F COLUMN G COLUMN H COLUMN I & J
--------- ------------- --------- --------- -------------- -------- ----------------
DEFERRED POLICY
DEFERRED BENEFITS, ACQUISITION COST
POLICY CLAIMS, AMORTIZATION AND
ACQUISITION FUTURE POLICY UNEARNED PREMIUM NET INVESTMENT LOSSES, OTHER OPERATING
COLUMN A COSTS BENEFITS(1) PREMIUMS REVENUES(3) INCOME ETC. EXPENSES
-------- --------- ------------- --------- --------- -------------- -------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31,
1994....................... $91,915 $ 1,542,474 $ 4,491 $11,373 $114,380 $12,654 $25,815
Year ended December 31,
1993....................... $83,495 $ 1,418,311 $10,260 $18,684 $109,661 $18,200 $23,915
Year ended December 31,
1992....................... $80,007 $ 1,272,732 $17,138 $22,860 $104,814 $20,843 $21,553
</TABLE>

NOTES:

(1) Column C includes accumulated fund values on annuity and interest sensitive
products.

(2) Column E is omitted as amounts are not material and are included with Column
C.

(3) Column F excludes premiums on annuity and interest sensitive products which
are accounted for as deposits.

(4) Column I and J are combined as actuarial method employed to determine
Deferred Policy Acquisition Cost provides only the net asset change for the
period.

S-2
<PAGE> 96

SCHEDULE IV

UNITED COMPANIES LIFE INSURANCE COMPANY

REINSURANCE
FOR THE THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
COLUMN F
----------
PERCENTAGE
COLUMN D OF
COLUMN C --------- AMOUNT
COLUMN B -------- ASSUMED COLUMN E ASSUMED
--------- CEDED TO FROM --------- TO
DIRECT OTHER OTHER NET NET
COLUMN A AMOUNT COMPANIES COMPANIES AMOUNT AMOUNT
- ----------------------------------- --------- -------- --------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1994
Life insurance in force.......... $ 709,883 $177,585 $1,106,148 $1,638,446 67.5%
--------- -------- ---------- ----------
Premiums
Life insurance................ $ 7,467 $ 1,931 $ 2,959 $ 8,495 34.8%
Accident and health
insurance.................. 3,070 199 7 2,878 0.2%
--------- -------- ---------- ---------- ----
Total premiums.......... $ 10,537 $ 2,130 $ 2,966 $ 11,373 26.1%
--------- -------- ---------- ---------- ----
December 31, 1993
Life insurance in force.......... $ 956,788 $215,917 $1,106,721 $1,847,591 59.9%
--------- -------- ---------- ----------
Premiums
Life insurance................ $ 12,260 $ 2,672 $ 2,893 $ 12,481 23.2%
Accident and health
insurance.................. 6,418 214 (1) 6,203 --
--------- -------- ---------- ---------- ----
Total premiums.......... $ 18,678 $ 2,886 $ 2,892 $ 18,684 15.5%
--------- -------- ---------- ---------- ----
December 31, 1992
Life insurance in force.......... $1,220,191 $267,942 $ 963,449 $1,915,698 50.3%
--------- -------- ---------- ----------
Premiums
Life insurance................ $ 18,437 $ 4,761 $ 2,468 $ 16,144 15.3%
Accident and health
insurance.................. 6,942 204 (22) 6,716 --
--------- -------- ---------- ---------- ----
Total premiums.......... $ 25,379 $ 4,965 $ 2,446 $ 22,860 10.7%
========= ======== ========== ========== ====
</TABLE>

S-3
<PAGE> 97

SCHEDULE V

UNITED COMPANIES LIFE INSURANCE COMPANY

VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
COLUMN C COLUMN D
COLUMN B ADDITIONS DEDUCTIONS(2) COLUMN E(3)
-------- ----------------------- ------------- -----------
BALANCE CHARGED
AT TO COSTS CHARGED BALANCE AT
BEGINNING AND TO OTHER END
COLUMN A OF YEAR EXPENSES ACCOUNTS(1) OF YEAR
- -------------------------------- -------- -------- ----------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1994
Allowance for loan losses..... $ 9,764 $ (912) $ -- $ -- $ 8,852
Allowance for bond losses..... 500 -- -- 500 --
Unearned loan charges......... 592 -- -- 174 418
------- ------- ------- ------- -------
Total................ $10,856 $ (912) $ -- $ 674 $ 9,270
------- ------ ------- ------- -------
December 31, 1993
Allowance for loan losses..... $ 8,286 $ 1,478 $ -- $ -- $ 9,764
Allowance for bond losses..... -- 500 -- -- 500
Unearned loan charges......... 764 -- -- 172 592
------- ------- ------- ------- -------
Total................ $ 9,050 $ 1,978 $ -- $ 172 $10,856
------- ------- ------- ------- -------
December 31, 1992
Allowance for loan losses..... $ 8,142 $ 144 $ -- $ -- $ 8,286
Allowance for bond losses..... 3,000 -- -- 3,000 --
Unearned loan charges......... 1,269 -- -- 505 764
------- ------- ------- ------- -------
Total................ $12,411 $ 144 $ -- $ 3,505 $ 9,050
======= ======= ======= ======= =======
</TABLE>

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

NOTES:

(1) Represents the approximate amount of unearned loan charges on installment
loans originated during the period.

(2) Represents loans and bonds charged off and loan charges earned during the
period.

(3) All of the above are deducted in the balance sheet from the asset to which
they apply.

S-4
<PAGE> 98

TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
Company............................................................................ 3
Experts............................................................................ 3
Legal Opinions..................................................................... 3
Distributor........................................................................ 3
Yield Calculation for Money Market Sub-Account..................................... 3
Performance Information............................................................ 4
Annuity Provisions................................................................. 5
Financial Statements............................................................... 6
</TABLE>

S-5
<PAGE> 99

APPENDIX

EXAMPLES OF APPLICATION OF MARKET VALUE ADJUSTMENT

The MVA Account currently offers the following Guarantee Periods: 3 years,
5 years, and 7 years.

Each subsequent Purchase Payment and transfer into the MVA Account will be
allocated to a new Guarantee Period with a new Effective Date specified and a
Guaranteed Interest Rate. These new Guarantee Period Account(s) will count
toward the ten investment option limit.

Contingent Deferred Sales Charges are calculated before the imposition of
any Market Value Adjustment.

Any Free Withdrawal is allocated on a pro-rata basis between all investment
options (Fixed, MVA or Separate Account) affected by the withdrawal. In the
event of a full withdrawal, the Free Withdrawal provision is not available.

The Market Value Adjustment Factor is:

n/12
(1 + i)
[ -------------- ] - 1
(1 + j + .005)

where:

<TABLE>
<C> <S>
i = Current Interest Rate credited to the Owner's Contract Value or
the Certificate Holder's Account Value allocated to a Guarantee
Period as of the beginning of the Guarantee Period.
j = Current Interpolated U.S. Constant Maturity Treasury Rate ("CITR")
for the time remaining in the current Guarantee Period plus the
difference between i and the corresponding CITR rate at time of
purchase.
n = Number of full months remaining in the Guarantee Period.
</TABLE>

The examples below assume the following:

<TABLE>
<C> <S>
1. An initial Purchase Payment of $10,000.00 is allocated to the
7-Year MVA Account on January 1, 1995.
2. The Guaranteed Interest Rate on the 7-Year Guarantee Period was
10%.
3. On January 1, 1995, the 7-Year Treasury Rate was 9%.
4. On April 7, 1998, the following Treasury Rates were in effect:
1-Year Treasury................................. 6%
3-Year Treasury................................. 8%
5-Year Treasury................................. 9%
7-Year Treasury................................. 10%
5. No additional Purchase Payments were made and there were no
partial withdrawals or transfers.
</TABLE>

EXAMPLE 1:

Assume there is a complete withdrawal on April 7, 1998 and the Account
Value is $13,651.43.

The Contingent Deferred Sales Charge (CDSC) applicable on April 7, 1998 is
4%. (See "Charges and Deductions -- Deduction for Contingent Deferred Sales
Charge.") The dollar amount of the CDSC is $400.

A-1
<PAGE> 100

The MVA Factor is calculated as follows:

<TABLE>
<S> <C> <C> <C>
n/12
(1 + i)
[ -------------- ] - 1
(1 + j + .005)

where i = .10

n = 44

j = (CITR + (Guaranteed Interest Rate at Issue -- Corresponding
Treasury Rate at Issue))

CITR = ((44 - 36)X.09) + ((60 - 44)X.08) = .0833333
------------------------------------
(60 - 36)

MVA FACTOR = (1 + .10) 44/12
[ ------------------------------------------ ]
(1 + (.0833333 + (.10 - .09) + .005) - 1 = +.005575

</TABLE>

The Withdrawal Value = Account Value + (MVA Adjustment X Account Value) -
CDSC

Withdrawal Value = $13,651.43 + ($13,651.43 X .005575) - $400 = $13,327.54

EXAMPLE 2:

Assume the same facts as above except there is a partial withdrawal on
April 7, 1998 of $5,000.00.

The Contingent Deferred Sales Charge (CDSC) applicable on April 7, 1998 is
4%. (See "Charges and Deductions -- Deduction for Contingent Deferred Sales
Charge.") The dollar amount of the CDSC for a complete withdrawal is $400.
Because this is a partial withdrawal, a portion can be withdrawn without the
imposition of the CDSC (Free Withdrawal). (See "Charges and
Deductions -- Deduction for Contingent Deferred Sales Charge -- Free
Withdrawal.") The Free Withdrawal amount is measured at the beginning of the
Contract/Certificate Year as the greater of the earnings in the Account or 10%
of Purchase Payments.

The MVA Factor will be the same as in Example 1, i.e. + .005575.

The Free Withdrawal for 1998 is the larger of the following:
$13,313.48 - $10,000.00 = $3,313.48
10% X $10,000.00 = $1,000.00

Therefore, the Free Withdrawal Amount is $3,313.48.

The Amount of the CDSC = ($5,000.00 - $3,313.48) X .04 = $67.46

The Withdrawal Value = Amount of Withdrawal + (MVA Adjustment X Amount of
Withdrawal) - CDSC

= $5,000 + (.005575 X $5,000) - $67.46

= $4,960.42

A-2