As a result of a provisional settlement agreement dated October 8, 2004 relating to pending litigation brought against an insurance subsidiary of the Company by a class of policyholders (the “Settlement Agreement”), the Company will recognize as of September 30, 2004 an obligation for future payments to the policyholders and their attorneys totaling $825,000.

The terms of the Settlement Agreement are subject to the approval of the court in which the action is pending. The court has scheduled a hearing on the issue of approval for January 24, 2005, following notice to members of the class, who will be afforded the opportunity to argue in support of or opposition to the Settlement Agreement. Accordingly, this description is subject to change depending upon the outcome of the January hearing.

United Liberty Life Insurance Company, which the Company acquired in 1998, has been defending an action in an Ohio state court brought by two policyholders in 2000. The Complaint in the action referred to a particular class of life insurance policies, including related certificates of participation, that United Liberty issued over a period of years ending around 1971 (known as “Five Star Policies”). It alleged that United Liberty’s dividend payments on these policies from 1993 through 1999 were less than the amounts required by the certificates of participation. It did not specify the amount of the alleged underpayment but implied a maximum of about $850,000. The plaintiffs also alleged that United Liberty is liable to pay punitive damages, also in an unspecified amount, for breach of an implied covenant of good faith and fair dealing to the plaintiffs in relation to the dividends. The action has been certified as a class action on behalf of all policyholders who were Ohio residents and whose policies were still in force in 1993. United Liberty denied the material allegations of the Complaint and has defended the action vigorously.

The Settlement Agreement, if approved, will resolve all issues in the action.

Nature and Terms of the Financial Obligation Recognized

The $825,000 obligation for future payments consists of [i] up to $500,000 payable to all persons who owned Five Star Policies that were still in force in 1993, [ii] $315,000 in attorneys’ fees payable to counsel for the class and [iii] a $10,000 incentive award payable to the lead plaintiffs for the class.

The attorneys’ fees and incentive award are also payable by the Initial Payment Date.

Other Financial Statement Effects of the Settlement Agreement

The Company will recognize expense associated with the Settlement Agreement equal to the dividend reimbursement, attorneys’ fees and incentive award described above, for the same total of $825,000. The Settlement Agreement also provides that the Company will have no further obligation to pay dividends on the Five Star Policies of the kind that gave rise to the litigation. This change will permit the Company to reduce the reserves it will be required to maintain for the Five Star Policies to extent they remain in force by an amount exceeding $825,000. However, the Company would incur surrender expense in respect of any policyholders who elect to surrender their Five Star Policies and accept the related surrender payments.¹ The Company currently estimates that the reserve reduction net of any surrender payments will exceed the $825,000 expense so long as the rate of surrenders does not exceed about 20%. The Company will complete its determination of appropriate estimates of these amount by the time it files its Form 10-Q for the quarter ended September 30, 2004, due by November 14, 2004.

The Settlement Agreement will settle the claims of all holders of the Five Star Policies, wherever they reside, and will release the Company and its

subsidiaries from all liability, including any liability for punitive or exemplary damages.

Forward Looking Statements

Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These statements involve uncertainties and are based on management’s current expectations. Actual results could differ materially from those described in the forward-looking statements. For additional information, see Company’s Form 10-Q for the quarter ended September 30, 2004, expected to be filed on or before November 14, 2004.