Life and health insurance industry premiums, including annuities, in the United States exceeded $500 billion for the year 2002, with approximately $200 billion of statutory equity capital for the year 2002 according to A.M. Best's Aggregates & Averages Life-Health Report—2003 Edition. Industry participants include large national and international insurers as well as small and medium-sized insurers with varying levels of geographic coverage and/or product lines. Industry participants also include divisions of multi-line insurance carriers, whose operations may include property and casualty insurance, financial guaranty insurance and other specialty insurance lines. Within the overall life and health insurance industry, the worksite marketing segment was estimated by Eastbridge Consulting Group, Inc., to produce over $14 billion of annual voluntary premiums in 2003 in addition to over $100 billion of group annual life and health premiums for 2002, as reported by the American Council of Life Insurers 2003 Fact Book. This segment of the life and health insurance business includes a number of insurers, some of which target only the worksite marketing segment of the industry and some of which offer varying levels of group and individual life, disability, annuity and health products to the employer market while also targeting various other market segments.

Most of the insurance products offered by Kanawha's worksite insurance business are underwritten by Kanawha and the primary underwriting risk under the policies is retained by Kanawha. Some of the insurance products marketed by Kanawha are underwritten by other insurance companies who retain the underwriting risk. The Company refers to insurance products underwritten by other carriers, but sold by Kanawha, as in-sourced products. Kanawha's worksite insurance business is licensed to offer group and individual life and health insurance products in 45 states.

Individual life insurance insures the life of a single individual. It is typically sold on a renewable term basis or with a cash value component such as whole life insurance.

Total revenues for the three months ended March 31, 2004, were $35.0 million, which represented no change from $35.0 million for the three months ended March 31, 2003.

Net premiums decreased $0.1 million, or 0.4%, to $25.3 million for the three months ended March 31, 2004, from $25.4 million for the three months ended March 31, 2003.

Net investment income declined $1.3 million, or 19.4%, to $5.4 million for the three months ended March 31, 2004, from $6.7 million for the three months ended March 31, 2003.