credited to his or her account. Any such withdrawal, however, typically is subject to a surrender charge during the early years of the annuity contract.

All of the Insurance Company’s deferred annuity products provide minimum interest rate guarantees. These minimum guaranteed rates range from 3.0% to 5.5% annually and the contracts (except for immediate contracts) are designed to permit the Insurance Company to change the crediting rates annually after the initial guarantee period subject to the minimum guarantee rate. The Insurance Company takes into account the profitability of its annuity business and its relative competitive position in the marketplace in determining the frequency and extent of changes to the interest-crediting rate.

The Insurance Company’s deferred annuity products are designed to encourage persistency by incorporating surrender charges that exceed the cost of issuing the policy. An annuitant may not terminate or withdraw substantial funds for periods generally ranging from one to seven years after purchase of the annuity without incurring significant penalties in the form of surrender charges. As of December 31, 2004, approximately 73.6% of the Insurance Company’s deferred annuity contracts inforce (measured by reserves) are subject to surrender charges.

Single Premium Immediate Productsguarantee a stream of payments, which begin immediately and continue for the life of the annuitant (known as an immediate annuity) or for a specified period of time (known as immediate income annuity). In an immediate annuity, the payment may be guaranteed for a period of time (typically five to twenty years). If the annuitant dies during the guarantee period, payments will continue to be made to the annuitant’s beneficiary for the balance of the guarantee period. Immediate annuities differ from deferred annuities in that they generally provide for payments that begin immediately and are not subject to surrender or loan. The implicit interest rate on immediate annuities is based on market conditions that exist at the time the annuity is issued and is guaranteed for the term of the annuity.

Other Annuity Productsinclude Structured Settlement Annuities, Flexible Premium Annuities, and Group Terminal Funding Annuities. Structured Settlement Annuities provide an alternative to a lump-sum payment or settlement in the case of a lottery or a personal injury case, as the case may be, and generally are purchased by state lottery agencies for the benefit of the lottery winner or by the property and casualty insurance companies for the benefit of the injured claimant with the benefits scheduled over a fixed period and/or for the life of the annuitant. Flexible annuity products provide similar benefits to those provided by the Insurance Company’s SPDA products, but instead permit periodic premium payments in such amounts as the holder deems appropriate. Group Terminal Funding Annuity products provide benefits similar to single premium immediate annuities. Benefits are provided to employees when a company’s pension plan is terminated or when the owner wants to transfer liability for making payments.

The following table presents annuity products in force measured by reserves, as well as certain statistical data for each of the years in the five fiscal year period ended December 31, 2004, in each case, as determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

ANNUITIES IN FORCE AS OF DECEMBER 31 FOR THE FOLLOWING YEARS

		2004	2003	2002	2001	2000
	(dollars in thousands)
Single Premium
Deferred		$ 2,597,436	$ 2,423,796	$ 2,256,448	$ 1,592,890	$ 1,095,860
Immediate		686,054	700,727	701,024	605,214	464,794
Other Annuities		433,886	434,723	429,228	420,585	417,617
Total Annuities		$ 3,717,376	$ 3,559,246	$ 3,386,700	$ 2,618,689	$ 1,978,271


Number of annuity contracts in force		77,100	75,217	72,089	56,104	45,056

Average size of annuity contract in force		$ 48.2	$ 47.3	$ 47.0	$ 46.7	$ 43.9

Ratio of surrenders and withdrawals to mean surrenderable annuities in force		4.5%	4.2%	4.1%	5.1%	10.0%

Insurance Policies Inforce – The following table sets forth universal, whole and term life insurance policies inforce, as well as, certain statistical data for each of the five years ended December 31, 2004.

LIFE INSURANCE INFORCE

		2004	2003	2002	2001	2000
	(dollars in thousands)
Beginning of year:
Universal		$ 474,888	$ 444,200	$ 385,857	$ 370,393	$ 368,424
Whole <F1>		136,744	146,359	151,596	167,214	192,803
Term		731,879	562,363	402,443	297,037	191,185
Total		$ 1,343,511	$ 1,152,922	$ 939,896	$ 834,644	$ 752,412

Sales and additions:
Universal		7,007	54,665	26,718	33,878	30,119
Whole <F1>		43,665	25,803	72,217	20,784	22,102
Term		85,507	233,362	216,116	150,869	139,920
Total		136,179	313,830	315,051	205,531	192,141

Terminations:
Death		9,291	10,401	8,289	7,467	8,129
Surrenders and conversions		24,310	32,196	16,898	19,299	28,159
Lapses		86,079	75,039	73,237	70,192	68,237
Other		5,593	5,605	3,601	3,321	5,384
Total		125,273	123,241	102,025	100,279	109,909

End of year:
Universal		459,744	474,888	444,200	385,857	370,393
Whole<F1>		146,604	136,744	146,359	151,596	167,214
Term		748,069	731,879	562,363	402,443	297,037
Total		$ 1,354,417	$ 1,343,511	$ 1,152,922	$ 939,896	$ 834,644

Total reinsurance ceded		$ 868,321	$ 859,249	$ 706,667	$ 550,194	$ 478,976

Total insurance inforce at end of year net of reinsurance		$ 486,096	$ 484,262	$ 446,255	$ 389,702	$ 355,668

<F1> Includes graded benefit life insurance products

Accident and Health

New York Statutory Disability Benefits, (“DBL”) are short-term disability contracts issued to employers of one or more employees in New York State. The benefit must be equal, in every respect, to the minimum benefits defined in the New York Disability Benefits Law. The minimum benefit allowed is 50% of the weekly earnings to a maximum of $170 commencing on the 8^th day of non-occupation disabilities for a maximum of 26 weeks for any one disability. With few exceptions, employers are required to provide this coverage to their New York employees.

Medical Stop Loss Coverage is sold to employers (not individual employees) to cover their liabilities as incurred in the administration of self-funded medical plans. These are plans that come under ERISA. The employer does not buy a full-insured plan from a carrier, but instead opts to pay the benefits for its medical plan itself. The parameters of these benefits are spelled out in a Plan Document that is disseminated to employees. The employer then purchases Stop Loss coverage to insure it against claims in excess of contractually designated amounts.

The coverage purchased by the employer will typically cover two types of risks to the self-funded plan:

The risk that a claim on an individual employee exceeds a certain level, usually called the specific deductible or self-insured retention. This is known as specific stop-loss coverage. This level is usually defined in terms of dollars on a particular life. For example, the specific deductible may be $50,000 of claims paid by the plan on any one life.

The risk that the overall claims for the plan (less whatever amount is covered under the specific deductible) exceeds a given level. This is called Aggregate Stop Loss. The given level is usually called the aggregate attachment point. It is typically defined by first computing the level of claims the insurer expects to occur in the given period. To this amount is added a “corridor” or margin amount, which is typically 25%. The aggregate cover would then reimburse all claims that exceed 125% of expected claims, exclusive of those claims reimbursed under the specific cover.

Both types of plans generally have a maximum reimbursement level. For specific claims, this generally ranges from $1 million to $2 million. For aggregate claims, the coverage is generally $1 million. Sometimes, the specific coverage is sold without the aggregate coverage. The reverse is almost never sold.

One key aspect of stop-loss coverage is that reimbursement is made to the plan, not to the individual participants. The participants’ medical expenses are paid by the plan. Stop Loss is insurance of the plan. As such, only expenses covered under the plan and that are spelled out in the Plan Document, are covered.

The Central National Life Insurance Company of Omaha

On December 29, 1999, the Corporation purchased Central National Life Insurance Company of Omaha (“CNL”) from the Household Insurance Group Holding Company, a subsidiary of Household International, Inc. In June 2002, the ownership of CNL was transferred by the Corporation to the Insurance Company as a capital contribution and, as a result, CNL is now a wholly owned subsidiary of the Insurance Company.

CNL has assets of $15.1 million and capital and surplus of $14.8 million as of December 31, 2004 and is licensed to market insurance products in 49 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. As of December 31, 2004, CNL had an aggregate of approximately $16.2 million of policies in force, comprised of credit life, credit accident and health, life insurance and annuities. The CNL policies are managed for the Insurance Company by Household Life Insurance Company, with whom all of the policies are fully reinsured.

Marketing and Distribution

The Insurance Company and CNL are licensed to market insurance products in 49 states and the District of Columbia. The Insurance Company distributes its annuity contracts and life insurance policies (products) through 909 independent General Agents (313 of which are located in New York State). These General Agents, in turn, distribute the Insurance Company’s products through their 21,241 licensed insurance agents or brokers most of whom also distribute similar products marketed by other insurance companies. Management believes the Insurance Company offers innovative products and quality service and that its product commission rates are competitive. The New York State Department of Insurance (NYSID) regulates General Agent commission rates.

The independent General Agent system is the Insurance Company’s primary product distribution system. Management believes the Insurance Company’s focus on the General Agent distribution system provides cost advantages since the Insurance Company incurs minimal fixed costs associated with recruiting, training and maintaining agents via their General Agents. Therefore, a substantial portion of the costs normally associated with product distribution is variable. Distribution costs rise and fall with the level of business.

The Insurance Company utilizes many General Agents to distribute its products and therefore, is not dependent on any one General Agent or agent for a substantial amount of its business. On the other hand, independent General Agents and agents are not captive to the Company. Management believes that interest crediting rates, General Agent product commission levels, annuity and life product features, company support services and perceived company financial stability help determine our competitive nature at any given point in time and influence General Agents and their agents to distribute our products. Generally, the Insurance Company issues annuity contracts along with the General Agent’s commission within two business days after application receipt. The Insurance Company also provides General Agent support by providing direct access to the Insurance Company’s senior executives. Annuity contract and life insurance policyholders may access information regarding their individual holdings via a toll-free telephone number or contact Client Services Department via the Internet.

The Insurance Company’s top ten General Agents, as measured by combined 2004 annuity and life premiums, accounted for approximately 25% of the Insurance Company’s sales in 2004. No single General Agent accounted for more than 6.2% and no single agent accounted for more than 1.3% of total sales. Management believes no single distribution source loss will have a material adverse impact on the Insurance Company. However, the simultaneous loss of several distribution sources would diminish our product distribution and reduce sales unless these sources are timely replaced. To guard against this contingency, the Insurance Company continuously recruits new independent General Agents.

Underwriting Procedures

Since March 2004, the only life policy the Insurance Company issues has been Graded Benefit Life, a guaranteed issue product that requires no underwriting. The maximum face amount for this product is $50,000. The Insurance Company continues to maintain its life inforce business and this may require additional underwriting (i.e. reinstatements, re-entries, and conversions). In that regard, the Insurance Company has adopted and follows detailed, uniform underwriting procedures designed to assess and quantify insurance risks. To the extent that a policyholder eligible for reinstatement, reentry or conversion does not meet the Insurance Company’s underwriting standards at the standard risk classifications, the Insurance Company may offer to issue a classified, sub-standard or impaired risk policy for a risk adjusted premium amount rather than declining the application. The amount of the Insurance Company’s impaired risk insurance in force in proportion to the total amount of the Insurance Company’s individual life insurance in force was approximately 6.1% at December 31, 2004.

Policy Claims

Claims are received and reviewed by claims examiners at the Insurance Company’s home office. The initial review of claims includes verification that coverage is in force and that the claim is not subject to exclusion under the policy. Birth and death certificates are basic requirements. Medical records and investigative reports are ordered for contestable claims.

Reinsurance

The Insurance Company follows the usual industry practice of reinsuring (“ceding”) portions of its life insurance and medical stop loss risks with other companies, a practice that permits the Insurance Company to write policies in amounts larger than the risk it is willing to retain and to obtain commissions on the insurance ceded and thereby reduce its net commission expense. The maximum amount of individual life insurance normally retained by the Insurance Company on any one life is $50,000 per policy and $100,000 per life. The Insurance Company cedes primarily on an “automatic” basis, under which risks are ceded to a reinsurer on specific blocks of business where the underlying risks meet certain predetermined criteria, and on a “facultative” basis, under which the reinsurer’s prior approval is required on each risk reinsured. The maximum retention of the group medical stop loss business varies, but typically the Insurance Company cedes 85% on a quota share basis.

Use of reinsurance does not discharge an insurer from liability on the insurance ceded. An insurer is required to pay the full amount of its insurance obligations regardless of whether it is entitled or able to receive payments from the reinsurer. In 2002, one of the reinsurer’s for the Insurance Company’s medical stop loss business, Folksham International, filed for bankruptcy protection. The Insurance Company anticipates that it will have approximately $260,000 in unpaid reinsurance claims against Folksham, which is not reflected in the financial statements as of December 31, 2004. As of December 31, 2004, it is unclear how much, if any, the Insurance Company will collect in the bankruptcy proceeding. At December 31, 2004, of the approximately $1,354 million of the Company’s individual life insurance in force, the Insurance Company had ceded to reinsurer’s approximately $868 million. The principal reinsurance companies of individual life policies with whom the Insurance Company does business at December 31, 2004 were Transamerica (Letter of Credit) and Swiss Re Life and Health America (A.M. Best rating of “A+ (Superior)”).

In 2003, the Insurance Company learned that one of its independent stop loss underwriters issued certain stop loss policies in the Insurance Company’s name without authorization and without applicable reinsurance in place. The Insurance Company paid all asserted claims under those policies in 2003 in the aggregate amount of approximately $2.2 million and is currently pursuing collection of this amount from the underwriter, based upon breach of contract and other claims.

Competition

The Insurance Company operates in a highly competitive environment. There are numerous insurance companies, banks, securities brokerage firms, and other financial intermediaries marketing insurance products, annuities, and other investments that compete with the Insurance Company, many of which are more highly rated and have substantially greater resources than the Insurance Company. The Insurance Company believes that the principal competitive factors in the sale of annuity and life insurance products are product features, commission structure, perceived stability of the insurer, claims paying rating, and service. Many other insurance and financial services companies are capable of competing for sales in the Insurance Company’s target markets.

Management believes that the Insurance Company’s ability to compete is dependent upon, among other things, its ability to retain and attract independent general agents to market its products and to successfully develop competitive products that also are profitable. Management believes that the Insurance Company has good relationships with its agents, has an adequate variety of products approved for issuance and generally is competitive within the industry in all applicable areas.

Investments And Investment Policy

At December 31, 2004, the Corporation had an aggregate of investment assets and cash of $4.63 billion. Of that amount, approximately 91.2%, or $4.23 billion, were invested in fixed maturity bonds and notes, consisting primarily of investment grade corporate bonds ($2.3 billion), U.S. Government, government agencies and authorities bonds ($769.6 million), public utility bonds ($462.6 million) and commercial mortgage backed securities ($326.5 million). Approximately $315.6 million or 6.8% of invested assets were invested in limited partnerships, 1% was invested in common stock and the remainder was held as short-term investments, policy loans and real estate.

Investment Grade Corporate Bonds

As of December 31, 2004, approximately 80.1% of the Corporation’s investment portfolio consisted of investment grade bonds. Of this amount, approximately $18.2 million (less than 1%) are private placements. Management believes that these bonds are marketable to other institutional investors. All of the bonds acquired by the Insurance Company in private placements have been assigned a National Association of Insurance Commissioners (“NAIC”) designation corresponding to one of the two highest quality rating categories. NAIC designations corresponding to the entire Investment Portfolio can be found on page 12.

Below Investment Grade Corporate Bonds

As of December 31, 2004, the Corporation held approximately $327.4 million in below investment grade corporate bonds, representing approximately 7.1% of the Corporation’s investment portfolio. Of these, approximately $170.8 million are rated at the highest below-grade investment level. Seventy percent (70%) of the Corporation’s holdings of below grade bonds were purchased at investment grade levels. Included in the below-grade bond portfolios are non-performing assets totaling $15.1 million, or .33% of total invested assets.

Government Bonds

The Corporation holds approximately $769.6 million in U.S. Treasury or other government agency bonds consisting primarily of U.S. Treasury and GNMA, FNMA, FHLMC and FHLB obligations.

Public Utility Bonds

As of December 31, 2004, the Corporation held $462.6 million in public utility bonds, representing 10.0% of investment portfolio. Approximately two-thirds of the holdings represented bonds issued by the operating companies of electric and gas utilities, with the balance consisting of an assortment of electric utility holding company bonds, capital trust securities and U.S. dollar holdings in foreign electric and water utilities. The portfolio is diversified, with 80 individual holdings of primarily investment-grade companies. Given their large and continuing need for additional capital, public utilities are sensitive to a general rise in overall interest rates. However, these risks are mitigated by overall economic growth, as utilities benefit by increased usage of electricity and gas and by an overall growth in their customer rate-base.

Collateralized Debt Obligations

As of December 31, 2004, approximately $ 93.4 million (2.1%) of the Company’s investment portfolio was invested in Collateralized Debt Obligations (“CDO”) excluding the CDO Income Notes associated with the principal protected notes discussed in Item 7: “Management’s Discussion – Principal Protected Notes”. Between 1994 and 1999, the Company purchased a number of CDOs with a par value of $ 155.8 million. These are investment vehicles that issue equity and debt to finance their purchase of a wide range of fixed-income assets. Most of the CDO debt purchased by the Company financed the purchase of high-yield bonds and bank loans. These CDOs are managed by professional portfolio managers with established track records in the relevant asset classes. CDOs are structured to provide diversification with respect to issuers, industry sector and/or asset classes. Guidelines and limits regarding diversification are determined by the rating agencies and collateral managers at the start of each transaction.

While the Company purchased both investment-grade and non-investment grade CDO debt, most of the CDO’s held by the Company are currently rated non-investment grade as a result of large numbers of defaults and historically low recovery levels for high-yield debt issued in 1997 and 1998. The Company’s CDO portfolio has realized losses of approximately $43.2 million due to aggressively underwritten CDO transactions and a declining credit cycle. During the past two years, however, during an improving credit cycle with low interest rates, the market value for the Company’s CDOs now reflects an unrealized gain of approximately $20.9 million as of December 31, 2004. The CDO portfolio was responsible for generating approximately $9.3 million in annual income in 2004. The market value and level of distributed income of the CDO portfolio is expected to fluctuate with changes in interest rates and the changes in credit spreads associated with below investment-grade debt.

Callable Agency Securities

The Company from time to time purchases callable bonds and notes issued by one of the U.S. Government sponsored entities: FNMA, FHLMC, FHLB and the FFCB. As of December 31, 2004, the Company had a market value total of $502 million in positions as shown below.

		Par Value	Book Value	Market Value

Federal Farm Credit Bank (FFCB)	$	2,900,000	$ 2,900,000	$ 2,957,101
Federal Home Loan Bank (FHLB)		728,540,000	174,640,973	169,393,886
Freddie Mac (FHLMC)		1,079,107,000	224,056,947	216,534,593
Fannie Mae (FNMA)		114,158,000	113,737,819	113,441,135
Total Callable	$	1,924,705,000	$ 515,335,739	$ 502,326,715

Agencies frequently issue callable paper with spreads that compensate the buyer for the Agencies’ call options and make their paper more competitive with fixed-rate corporate bonds. The Company typically purchases the callable Agency issues at par, or discounts to par, to insure that the yield-to-call is at least equal to the yield-to-maturity and to avoid principal loss in the event the issuer exercises its par call option. In the event that interest rates fall and a call option is exercised, the Company may be forced to reinvest at lower yields.

Commercial Mortgage Backed Securities

As of December 31, 2004, approximately $326.5 million (7.0%) of the Company’s investment portfolio was invested in mortgage-backed related securities, most of which are commercial mortgage-backed obligations (“CMBS”). Mortgage-backed securities are generally subject to prepayment risk due to the fact that, in periods of declining interest rates, mortgages may be repaid more rapidly than scheduled as borrowers refinance higher rate mortgages to take advantage of the lower current rates. As a result, holders of mortgage-backed securities may receive prepayments on their investments that cannot be reinvested at an interest rate comparable to the rate on the prepaid mortgages. Notwithstanding the foregoing, the Company’s investment portfolio has not been materially impacted as a result of such prepayments because it purchases such securities at prices no greater than par and the Insurance Company has invested primarily in mezzanine level CMBS that generally have limited prepayment risk. These securities are collateralized by commercial mortgages which have provisions which limit loan prepayments and a security structure which further directs principal payments to the senior most outstanding security before they make such distributions to the mezzanine debt owned by the Insurance Company.

Limited Partnerships

As of December 31, 2004, approximately $315.6 million (6.8%) of the Company’s investment portfolio consisted of interests in over sixty limited partnerships, which are engaged in a variety of investment strategies, including real estate, debt restructurings, international opportunities and merchant banking. In general, risks associated with such limited partnerships include those related to their underlying investments (i.e., equity securities, debt securities and real estate), plus a level of illiquidity, which is mitigated by the ability of the Insurance Company to take annual distributions of partnership earnings.

The limited partnerships that are involved in real estate activities generally invest in real estate assets, real estate joint ventures and real estate operating companies. These partnerships seek to achieve significant rates of return by targeting investments that provide a strategic or competitive advantage and are priced at levels that the general partner believes to be attractive.

The limited partnerships that are involved in debt restructuring activities take positions in debt and equity securities, loans originated by banks and other liabilities of financially troubled companies. Investments in companies undergoing debt restructurings, which by their nature have a high degree of financial uncertainty, may be senior, unsecured or subordinated indebtedness and carry a high characteristic of merchant banking and debt restructuring transactions. This makes such underlying investments particularly sensitive to interest rate increases, which could affect the ability of the borrower to generate sufficient cash flow to meet its fixed charges.

The limited partnerships that are involved in international investments generally purchase sovereign debt, corporate debt, and/or equity in foreign companies that are developing a greater worldwide presence. A general partner who has demonstrated expertise in this area and the particular country involved operates such limited partnerships. Such investments involve risks related to the particular country including political instability, currency fluctuations, and repatriation restrictions. The limited partnerships that are involved in merchant banking activities generally seek to achieve significant rates of return (including capital gains) through a wide variety of investment strategies, including leveraged acquisitions, bridge financing, and other private equity investments in existing businesses.

The Insurance Company has been investing in limited partnerships for over sixteen years. During this time, the Insurance Company has had an opportunity to consider and evaluate a substantial number of limited partnerships and their managers. The Insurance Company makes limited partnership investments based on a number of considerations, including the reputation, investment philosophy (particularly with respect to risk), performance history and investment strategy of the manager of the limited partnership. Managers of the limited partnerships in which the Insurance Company is invested include, among others, Blackstone Investment Management, Starwood Capital, Goldman Sachs Partners, Trust Company of the West Asset Management, Clayton Dubilier & Rice Partners, Apollo Real Estate and Fortress Investment Group.

Limited partnership investments are selected through a careful, two-stage review process. The Investment Analyst staff reviews the offering documents and performance history of each investment manager. Separately, the Investment Committee interviews the manager to determine whether the investment philosophy (particularly with respect to risk) and strategies of the limited partnership are in the best interests of the Insurance Company. Only after both the Investment Analyst Staff and the Investment Committee make a positive recommendation does the Insurance Company invest in a limited partnership. In addition, the actions of the Investment Committee are subject to review and approval by the Board of Directors of the Corporation or the Insurance Company, as the case may be. To evaluate both the carrying value and the continuing appropriateness of the Company’s investment in any limited partnership, management maintains ongoing discussions with the investment manager and considers the limited partnership’s operations, current and near term projected financial condition, earnings capacity and distributions received by the Insurance Company during the year.

Pursuant to the terms of certain limited partnership agreements to which the Insurance Company is a party, the Insurance Company is committed to contribute, if called upon, an aggregate of approximately $96.4 million of additional capital to certain of these limited partnerships. $17.0 million in commitments will expire in 2005, $38.4 million in 2006, $22.4 million in 2007, $9.7 million in 2009 and $9.0 million in 2010.

The book value of the Corporation’s investments in limited partnerships as of December 31, 2004, 2003 and 2002 was approximately $315.6 million, $323.1 million and $254.7 million respectively. Net investment income derived from the Insurance Company’s interests in limited partnership investments aggregated approximately $57.5 million, $30.2 million and $21.9 million in fiscal 2004, 2003 and 2002 respectively.

Management anticipates that in the future it will continue to make selective investments in limited partnerships as opportunities arise, subject to the approval of the Chief Investment Officer and the Investment Committee and the review and approval by the Board of Directors of the Insurance Company, as the case may be. There can be no assurance that the Insurance Company will continue to achieve the same level of returns on its investments in limited partnerships that it has received during the foregoing periods or that it will achieve any returns on such investments at all. In addition, there can be no assurance that the Insurance Company will receive a return of all or any portion of its current or future capital investments in limited partnerships. The failure of the Insurance Company to receive the return of a material portion of its capital investments in limited partnerships, or to achieve historic levels of returns on such investments, could have a material adverse effect on the Insurance Company’s financial condition and results of operations.

Other

As of December 31, 2004, the Company’s investment portfolio also consisted of approximately $185.6 million (4.0%) invested in preferred stock, and approximately $45.9 million (1.0%) invested in common stock. The Company’s only direct real estate investments are two buildings in Nyack, New York, which are used as the current home office of the Insurance Company, and two acres of undeveloped land in Nyack, New York.

As of May 2003, the Company no longer participates in “dollar roll” repurchase agreement transactions. In fiscal 2003 and 2002, dollar roll transactions generated approximately $.6 million and $1.6 million, respectively, of net investment income for the Company. Amounts outstanding to repurchase securities under dollar roll repurchase agreements were approximately $0.00 and $262.5 million as of December 31, 2003 and December 31, 2002, respectively.

10.

The following table sets forth the scheduled maturities for the Company’s investments in bonds and notes as of December 31, 2004.

Scheduled Maturities
Maturity <F1>	Estimated Fair Value <F2>	Percent of Total Estimated Fair Value <F2>
	(Dollars in thousands)
Due in one year or less	$ 2,699	.07
Due after one year through five years	116,714	2.89
Due after five years through ten years	475,376	11.76
Due after 10 years through 20 years	3,120,171	77.20
Total	3,714,960	91.92
Mortgage-backed bonds (various Maturities)	326,537	8.08
Total bonds and notes	$ 4,041,497	100.00%

<F1> This table is based upon stated maturity dates and does not reflect the effect of prepayments, which would shorten the average life of these securities. All securities are classified as available for sale; accordingly total carrying value equals estimated fair value.

<F2> Independent pricing services provide market prices for most publicly traded securities. Where prices are unavailable from pricing services, prices are obtained from securities dealers and valuation methodologies.

The following table sets forth the composition of the Company’s bond and notes portfolio by rating as of December 31, 2004.

Rating <F1>		Estimated Fair Value <F2>	Percent of Total Estimated Fair Value <F2>
	(Dollars in thousands)
Aaa <F3>		$ 856,893	21.20
Aa		203,450	5.03
A		1,037,474	25.67
Baa		1,570,344	38.86
Total investment grade <F4>		3,668,161	90.76
Ba		212,846	5.27
B		103,521	2.56
C		56,969	1.41
Total non-investment grade<F5>		373,336	9.24
Total		$ 4,041,497	100.00%

<F1> Ratings are those assigned primarily by Moody’s when available, with remaining ratings assigned by Standard & Poor’s and converted to a generally comparable Moody’s rating. Bonds not rated by any such organization (e.g., private placement securities) are included based on the rating prescribed by the Securities Valuation Office of the NAIC. NAIC class 1 is considered equivalent to an A or higher rating; class 2, Baa; class 3, Ba; and classes 4-6, B and below. All securities are classified as available for sale; accordingly total carrying value equals estimated fair value

<F3> Includes two securities totaling $22.6 million, which have been rated AAA by Moody’s, Standard and Poors or Fitch with respect to repayment of principal only.

<F4> Approximately 21.0% consists of U.S government and agency bonds.

<F5> Approximately 70.2% of the non-investment grade bonds represents bonds which experienced credit migration from investment grade status.

The NAIC assigns securities quality ratings and uniform prices called “NAIC Designation”, which are used by insurers when preparing their statutory annual statements. The NAIC annually assigns designations at December 31 to publicly traded as well as privately placed securities. These designations range from class 1 to class 6, with a designation in class 1 being of the highest quality. Of the bonds and notes in the Company’s investment portfolio, approximately 91.9% were in one of the highest two NAIC Designations at December 31, 2004.

11.

The following table sets forth the carrying value and estimated fair value of these securities according to NAIC Designations at December 31, 2004.

NAIC Designations (generally comparable to Moody’s ratings <F1>	Estimated Fair Value <F2>	Percent of Total Estimated Fair Value <F2>
	(Dollars in thousands)
1 (Aaa, Aa, A) <F3>	$ 2,096,352	51.87
2 (Baa)	1,617,713	40.03
3 (Ba)	170,831	4.23
4 (B)	90,190	2.23
5 (Caa, Ca)	51,322	1.27
6 (C)	15,089	.37
Total	$ 4,041,497	100.00%

<F1> Comparison between NAIC Designations and Moody’s rating is as published by the NAIC. NAIC class 1 is considered equivalent to an A or higher rating by Moody’s; class 2, Baa; class 3, Ba; class 4, B; class 5, Caa and Ca; and class 6, C. All securities are classified as available for sale; accordingly total carrying value equals estimated fair value.

<F2> Independent pricing services provide market prices for most publicly-traded securities. Where prices are unavailable from pricing services, prices are obtained from securities dealers and valuation methodologies.

<F3> This amount includes two securities totaling $22.6 million, which have been rated AAA by Moody’s, Standard and Poors or Fitch and which were not assigned a rating by the NAIC.

New York State Insurance Department Regulation 130

The Insurance Company is subject to Regulation 130 adopted and promulgated by the New York State Insurance NYSID. Under this Regulation, the Insurance Company’s ownership of below investment grade debt securities is limited to 20% of total admitted assets, as calculated under statutory accounting. As of December 31, 2004, approximately 6.1% of the Insurance Company’s total admitted assets were invested in below investment grade debt securities. Included in the below investment grade debt securities were 24 bond holdings in the Insurance Company’s investment portfolio that were in default, with an estimated fair value totaling $11.7 million at December 31, 2004. For a detailed discussion concerning below investment grade debt securities, including the risks inherent in such investments, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.” Also see “Note 2 to the Notes to Consolidated Financial Statements” for certain other information concerning the Company’s investment portfolio.

12.

Investment Portfolio Summary

The following table summarizes the Company's investment portfolio at December 31, 2004. This table consists primarily of fixed maturity investments available for sale, which are carried at fair value.

Investment Portfolio

	Total Carrying Value<F1>
	(dollars in thousands)
Fixed Maturities
Bonds and Notes:
U.S. Government, government agencies
and authorities<F2>	$ 769,568
Investment grade corporate<F3>	2,280,785
Public utilities	462,636
Below investment grade corporate	201,971
Mortgage backed	326,537
Preferred stocks<F4>		185,637

Total Fixed Maturities<F4>	4,227,134

Equity Securities
Common stock	45,859

Other Investments:
Policy loans	17,642
Real Estate	415
Other long‑term investments<F5>	315,581
Cash and short‑term investments			34,234

Total cash and investments		$ 4,640,865

_______________________________________________________________________________

<F1> All fixed maturity and equity securities are classified as available for sale; accordingly total carrying value equals estimated fair value. Independent pricing services provide market prices for over 95% of the publicly traded securities. Where prices are unavailable from pricing services, prices are obtained from securities dealers and valuation methodologies. For other long-term investments, estimated market value either approximates estimated carrying value or was not readily ascertainable. See “Note 1(c) to the Notes to the Consolidated Financial Statements for an explanation of the methodology used to value "Other Investments."”

<F2> Approximately $1.0 million of such securities represent beneficial ownership interests in mortgage-backed securities of FDIC, FHLMC, FNMA, GNMA or the RTC. Amount includes one security totaling $6.6 million, which has an investment grade rating with respect to repayment of principal only.

<F3> Ratings are based primarily upon those assigned by the NAIC. Amount includes one security totaling $16.0 million, which has an investment grade rating with respect to repayment of principal only.

<F4> Includes approximately $1.3 million of convertible preferred stock.

<F5> Consist principally of investments in limited partnerships, which are accounted for under the equity method.

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Insurance Regulation

General Regulation

As an insurance holding company, the Corporation is subject to regulation by the State of New York, where the Insurance Company is domiciled, as well as all other states where the Insurance Company transacts business. Most states have enacted legislation that requires each insurance company in a holding company system to register with the insurance regulatory authority of its state of domicile and furnish to it financial and other information concerning the operations of the companies within the holding company system that may materially affect the operations, management or financial condition of the insurers within the system. The Corporation has registered as a holding company system in New York.

The laws and regulations of New York applicable to insurance holding companies require, among other things, that all transactions within a holding company system be fair and equitable and that charges for services be equitable. In addition, many transactions require prior notification to or approval of the Superintendent of Insurance of the State of New York (the “Superintendent”). Prior written approval of the Superintendent is required for the direct or indirect acquisition of 10% or more of the insurance companies’ voting securities. Applicable state insurance laws, rather than federal bankruptcy laws, also apply to the liquidation or reorganization of insurance companies.

The Insurance Company is subject to regulation and supervision by the insurance regulatory agencies of the states in which it is authorized to transact business. State insurance laws establish supervisory agencies with broad administrative and supervisory powers. Principal among these powers are granting and revoking licenses to transact business, regulate marketing and other trade practices, operating guaranty associations, licensing agents, approving policy forms, regulating premium rates, regulating insurance holding company systems, establishing reserve requirements, prescribing the form and content of required financial statements and reports, performing financial, market conduct and other examinations, determining the reasonableness and adequacy of statutory capital and surplus, defining acceptable accounting principles, regulating the type, valuation and amount of investments permitted, and limiting the amount of dividends that can be paid and the size of transactions that can be consummated without first obtaining regulatory approval. One of the requirements is that the Insurance Company performs annual cash flow testing of its assets and liabilities. Based on the testing performed as of December 31, 2004, the Insurance Company established an asset/liability reserve of $60 million. This is a statutory reserve only. The reserve deals with the risk of a substantial increase in surrenders in a rising interest rate environment.

During the last decade, the insurance regulatory framework has been placed under increased scrutiny by various states, the federal government, and the National Association of Insurance Commissioners (NAIC). Various states have considered or enacted legislation that changes, and in many cases increases, the states’ authority to regulate insurance companies. Legislation was passed in Congress that could result in the federal government assuming some role in the regulation of insurance companies and allowing combinations among insurance companies, banks, and other entities. In recent years, the NAIC has approved and recommended to the states for adoption and implementation several regulatory initiatives designed to reduce the risk of insurance company insolvencies and market conduct violations. These initiatives include investment reserve requirements, risk-based capital standards, codification of insurance accounting principles, new investment standards, and restrictions on an insurance company’s ability to pay dividends to its shareholders. All of these have had and will continue to have a material impact on the conduct of the Company’s business.

The Insurance Company is required to file detailed periodic reports and financial statements with the state insurance regulators in each of the states in which it does business. In addition, insurance regulators periodically examine the Insurance Company’s financial condition, adherence to statutory accounting practices and compliance with the insurance department rules and regulations. As part of their routine regulatory oversight process, the New York State Insurance Department (NYSID) generally conducts detailed examinations every three years of the books, records and accounts of the Insurance Company. The Insurance Company’s most recent examination occurred during 2004 for the three-year period ending December 31, 2003. To date, the NYSID has not issued its report with respect to that examination.

Regulation of Dividends and Other Payments from the Insurance Company

The Corporation is a legal entity separate and distinct from its subsidiaries. As a holding company with no other business operations, its primary sources of cash needed to meet its obligations, including principal and interest payments on its outstanding indebtedness and dividend payments on its common stock, are rent from its real estate, income from its investments, and dividends from the Insurance Company.

The Insurance Company is subject to various regulatory restrictions on the maximum amount of payments, including loans or cash advances, that it may make to Company without obtaining prior regulatory approval. Under New York law, the Insurance Company is permitted without prior insurance regulatory clearance, to pay a stockholder dividend to the Company as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of (i) 10% of its surplus as

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of the end of the immediately preceding calendar year, or (ii) its net gain (after tax) from operations for the immediately preceding calendar year. Any dividend in excess of such amount is subject to approval by the Superintendent. The Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders. The NYSID has established informal guidelines for such determinations. The guidelines focus on, among other things, an insurer’s overall financial condition and profitability under statutory accounting practices. Statutory accounting practices differ in certain respects from accounting principles used in financial statements prepared in conformity with GAAP. The significant differences relate to deferred policy acquisition costs, deferred income taxes, required investment reserves and reserve calculation assumptions.

Management of the Company cannot provide assurance that the Insurance Company will have adequate statutory earnings to support payment of dividends to the Company in an amount sufficient to fund the Company’s cash requirements, including the payment of dividends, or that the Superintendent will not disapprove any dividends that the Insurance Company must submit for the Superintendent’s consideration. The Insurance Company paid no dividends to the Company in fiscal 2004, 2003 or 2002.

Investment Reserves

Asset Valuation Reserve – Statutory accounting practices require a life insurance company to maintain an Asset Valuation Reserve (“AVR”) to absorb realized and unrealized capital gains and losses on a portion of an insurer’s fixed income securities and equity securities.

The AVR is required to stabilize statutory surplus from fluctuations in the market value of bonds, stocks, mortgages, real estate, and other invested assets. The maximum AVR is calculated based on the application of various factors that are applied to the assets in the insurer’s portfolio. The AVR generally captures credit-related realized and unrealized capital gains and losses on such assets. Each year the amount of an insurer’s AVR will fluctuate as the investment portfolio changes and capital gains and losses are absorbed by the reserve. To adjust for such changes over time, contributions must be made to the AVR in an aggregate amount equal to 20% of the difference between the maximum AVR as calculated and the actual AVR. These contributions may result in a slower rate of growth in or a reduction of the Insurance Company’s Unassigned Surplus. The extent of the impact of the AVR on the Insurance Company’s surplus depends in part on the future composition of the Insurance Company’s investment portfolio.

Interest Maintenance Reserve – The Interest Maintenance Reserve (“IMR”) captures capital gains and losses (net of taxes) on fixed income investments (primarily bonds and mortgage loans) resulting from interest rate changes, which are amortized into net income over the estimated remaining periods to maturity of the investments sold. The extent of the impact of the IMR depends on the amount of future capital gains and losses on fixed maturity investments resulting from interest rate changes.

NAIC-IRIS Ratios

The NAIC’s Insurance Regulatory Information System (“IRIS”) was developed by a committee of state insurance regulators and primarily is intended to assist state insurance departments in executing their statutory mandates to oversee the financial condition of insurance companies operating in their respective states. IRIS identifies 12 industry ratios and specifies “normal ranges” for each ratio. The IRIS ratios were designed to advise state insurance regulators of significant changes in an insurance company’s product mix, larges reinsurance transactions, increases or decreases in premium received, and certain other changes in operations. These changes need not result from any problems with an insurance company but merely indicate changes in certain ratios outside ranges defined as normal by the NAIC. When an insurance company has four or more ratios falling outside “normal ranges,” state regulators may, but are not obligated to, inquire of the company regarding the nature of the company’s business to determine the reasons for the ratios being outside the “normal range.” No regulatory significance results from being out of the normal range on fewer than four of the ratios. For the year ended December 31, 2004, two ratios fell outside the normal range. One ratio “Net Income to Total Income” resulted in a ratio of –9%. Any result below zero is considered outside the “normal range”. This result is attributable to the “other than temporary impairments” the Insurance Company realized in 2004 on certain Principal Protected Notes in its portfolio as a result of the restatement of its financial statements [See Item 7: “Management’s Discussion and Analysis- Executive Summary and Note 12 to the Consolidated Financial Statements included at Item 8”]. The other ratio, “Change in Reserve Ratio – Life” resulted in a ratio of –119% and is considered outside the normal range. This result is attributable to the Insurance Company discontinuing the sale of its universal life products in early 2004, as well as, the increase in the life reserves was down dramatically from the prior year.

Risk‑Based Capital

Under the NAIC's risk‑based capital formula, insurance companies must calculate and report information under a risk‑based capital formula. The standards require the computation of a risk‑based capital amount, which then is compared to a company’s actual total adjusted capital. The computation involves applying factors to various financial data to address four primary risks:

15.

asset default, adverse insurance experience, disintermediation and external events. This information is intended to permit insurance regulators to identify and require remedial action for inadequately capitalized insurance companies, but is not designed to rank adequately capitalized companies. The NAIC formula provides for four levels of potential involvement by state regulators for inadequately capitalized insurance companies, ranging from a requirement for an insurance company to submit a plan to improve its capital (Company Action Level) to regulatory control of the insurance company (Mandatory Control Level). At December 31, 2004, the Insurance Company’s Company Action Level was $112.4 million and the Mandatory Control Level was $39.3 million. The Insurance Company’s adjusted capital at December 31, 2004 and 2003 was $264.1 million and $260.2 million, respectively, which exceeds all four-action levels.

Assessments Against Insurers

Most applicable jurisdictions require insurance companies to participate in guaranty funds, which are designed to indemnify policyholders of insolvent insurance companies. Insurers authorized to transact business in these jurisdictions generally are subject to assessments based on annual direct premiums written in that jurisdiction. These assessments may be deferred or forgiven under most guaranty laws if they would threaten an insurer’s insolvency and, in certain instances, may be offset against future state premium taxes.

The amount of these assessments against the Insurance Company in 2004 and prior years have not been material. However, the amount and timing of any future assessment against the Insurance Company under these laws cannot be reasonably estimated and are beyond the control of the Company and the Insurance Company. As such, no reasonable estimate of such assessments can be made.

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 any future 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. It is not possible to predict the outcome of any such Congressional activity or the potential effects thereof on the Corporation.

Affiliates

The Corporation has one principal subsidiary, the Insurance Company. The Insurance Company has one subsidiary, Central National Life Insurance Company of Omaha Inc. The Corporation has three additional subsidiaries, Presidential Securities Corporation, P.L. Assigned Services Corporation, and Presidential Asset Management Company, Inc. In aggregate, these three subsidiaries are not material to the Corporation’s consolidated financial condition or results of operations. In addition, the Corporation consolidates the issuers of 17 principal protected note investments due to a majority ownership percentage of the notes issued by those issuers and its unilateral ability to cause the liquidation of these issuers. (See “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 12 of the Consolidated Financial Statements included in Item 8.”)

ITEM 2. PROPERTIES

The Corporation owns, and the Insurance Company leases and is the sole occupant of, two adjacent office buildings located at 69 Lydecker Street and 10 North Broadway in Nyack, New York. These buildings contain an aggregate of approximately 45,000 square feet of usable office space.

The Insurance Company also owns two acres of unimproved land in Nyack, New York.

Management believes that the Corporation’s present facilities are adequate for its anticipated needs.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Corporation is involved in litigation relating to claims arising out of its operations in the normal course of business. As of March 30, 2005, the Corporation is not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on the Corporation’s financial condition or results of operations.

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

No matters were submitted by the Corporation to its shareholders for vote during the fiscal year ended December 31, 2004.

16.

Part II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Corporation’s common stock trades on The NASDAQ Stock Market® under the symbol “PLFE”. The following table sets forth, for the indicated periods, the high and low bid quotations for the common stock as of the close of business each day, as reported by the

	For the fiscal year ended December 31,
	2004	2003	2002	2001	2000
	(dollars in thousands)
Single Premium Deferreds	$ 182,518	$ 169,331	$ 658,617	$ 511,588	$ 239,256
Single Premium Immediates	28,351	32,596	67,524	93,871	54,719
Other Annuity Considerations	14,025	11,532	12,326	10,277	6,270

Total Annuity Considerations	$ 224,894	$ 213,459	$ 738,467	$ 615,736	$ 300,245

SECURITIES AND EXCHANGE COMMISSION

ITEM 1. BUSINESS

General

Products

Life Insurance Business