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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-K (Mark One)

/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
	EXCHANGE ACT OF 1934 [No Fee Required]

For the transition period from __________  to ___________ Commission File No. 33-85014 FIRST SUNAMERICA LIFE INSURANCE COMPANY

PART I ITEM 1.  BUSINESS      GENERAL DESCRIPTION      First SunAmerica Life Insurance Company (the "Company") is an indirect wholly owned subsidiary of American International Group, Inc. ("AIG"), an international insurance and financial services holding company.  At December 31, 1998, the Company was a wholly owned indirect subsidiary of SunAmerica Inc., a Maryland Corporation.  On January 1, 1999, SunAmerica Inc. merged with and into AIG in a tax-free reorganization that has been treated as a pooling of interests for accounting purposes.  Thus, SunAmerica Inc. ceased to exist on that date.  However, immediately prior to the date of merger, substantially all of the net assets of SunAmerica Inc. were contributed to a newly formed subsidiary of AIG named SunAmerica Holdings, Inc., a Delaware Corporation. SunAmerica Holdings, Inc. subsequently changed its name to SunAmerica Inc. ("SunAmerica").       The Company is incorporated in New York and maintains its principal offices at 733 Third Avenue, 4th Floor, New York, New York 10017, telephone (800) 996-9786.  The Company has no employees; however, employees of SunAmerica and its other subsidiaries perform various services for the Company. At December 31, 2000, SunAmerica had approximately 2,400 employees, approximately 1,000 of whom perform services for the Company as well as for certain of its affiliates.      The Company is a life insurance company specializing in the issuance of fixed and variable annuities for retirement savings.  The Company believes that demographic trends have produced strong consumer demand for long-term, investment-oriented products.  According to U.S. Census Bureau projections, the number of individuals between the ages of 45 to 64 grew from 46 million to 60 million during the 1990s, making this age group the fastest-growing segment of the U.S. population.  Between 1989 and 1999, annual industry premiums from fixed and variable annuities and fund deposits increased from $113.8 billion to $270.2 billion.      Benefiting from continued strong growth of the retirement savings market, industry sales of tax-deferred savings products have represented, for a number of years, a significantly larger source of new premiums for the U.S. life insurance industry than have traditional life insurance products. Recognizing the growth potential of this market, the Company focuses its operations on the sale of annuities.      The Company's six affiliated broker-dealers comprise the largest network of independent registered representatives in the nation and the fifth-largest securities sales force, based on industry data.  Its affiliated broker-dealers accounted for approximately one-third of the Company's total annuity sales in fiscal 2000.  The Company also distributes its products and services through an extensive network of independent broker-dealers, full-service securities firms, independent general insurance agents and major financial institutions.      The Company and its affiliates have made significant investments in technology over the past several years in order to lower operating costs and enhance its marketing efforts.  Its use of optical disk imaging and artificial intelligence has substantially eliminated the more traditional paper-intensive life insurance processing procedures, reducing annuity processing and servicing costs and improving customer service.  This has also enabled the Company to more efficiently assimilate acquired business. The Company has also implemented technology to interface with its affiliated broker-dealers, which enables the Company to more effectively market its products and help the affiliated financial professionals to better serve their clients.

In recent years, the Company has enhanced its marketing efforts and expanded its offerings of variable annuities through internal growth, resulting in increased fee income.  The Company's variable annuity business entails no portfolio credit risk and requires significantly less capital support than its fixed-rate business, which generates net investment income. The Company's fixed-rate business, comprised of fixed annuities and universal life insurance contracts, has grown significantly in recent years through acquisitions.      For the year ended December 31, 2000, the Company's net investment income (including net realized investment losses) and fee income by primary product line or service are as follows:

   

BUSINESS COMBINATION      On March 31, 1997, SunAmerica Life Insurance Company, the direct parent of the Company, completed the acquisition of all of the outstanding stock of John Alden Life Insurance Company of New York ("JANY").  On October 31, 1997, JANY was merged with and into the Company.  On the date of acquisition, JANY had assets having an aggregate fair value of $1,536,179,000, composed primarily of invested assets totaling $1,403,807,000.  Liabilities assumed in this acquisition totaled $1,411,179,000, including $1,363,764,000 of fixed annuity reserves.  The excess of the purchase price over the fair value of the net assets acquired, amounting to $125,000,000 at the date of acquisition was included in Deferred Acquisition Costs in the balance sheet.  The acquisition was accounted for by using the purchase method of accounting and the merger by using the pooling method from the date of acquisition through the date of merger.

ANNUITY OPERATIONS      Founded in 1978, the Company is licensed in the States of New York, New Mexico and Nebraska and issues a portfolio of single-premium fixed and flexible-premium variable annuities.  It has a "AAA" (Extremely Strong) financial strength rating from Standard & Poor's ("S&P"), a "Aaa" (Exceptional) rating from Moody's Investors Service ("Moody's"), an "AAA" (Exceptionally strong) rating from Fitch ("Fitch") and an "A++" (Superior) rating from industry analyst A.M. Best Company.      In addition to distributing its variable annuity products through its six affiliated broker-dealers, the Company distributes its products through over 350 other independent broker-dealers, full-service securities firms and financial institutions as well as through independent general insurance agents.  In total, more than 7,600 independent sales representatives are licensed to sell the Company's annuity products in three states.      On December 31, 1998, Anchor National Life Insurance Company ("ANLIC"), an affiliate of the Company, acquired the individual life business and the individual and group annuity business of MBL Life Assurance Corporation ("MBL Life"), via a 100% coinsurance transaction.  ANLIC assumed reserves in this acquisition totaling $5,793,256,000, including $3,460,503,000 of fixed annuity contracts, $2,308,742,000 of universal life insurance contracts and $24,011,000 of guaranteed investment contracts.     Included in the block of business acquired from MBL Life were policies whose owners are residents of New York State (the "New York Business).  On July 1, 1999, the New York Business was acquired by the Company via an assumption reinsurance agreement.  As part of this acquisition, invested assets equal to $678,272,000, universal life reserves equal to $282,247,000, group pension reserves equal to $406,118,000, and other net assets of $10,093,000 were assumed by the Company.  Policyholders of MBL Life annuity products were required to transfer their funds into an existing product of the Company or one of its affiliates by December 31, 1999 in order to receive the policy enhancements due under the MBL Life rehabilitation agreement.  Over 80% of the deferred annuity reserves had either been transferred or surrendered by December 31, 1999.      ANNUITY OPERATIONS - VARIABLE ANNUITIES      The variable annuity products of the Company offer investors a broad spectrum of fund alternatives, with a choice of investment managers, as well as guaranteed fixed-rate account options.  The Company earns fee income through the sale, administration and management of the variable account options of its variable annuity products.  The Company also earns investment income on monies allocated to the fixed-rate account options of these products.  Variable annuities offer retirement planning features similar to those offered by fixed annuities, but differ in that the contractholder's rate of return is generally dependent upon the investment performance of the particular equity, fixed-income, money market or asset allocation fund selected by the contractholder.  Because the investment risk is borne by the customer in all but the fixed-rate account options, these products require significantly less capital support than fixed annuities.       The Company's flagship Polaris variable annuity products are multimanager variable annuities that offer investors a choice of 31 variable funds, 5 fixed account options and 2 dollar cost averaging fixed account options for different time periods.  Polaris sales have increased significantly in recent years due to enhanced distribution efforts and growing consumer demand for flexible retirement savings products that offer a variety of equity, fixed-income and guaranteed fixed account investment choices.  The decrease in sales growth in 1999 and 2000 is primarily due to regulatory changes in the State of New York (See "Growth in Average Invested Assets").

At December 31, 2000, total variable product reserves were $717.2 million, of which $565.5 million were held in separate accounts and $151.7 million were the liabilities of the fixed-rate account options which are held in the general accounts. The Company's variable annuity products incorporate surrender charges to encourage persistency.  At December 31, 2000, 99% of the Company's variable annuity reserves held in separate accounts were subject to surrender penalties.  The Company's variable annuity products also generally limit the number of transfers made in a specified period between account options without the assessment of a fee.  The average size of a new variable annuity contract sold by the Company in 2000 was approximately $59,000.      ANNUITY OPERATIONS - FIXED ANNUITIES      The Company's general account obligations are fixed-rate products, including fixed annuities issued in prior years, universal life insurance contracts assumed from MBL Life and fixed-rate options of its variable annuity contracts.  The Company offers single-premium and flexible-premium deferred annuities that provide one, three, five, seven, or ten-year fixed interest rate guarantees. The Company also offers fixed-rate account options on its variable annuity contracts with similar guarantees.  Although the Company's contracts remain in force an average of seven to ten years, a majority (approximately 88% at December 31, 2000) of the annuity contracts, as well as the universal life contracts, reprice annually at discretionary rates determined by the Company.  In repricing, the Company takes into account yield characteristics of its investment portfolio, annuity surrender assumptions and competitive industry pricing, among other factors.  Its fixed annuity products offer many of the same features as conventional certificates of deposit from financial institutions, giving investors a choice of interest period and yield as well as additional advantages particularly applicable to retirement planning, such as tax-deferred accumulation and flexible payout options (including the option of payout over the life of the annuitant).  The average size of a new single-premium fixed annuity contract sold by the Company in 2000 was approximately $62,000.      The Company designs its fixed-rate annuity products and conducts its investment operations in order to closely match the duration of the assets in its investment portfolio to its fixed annuity and universal life obligations.  The Company seeks to achieve a predictable spread between what it earns on its assets and what it pays on its liabilities by investing principally in fixed-rate securities.  The Company's fixed annuity and universal life products incorporate surrender charges or other restrictions in order to encourage persistency. Approximately 77% of the Company's fixed annuity and universal life reserves had surrender penalties or other restrictions at December 31, 2000.      INVESTMENT OPERATIONS      The Company believes that its fixed-rate liabilities should be backed by a portfolio principally composed of fixed-rate investments that generate predictable rates of return.  The Company does not have a specific target rate of return.  Instead, its rates of return vary over time depending on a variety of factors, including the current interest rate environment, the slope of the yield curve, the spread at which fixed-rate investments are priced over the yield curve, default rates and general economic conditions. The Company manages most of its invested assets internally.  Its portfolio strategy is constructed with a view to achieve adequate risk-adjusted returns consistent with its investment objectives of effective asset-liability matching, liquidity and safety.      As part of its asset-liability matching discipline, the Company conducts detailed computer simulations that model its fixed-rate assets and liabilities under commonly used stress-test interest rate scenarios.

With the  results  of  these  computer  simulations, the  Company can measure the potential gain or loss in fair value of its interest-rate sensitive instruments and seek to protect its economic value and achieve a predictable spread between what it earns on its invested assets and what it pays on its liabilities by designing its fixed-rate products and conducting its investment operations to closely match the duration of the fixed-rate assets to that of its fixed-rate liabilities.  The Company's fixed-rate assets include:  cash and short-term investments; bonds, notes and redeemable preferred stocks; and mortgage loans.  At December 31, 2000, these assets had an aggregate fair value of $1.6 billion with a duration of 3.7.  See further discussion of duration under Financial Condition and Liquidity-Asset Liability Matching section.  The Company's fixed-rate liabilities are its fixed annuity and universal life insurance contracts.  At December 31, 2000, these liabilities had an aggregate fair value (determined by discounting future contractual cash flows by related market rates of interest) of $1.4 billion with a duration of 2.5.  For the years ended December 31, 2000, December 31, 1999 and September 30, 1998, the Company's yields on average invested assets were 7.08%, 7.10% and 7.46%, respectively; its average rates paid on all interest-bearing liabilities were 4.81%. 4.92% and 5.36%, respectively; it realized net investment spreads of 2.27%, 2.18% and 2.10%, respectively, on average invested assets. Net realized investment losses were 1.23% and 0.63% in 2000 and 1999, respectively. Net realized gains were 0.30% of average invested assets in 1998.     The Company's general investment philosophy is to hold fixed-rate assets for long-term investment.  Thus, it does not have a trading portfolio.  However, the Company has determined that all of its portfolio of bonds, notes and redeemable preferred stocks (the "Bond Portfolio") is available to be sold in response to changes in market interest rates, changes in relative value of asset sectors and individual securities, changes in prepayment risk, changes in credit quality outlook for certain securities, the Company's need for liquidity and other similar factors.     The following table summarizes the Company's investment portfolio at December 31, 2000:

At December 31, 2000, the Bond Portfolio (excluding $75,000 of redeemable preferred stocks) included $1.23 billion of bonds rated by S&P, Moody's, Fitch, or the National Association of Insurance Commissioners ("NAIC"), and $9.9 million of bonds rated by the Company pursuant to statutory ratings guidelines established by the NAIC.  At December 31, 2000, approximately $1.15 billion of the Bond Portfolio was investment grade, including $557.5 million of U.S. government/agency securities and mortgage-backed securities.       At  December 31, 2000, the  Bond Portfolio included $89.3 million of bonds  that  were  not  investment  grade. These non-investment-grade  bonds accounted for 4.0% of the Company's total assets and 6.0% of its invested assets.

Senior secured loans ("Secured Loans") are included in the Bond Portfolio and aggregated $53.9 million at December 31, 2000.  Secured Loans are senior to subordinated debt and equity and are secured by assets of the issuer.  These Secured Loans are composed of loans to borrowers spanning 8 industries, with 26% of these assets concentrated in utilities, 10% concentrated in technology, 10% concentrated in telecommunication and 10% concentrated in energy.  No other industry constituted more than 7% of these assets.        Mortgage loans aggregated $167.4 million at December 31, 2000 and consisted of 117 commercial first mortgage loans with an average loan balance of approximately $1.4 million, collateralized by properties located in 32 states.  Approximately 31% of this portfolio was office, 28% was retail, 17% was industrial, 11% was multifamily residential and 13% was other types.  At December 31, 2000, approximately 28% of this portfolio was secured by properties located in California, approximately 13% by properties located in Michigan, approximately 10% by properties located in New York and no more than 5% of this portfolio was secured by properties located in any other single state.       At December 31, 2000, the carrying value (after impairment writedowns) of all investments in default as to the payment of principal or interest totaled $7.2 million, which constituted 0.5% of total invested assets.       For more information concerning the Company's investments, including the risks inherent in such investments, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition and Liquidity."       REGULATION       The Company, in common with other insurers, is subject to regulation and supervision by the states and other jurisdictions in which it does business.   Within  the  United States, the method of such regulation varies but generally has its source in statutes that delegate regulatory and supervisory powers to a State insurance official.  The regulation and supervision relate primarily to approval of policy forms and rates, the standards of solvency that must be met and maintained, including risk based capital measurements, the licensing of insurers and their agents, the nature of and limitations on investments, restrictions on the size of risks which may be insured under a single policy, deposits of securities for the benefit of policyholders, methods of accounting, periodic examinations of the affairs of insurance companies, the form and content of reports of financial condition required to be filed, and reserves for unearned premiums, losses and other purposes.  In general, such regulation is for the protection of policyholders rather than security holders.       Risk based capital ("RBC") standards are designed to measure the adequacy of an insurer's statutory capital and surplus in relation to the risks inherent in its business.  The RBC standards consist of formulas that establish capital requirements relating to insurance, business, asset and interest rate risks.  The standards are intended to help identify companies which are under-capitalized and require specific regulatory actions in the event an insurer's RBC is deficient.  The RBC formula develops a risk- adjusted target level of adjusted statutory capital and surplus by applying certain factors to various asset, premium and reserve items.  Higher factors are applied to more risky items and lower factors are applied to less risky items.  Thus, the target level of statutory surplus varies not only as a result of the insurer's size, but also on the risk profile of the insurer's operations.  The  statutory  capital and surplus of the Company exceeded its

RBC requirements by a considerable margin as of December 31, 2000.  In 1998, the NAIC adopted the codification of statutory accounting principles ("Codification").  Codification is effective January 1, 2001 and replaces the current Accounting Practices and Procedures Manual as the NAIC's primary guidance on statutory accounting practices.  Codification has been adopted by all fifty states as the prescribed basis of accounting.  New York, however, has made certain modifications (e.g., no deferred taxes will be recorded for companies domiciled in the State of New York).  The impact of Codification on the Company's statutory  surplus  is not expected to be material.      Federal legislation has been enacted allowing combinations between insurance companies, banks and other entities.  It is not yet known what effect this legislation will have on insurance companies.  In addition, from time to time, Federal initiatives are proposed that could affect the Company's businesses.  Such initiatives include employee benefit plan regulations and tax law changes affecting the taxation of insurance companies and the tax treatment of insurance and other investment products. Proposals made in recent years to limit the tax deferral of annuities or otherwise modify the tax rules related to the treatment of annuities have not been enacted.  While certain of such proposals, if implemented, could have an adverse effect on the Company's sales of affected products, and, consequently, on its results of operations, the Company believes these proposals have a small likelihood of being enacted, because they would discourage retirement savings and there is strong public and industry opposition to them.      COMPETITION     The businesses conducted by the Company are highly competitive.  The Company competes with other life insurers, and also competes for customers' funds with a variety of investment products offered by financial services companies other than life insurance companies, such as banks, investment advisors, mutual fund companies and other financial institutions.  In 1999, net annuity premiums written among the top 100 companies ranged from approximately $65 million to approximately $18 billion annually.  The Company together with its affiliates ranks in the top quartile of this group.  The Company believes the primary competitive factors among life insurance companies for investment-oriented insurance products, such as annuities, include product flexibility, net return after fees, innovation in product design, the claims-paying ability rating and the name recognition of the issuing company, the availability of distribution channels and service rendered to the customer before and after a contract is issued.  Other factors affecting the annuity business include the benefits (including before-tax and after-tax investment returns) and guarantees provided to the customer and the commissions paid. ITEM 2.  PROPERTIES       The Company's executive offices and its principal office are in leased premises at 733 Third Avenue, New York, New York 10017.  The Company, through an affiliate, also leases office space in Los Angeles and Woodland Hills, California.       The Company believes that such properties, including the equipment located therein, are suitable and adequate to meet the requirements of its business. ITEM 3.  LEGAL PROCEEDINGS      The Company is involved in various kinds of litigation common to its business.  These cases are in various stages of development and, based on reports of counsel, management believes that provisions made for potential losses relating to such litigation are  adequate and any further liabilities and costs will not have a material adverse impact upon the Company's financial position, results of operations or cash flows.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS      No matters were submitted during the year ended December 31, 2000 to a vote of security holders, through the solicitation of proxies or otherwise.    PART II ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER  MATTERS      Not applicable.

ITEM 6.  SELECTED FINANCIAL DATA (Continued)

		At December 31,									At September 30,
		2000			1999			1998			1998			1997			1996
		(In thousands)
FINANCIAL POSITION
Investments		$	1,486,247		$	1,806,742		$	1,515,132		$	1,554,316		$	1,690,232		$	153,237
Variable annuity assets held
	in separate accounts		565,547			558,605			344,619			271,865			171,475			68,901
Deferred acquisition costs			124,451			137,637			96,918			87,074			96,516			12,127
Current income taxes receivable			8,067			6,638			---			---			---			---
Deferred income taxes			7,914			18,275			---			---			---			---
Other assets			22,147			27,615			51,013			28,965			26,267			2,603
TOTAL ASSETS		$	2,214,373		$	2,555,512		$	2,007,682		$	1,942,220		$	1,984,490		$	236,868
Reserves for fixed annuity
	contracts	$	1,186,995		$	1,523,641		$	1,432,558		$	1,460,856		$	1,556,656		$	140,613
Reserves for universal life
	insurance contracts		249,987			277,250			---			---			---			---
Variable annuity liabilities
	related to separate accounts		565,547			558,605			344,619			271,865			171,475			68,901
Other payables and
	accrued liabilities		24,215			34,776			42,038			18,073			83,297			2,784
Deferred income taxes			---			---			3,792			5,371			4,984			1,350
Shareholder's equity			187,628			161,240			184,675			186,055			168,078			23,220
TOTAL LIABILITIES AND
	SHAREHOLDER'S EQUITY	$	2,214,373		$	2,555,512		$	2,007,682		$	1,942,220		$	1,984,490		$	236,868

The financial position of the Company as of December 31, 1997 has been affected by the acquisition and subsequent merger with JANY effective March 31, 1997. The financial position of the Company as of December 31, 1999 is affected by the acquisition of business from MBL Life (See Note 5 of the accompanying financial statements).

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS       Management's discussion and analysis of financial condition and results of operations of First SunAmerica Life Insurance Company (the "Company") for the three years ended December 31, 2000, December 31, 1999 and September 30, 1998 follows.  Effective December 31, 1998, the Company changed its fiscal year end from September 30 to December 31.  Accordingly, the three-month period ended December 31, 1998 was a transition period. Certain prior period amounts have been restated to conform to the current period's presentation.        In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions readers regarding certain forward-looking statements contained in this report and in any other statements made by, or on behalf of, the Company, whether or not in future filings with the Securities and Exchange Commission (the "SEC"). Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments.  Statements using verbs such as "expect," "anticipate," "believe" or words of similar import generally involve forward-looking statements.  Without limiting the foregoing, forward-looking statements include statements which represent the Company's beliefs concerning future levels of sales and redemptions of the Company's products, investment spreads and yields, or the earnings or profitability of the Company's activities.        Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control and many of which are subject to change.  These uncertainties and contingencies could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company.  Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable developments.  Some may be national in scope, such as general economic conditions, changes in tax law and changes in interest rates.  Some may be related to the insurance industry generally, such as pricing competition, regulatory developments and industry consolidation.  Others may relate to the Company specifically, such as credit, volatility and other risks associated with the Company's investment portfolio.  Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the SEC.  The Company disclaims any obligation to update forward-looking information.      RESULTS OF OPERATIONS       NET INCOME totaled $7.3 million in 2000, compared with $7.7 million in 1999 and $16.5 million in 1998. On July 1, 1999, the Company acquired the New York individual life business and the individual and group annuity business of MBL Life Assurance Corporation (the "Acquisition").  The Acquisition was accounted for under the purchase method of accounting, and therefore results of operations include those of the Acquisition only from its date of acquisition. Consequently, the operating results for 2000, 1999 and 1998 are not comparable. On a  pro forma  basis,  using  the  historical financial information of the acquired business and assuming that the Acquisition had been consummated on October 1, 1997, the beginning of the prior-year periods discussed herein, net income would have been $9.4 million and $19.9 million for the years ended December 31, 1999 and September 30, 1998 respectively.

PRETAX INCOME totaled $11.6 million in 2000, $14.3 million in 1999 and $28.6 million in 1998. The 18.9% year-to-date decline in 2000 over 1999 primarily resulted from increased net realized investment losses, partially offset by increased variable annuity fees, decreased general and administrative expenses, and decreased amortization of deferred acquisition costs.  The significant decline from 1998 to 1999 was also due to an increase in net realized investment losses.         NET INVESTMENT INCOME, which is the spread between the income earned on invested assets and the interest paid on fixed annuities and other interest-bearing liabilities, totaled $42.1 million in 2000, down from $42.8 million in 1999 and up from $35.2 million in 1998.  These amounts equal 2.49% on average invested assets (computed on a daily basis) of $1.69 billion in 2000, 2.42% on average invested assets of $1.77 billion in 1999 and 2.27% on average invested assets of $1.55 billion in 1998. On a pro forma basis, assuming the Acquisition had been consummated on October 1, 1997, net investment income on related average invested assets would have been 2.05% in 1999 and 1.64% in 1998.  The improvement in the 1999 net investment yield over the 1998 pro forma amount reflects the redeployment of assets received in the Acquisition into higher yielding investment categories.          Net investment spreads include the effect of income earned or interest paid on the difference between average invested assets and average interest-bearing liabilities.  Average invested assets exceeded average interest-bearing liabilities by $79.6 million in 2000, compared with $89.0 million in 1999 and $47.3 million in 1998.  The difference between the Company's yield on average invested assets and the rate paid on average interest-bearing liabilities (the "Spread Difference") was 2.27% in 2000, 2.18% in 1999 and 2.10% in 1998. On a pro forma basis, assuming the Acquisition had been consummated on October 1, 1997, the Spread Difference would have been 1.87% in 1999 and 1.57% in 1998 reflecting primarily the effect of the lower-yielding assets received in the Acquisition.          Investment income (and the related yields on average invested assets) totaled $119.6 million (7.08%) in 2000, $125.4 million (7.10%) in 1999 and $115.9 million (7.46%) in 1998. The decrease in the investment yield in 2000 as compared to 1999 and in 1999 as compared to 1998 principally reflect the effects of lower yielding assets received in the MBL Life acquisition. The invested assets associated with the Acquisition included high-grade corporate, government and government/agency bonds, which are generally lower yielding than a significant portion of the invested assets that comprise the remainder of the Company's portfolio.  On a pro forma basis, assuming the Acquisition had been consummated on October 1, 1997, the yield on related average invested assets would have been 6.83% in 1999 and 6.85% in 1998.         Expenses incurred to manage the investment portfolio amounted to $2.0 million in 2000, $1.9 million in 1999 and $1.6 million in 1998.  These expenses are included as a reduction to investment income in the income statement.  Investment expenses increased from prior periods because the size of the portfolio increased as a result of the Acquisition.         Total interest expense equaled $77.5 million in 2000, $82.6 million in 1999 and $80.7 million in 1998. The average rate paid on all interest-bearing liabilities was 4.81% in 2000, compared with 4.92% in 1999 and 5.36% in 1998. Interest-bearing liabilities averaged $1.61 billion during 2000, $1.68 billion during 1999 and $1.51 billion during 1998. The decrease in interest rates paid in 2000 results primarily from the continued reduction of crediting rates on certain closed blocks of business and the effects of the Acquisition.  On a pro forma basis, assuming the Acquisition had been consummated on October 1, 1997, the average rate paid on all interest-bearing liabilities would have been 4.96% in 1999 and 5.28% in 1998 and interest-bearing liabilities would have averaged $2.10 billion during 1999 and $2.34 billion in 1998.

DECLINE IN AVERAGE INVESTED ASSETS largely results from the surrenders and rollovers to variable products of the fixed annuity liabilities related to the Acquisition. Changes in average invested assets also reflect sales of fixed annuities and the fixed account options of the Company's variable annuity products ("Fixed Annuity Premiums"), and renewal premiums on its universal life product ("UL Premiums") acquired in the Acquisition, partially offset by net exchanges from fixed accounts into the separate accounts of variable annuity contracts.  Fixed Annuity Premiums and UL Premiums totaled $63.9 million in 2000, $89.2 million in 1999 and $130.9 million in 1998 and are largely premiums for the fixed accounts of variable annuities.  Such premiums have decreased, in part, as a result of regulatory changes in the state of New York relating to non-taxable policy exchange requirements.  On an annualized basis, these premiums represent 5%, 6% and 8%, respectively, of the related reserve balances at the beginning of the respective periods.         NET REALIZED INVESTMENT LOSSES totaled $20.8 million in 2000, and $11.2 million in 1999 compared with net realized investment gains of $4.7 million in 1998 and include impairment writedowns of $20.8 million in 2000, $7.7 million in 1999, and $0.4 million in 1998, respectively. Thus, net realized losses from sales and redemptions of investments totaled $0.03 million of losses in 2000, $3.5 million of losses in 1999 and $5.1 million of gains in 1998.        The Company sold or redeemed invested assets, principally bonds and notes, aggregating $389.1 million in 2000, $478.7 million in 1999 and $985.1 million in 1998.  Sales of investments result from the active management of the Company's investment portfolio, including assets received as part of the Acquisition.  Because redemptions of investments are generally involuntary and sales of investments are made in both rising and falling interest rate environments, net gains and losses from sales and redemptions of investments fluctuate from period to period, and represent 0.00%, 0.20% and 0.33% of average invested assets in 2000, 1999 and 1998, respectively. Active portfolio management involves the ongoing evaluation of asset sectors, individual securities within the investment portfolio and the reallocation of investments from sectors that are perceived to be relatively overvalued to sectors that are perceived to be relatively undervalued.  The intent of the Company's active portfolio management is to maximize total returns on the investment portfolio, taking into account credit, option, liquidity and interest-rate risk.         Impairment writedowns include $20.8 million, $7.7 million and $0.4 million of provisions applied to bonds in 2000, 1999 and 1998, respectively. Impairment writedowns represent 1.23%, 0.44% and 0.03% of average invested assets for 2000, 1999 and 1998, respectively.  For the five years ended December 31, 2000, impairment writedowns as a percentage of average invested assets have ranged from 0.03% to 1.23% and have averaged 0.44%. Such writedowns are based upon estimates of the net realizable value of the applicable assets.  Actual realization will be dependent upon future events.         VARIABLE ANNUITY FEES are based on the market value of assets in separate accounts supporting variable annuity contracts.  Such fees totaled $9.1 million in 2000, $6.6 million in 1999 and $3.6 million in 1998. The increased fees in 2000 reflect growth in average variable annuity assets, principally due to the receipt of variable annuity premiums and net exchanges into the separate accounts from the fixed accounts of variable annuity contracts, partially offset by surrenders and declines in market values. Variable annuity fees represent 1.5% of average variable annuity assets in all periods presented. Variable annuity assets averaged $591.9 million, $417.8 million and $234.1 million during 2000, 1999 and 1998, respectively.  Variable annuity  premiums, which  exclude premiums allocated to the fixed accounts of  variable  annuity products, totaled $39.6 million, $66.7 million and $80.2 million in 2000, 1999 and 1998, respectively.

These amounts represent 9%, 19% and 47% of variable annuity reserves at the beginning of the respective periods.  Transfers  from  the  fixed accounts of the Company's variable annuity products to the separate accounts (see "Growth in Average Invested Assets") are not classified in variable annuity premiums. Accordingly, changes in variable annuity premiums are not necessarily indicative of the ultimate allocation by customers among fixed and variable account options of the Company's variable annuity products.       Sales of variable annuity products (which include premiums allocated to the fixed accounts) ("Variable Annuity Product Sales") amounted to $72.0 million, $127.7 million and $157.5 million in 2000, 1999 and 1998, respectively.  Variable Annuity Product Sales primarily reflect sales of the Company's flagship variable annuity line, Polaris.  Polaris is a multimanager variable annuity that offers investors a choice of 31 variable funds and a number of guaranteed fixed-rate funds.  Variable Annuity Product Sales have decreased in both 1999 and 2000, principally as a result of regulatory changes in the State of New York relating to non-taxable policy exchange requirements.       The Company has encountered increased competition in the variable annuity marketplace during recent years and anticipates that the market will remain highly competitive for the foreseeable future.  Also, from time to time, Federal initiatives are proposed that could affect the taxation of variable annuities and annuities generally (See "Regulation" in Item 1).      UNIVERSAL LIFE INSURANCE FEES, NET result from the universal life insurance contract reserves acquired in the Acquisition and the ongoing receipt of renewal premiums on such contracts, and consist of mortality charges, up-front fees earned on premiums received and administrative fees, net of excess mortality expense on these contracts.  The Company does not actively market universal life insurance contracts.  Universal life insurance fees amounted to $2.2 million and $1.1 million in 2000 and 1999, respectively. Such fees represent 0.84% and 0.83% of average reserves for universal life insurance contracts in the respective periods.        SURRENDER CHARGES on fixed and variable annuity contracts and universal life contracts totaled $3.8 million in 2000 (including $2.4 million attributable to JANY merger),$3.3 million in 1999 (including $2.5 million attributable to JANY merger) and $4.4 million in 1998 (including $3.9 million attributable to JANY merger). Surrender charges generally are assessed on withdrawals at declining rates during the first seven years of a contract. Withdrawal payments, which exclude claims and periodic annuity benefits, totaled $409.2 million in 2000 (including $58.1 million attributable to the Acquisition), compared with $392.4 million in 1999 (including $297.7 million attributable to the Acquisition) and $234.4 million in 1998.  These payments, when expressed as a percentage of average fixed and variable annuity and universal life reserves, represent 19.1% (2.7% attributable to the Acquisition), 19.0% (14.5% attributable to the Acquisition) and 14.0% for 2000, 1999 and 1998, respectively.  The increase in withdrawal rates in 2000 as compared to 1999 and 1998 is due primarily to increased surrenders on certain closed blocks of fixed annuity business.  Withdrawals include variable annuity payments from the separate accounts totaling $36.6 million (6.2% of average variable annuity reserves), $28.6 million (6.9% of average variable annuity reserves) and $12.8 million (5.5% of average variable annuity reserves) in 2000, 1999 and 1998, respectively.  Management anticipates that withdrawal rates will remain relatively stable for the foreseeable future.       GENERAL AND ADMINISTRATIVE EXPENSES totaled $4.8 million in 2000, $5.3 million in 1999 and $1.7 million in 1998. General and administrative expenses remain closely controlled through a company-wide cost containment program  and  continue  to  represent  less than 1% of average total assets.

AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $19.4 million in 2000, compared with $22.7 million in 1999 and $17.1 million in 1998.   The decline in amortization during 2000 represents a reduction in amortization attributable to a closed block of fixed annuties acquired in prior years. The higher amortization during 1999 was due to additional variable annuity product sales and the subsequent amortization of related deferred commissions and other direct selling costs.       ANNUAL COMMISSIONS represent renewal commissions paid quarterly in arrears to maintain the persistency of certain of the Company's variable annuity contracts.  Substantially all of the Company's currently available variable annuity products allow for an annual commission payment option in return for a lower immediate commission.  Annual commissions totaled $0.6 million in 2000, compared with $0.5 million in 1999 and $0.3 million in 1998.       INCOME TAX EXPENSE totaled $4.3 million in 2000, $6.6 million in 1999 and $12.1 million in 1998, representing effective tax rates of 37%, 46% and 42%, respectively.  The lower rate in 2000 was principally due to the impact of state income taxes. See Note 11 of the accompanying financial statements.      FINANCIAL CONDITION AND LIQUIDITY       SHAREHOLDER'S EQUITY increased to $187.6 million at December 31, 2000 from $161.2 million at December 31, 1999, due principally to $7.3 million of net income recorded in 2000 and a $19.1 million decrease in accumulated other comprehensive loss.       INVESTED ASSETS at December 31, 2000 totaled $1.49 billion, compared with $1.81 billion at December 31, 1999.  The Company manages most of its invested  assets internally.  The Company's general investment philosophy is to hold fixed-rate assets for long-term investment.  Thus, it does not have a trading portfolio.  However, the Company has determined that all of its portfolio of bonds, notes and redeemable preferred stocks (the "Bond Portfolio") is available to be sold in response to changes in market interest  rates,  changes  in relative value of asset sectors and individual securities, changes in prepayment risk, changes in the credit quality outlook for certain securities, the Company's need for liquidity and other similar factors.      THE BOND PORTFOLIO, which constituted 83% of the Company's total investment portfolio at December 31, 2000, had an amortized cost that was $31.9 million greater than its aggregate fair value at December 31, 2000 and $64.2 million greater than its aggregate fair value at December 31, 1999. The decrease in net unrealized losses on the Bond Portfolio during 2000 principally reflects the decline in prevailing interest rates and the corresponding effect on the fair value of the Bond Portfolio at December 31, 2000.       At December 31, 2000 the Bond Portfolio (excluding $75,000 of redeemable preferred stocks) included $1.23 billion of bonds rated by Standard & Poor's ("S&P"), Moody's Investors Service ("Moody's), Fitch  ("Fitch") or the Securities Valuation Office of the National Association of Insurance Commissioners ("NAIC"), and $9.9 million of bonds rated by the Company pursuant to statutory ratings guidelines established by the NAIC. At December 31, 2000, approximately $1.15 billion of the Bond Portfolio was investment grade, including $557.5 million of U.S. government/agency securities and mortgage-backed securities ("MBSs").      At December 31, 2000, the Bond Portfolio included $89.3 million of bonds that were not investment grade.  These non-investment-grade bonds accounted  for  approximately  4.0%  of  the  Company's  total  assets  and  approximately 6.0% of its invested assets.

Non-investment-grade securities generally provide higher yields and involve greater risks than investment-grade securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment-grade issuers.  In addition, the trading market for these securities is usually more limited than for investment-grade securities.  The Company had no material issuer concentrations of non-investment-grade securities at December 31, 2000.       The table on the following page summarizes the Company's rated bonds by rating classification as of  December 31, 2000.