UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005


o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-23637

Global Preferred Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)


DELAWARE		58-2179041
(State or other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

C/O MORRIS, MANNING AND MARTIN LLP
3343 PEACHTREE ROAD, SUITE 1600
ATLANTA, GEORGIA 30326
(770) 248-3311
(Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

6455 EAST JOHNS CROSSING, SUITE 402
DULUTH, GEORGIA 30097
(770) 248-3311
(Former Address if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

As of November 14, 2005, there were 4,199,149 shares of common stock outstanding.

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION			3
ITEM 1. FINANCIAL STATEMENTS			3
Condensed Consolidated Statement of Net Assets in Liquidation			3
Condensed Consolidated Balance Sheet (Going Concern Basis)			4
Condensed Consolidated Statement of Changes in Net Assets in Liquidation			5
Condensed Consolidated Statements of Income (Going Concern Basis)			6
Condensed Consolidated Statements of Cash Flows (Going Concern Basis)			7
Notes to Condensed Consolidated Financial Statements			8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			23
ITEM 4. CONTROLS AND PROCEDURES			23
PART II – OTHER INFORMATION			24
ITEM 1. LEGAL PROCEEDINGS			24
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			24
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			24
ITEM 5. OTHER INFORMATION			24
ITEM 6. EXHIBITS			24
EX-10.1 SEPARATION AND RELEASE AGREEMENT WITH EDWARD F. MCKERNAN
EX-10.2 SEPARATION AND RELEASE AGREEMENT WITH BRADLEY E. BARKS
EX-10.3 SEPARATION AND RELEASE AGREEMENT WITH DAVID W. MCLEROY
EX-31.1 SECTION 302 CERTIFICATION OF THE CAO
EX-32.1 SECTION 906 CERTIFICATION OF THE CAO

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GLOBAL PREFERRED HOLDINGS, INC.

Condensed Consolidated Statement of Net Assets in Liquidation

(Unaudited)


	September 30,
	2005
Estimated Values of Assets:
Cash and cash equivalents	$	2,296,679
Fixed maturity securities		2,428,287
Equity securities		20,592
Accounts receivable		8,885
Current income tax recoverable		4,510
Fixed assets		6,936
Estimated future investment income		271,531

Total estimated assets		5,037,420


Estimated Liabilities:
Accrued expenses and accounts payable		123
Dividends payable		20,876
Estimated future operating costs and settlement reserves during liquidation period		5,016,421

Total estimated liabilities		5,037,420


Net assets in liquidation	$	—

See accompanying notes to condensed consolidated financial statements.

GLOBAL PREFERRED HOLDINGS, INC.

Condensed Consolidated Balance Sheet (Going Concern Basis)


	December 31,
	2004
Assets
Fixed maturity securities – available for sale (amortized cost of $19,885,253)	$	20,071,625
Other equity investments (cost of $500,000)		548,819
Cash and cash equivalents		12,463,601
Reinsured policy loans		1,475,516

Total invested assets		34,559,561
Investment income due and accrued		234,220
Accounts receivable		11,357
Reinsurance balances receivable		2,567,121
Deferred acquisition costs		40,167,670
Prepaid expenses		223,973
Fixed assets (net of accumulated depreciation of $433,046)		43,095

Total assets	$	77,806,997

Liabilities and Stockholders’ Equity
Liabilities:
Future policy benefits	$	19,401,495
Accrued expenses and accounts payable		526,316
Current income tax payable		377,075
Deferred tax liability		8,236,127

Total liabilities		28,541,013


Commitments and contingencies

Stockholders’ equity:
Preferred stock, par value $.001, 2,000,000 shares authorized; no shares issued		—
Common stock, par value $.001, 15,000,000 shares authorized; 4,149,074 shares issued		4,149
Additional paid-in capital		23,326,026
Accumulated other comprehensive income		123,007
Retained earnings		25,862,069
Treasury stock, at cost (7,390 shares)		(49,267	)

Total stockholders’ equity		49,265,984

Total liabilities and stockholders’ equity	$	77,806,997

See accompanying notes to condensed consolidated financial statements.

GLOBAL PREFERRED HOLDINGS, INC.

Condensed Consolidated Statement of Changes in Net Assets in Liquidation

(Unaudited)


				For the Period
	Three Months Ended			May 26, 2005 through
	September 30, 2005			September 30, 2005
Accumulated Stockholders’ Equity as of May 25, 2005				$	50,413,081

Adjustment of assets and liabilities to estimated fair value					8,444,710

Estimated net assets in liquidation as of June 30, 2005 and May 26, 2005, respectively	$	57,957,136			58,857,791

AEGON N.V. shares distribution to stockholders		(57,957,136	)		(57,957,136	)
Change in estimate of:
Future operating costs and settlement reserves during liquidation period		(32,975	)		(37,207	)
Fair value of invested assets		(14,096	)		(910,564	)
Future investment income		45,745			49,240
Fixed assets		1,326			(2,124	)

Net change in net assets in liquidation		(57,957,136	)		(58,857,791	)


Net assets in liquidation at September 30, 2005	$	—		$	—

See accompanying notes to condensed consolidated financial statements.

GLOBAL PREFERRED HOLDINGS, INC.

Condensed Consolidated Statements of Income (Going Concern Basis)

(Unaudited)


							For the Period
	Three Months			Nine Months			January 1, 2005
	Ended			Ended			through
	September 30,			September 30,			May 25, 2005
	2004			2004			(145 Days)
Revenues:
Premiums	$	4,286,039		$	12,858,897		$	6,744,999
Reinsured policy revenues		3,190,516			9,501,967			4,655,164
Net investment income		222,035			610,127			425,770
Net realized (loss) gain on investments		(1,739	)		(31,195	)		36,785
Net unrealized gain on trading investments		41,439			41,439			16,923
Other income		—			6,981			9,050

Total revenues		7,738,290			22,988,216			11,888,691


Benefits and expenses:
Benefits, claims and settlement expenses		1,766,934			5,193,697			3,541,827
Change in future policy benefits		140,554			512,840			189,068
Reinsurance expense allowances, net		1,794,907			5,761,247			3,027,560
Amortization of deferred acquisition costs		1,649,152			4,553,159			1,955,803
Operating expenses		792,063			2,362,789			1,601,076
Interest expense		29,794			216,781			—

Total benefits and expenses		6,173,404			18,600,513			10,315,334

Income before income tax		1,564,886			4,387,703			1,573,357
Income tax expense		(362,637	)		(1,227,378	)		(360,941	)

Net income	$	1,202,249		$	3,160,325		$	1,212,416


Basic earnings per share	$	0.29		$	0.76		$	0.29


Diluted earnings per share	$	0.29		$	0.76		$	0.29


Weighted-average common shares outstanding		4,141,684			4,141,684			4,141,684


Total weighted-average common and common equivalent shares outstanding		4,159,339			4,157,437			4,197,857

See accompanying notes to condensed consolidated financial statements.

GLOBAL PREFERRED HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows (Going Concern Basis)
(Unaudited)


	Nine Months			For the Period
	Ended			January 1, 2005
	September 30,			through May 25, 2005
	2004			(145 Days)
Cash flows from operating activities:
Net income	$	3,160,325		$	1,212,416
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation		4,738,804			2,018,782
Net realized loss (gain) on investments		31,195			(36,785	)
Net unrealized gain on trading investments		(41,439	)		(16,923	)
Deferred tax expense		(377,385	)		(279,238	)
Capitalization of deferred acquisition costs, net		(608,972	)		(229,242	)
Loss on disposal of assets		—			1,821
Expense of stock option compensation		—			6,534
Change in:
Investment income due and accrued		(57,623	)		4,561
Accounts receivable		41,926			4,723
Reinsurance balances receivable		(649,235	)		1,589,678
Prepaid expenses		203,047			(763,182	)
Current income tax recoverable		48,152			(16,378	)
Future policy benefits		460,891			(268,597	)
Reinsurance balances payable		(164,703	)		377,573
Accrued expenses and accounts payable		(85,035	)		(133,448	)
Accrued interest payable		(158,219	)		—
Current income tax payable		35,261			(377,075	)

Net cash provided by operating activities		6,576,990			3,095,220

Cash flows from investing activities:
Proceeds from principal payments on mortgage-backed securities available-for-sale		182,766			231,240
Proceeds from maturity of available-for-sale securities		200,000			750,000
Proceeds from sale of equity securities		2,009,731			—
Proceeds from sale of fixed maturity securities available for sale		529,185			532,540
Purchase of fixed maturity securities available for sale		(6,254,029	)		—
Purchase of fixed assets		(3,828	)		(3,629	)
Change in reinsured policy loans		(163,718	)		(205,478	)

Net cash (used in) provided by investing activities		(3,499,893	)		1,304,673

Cash flows from financing activities:
Repayment of current maturities of long-term debt		(5,000,000	)		—
Issuance of stock		—			11

Net cash provided by (used in) financing activities		(5,000,000	)		11

Net (decrease) increase in cash and cash equivalents		(1,922,903	)		4,399,904
Cash and cash equivalents at beginning of period		11,580,045			12,463,601

Cash and cash equivalents at end of period	$	9,657,142		$	16,863,505

Supplemental disclosure of cash flow information:
Interest paid	$	375,000		$	—

Income taxes paid	$	1,521,350		$	1,033,632

See accompanying notes to condensed consolidated financial statements.

GLOBAL PREFERRED HOLDINGS, INC.

Notes to Condensed Consolidated Financial Statements

September 30, 2005

(Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Global Preferred Holdings, Inc. (“Global Preferred”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The unaudited condensed consolidated financial statements should be read in conjunction with Global Preferred’s audited financial statements included in Global Preferred’s 2004 Annual Report on Form 10-K, as amended and filed with the Securities and Exchange Commission.

On December 30, 2004, Global Preferred announced that it had entered into an agreement and plan of reorganization (the “Reorganization Agreement”) with AEGON N.V. (“AEGON”) and its wholly owned subsidiary, GPRE Acquisition Corp. (“GAC”). On May 10, 2005, Global Preferred’s stockholders authorized: (1) the sale of Global Preferred Re Limited (“Global Preferred Re”) to GAC, pursuant to the Reorganization Agreement and (2) the subsequent liquidation and dissolution of Global Preferred pursuant to a plan of complete liquidation and dissolution (the “Dissolution Plan”). On May 25, 2005, the transactions contemplated by the Reorganization Agreement were consummated whereby Global Preferred received 4,503,274 shares of AEGON common stock in exchange for all of the outstanding shares of Global Preferred Re.

Immediately following the sale of substantially all of its assets on May 25, 2005, Global Preferred commenced winding-up its business and affairs, selling its remaining assets and discharging its known liabilities. As a result, Global Preferred’s operations and substantially all operating cash flows, except for investment income and wind-up expenses have ceased. On June 1, 2005, a certificate of dissolution for Global Preferred was filed with and accepted by the Secretary of State of the State of Delaware. Once a corporation is dissolved under Delaware law, its existence is automatically continued for a term of three years, or for such longer period as the Delaware court directs, but solely for the purpose of winding up its business. The process of winding up includes: (1) the prosecution and defense of lawsuits, if any; (2) the settling and closing of any business; (3) the disposition and conveyance of any property; (4) the discharge of any liabilities; and (5) the distribution of any remaining assets to the stockholders.

On July 6, 2005, Global Preferred’s board of directors approved the distribution of all 4,503,274 AEGON common shares to stockholders of record as of June 1, 2005. As of June 1, 2005, Global Preferred had 4,199,149 shares of common stock outstanding. The distribution consisted of approximately 1.07 AEGON common shares for each share of Global Preferred common stock. On July 8, 2005, Global Preferred initiated the distribution of the AEGON common shares in whole shares. Fractional AEGON common shares remaining from the distribution of whole shares will be liquidated and the cash distributed to the Global Preferred stockholders following the distribution of the whole shares. Together, these distributions will represent the distribution of all the consideration received by Global Preferred from AEGON for the sale of Global Preferred Re in May 2005 and represent a substantial part of the assets to be distributed to stockholders under the Dissolution Plan. Global Preferred plans to distribute any remaining cash to its stockholders, after making adequate provision for its liabilities in accordance with Delaware law. Global Preferred expects that it will be necessary to retain a portion of its liquid assets to pay liabilities that may arise after completion of the dissolution; therefore, Global Preferred’s board of directors intends to transfer a portion of its assets to a liquidating trust. The liquidating trust will permit Global Preferred to dissolve and, as required under Delaware law, have assets still available to be applied to liabilities after the dissolution. In accordance with the Reorganization Agreement, if Global Preferred determines to transfer assets to a liquidating trust, then the transfer must occur on or before May 25, 2006.

2. Liquidation Basis of Accounting

The accompanying historical statements of income and cash flows for the 145 day period ended May 25, 2005 have been presented on a going concern basis similar to prior periods, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. Effective May 26, 2005, Global Preferred adopted the liquidation basis of accounting. Under the liquidation basis of accounting, assets are recorded at their estimated net

realizable values and liabilities are recorded at their estimated settlement amounts and include estimates for future operating costs and settlement reserves during the liquidation period. Accordingly, the financial statements presented on a going concern basis for the periods ended May 25, 2005 and the financial statements presented on a liquidation basis for the periods ended September 30, 2005 are not comparable. In accordance with the Dissolution Plan, management is required to make estimates and assumptions that affect the valuation of the assets and liabilities reported at the date of the financial statements. Actual results could differ from these estimates. The amount and timing of future liquidating distributions will depend upon a variety of factors including, but not limited to, the ultimate settlement amounts of Global Preferred’s liabilities and obligations, actual costs incurred in connection with carrying out the Dissolution Plan including administrative costs during the liquidation period, and the timeframe it takes to complete the liquidation. Distributions ultimately made to stockholders upon liquidation will differ from the “net assets in liquidation” recorded in the accompanying unaudited condensed consolidated statement of net assets in liquidation as a result of the actual proceeds received from the realization of assets and the ultimate settlement amounts of our liabilities and obligations.

Pursuant to the Dissolution Plan, on May 26, 2005 Global Preferred commenced an orderly wind-down of its operations. The actions taken since that time included negotiating the severance of most of the remaining employees, identifying outstanding and potential liabilities and estimating the administrative and professional costs to complete the wind-up of Global Preferred’s affairs. These actions resulted in a charge of $6.7 million for estimated future operating costs and settlement reserves during liquidation, consisting primarily of $4.2 million in administrative and professional costs to wind-up company operations over the next three years and $2.5 million in settlement reserves for potential and unknown contingencies. In order to reflect the liquidation basis of accounting, Global Preferred increased the value of its net assets in liquidation by $8.4 million from the amount of stockholders’ equity at May 25, 2005 to state its assets and liabilities at their estimated fair values. The net increase in the value of net assets resulted from the following:


	As of
(Dollars in Thousands)	May 26, 2005
Assets held for sale adjusted to estimated fair value	$	16,352.3
Estimated future investment income		236.8
Elimination of prepaid expenses		(934.5	)
Fixed assets adjusted to estimated fair value		(17.1	)
Elimination of deferred tax asset, net		(694.4	)
Reduction of accrued expenses		196.6
Estimated future operating costs and settlement reserves during liquidation		(6,695.0	)

Total adjustment of assets and liabilities at estimated fair value	$	8,444.7

The fair value of the 4,503,274 shares of AEGON common stock as of the close of the markets on May 25, 2005 amounted to $58.9 million. The net assets of Global Preferred Re as of the close of business on May 25, 2005 amounted to $42.5 million, resulting in a gain of $16.4 million. In accordance with the liquidation basis of accounting, the gain was reported as an adjustment to the net assets in liquidation on the accompanying unaudited condensed consolidated statement of changes in net assets in liquidation. If Global Preferred had not adopted the liquidation basis of accounting as of May 26, 2005, the gain would have been reported on the unaudited condensed consolidated statement of operations as other income for the three months ended June 30, 2005 and the nine months ended September 30, 2005.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates include, but are not limited to, estimated future operating costs, which represent the estimate of costs to be incurred during liquidation, and settlement reserves. Actual results could differ from those estimates.

3. Estimated Value of Assets and Liabilities in Liquidation

The estimated value of assets of Global Preferred that are set forth in the accompanying unaudited September 30, 2005 “Condensed Consolidated Statement of Net Assets in Liquidation” are presented on the following basis:

	•		Cash and cash equivalents are stated at fair value. At times, cash balances held in financial institutions may be in excess of federally insured amounts. Cash balances held in money market funds are not insured. Cash equivalents consist of United States treasury bills.

	•		Fixed maturity securities consist of United States treasury notes and represent estimated net sales proceeds less the costs of disposal.

	•		Equity securities consist of 1,382 AEGON common shares, of which 896 shares are held on behalf of stockholders who have not claimed their ownership and 486 shares are held for liquidation to pay cash for fractional interests due to stockholders. The AEGON common shares were valued at $13.07 per share as of the close of business on May 25, 2005 when received by us pursuant to the Reorganization Agreement and are valued at $14.90 per share as of September 30, 2005.

	•		Accounts receivable represents deposits due to Global Preferred by third-party service providers.

	•		Current income tax recoverable represents an overpayment of 2005 estimated taxes paid in 2005.

	•		Fixed assets are assets such as furniture and office equipment stated at net realizable value.

	•		Estimated future investment income was projected by management based upon prevailing interest rates, anticipated investment portfolio composition and future expected cash flows.

The estimated liabilities of Global Preferred that are set forth in the accompanying unaudited September 30, 2005 “Condensed Consolidated Statement of Net Assets in Liquidation” are presented on the following basis:

	•		Accrued expenses and accounts payable include all current amounts due that remain unpaid for recurring administrative costs.

	•		Dividends payable include the AEGON common shares yet to be distributed (as discussed above) as of September 30, 2005 at $14.90 per share and cash dividends received from those remaining shares which are also to be distributed.

	•		Estimated future operating costs and settlement reserves during liquidation were recorded on May 26, 2005 when Global Preferred adopted the liquidation basis of accounting and include all estimated future amounts that remain unpaid for liquidation activities.

The distribution of the AEGON common shares was recorded in the liquidation basis financial statements during the third quarter at a value of $12.87 per share which was equal to the value per share as of June 30, 2005.

The table presented below summarizes the estimated future operating costs and settlement reserves as of May 26, 2005 and the actual costs that have been paid or incurred during the period May 26, 2005 through September 30, 2005.


	Costs							Costs
	Incurred							Incurred
	as of					Costs		as of
	May 26,		Change in			Incurred		September
(Dollars in Thousands)	2005		Estimate			and Paid		30, 2005
Employee compensation and benefits, including severance payments	$	2,925.8		($73.2	)	$	992.1	$	1,860.5
Legal, audit and other professional fees		1,078.4		187.9			606.8		659.5
Other estimated costs of liquidation		200.6		16.7			116.9		100.4
Settlement reserves		2,490.2		(94.2	)		—		2,396.0

Total estimated future operating costs and settlement reserves	$	6,695.0	$	37.2		$	1,715.8	$	5,016.4

The settlement reserve was established to provide a reserve for potential expenses or claims against Global Preferred including, without limitation, unanticipated tax obligations, additional expenses arising from the sale of Global Preferred’s property and assets, and additional costs associated with the collection and defense of Global Preferred’s assets and the liquidation and dissolution of Global Preferred. The board of directors will review the adequacy of the estimated future operating costs and settlement reserves from time to time and make adjustments to them as necessary. Because the establishment of the estimated value of assets, liabilities and reserves involves considerable judgment and estimation, it is likely that the actual proceeds from the realization of assets, the actual settlement of liabilities and the actual outcome of the resolutions of any contingencies will differ from management’s estimates at this time, and those differences may be significant.

4. Stock Options

Global Preferred’s employee stock incentive plan and directors stock option plan (the “stock option plans”) were accounted for under the intrinsic value recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The application of APB No. 25 did not result in significant compensation expense for the three and nine-month periods ended September 30, 2004 and the 145 day period ended May 25, 2005. The following table illustrates the effect on net income and earnings per share if Global Preferred had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to the stock option plans as of the dates reported.

For purposes of this pro-forma disclosure, the estimated fair value of the options is assumed to be amortized as a stock-based compensation expense over the options’ vesting periods.


	Three			Nine
	Months			Months
	Ended			Ended			145 Days
	September			September			Ended
	30,			30,			May 25,
(In Thousands—Except Per Share Amounts)	2004			2004			2005
Net income	$	1,202.2		$	3,160.3		$	1,212.4
Less: Total stock-based employee compensation expense determined under the fair value method for all awards, net of tax		(2.7	)		(14.3	)		(0.1	)


Pro-forma net income	$	1,199.5		$	3,146.0		$	1,212.3


Reported basic earnings per common share	$	0.29		$	0.76		$	0.29


Reported diluted earnings per common share	$	0.29		$	0.76		$	0.29


Pro-forma basic earnings per common share	$	0.29		$	0.76		$	0.29


Pro-forma diluted earnings per common share	$	0.29		$	0.76		$	0.29

On February 2, 2005, Global Preferred’s board of directors approved the acceleration of the vesting of outstanding employee options effective upon the closing of the sale of Global Preferred Re. Pursuant to the terms of the stock option plans, all options outstanding under such plans were unilaterally canceled as of the effective date of the sale of Global Preferred Re and on May 27, 2005, Global Preferred issued 57,464 shares of stock to its employees and directors to settle the outstanding options on a net basis. The number of shares issued was net of shares withheld for income tax withholding. Additional information with respect to stock option plan activity is as follows:


	Shares Available			Number of			Weighted Average
(Shares in Thousands)	for Options			Shares			Exercise Price
December 31, 2003		1,530.7			245.4		$	10.46
Grants		(44.4	)		44.4		$	10.94
Cancellations		—			(6.8	)	$	10.46
					(1.1	)	$	10.94
December 31, 2004		1,486.3			238.6		$	10.46
					43.3		$	10.94
Grants		—			1.3		$	10.46
					0.4		$	10.94
Cancellations		—			(18.1	)	$	10.46
					(5.5	)	$	10.94
Exercised		—			(221.8	)	$	10.46
					(38.2	)	$	10.94

June 30, 2005		1,486.3			—			N/A

Options exercisable at:
December 31, 2002		—			—			N/A
December 31, 2003		—			81.2		$	10.46
December 31, 2004		—			128.0		$	10.46

Effective as of July 1, 2005, Global Preferred terminated the stock option plans. No options were outstanding under either plan as of July 1, 2005.

5. Deferred Taxes

Global Preferred used the asset and liability method to record deferred income taxes on a going concern basis. Accordingly, deferred tax assets and liabilities were recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

6. Comprehensive Income

Statement of Financial Accounting Standards (“SFAS”) No. 130, Reporting Comprehensive Income, establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. The primary component of accumulated other comprehensive income or loss as shown under the equity section of the consolidated balance sheet was the unrealized gain or loss on available-for-sale fixed maturity securities. Total comprehensive income was $1,420,266 for the three months ended September 30, 2004. Total comprehensive income was $1,140,552 and $3,185,691 for the 145 days ended May 25, 2005 and for the nine months ended September 30, 2004, respectively.

7. Earnings Per Share

Basic earnings per share were computed based on the weighted-average number of common shares outstanding during the period, in accordance with SFAS No. 128, Earnings Per Share. Diluted earnings per share were computed based on the total weighted-average number of common and common equivalent shares outstanding during the period. The dilutive effect of the 258,282 stock options outstanding on May 25, 2005 was computed using the treasury stock method and was not significant to Global Preferred’s financial statements for the 145 day period ended May 25, 2005. For further discussion, refer to Note 15 to the consolidated financial statements in Global Preferred’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2004.

8. Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued a revision to SFAS No. 123, Accounting for Stock-Based Compensation, as SFAS No. 123R, Share-Based Payment. The provisions of SFAS No. 123R are effective as of the beginning of the first annual reporting period that begins after December 15, 2005. The issuance of SFAS No. 123R would have had no impact on Global Preferred’s financial statements due to the settlement of the outstanding options on May 27, 2005 and the termination of the stock option plans as of July 1, 2005.

9. Segment Reporting

Prior to the sale of Global Preferred Re on May 25, 2005, Global Preferred defined reportable segments based on the nature of its reinsurance agreements and the accounting treatment used for the various reinsurance agreements. Based on this definition, two reportable segments were identified: non-universal life-type agreements and universal life-type agreements (as each is referenced in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments, paragraphs 44 and 45). Global Preferred reinsured certain variable universal life insurance policies on a renewable term basis, which were reported below as Non-Universal Life-Type Agreements and, as such, these revenues were classified as premium revenue. Renewable term reinsurance involves the reinsurance of mortality risk whereby premiums are not directly related to the premium rates on the original plan of insurance. Global Preferred’s renewable term agreements were accounted for under SFAS No. 60, Accounting and Reporting by Insurance Enterprises. Global Preferred reinsured variable annuity contracts and certain other variable universal life insurance policies on a coinsurance and modified coinsurance basis, which were reported below as Universal Life-Type Agreements and, as such, these revenues were classified as reinsured policy revenues. Coinsurance involves the reinsurance of mortality and investment risks on the same basis as that of the underlying policies. The ceding life companies and Global Preferred shared in these risks on a pro rata basis. Global Preferred’s coinsurance and modified coinsurance agreements were accounted for under SFAS No. 97.

Items not directly related to the business segments and unallocated corporate items (i.e., other income, interest expense on corporate debt and unallocated operating expenses) were shown separately, consistent with Global Preferred’s internal measurement process. Segment assets reported included those assets directly attributable to the reinsurance agreements such as reinsurance balances receivable, deferred acquisition costs, policy loans, prepaid expenses, invested assets and cash. Cash and invested assets were allocated to the agreements based upon statutory reserves, the letters of credit posted in support of the statutory reserves held, and statutory receivables and allocated surplus, which was consistent with Global Preferred’s internal measurement process.


	Three Months Ended September 30, 2004
	Non-Universal		Universal
(Dollars in thousands)	Life-Type		Life-Type		Other			Total
Premiums	$	4,286	$	—	$	—		$	4,286
Reinsured policy revenues		—		3,191		—			3,191
Benefits, claims and settlement expenses*		1,701		207		—			1,908
Reinsurance expense allowances, net		1,465		330		—			1,795
Amortization of deferred acquisition costs		54		1,595		—			1,649

Underwriting profit		1,066		1,059		—			2,125
Net investment income		12		28		182			222
Net realized loss on investments		—		—		(1	)		(1	)
Net unrealized gain on trading Investments		—		—		41			41
Other expenses		41		89		692			822

Segment operating income (loss) before income tax		1,037		998		(470	)		1,565
Income tax expense (benefit)		241		231		(109	)		363

Segment net income (loss)	$	796	$	767	$	(361	)	$	1,202

Segment assets	$	5,942	$	44,718	$	26,533		$	77,193


*		Benefits, claims and settlement expenses include changes in future policy benefits.


	Nine Months Ended September 30, 2004										145 Days ended May 25, 2005
	Non-Universal		Universal								Non-Universal		Universal
(Dollars in thousands)	Life-Type		Life-Type		Other			Total			Life-Type		Life-Type		Other			Total
Premiums	$	12,859	$	—	$	—		$	12,859		$	6,745	$	—	$	—		$	6,745
Reinsured policy revenues		—		9,502		—			9,502			—		4,655		—			4,655
Benefits, claims and settlement expenses*		4,761		945		—			5,706			3,075		656		—			3,731
Reinsurance expense allowances, net		4,412		1,349		—			5,761			2,308		720		—			3,028
Amortization of deferred acquisition costs		127		4,426		—			4,553			73		1,883		—			1,956

Underwriting profit		3,559		2,782		—			6,341			1,289		1,396		—			2,685
Net investment income		27		75		508			610			30		46		350			426
Net realized (loss) gain on investments		—		—		(31	)		(31	)		—		—		37			37
Net unrealized gain on trading Investments		—		—		41			41			—		—		17			17
Other income		—		—		7			7			—		—		9			9
Other expenses		120		280		2,180			2,580			86		183		1,332			1,601

Segment operating income (loss) before income tax		3,466		2,577		(1,655	)		4,388			1,233		1,259		(919	)		1,573
Income tax expense (benefit)		970		721		(463	)		1,228			283		289		(211	)		361

Segment net income (loss)	$	2,496	$	1,856	$	(1,192	)	$	3,160		$	950	$	970	$	(708	)	$	1,212

Segment assets	$	5,942	$	44,718	$	26,533		$	77,193		$	5,738	$	38,801	$	33,697		$	78,236


*		Benefits, claims and settlement expenses include changes in future policy benefits.

During the three months ended September 30, 2004 the percentage of total premiums and reinsured policy revenues that related to business issued by Western Reserve Life Assurance Co. of Ohio (“Western Reserve”) was 92%. The percentage of total premiums and reinsured policy revenues that related to business issued by Western Reserve for the nine months ended September 30, 2004 and the 145 day period ended May 25, 2005 was 92%. The percentage of total underwriting profit that related to business issued by Western Reserve for the three months ended September 30, 2004 was 97%. The percentages of total underwriting profit that related to business issued by Western Reserve for the nine months ended September 30, 2004 and the 145 day period ended May 25, 2005 were 96% and 94%, respectively.

10. Investments

As of May 25, 2005, none of Global Preferred’s investments were deemed to be other-than-temporarily impaired. All of the unrealized losses on investments were caused by increases in market interest rates. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.

As of September 30, 2005, all of Global Preferred’s investments were held at fair market value. The major categories of investments consist of the following:



(Dollars in Thousands)	Fair Value
Fixed maturity securities:
U.S. government agency obligations	$	2,428,287
Equity securities		20,592

Total fixed maturity and equity securities	$	2,448,879

11. Employment Agreements

Global Preferred has a written employment agreement with its remaining executive officer. This agreement governs employee conduct and Global Preferred’s obligation to compensate such a key employee. The stated terms of the agreement provides for expiration on December 31, 2005.

On July 6, 2005, Global Preferred entered into transition agreements with certain of its former executive officers. Pursuant to the terms of these agreements, each of these employees resigned as an officer of Global Preferred, but continued as an employee until August 19, 2005 to assist with the wind-up and dissolution of Global Preferred. In addition, the transition agreements amended the employment agreement of each of the respective executive officers to modify the restrictive covenants of the employment agreement to permit such employee to own and participate in the operations of a non-affiliated company formed by those executive officers. As disclosed in their respective transition agreements, the severance amounts shall be paid in accordance with Global Preferred’s regular payroll practices, provided that (i) Global Preferred may, in its sole discretion, at any time elect to pay any remaining installments in a lump sum and (ii) Global Preferred agrees that any installments remaining unpaid at the time of the transfer of the remaining assets of Global Preferred to a liquidating trust will be paid to those officers prior to such transfer. The severance amounts remaining to be paid to those certain executive officers as of September 30, 2005 total $1.1 million.

12. Commitments and Contingencies

Under its reinsurance agreements, Global Preferred Re was required to provide security through letters of credit for the benefit of the ceding life companies with which it had agreements. Global Preferred Re had three letters of credit totaling $5.85 million as of May 25, 2005, which were issued by its custodian, Comerica Bank, for the benefit of the ceding life companies.

Liabilities for future policy benefits under modified coinsurance agreements equaled reinsured policy account balances on the underlying life insurance and annuity policies. With regard to the separate account benefits reinsured on a modified coinsurance basis, liabilities were recorded as an offset to related assets as the intentions and rights under the agreements with the ceding life companies met the appropriate conditions governing rights of setoff. Separate account benefits and related assets reinsured on a modified coinsurance basis totaled $262.2 million as of May 25, 2005.

13. Sale of Subsidiaries

On July 6, 2005, Global Preferred completed the sale of its remaining subsidiaries, Global Preferred Solutions, Inc., Global Preferred Resources, Inc. and Preferred Advantage Insurance Services, Inc., to a company that is owned and managed by certain former officers of Global Preferred and was formed to facilitate the liquidation of Global Preferred’s investment in these subsidiaries. These subsidiaries were substantially inactive. Global Preferred received $300 in consideration for these subsidiaries which was recorded as an increase in net assets in liquidation as part of the adjustment for changes in fair value of invested assets.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) addresses the financial condition of Global Preferred Holdings, Inc. as of September 30, 2005 compared with December 31, 2004. The results of operations for the 145 day period ended May 25, 2005, were compared with the three and six month periods ended June 30, 2004, in Global Preferred’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005. Due to the conversion of Global Preferred’s financial accounting to liquidation basis accounting beginning on May 26, 2005,and the fundamentally different nature of Global Preferred’s operations following that date, a comparison of the results of operations for the periods ended September 30, 2005 to the periods ended September 30, 2004 would be immaterial. This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes included elsewhere in this report and with the MD&A and Global Preferred’s consolidated financial statements and notes thereto included in Global Preferred’s 2004 Annual Report on Form 10-K, as amended.

Overview

Global Preferred Holdings, Inc. was incorporated in Delaware in 1995 as a holding company and, until May 2005, owned all of the outstanding capital stock of Global Preferred Re Limited, and until July 2005, owned all of the outstanding capital stock of Global Preferred Solutions, Inc., Global Preferred Resources, Inc. and Preferred Advantage Insurance Services, Inc. Global Preferred Solutions, Global Preferred Resources and Preferred Advantage Insurance Services were formed during 2003. References in this report to “Global Preferred,” “we,” “us,” “our” and “our company” refer to Global Preferred Holdings, Inc. and its subsidiaries unless the context otherwise requires or is expressly stated.

Plan of Liquidation

On December 30, 2004, we entered into an agreement and plan of reorganization (the “Reorganization Agreement”) with AEGON N.V. (“AEGON”) and GPRE Acquisition Corp. (“GAC”), a direct, wholly owned subsidiary of AEGON, to transfer to GAC all of the outstanding shares of Global Preferred Re Limited (“Global Preferred Re”). Global Preferred Re was formed during 1995 as a Bermuda company registered as a long-term insurer under the Bermuda Insurance Act 1978. The Reorganization Agreement provides that, no more than twelve months after closing of the asset transfer, we must dissolve and distribute all remaining AEGON common shares received pursuant to the Reorganization Agreement and any of our other remaining assets to our stockholders, after making adequate provision for our liabilities in accordance with Delaware law.

On May 10, 2005, our stockholders authorized: (1) the sale of Global Preferred Re to GAC pursuant to the Reorganization Agreement and (2) the subsequent liquidation and dissolution of Global Preferred pursuant to a plan of complete liquidation and dissolution (the “Dissolution Plan”). On May 25, 2005, the transactions contemplated by the Reorganization Agreement were consummated whereby Global Preferred received 4,503,274 AEGON common shares in exchange for all of the outstanding shares of Global Preferred Re.

Since the sale of substantially all of our assets on May 25, 2005, our operations have been limited to winding-up our business and affairs, selling our remaining assets and discharging our known liabilities. On June 1, 2005, a certificate of dissolution for Global Preferred was filed with and accepted by the Secretary of State of the State of Delaware. Once a corporation is dissolved under Delaware law, its existence is automatically continued for a term of three years, or for such longer period as the Delaware court directs, but solely for the purpose of winding up its business. The process of winding up includes: (1) the prosecution and defense of lawsuits, if any; (2) the settling and closing of any business; (3) the disposition and conveyance of any property; (4) the discharge of any liabilities; and (5) the distribution of any remaining assets to the stockholders.

We plan to distribute all remaining assets to our stockholders, after making adequate provision for our liabilities in accordance with Delaware law. Global Preferred expects that it will be necessary to retain a portion of its liquid assets to pay liabilities that may arise after completion of the dissolution; therefore, Global Preferred’s board of directors may transfer a portion of its assets to a liquidating trust. The liquidating trust will permit Global Preferred to dissolve and, as required under Delaware law, have assets still available to be applied to liabilities after the dissolution. In accordance with the Reorganization Agreement, if Global Preferred determines to transfer assets to a liquidating trust, then the transfer must occur on or before May 25, 2006.

The accompanying condensed consolidated statements of income and cash flows for the 145 day period ended May 25, 2005 have been presented on a going concern basis comparable to prior periods, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. Effective May 26, 2005, we adopted the liquidation basis of accounting.

Under the liquidation basis of accounting, assets are recorded at their estimated net realizable value and liabilities are recorded at their estimated settlement amounts and include estimates for future operating costs and settlement reserves during the liquidation period. The valuation of assets and liabilities requires many estimates and assumptions by management and there may be substantial uncertainties in carrying out the provisions of the Dissolution Plan. In all instances, actual results could vary from those estimates. Distributions ultimately made to stockholders upon liquidation will differ from the “net assets in liquidation” recorded in the accompanying condensed consolidated statement of net assets in liquidation as a result of the actual proceeds received from the realization of assets and the ultimate settlement amount of our liabilities and obligations.

Upon changing to the liquidation basis of accounting on May 26, 2005, we recorded an $8.4 million increase to net assets, which included a charge of $6.7 million of estimated future operating costs and settlement reserves during liquidation.

The following represents the estimated future operating costs and settlement reserves during liquidation:


	As of
(Dollars in Thousands)	September 30, 2005
Employee compensation and benefits, including severance	$	1,860.5
Legal, audit and other professional services		659.5
Other estimated costs of liquidation		100.4
Settlement reserve		2,396.0

Total	$	5,016.4

Status of Liquidation

On July 6, 2005, our board of directors approved the distribution of all 4,503,274 AEGON common shares, received by us pursuant to the Reorganization Agreement, to stockholders of record as of June 1, 2005. On July 8, 2005, we initiated the distribution of the AEGON common shares in whole shares. As of September 30, 2005, Global Preferred has 1,382 shares of AEGON common shares, of which 896 shares are held on behalf of stockholders who have not claimed their ownership and 486 shares are held for liquidation to pay cash for fractional interests due to stockholders. Together, the whole share distribution and the cash to be distributed for the fractional interests will represent the distribution of all the consideration received by Global Preferred from AEGON for the sale of Global Preferred Re in May 2005 and represent a substantial part of the assets to be distributed to stockholders under the Dissolution Plan. The distribution of the AEGON common shares was recorded in the liquidation basis financial statements during the third quarter at a value of $12.87 per share which was equal to the market value per share as of June 30, 2005. The AEGON common shares yet to be distributed are recorded as dividends payable in the liquidation basis financial statements as of September 30, 2005 at $14.90 per share, the market value as of that date, along with the cash dividends received from those remaining shares which are also to be distributed.

Also on July 6, 2005, we entered into transition agreements with certain of our former executive officers. Pursuant to the terms of these agreements, each of these employees resigned as an officer of Global Preferred, but continued as an employee until August 19, 2005 to assist with the wind-up and dissolution of Global Preferred. In addition, the transition agreements amended the employment agreement of each of the respective executive officers to modify the restrictive covenants of the employment agreement to permit such employee to own and participate in the operations of a non-affiliated company formed by those executive officers. As disclosed in their respective transition agreements, the severance amounts shall be paid in accordance with Global Preferred’s regular payroll

practices, provided that (i) Global Preferred may, in its sole discretion, at any time elect to pay any remaining installments in a lump sum and (ii) Global Preferred agrees that any installments remaining unpaid at the time of the transfer of the remaining assets of Global Preferred to a liquidating trust will be paid to those officers prior to such transfer. The severance amounts remaining to be paid to those certain executive officers as of September 30, 2005 total $1.1 million.

Additionally, on July 6, 2005, Global Preferred completed the sale of its remaining subsidiaries, Global Preferred Solutions, Global Preferred Resources, and Preferred Advantage Insurance Services, to a company that is owned and managed by certain former officers of Global Preferred and was formed to facilitate the liquidation of Global Preferred’s investment in these subsidiaries. These subsidiaries were substantially inactive. Global Preferred received $300 in consideration for these subsidiaries which was recorded as an increase in net assets in liquidation as part of the adjustment for changes in fair value of invested assets.

Business Operations Prior to Asset Sale

Prior to the sale of Global Preferred Re, Global Preferred, through its subsidiaries, provided profit sharing solutions for independent marketing organizations or “IMOs” in the life insurance and annuity industry. An IMO is an organization of independent agents that contracts with one or more insurance companies to distribute and market securities and insurance products. These organizations include: insurance agencies, insurance brokers, broker-dealers, banks, savings and loans and any other group or institution that markets life insurance and annuities. While we no longer have active business operations, the following description of our business operations prior to the asset sale is provided to aid our readers’ understanding of our historical financial statements.

Our core business consisted of providing reinsurance on business that resulted from a relationship with the independent agents of an IMO affiliate of AEGON USA, Inc. Although our reinsurance business was directed to us through these independent agent relationships, the life insurance and annuity policies that we reinsured were underwritten and issued by various ceding life companies, including:

	•		Western Reserve Life Assurance Co. of Ohio, a subsidiary of AEGON USA, Inc. (“Western Reserve”);

	•		American Skandia Life Assurance Corporation, a subsidiary of Prudential Financial, Inc. (“American Skandia”);

	•		Pacific Life Insurance Company (“Pacific Life”); and

	•		Federal Kemper Life Assurance Company, a subsidiary of J.P. Morgan Chase & Co. (“Kemper”).

Under a reinsurance agreement, like the ones we entered into with the above insurance companies, the economic consequences of certain insurance risks were transferred from the ceding life company to the reinsurer.

The ceding life companies retained responsibility for the payment of all claims, surrender values, commissions, and expenses involved in issuing and maintaining the policies we reinsured. In addition, the ceding life companies administered the reinsurance contracts and, on a monthly and quarterly basis, provided us with information regarding premiums, reserves and benefits and the amounts we owed to the ceding life company for claims and settlement expenses on the policies we reinsured.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions regarding uncertainties that affect certain amounts in the unaudited condensed consolidated financial statements on a going concern basis and related footnotes. Accounts that we deemed to be sensitive to changes in estimates for those amounts reported through May 25, 2005 included reinsurance settlements, deferred acquisition costs and future policy benefits. In all instances, actual results could differ from estimates. Information included in our Quarterly Report on Form 10-Q for the Quarterly Period ended June 30, 2005 and in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K, for the year ended December 31, 2004, as amended, includes a summary of the critical accounting policies used in the preparation of our unaudited condensed consolidated financial statements.

Reinsurance Agreements under Global Preferred Re

The life insurance and annuity policies that we reinsured were underwritten and issued by Western Reserve, American Skandia, Kemper and Pacific Life. The following table indicates the percentage of our reinsurance revenues derived from these ceding life companies:


							145 Days
	Year Ended			Year Ended			Ended
	December 31,			December 31,			May 25,
	2003			2004			2005
Western Reserve		92	%		92	%		92	%
American Skandia		7			6			6
Kemper		1			1			1
Pacific Life		—	⁽¹⁾		1			1

Total		100	%		100	%		100	%


(1)		Less than 1%.

Under our reinsurance agreements with the ceding life companies, we reinsured variable life insurance and variable annuity policies on either a renewable term basis or a coinsurance and modified coinsurance basis. The policies we reinsured on a renewable term basis represented 60% of our reinsurance revenues for the 55 day period ended May 25, 2005. The policies we reinsured on a coinsurance and modified coinsurance basis represented 40% of our reinsurance revenues for the same period. Of the 40%, 57% related to variable life insurance policies and 43% related to variable annuity policies.

Results of Operations

On May 25, 2005, Global Preferred completed its sale of Global Preferred Re, which comprised substantially all of its assets, to AEGON for 4,503,274 shares of AEGON common stock. As a result, our operations and substantially all operating cash flows, except for investment income and wind-up expenses have ceased. Effective May 26, 2005, Global Preferred adopted the liquidation basis of accounting as opposed to preparing our financial statements on a going concern basis under accounting principles generally accepted in the United States of America. The asset sale resulted in no further premium or reinsured policy revenues after May 25, 2005. Additionally, no benefits, claims and expenses, change in future policy benefits, reinsurance expense allowances, net, or amortization of deferred acquisition costs were incurred after May 25, 2005. Accordingly, results of operations for the 145 days ended May 25, 2005 are not comparable to the three months and nine months ended September 30, 2004 due to the shortened reporting periods. Results of operations do not reflect adjustments recorded upon the change to the liquidation basis of accounting adopted on May 26, 2005.

The results of operations for the 145 day period ended May 25, 2005, were compared with the three and six month periods ended June 30, 2004, in Global Preferred’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005. Due to the conversion of Global Preferred’s financial accounting to liquidation basis accounting beginning on May 26, 2005, and the fundamentally different nature of Global Preferred’s operations following that date, a comparison of the results of operations for the periods ended September 30, 2005 to the periods ended September 30, 2004 would be immaterial.

The following table sets forth certain operating data as a percentage of total revenue for the periods indicated:


	Three Months			Nine Months
	Ended			Ended
	September 30,			September 30,			145 Days Ended
	2004			2004			May 25, 2005
	(As a percentage of total revenue)
Consolidated Statements of Income Data:
Revenues:
Premiums		55	%		56	%		57	%
Reinsured policy revenues		41			41			39
Net investment income		3			3			4
Net unrealized gain on investments		1			—			—

Total revenues		100	%		100	%		100	%
Benefits and expenses:
Benefits, claims and settlement expenses		23			23			30
Change in future policy benefits		2			2			2
Reinsurance expense allowances, net		23			25			26
Amortization of deferred acquisition costs		21			20			16
Operating expenses		10			10			13
Interest expense		1			1			—

Total benefits and expenses		80			81			87

Income before income tax		20			19			13
Income tax expense		(4	)		(5	)		(3	)

Net income		16	%		14	%		10	%

Liquidity and Capital Resources

Due to the sale of Global Preferred Re and the dissolution of Global Preferred, during the third quarter of 2005, Global Preferred restructured its investment portfolio to invest in higher quality and shorter duration investments over the remaining dissolution period. Global Preferred sold its remaining fixed maturity securities for $2.4 million and used the proceeds to purchase United States treasury notes. Additionally, cash of $2.1 million was used to purchase $2.1 million of United States treasury bills, which are classified as cash equivalents. As of September 30, 2005, our primary sources of liquidity were $2.4 million in fixed maturity securities held for sale and $2.3 million in cash and cash equivalents. The effective duration of our fixed maturity portfolio is 1.6 years with 100% of the fixed maturity securities having an effective maturity of less than 3 years. Our fixed maturity portfolio represents 51% of our total invested assets, and has an average Moody’s quality rating of Aaa.

Since May 26, 2005, our operations have been limited to winding-up our business and affairs, selling our remaining assets and discharging our known liabilities. The Reorganization Agreement provides that, no more than twelve months after closing of the asset transfer, we must dissolve and distribute all remaining AEGON common shares received pursuant to the Reorganization Agreement and any remaining cash to our stockholders, after making adequate provision for our liabilities in accordance with Delaware law.

On July 6, 2005, our board of directors approved the distribution of all 4,503,274 AEGON common shares to stockholders of record as of June 1, 2005. As of June 1, 2005, Global Preferred had 4,199,149 shares of common stock outstanding. The distribution consisted of approximately 1.07 AEGON common shares for each share of Global Preferred common stock. On July 8, 2005, we initiated the distribution of the AEGON common shares in whole shares. As of September 30, 2005, Global Preferred has 1,382 AEGON common shares, of which 896 shares are held on behalf of stockholders who have not claimed their ownership and 486 shares are held for liquidation to pay cash for fractional interests due to stockholders. Together, the whole share distribution and the distribution of cash in lieu of the fractional interests will represent the distribution of all the consideration received by Global Preferred from AEGON for the sale of Global Preferred Re in May 2005 and represent a substantial part of the assets to be distributed to stockholders under the Dissolution Plan. The distribution of the AEGON common shares was recorded in the liquidation basis financial statements during the third quarter at a value of $12.87 per share which was equal to the market value per share as of June 30, 2005. The AEGON common shares yet to be distributed are recorded as

dividends payable in the liquidation basis financial statements as of September 30, 2005 at $14.90, the market value per share as of that date, per share along with the cash dividends received from those remaining shares which are also to be distributed.

Contractual Obligations and Commitments

The following table shows our contractual obligations and commitments as of September 30, 2005, which are reported in the condensed consolidated statement of net assets in liquidation as accrued expenses and accounts payable or estimated future operating costs. None of these commitments were assumed by AEGON in connection with the sale of Global Preferred Re. Pursuant to a termination option in our office lease, we gave notice of our intent to exercise this option and vacated the premises effective October 14, 2005. Additionally, we exercised our option to return the furniture and office equipment under the operating leases in October 2005. We paid the last payments for the office lease and the operating leases in September 2005. No further amounts are due under the office and operating leases. The severance payments and benefits are due to those employees that have been terminated or that will be terminated in the near future as a result of the sale of Global Preferred Re and subsequent dissolution of Global Preferred. Further information is included elsewhere herein and in Note 10 to the Consolidated Financial Statements in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2004.


(In Thousands)	Total		2005		2006
Severance payments and benefits	$	1,651.6	$	450.8	$	1,200.8

Forward-Looking Statements

Certain statements made in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the “safe-harbor” provisions of that Act. Additionally, any written or oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. These statements may include, but are not limited to statements relating to reinsurance revenues, gross profits, cash flows, and net income in future periods. Such statements often include the words “believes,” “expects,” “assumes,” “predicts,” “continue,” “potential,” “should,” “could,” “can,” “may,” “will,” “proposes,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” and variations or negations of such expressions or similar expressions. When we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. Because such forward-looking statements involve risks, both known and unknown, and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including but not limited to:

	•		The distribution of the remaining AEGON shares and cash, if any, prior to payment of liquidation expenses;

	•		Estimates of our cash requirements and costs of liquidation;

	•		Estimates of our asset values, including future investment income;

	•		Estimates of our settlement reserve during liquidation;

	•		The passage of federal or state legislation subjecting our business to additional supervision or regulation, including additional tax regulation, in the United States or other jurisdictions in which we operate; and

	•		Changes in economic conditions, including interest rate and equity market conditions, which could affect our investment portfolio.

These forward-looking statements are subject to change and uncertainty that are beyond our control and have been made based upon our expectations and beliefs concerning future developments and their potential effect on our business. We cannot assure you that future developments will be in accordance with our expectations or that the effect of future developments will be those we anticipate. Actual results could differ materially from those we expect,

depending upon the outcome of certain factors, including those described in the forward-looking statements. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates. We have described some important factors that could cause our actual results to differ materially from our expectations in “Factors That May Affect Future Results of Operations” included as Exhibit 99.1 in our 2004 Annual Report on Form 10-K, as amended. You should carefully review these risks and additional risks described in other documents we file from time to time with the Securities and Exchange Commission, including quarterly reports on the Form 10-Q. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We utilized an independent investment manager to invest our assets in accordance with our investment guidelines. Conning Asset Management Inc., a subsidiary of Swiss Reinsurance Company, has been our investment manager since June 1998. Due to the dissolution of Global Preferred and the restructuring of the investment portfolio, effective September 30, 2005, we have terminated our contract with Conning Asset Management.

Our exposure to market risk related to changes in interest rates is primarily due to our highly liquid investments. The primarily objective of our investment activities is to preserve principal for our stockholders while maximizing yields without significantly increasing risk. Our cash and fixed income portfolio includes investments that are subject to changes in market values with changes in interest rates. The impact on our cash and fixed income investment portfolio from an immediate 100 basis point increase in market interest rates would have resulted in an estimated decrease in fair value of 0.3%, or approximately $14,000 on a portfolio valued at approximately $4.5 million at September 30, 2005. The impact on our cash and fixed income investment portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in fair value of 0.3%, or approximately $15,000. The foregoing reflects the use of an immediate time horizon. Credit spreads are assumed to remain constant in these hypothetical examples.

At the present time, we have no financial instruments in place to manage the impact of changes in interest rates or equity market prices.

ITEM 4. CONTROLS AND PROCEDURES

As of the most recent fiscal quarter end, we carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined by Rule 13a-14(c) of the Securities Exchange Act of 1934) under the supervision and with the participation of our chief accounting officer. Based on and as of the date of such evaluation, the aforementioned officer has concluded that our disclosure controls and procedures were effective, in all material aspects, to ensure that information required to be disclosed in the reports we file with the Securities and Exchange Commission is recorded, processed, summarized and reported as and when required.

There were no significant changes in our internal controls or other factors that could significantly affect these controls subsequent to the date our chief accounting officer carried out her evaluation. There were no significant deficiencies or material weaknesses identified in the evaluation and, therefore, no corrective actions were taken.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not a party to any material legal proceedings.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no changes in securities during the quarter ended September 30, 2005.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There have been no defaults in the payment of principal or interest of any indebtedness of the issuer.

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

During the third quarter of 2005, no matters were submitted to our security holders for a vote.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


10.1		Separation and Release Agreement with Edward F. McKernan dated August 19, 2005.

10.2		Separation and Release Agreement with Bradley E. Barks dated August 19, 2005.

10.3		Separation and Release Agreement with David W. McLeroy dated August 25, 2005.

31.1		Certification by Caryl P. Shepherd, Chief Accounting Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Caryl P. Shepherd, Chief Accounting Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Atlanta, State of Georgia on the 21^st day of November, 2005.


	GLOBAL PREFERRED HOLDINGS, INC.
	By:	/s/ CARYL P. SHEPHERD
		Caryl P. Shepherd
		Chief Accounting Officer, Vice President and Treasurer

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GLOBAL PREFERRED HOLDINGS INC 10-Q