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ASSETS Current Statement 4 1 2 3 Net Admitted December 31 Nonadmitted Assets Prior Year Net Assets Assets (Cols. 1-2) Admitted Assets 1. Bonds......20,039,545,679......20,039,545,679...19,521,021,779 2. Stocks: 2.1 Preferred stocks............0... 2.2 Common stocks......104,913,214...1,553,049...103,360,165...103,767,193 3. Mortgage loans on real estate: 3.1 First liens......3,707,242,815......3,707,242,815...3,419,606,175 3.2 Other than first liens............0... 4. Real estate: 4.1 Properties occupied by the company (less $...0 encumbrances)......35,817,900......35,817,900...35,935,394 4.2 Properties held for the production of income (less $...0 encumbrances)......1,477,510......1,477,510...1,491,942 4.3 Properties held for sale (less $...0 encumbrances)............0... 5. Cash ($...(12,363,492)), cash equivalents ($...320,278,028) and short-term investments ($...268,405,527)......576,320,062......576,320,062...186,909,521 6. Contract loans (including $...0 premium notes)......3,991,181,580......3,991,181,580...3,993,638,120 7. Derivatives......117,991,305......117,991,305...133,811,691 8. Other invested assets......475,202,628...11,439,864...463,762,764...459,911,508 9. Receivables for securities......61,321,783......61,321,783...15,300,498 10. Securities lending reinvested collateral assets......88,811,176......88,811,176... 11. Aggregate write-ins for invested assets......0...0...0...0 12. Subtotals, cash and invested assets (Lines 1 to 11)......29,199,825,652...12,992,913...29,186,832,739...27,871,393,821 13. Title plants less $...0 charged off (for Title insurers only)............0... 14. Investment income due and accrued......298,885,750......298,885,750...271,067,623 15. Premiums and considerations: 15.1 Uncollected premiums and agents' balances in the course of collection......2,810,446...267,655...2,542,791...11,578,781 15.2 Deferred premiums, agents' balances and installments booked but deferred and not yet due (including $...0 earned but unbilled premiums)......11,073,112......11,073,112...12,024,005 15.3 Accrued retrospective premiums ($...0) and contracts subject to redetermination ($...0)............0... 16. Reinsurance: 16.1 Amounts recoverable from reinsurers......490,636......490,636...5,102,054 16.2 Funds held by or deposited with reinsured companies............0... 16.3 Other amounts receivable under reinsurance contracts......5,842,215......5,842,215...6,227,374 17. Amounts receivable relating to uninsured plans............0... 18.1 Current federal and foreign income tax recoverable and interest thereon......67,593,693......67,593,693...44,718,091 18.2 Net deferred tax asset......494,028,637...370,191,281...123,837,356...183,578,894 19. Guaranty funds receivable or on deposit......941,914......941,914...1,769,801 20. Electronic data processing equipment and software......16,573,672......16,573,672...18,330,356 21. Furniture and equipment, including health care delivery assets ($...0)......5,716,390...5,716,390...0... 22. Net adjustment in assets and liabilities due to foreign exchange rates............0... 23. Receivables from parent, subsidiaries and affiliates......89,313,268...36,666,421...52,646,847...66,275,636 24. Health care ($...0) and other amounts receivable............0... 25. Aggregate write-ins for other than invested assets......511,420,835...77,456,801...433,964,034...448,599,289 26. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines 12 through 25)......30,704,516,220...503,291,461...30,201,224,759...28,940,665,725 27. From Separate Accounts, Segregated Accounts and Protected Cell Accounts......28,157,016,580......28,157,016,580...27,495,359,101 28. Total (Lines 26 and 27)......58,861,532,800...503,291,461...58,358,241,339...56,436,024,826 DETAILS OF WRITE-INS 1101.............0... 1102.............0... 1103.............0... 1198. Summary of remaining write-ins for Line 11 from overflow page......0...0...0...0 1199. Totals (Lines 1101 thru 1103 plus 1198) (Line 11 above)......0...0...0...0 2501. Cash value of company owned life insurance......258,527,148......258,527,148...252,762,666 2502. Other receivables......170,806,450...54,381...170,752,069...187,557,078 2503. Capitalized costs......58,747,621...58,747,621...0... 2598. Summary of remaining write-ins for Line 25 from overflow page......23,339,616...18,654,799...4,684,817...8,279,545 2599. Totals (Lines 2501 thru 2503 plus 2598) (Line 25 above)......511,420,835...77,456,801...433,964,034...448,599,289 Q02

LIABILITIES, SURPLUS AND OTHER FUNDS 1 2 Current December 31 Statement Prior Year 1. Aggregate reserve for life contracts $...25,937,029,735 less $...0 included in Line 6.3 (including $...12,137,503,252 Modco Reserve)......25,937,029,735...25,675,516,075 2. Aggregate reserve for accident and health contracts (including $...0 Modco Reserve)......265,709,606...269,093,481 3. Liability for deposit-type contracts (including $...0 Modco Reserve)......221,836,854...224,774,825 4. Contract claims: 4.1 Life......85,218,157...82,299,400 4.2 Accident and health......22,857,851...22,439,689 5. Policyholders' dividends $...0 and coupons $...0 due and unpaid......... 6. Provision for policyholders' dividends and coupons payable in following calendar year - estimated amounts: 6.1 Dividends apportioned for payment (including $...0 Modco)......45,170,400...46,621,400 6.2 Dividends not yet apportioned (including $...0 Modco)......... 6.3 Coupons and similar benefits (including $...0 Modco)......... 7. Amount provisionally held for deferred dividend policies not included in Line 6......... 8. Premiums and annuity considerations for life and accident and health contracts received in advance less $...0 discount; including $...0 accident and health premiums......2,501,089...16,947,911 9. Contract liabilities not included elsewhere: 9.1 Surrender values on canceled contracts......... 9.2 Provision for experience rating refunds, including the liability of $...25,333,924 accident and health experience rating refunds of which $...0 is for medical loss ratio rebate per the Public Health Service Act......56,509,700...114,082,481 9.3 Other amounts payable on reinsurance, including $...1,061,990 assumed and $...4,086,115 ceded......5,148,105...9,136,485 9.4 Interest Maintenance Reserve......101,610,161...117,342,292 10. Commissions to agents due or accrued - life and annuity contracts $...25,148,089, accident and health $...0 and deposit-type contract funds $...0......25,148,089...24,265,006 11. Commissions and expense allowances payable on reinsurance assumed......... 12. General expenses due or accrued......128,261,376...168,703,212 13. Transfers to Separate Accounts due or accrued (net) (including $...0 accrued for expense allowances recognized in reserves, net of reinsured allowances)......1,042,763...(4,807,037) 14. Taxes, licenses and fees due or accrued, excluding federal income taxes......6,758,002...7,934,568 15.1 Current federal and foreign income taxes, including $...0 on realized capital gains (losses)......... 15.2 Net deferred tax liability......... 16. Unearned investment income......3,020,557...4,803,214 17. Amounts withheld or retained by company as agent or trustee......48,652,714...53,737,712 18. Amounts held for agents' account, including $...0 agents' credit balances......... 19. Remittances and items not allocated......40,002,520...2,155,487 20. Net adjustment in assets and liabilities due to foreign exchange rates......... 21. Liability for benefits for employees and agents if not included above......2,260,161...2,282,704 22. Borrowed money $...98,644,819 and interest thereon $...0......98,644,819...97,538,141 23. Dividends to stockholders declared and unpaid......... 24. Miscellaneous liabilities: 24.01 Asset valuation reserve......186,645,272...185,043,214 24.02 Reinsurance in unauthorized and certified ($...0) companies......27,337...19,106 24.03 Funds held under reinsurance treaties with unauthorized and certified ($...0) reinsurers......430,668,568...430,668,568 24.04 Payable to parent, subsidiaries and affiliates......28,033,099...45,660,618 24.05 Drafts outstanding......... 24.06 Liability for amounts held under uninsured plans......... 24.07 Funds held under coinsurance......... 24.08 Derivatives......40,711,496...30,379,021 24.09 Payable for securities......38,847,554...42,348,396 24.10 Payable for securities lending......88,811,176... 24.11 Capital notes $...0 and interest thereon $...0......... 25. Aggregate write-ins for liabilities......1,350,009,620...218,355,246 26. Total liabilities excluding Separate Accounts business (Lines 1 to 25)......29,261,136,781...27,887,341,215 27. From Separate Accounts statement......28,157,007,639...27,495,350,385 28. Total liabilities (Lines 26 and 27)......57,418,144,420...55,382,691,600 29. Common capital stock......7,292,708...7,292,708 30. Preferred capital stock......... 31. Aggregate write-ins for other-than-special surplus funds......0...0 32. Surplus notes......527,908,711...527,901,740 33. Gross paid in and contributed surplus......620,116,392...619,698,153 34. Aggregate write-ins for special surplus funds......0...0 35. Unassigned funds (surplus)......(215,220,892)...(101,559,375) 36. Less treasury stock, at cost: 36.1...0.000 shares common (value included in Line 29 $...0)......... 36.2...0.000 shares preferred (value included in Line 30 $...0)......... 37. Surplus (Total Lines 31 + 32 + 33 + 34 + 35-36) (including $...8,941 in Separate Accounts Statement)......932,804,211...1,046,040,518 38. Totals of Lines 29, 30 and 37......940,096,919...1,053,333,226 39. Totals of Lines 28 and 38 (Page 2, Line 28, Col. 3)......58,358,241,339...56,436,024,826 DETAILS OF WRITE-INS 2501. Repurchase agreements......1,098,252,836... 2502. Other contract deposit funds......118,543,392...66,289,549 2503. Derivative collateral payable......79,037,268...103,213,854 2598. Summary of remaining write-ins for Line 25 from overflow page......54,176,124...48,851,843 2599. Totals (Lines 2501 thru 2503 plus 2598) (Line 25 above)......1,350,009,620...218,355,246 3101.......... 3102.......... 3103.......... 3198. Summary of remaining write-ins for Line 31 from overflow page......0...0 3199. Totals (Lines 3101 thru 3103 plus 3198) (Line 31 above)......0...0 3401.......... 3402.......... 3403.......... 3498. Summary of remaining write-ins for Line 34 from overflow page......0...0 3499. Totals (Lines 3401 thru 3403 plus 3498) (Line 34 above)......0...0 Q03

SUMMARY OF OPERATIONS 1 2 3 Current Prior Prior Year Ended Year to Year to December 31 1. Premiums and annuity considerations for life and accident and health contracts......1,490,441,610...1,693,931,251...(397,782,806) 2. Considerations for supplementary contracts with life contingencies............ 3. Net investment income......308,135,099...305,313,867...1,235,840,731 4. Amortization of Interest Maintenance Reserve (IMR)......5,174,856...5,454,517...23,252,563 5. Separate Accounts net gain from operations excluding unrealized gains or losses......41,469...25,685...150,191 6. Commissions and expense allowances on reinsurance ceded......7,441,943...976,256...5,785,228 7. Reserve adjustments on reinsurance ceded......(117,513,006)...(82,166,053)...5,627,638,477 8. Miscellaneous Income: 8.1 Income from fees associated with investment management, administration and contract guarantees from Separate Accounts......39,396,568...35,897,888...151,744,454 8.2 Charges and fees for deposit-type contracts............ 8.3 Aggregate write-ins for miscellaneous income......52,792,569...22,472,413...154,545,203 9. Totals (Lines 1 to 8.3)......1,785,911,108...1,981,905,824...6,801,174,041 10. Death benefits......72,764,968...82,669,771...341,292,029 11. Matured endowments (excluding guaranteed annual pure endowments)............ 12. Annuity benefits......49,530,410...50,826,745...202,093,494 13. Disability benefits and benefits under accident and health contracts......10,453,015...9,253,519...41,580,328 14. Coupons, guaranteed annual pure endowments and similar benefits............ 15. Surrender benefits and withdrawals for life contracts......1,190,877,824...1,036,884,715...4,330,312,982 16. Group conversions............ 17. Interest and adjustments on contract or deposit-type contract funds......3,117,840...2,614,657...10,448,449 18. Payments on supplementary contracts with life contingencies......374,962...420,627...1,542,901 19. in aggregate reserves for life and accident and health contracts......258,129,785...401,424,236...1,139,669,225 20. Totals (Lines 10 to 19)......1,585,248,804...1,584,094,270...6,066,939,408 21. Commissions on premiums, annuity considerations and deposit-type contract funds (direct business only)......49,552,791...39,169,526...179,626,618 22. Commissions and expense allowances on reinsurance assumed......471,158...382,510...1,940,231 23. General insurance expenses......127,512,742...118,878,876...495,228,965 24. Insurance taxes, licenses and fees, excluding federal income taxes......16,113,699...14,899,410...48,574,574 25. in loading on deferred and uncollected premiums......(1,694,409)...(568,753)...683,777 26. Net transfers to or (from) Separate Accounts net of reinsurance......(25,619,006)...194,335,592...(101,482,018) 27. Aggregate write-ins for deductions......4,439,543...0...0 28. Totals (Lines 20 to 27)......1,756,025,322...1,951,191,431...6,691,511,555 29. Net gain from operations before dividends to policyholders and federal income taxes (Line 9 minus Line 28)......29,885,786...30,714,393...109,662,486 30. Dividends to policyholders......14,326,832...15,269,912...45,841,784 31. Net gain from operations after dividends to policyholders and before federal income taxes (Line 29 minus Line 30)......15,558,954...15,444,481...63,820,702 32. Federal and foreign income taxes incurred (excluding tax on capital gains)......(11,710,430)...2,186,293...(37,931,886) 33. Net gain from operations after dividends to policyholders and federal income taxes and before realized capital gains or (losses) (Line 31 minus Line 32)......27,269,384...13,258,188...101,752,588 34. Net realized capital gains (losses) (excluding gains (losses) transferred to the IMR) less capital gains tax of $...(546,074) (excluding taxes of $...(5,684,686) transferred to the IMR)......(1,014,135)...(1,024,316)...(1,095,932) 35. Net income (Line 33 plus Line 34)......26,255,249...12,233,872...100,656,656 CAPITAL AND SURPLUS ACCOUNT 36. Capital and surplus, December 31, prior year......1,053,333,226...1,114,764,214...1,114,764,214 37. Net income (Line 35)......26,255,249...12,233,872...100,656,656 38. net unrealized capital gains (losses) less capital gains tax of $...(3,607,481)......(3,518,309)...15,354,518...(32,222,791) 39. net unrealized foreign exchange capital gain (loss)......(912,348)...(1,720)...(76,891) 40. net deferred income tax......(10,242,355)...23,449,073...16,604,649 41. nonadmitted assets......(46,753,371)...(24,400,820)...(47,305,766) 42. liability for reinsurance in unauthorized and certified companies......(8,231)...(323)...(61) 43. reserve on account of change in valuation basis, (increase) or decrease............ 44. asset valuation reserve......(1,602,058)...(11,432,797)...6,171,029 45. treasury stock............ 46. Surplus (contributed to) withdrawn from Separate Accounts during period............(195) 47. Other changes in surplus in Separate Accounts Statement......(41,244)...(1,768,912)...(150,337) 48. surplus notes......6,971...6,971...27,883 49. Cumulative effect of changes in accounting principles............ 50. Capital changes: 50.1 Paid in............59,722 50.2 Transferred from surplus (Stock Dividend)............ 50.3 Transferred to surplus............ 51. Surplus adjustment: 51.1 Paid in......418,239...655,414...22,359,050 51.2 Transferred to capital (Stock Dividend)............ 51.3 Transferred from capital............ 51.4 surplus as a result of reinsurance............ 52. Dividends to stockholders......(77,000,057)...(73,400,559)...(125,691,431) 53. Aggregate write-ins for gains and losses in surplus......161,207...69,851...(1,862,505) 54. Net change in capital and surplus (Lines 37 through 53)......(113,236,307)...(59,235,432)...(61,430,988) 55. Capital and surplus as of statement date (Lines 36 + 54)......940,096,919...1,055,528,782...1,053,333,226 DETAILS OF WRITE-INS 08.301. Other income......52,060,817...21,785,519...151,811,788 08.302. Interest on intercompany loan......731,752...686,894...2,733,415 08.303............. 08.398. Summary of remaining write-ins for Line 8.3 from overflow page......0...0...0 08.399. Totals (Lines 08.301 thru 08.303 plus 08.398) (Line 8.3 above)......52,792,569...22,472,413...154,545,203 2701. Interest on funds withheld assets - Ceded......4,439,543...... 2702............. 2703............. 2798. Summary of remaining write-ins for Line 27 from overflow page......0...0...0 2799. Totals (Lines 2701 thru 2703 plus 2798) (Line 27 above)......4,439,543...0...0 5301. pension and postretirement benefit liability, net of income taxes......161,207...69,851...(1,862,505) 5302............. 5303............. 5398. Summary of remaining write-ins for Line 53 from overflow page......0...0...0 5399. Totals (Lines 5301 thru 5303 plus 5398) (Line 53 above)......161,207...69,851...(1,862,505) Q04

CASH FROM OPERATIONS CASH FLOW 1 2 3 Current Year Prior Year Prior Year Ended to To December 31 1. Premiums collected net of reinsurance......1,472,953,342...1,678,651,010...5,910,874,588 2. Net investment income......253,431,602...256,251,324...1,080,450,237 3. Miscellaneous income......(17,496,767)...(22,132,583)...(23,873,898) 4. Total (Lines 1 through 3)......1,708,888,177...1,912,769,751...6,967,450,927 5. Benefit and loss related payments......1,287,630,438...1,153,805,856...4,671,246,108 6. Net transfers to Separate Accounts, Segregated Accounts and Protected Cell Accounts......(31,468,806)...194,896,445...(99,782,956) 7. Commissions, expenses paid and aggregate write-ins for deductions......224,238,881...192,861,707...688,454,965 8. Dividends paid to policyholders......15,817,665...16,690,912...51,521,071 9. Federal and foreign income taxes paid (recovered) net of $...(5,684,686) tax on capital gains (losses)......4,821,542...(17,853,807)...(15,711,075) 10. Total (Lines 5 through 9)......1,501,039,720...1,540,401,113...5,295,728,113 11. Net cash from operations (Line 4 minus Line 10)......207,848,457...372,368,638...1,671,722,814 CASH FROM INVESTMENTS 12. Proceeds from investments sold, matured or repaid: 12.1 Bonds......2,109,016,511...2,251,956,067...7,202,701,607 12.2 Stocks......814,250...287,930...1,539,483 12.3 Mortgage loans......49,875,834...88,310,743...365,790,189 12.4 Real estate............1,456,569 12.5 Other invested assets......1,256,089...(141,955)...9,884,109 12.6 Net gains or (losses) on cash, cash equivalents and short-term investments......(1,197)...5,499...12,570 12.7 Miscellaneous proceeds.........87,629,900...40,414,324 12.8 Total investment proceeds (Lines 12.1 to 12.7)......2,160,961,487...2,428,048,184...7,621,798,851 13. Cost of investments acquired (long-term only): 13.1 Bonds......1,501,352,519...2,013,337,363...8,434,226,549 13.2 Stocks......28,616......19,046 13.3 Mortgage loans......335,323,775...117,750,000...688,991,000 13.4 Real estate......516,338...267,692...2,006,228 13.5 Other invested assets......4,389,966...552,537...3,984,917 13.6 Miscellaneous applications......71,599,453...15,829,082...4,707,800 13.7 Total investments acquired (Lines 13.1 to 13.6)......1,913,210,667...2,147,736,674...9,133,935,540 14. Net increase or (decrease) in contract loans and premium notes......669,801...167,796...(6,808,609) 15. Net cash from investments (Line 12.8 minus Line 13.7 and Line 14)......247,081,019...280,143,714...(1,505,328,080) 16. Cash provided (applied): CASH FROM FINANCING AND MISCELLANEOUS SOURCES 16.1 Surplus notes, capital notes............ 16.2 Capital and paid in surplus, less treasury stock.........140,658...20,305,674 16.3 Borrowed funds......1,106,678...5,799,958...4,166,845 16.4 Net deposits on deposit-type contracts and other insurance liabilities......(2,937,971)...(6,213,964)...(22,342,458) 16.5 Dividends to stockholders......77,000,057...73,400,559...125,691,431 16.6 Other cash provided (applied)......13,312,415...(58,862,011)...(32,540,768) 17. Net cash from financing and miscellaneous sources (Lines 16.1 through 16.4 minus Line 16.5 plus Line 16.6)......(65,518,935)...(132,535,918)...(156,102,138) RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 18. Net change in cash, cash equivalents and short-term investments (Line 11 plus Line 15 plus Line 17)......389,410,541...519,976,434...10,292,596 19. Cash, cash equivalents and short-term investments: 19.1 Beginning of year......186,909,521...176,616,925...176,616,925 19.2 End of period (Line 18 plus Line 19.1)......576,320,062...696,593,359...186,909,521 Note: Supplemental disclosures of cash flow information for non-cash transactions: 20.0001 Share-based compensation expense......(418,239)...(514,756)...(2,113,098) 20.0002 Assets received from limited partnership investment distributions............(10,346) Q05

EXHIBIT 1 DIRECT PREMIUMS AND DEPOSIT-TYPE CONTRACTS 1 2 3 Current Year Prior Year Prior Year To To Ended December 31 1. Industrial life............ 2. Ordinary life insurance......253,298,658...213,071,838...990,976,644 3. Ordinary individual annuities......122,957,528...57,350,943...335,399,083 4. Credit life (group and individual)............ 5. Group life insurance......35,168,638...32,384,004...95,205,938 6. Group annuities......1,063,961,594...1,382,260,399...4,576,023,183 7. A&H - group......7,087,035...9,085,891...59,028,335 8. A&H - credit (group and individual)............ 9. A&H - other............ 10. Aggregate of all other lines of business......0...0...0 11. Subtotal......1,482,473,453...1,694,153,075...6,056,633,183 12. Deposit-type contracts......4,979,163...2,571,164...12,466,831 13. Total......1,487,452,616...1,696,724,239...6,069,100,014 DETAILS OF WRITE-INS 1001............. 1002............. 1003............. 1098. Summary of remaining write-ins for Line 10 from overflow page......0...0...0 1099. Total (Lines 1001 thru 1003 plus 1098) (Line 10 above)......0...0...0 Q06

NOTES TO FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies A. Accounting Practices The Company prepares its statutory financial statements in conformity with accounting practices prescribed or permitted by the Colorado Division of Insurance (the Division ). The Division requires that insurance companies domiciled in the State of Colorado prepare their statutory financial statements in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual ( NAIC SAP ), subject to any deviations prescribed or permitted by the State of Colorado insurance commissioner. The only prescribed deviation that impacts the Company allows the Company to account for certain separate account products at book value instead of fair value. The Division has not permitted the Company to adopt any other accounting practices that have an impact on the Company s statutory financial statements as compared to NAIC SAP or the Division s prescribed accounting practices. There is no impact to either capital and surplus or net income as a result of the prescribed accounting practice. State of Domicile Current Period Prior Year NET INCOME (1) state basis (Page 4, Line 35, Columns 1 & 3) Colorado 26,255,249 100,656,656 (2) State Prescribed Practices that increase/decrease NAIC SAP (3) State Permitted Practices that increase/decrease NAIC SAP (4) NAIC SAP (1 2 3 = 4) Colorado 26,255,249 100,656,656 SURPLUS (5) state basis (Page 3, line 38, Columns 1 & 2) Colorado 940,096,919 1,053,333,226 (6) State Prescribed Practices that increase/decrease NAIC SAP (7) State Permitted Practices that increase/decrease NAIC SAP (8) NAIC SAP (5 6 7 = 8) Colorado 940,096,919 1,053,333,226 C. Loan-backed Securities (6) Loan-backed and structured securities and bonds not backed by other loans (collectively referred to as bonds ) are carried at statutory adjusted carrying value in accordance with the NAIC designation of the security. Carrying value is amortized cost, unless the bond is either (a) designated as a six, in which case it is the lower of amortized cost or fair value or (b) required to be carried at fair value due to the structured securities ratings methodology. The Company recognizes the acquisition of its public bonds on a trade date basis and its private placement investments on a funding date basis. Bonds containing call provisions are amortized to the call or maturity value/date which produces the lowest asset value. D. Going Concern After evaluating the Company s ability to continue as a going concern, management is not aware of any conditions or events which raise substantial doubts concerning the Company s ability to continue as a going concern as of the date of filing this statement. Note 2 - Accounting Changes and Corrections of Errors No significant change. Note 3 - Business Combinations and Goodwill No significant change. Note 4 - Discontinued Operations No significant change. Note 5 Investments 5D Loan-Backed Securities (1) Prepayment assumptions are based on the average of recent historical prepayments and are obtained from broker/dealer survey values or internal estimates. These assumptions are consistent with the current interest rate and economic environment. Significant changes in estimated cash flows from the original purchase assumptions are accounted for using the retrospective method. Q07

NOTES TO FINANCIAL STATEMENTS (2) The Company did not have any loan-backed or structured securities with a recognized other-than-temporary impairment during the period ended March 31, 2017 that occurred due to the Company having the intent to sell the security or due to the inability or lack of intent to retain the investment in the security for a period of time sufficient to recover the amortized cost basis. (3) There were no loan-backed or structured securities currently held with a recognized other-than-temporary impairment during the period ended March 31, 2017 that occurred due to the present value of cash flows expected to be collected being less than the amortized cost basis of the security. (4) The following table summarizes unrealized investment losses at March 31, 2017. The Company considers these investments to be only temporarily impaired. a. The aggregate amount of unrealized losses: 1. Less than 12 Months $ 51,409,754 2. 12 Months or Longer $ 13,539,461 b. The aggregate related fair value of securities with unrealized losses: 1. Less than 12 Months $ 3,295,179,887 2. 12 Months or Longer $ 293,647,415 (5) The underlying collateral on the securities within the portfolio along with credit enhancement and/or guarantees is sufficient to expect full repayment of the principal. At March 31, 2017, the Company does not have the intent to sell the securities before the recovery of the cost of the securities and the Company has the intent and ability to hold the securities for a period of time sufficient to recover the amortized cost. Therefore, the Company does not consider these investments to be other-than-temporarily impaired. 5E Repurchase Agreements and/or Securities Lending Transactions (3) Collateral Received b. Fair value of the collateral and of the portion of the collateral that has been sold or repledged: Collateral received at March 31, 2017: Reverse repurchase agreements N/A Dollar reverse repurchase agreements $1,120,008,377 Securities lending $147,498,944 Collateral received at December 31, 2016: Reverse repurchase agreements N/A Dollar reverse repurchase agreements N/A Securities lending N/A Reinvested collateral at March 31, 2017: Reverse repurchase agreements N/A Dollar reverse repurchase agreements $1,120,008,377 Securities lending $ 88,811,176 Reinvested collateral at December 31, 2016: Reverse repurchase agreements N/A Dollar reverse repurchase agreements N/A Securities lending N/A Cash collateral related to the securities lending program and dollar repurchase agreement practices is primarily invested in U.S. Government securities, investment grade corporate securities and short-term repurchase agreements which are also collateralized by U.S. Government or U.S. Government Agency securities. In addition, the securities lending agent indemnifies the Company against borrower risk, meaning that the lending agent agrees contractually to replace securities not returned due to a borrower default. The Company does not enter into these types of transactions for liquidity purposes, but rather for yield enhancement on its investment portfolio. 5(F) Real Estate 5 (F) Real Estate - NONE Q07.1

NOTES TO FINANCIAL STATEMENTS 5(H) Restricted Assets H. Restricted Assets 1. Restricted Assets (Including Pledged) Gross (Admitted & Nonadmitted) Restricted Current Year Current Year Percentage 1 2 3 4 5 6 7 8 9 10 11 Total Gross Separate (Admitted & Account S/A Assets Nonadmitted) (S/A) Supporting / Restricted to G/A Supporting Restricted G/A Total Total From Prior (5 minus Total Nonadmitted Total Admitted Total Assets S/A Activity (a) Assets Activity (b) (1 plus 3) Year 6) Restricted Restricted (5 minus 8) Total General Account (G/A) Admitted Restricted to Total Admitted Assets (d) Restricted Asset Category a. Subject to contractual obligation for which liability is not shown $ - $ - $ - $ - $ - $ - $ - $ - $ - 0.000% 0.000% b. Collateral held under security lending arrangements 88,811,176 - - - 88,811,176-88,811,176 88,811,176 0.151% 0.152% c. Subject to repurchase agreements - - - - - - - - 0.000% 0.000% d. Subject to reverse repurchase agreements - - - - - - - - 0.000% 0.000% e. Subject to dollar repurchase agreements - - - - - - - - 0.000% 0.000% f. Subject to dollar reverse repurchase agreements 1,120,008,377 - - - 1,120,008,377-1,120,008,377 1,120,008,377 1.903% 1.918% g. Placed under option contracts - - - - - - - - 0.000% 0.000% h. Letter stock or securities restricted as to sale - excluding FHLB capital stock - - - - - - - - 0.000% 0.000% i. FHLB capital stock - - - - - - - - 0.000% 0.000% j. On deposit with states 4,343,761 - - - 4,343,761 4,350,104 (6,343) 4,343,761 0.007% 0.007% k. On deposit with other regulatory bodies 507,506 - - - 507,506 512,426 (4,920) 507,506 0.001% 0.001% l. Pledged as collateral to FHLB (including assets backing funding agreements) - - - - - - - - 0.000% 0.000% m. Pledged as collateral not captured in other categories 3,217,791 - - - 3,217,791 3,570,431 (352,640) 3,217,791 0.005% 0.006% n. Other restricted assets 527,500 - - - 527,500 581,290 (53,790) 527,500 0.001% 0.001% o. Total Restricted Assets $ 1,217,416,111 $ - $ - $ - $ 1,217,416,111 $ 9,014,251 $ 1,208,401,860 $ - $ 1,217,416,111 2.069% 2.085% (a) Subset of column 1 (b) Subset of column 3 (c) Column 5 divided by Asset Page, Column 1, Line 28 (d) Column 9 divided by Asset Page, Column 3, Line 28 2. Detail of Assets Pledged as Collateral Not Captured in Other Categories Gross (Admitted & Nonadmitted) Restricted Percentage Current Year 1 2 3 4 5 6 7 8 9 10 Total Separate Account (S/A) S/A Assets Supporting Gross (Admitted & Nonadmitted) Admitted Restricted to Total Total General Account G/A Supporting Restricted G/A Total From Prior / Total Current Year Restricted to Total Admitted Other Restricted Assets (G/A) S/A Activity (a) Assets Activity (b) Total (1 plus 3) Year (5 minus 6) Admitted Restricted Assets Assets Futures margin deposits $ 3,217,791 $ - $ - $ - $ 3,217,791 $ 3,570,087 $ (352,296) $ 3,217,791 0.005% 0.006% Derivatives cash collateral $ - $ - $ - $ - $ 344 $ (344) $ - 0.000% 0.000% Total $ 3,217,791 $ - $ - $ - $ 3,217,791 $ 3,570,431 $ (352,640) $ 3,217,791 0.005% 0.006% (a) Subset of column 1 (b) Subset of column 3 Check (s/b 0) Do not report! - - - - - - - - - - 0 (c) Total Line for Columns 1 through 7 should equal 5H(1)m Columns 1 through 7 respectively and Total Line for Columns 8 through 10 should equal 5H(1)m columns 9 through 11 respectively. 3. Detail of Other Restricted Assets Gross (Admitted & Nonadmitted) Restricted Percentage Current Year 1 2 3 4 5 6 7 8 9 10 Total Separate Account S/A Assets Gross (Admitted & Admitted Restricted to Total General Account G/A Supporting S/A Restricted (S/A) Restricted Supporting G/A Total From Prior / Total Current Year Nonadmitted) Restricted to Total Total Admitted Description of Assets (G/A) Assets (a) Assets Activity (b) Total (1 plus 3) Year (5 minus 6) Admitted Restricted Assets Assets Puerto Rico Public Bldgs Muni Revenue due 7/1/18 $ 527,500 $ - $ - $ - $ 527,500 $ 581,290 $ (53,790) $ 527,500 0.001% 0.001% $ - $ - 0.000% 0.000% Total $ 527,500 $ - $ - $ - $ 527,500 $ 581,290 $ (53,790) $ 527,500 0.001% 0.001% (a) Subset of column 1 (b) Subset of column 3 Check (s/b 0) Do not report! - - - - - - - - - 0 0 (c) Total Line for Columns 1 through 7 should equal 5H(1)n Columns 1 through 7 respectively and Total Line for Columns 8 through 10 should equal 5H(1)n columns 9 through 11 respectively. 4. Collateral Received and Reflected as Assets Within the Reporting Entity's Financial Statements 1 2 3 4 % of BACV to Collateral Assets (BACV) Fair Value Total Assets (Admitted and Nonadmitte d)* % of BACV to Total Admitted Assets ** a. Cash $ 80,145,268 $ 80,145,268 0.261% 0.265% b. Schedule D, Part 1 - - 0.000% 0.000% c. Schedule D, Part 2, Section 1 - - 0.000% 0.000% d. Schedule D, Part 2, Section 2 - - 0.000% 0.000% e. Schedule B - - 0.000% 0.000% f. Schedule A - - 0.000% 0.000% g. Schedule BA, Part 1 - - 0.000% 0.000% h. Schedule DL, Part 1 88,811,176 88,811,176 0.289% 0.294% i. Other - - 0.000% 0.000% j. Total Collateral Assets (a+b+c+d+e+f+g+h+i) $ 168,956,444 $ 168,956,444 0.550% 0.559% * Column 1 divided by Asset Page, Line 26 (Column 1) ** Column 1 divided by Asset Page, Line 26 (Column 3) 1 2 % of Liability to Amount Total Liabilities * k. Recognized Obligation to Return Collateral Asset $ 168,956,444 0.577% * Column 1 divided by Liability Page, Line 26 (Column 1) 5(I) Working Capital Finance Transactions-NONE 5(J) Offsetting and Netting of Assets and Liabilities-NONE Q07.2

NOTES TO FINANCIAL STATEMENTS Note 6 - Joint Ventures, Partnerships and Limited Liability Companies No significant change. Note 7 - Investment Income No significant change. Note 8 - Derivative Instruments No significant change. Note 9 - Income Taxes No significant change. Note 10 - Information Concerning Parent, Subsidiaries, Affiliates and Other Related Parties No significant change. Note 11 Debt 11 (B) Debt - NONE Note 12 - Retirement Plans, Deferred Compensation, Postemployment Benefits and Compensated Absences and Other Postretirement Benefit Plans Net periodic cost (benefit) of the Post-Retirement Medical and Supplemental Executive Retirement plans included in general insurance expenses in the Summary of Operations for the periods ended March 31, 2017 and December 31, 2016 includes the following components: Supplemental Executive Post-Retirement Retirement Plan Medical Plan 2017 2016 2017 2016 (4) Components of net periodic benefit cost a. Service cost $ (3,940) $ 294,107 $ 357,025 $ 1,246,269 b. Interest cost 405,085 1,774,539 188,353 712,845 c. Expected return on plan assets 0 0 0 0 d. Transition asset or obligation 0 0 0 0 e. Gains and losses (13,590) (61,041) (10,498) (136,643) f. Prior service cost or credit 125,351 501,409 146,748 149,659 g. Gain or loss recognized due to a settlement 0 0 0 h. Total net periodic cost (benefit) $ 512,906 $ 2,509,014 $ 681,629 $ 1,972,130 Note 13 - Capital and Surplus, Shareholders Dividend Restrictions and Quasi-Reorganizations No significant change. Note 14 - Contingencies No significant change. Note 15 - Leases No significant change. Note 16 - Information About Financial Instruments With Off-Balance Sheet Risk and Financial Instruments With Concentrations of Credit Risk No significant change. Note 17 - Sale, Transfer and Servicing of Financial Assets and Extinguishments of Liabilities 17 (B) Transfer and Servicing of Financial Assets - NONE 17 (C) Wash Sales - NONE Q07.3

NOTES TO FINANCIAL STATEMENTS Note 18 - Gain or Loss to the Reporting Entity from Uninsured Plans and the Uninsured Portion of Partially Insured Plans No significant change. Note 19 - Direct Premium Written/Produced by Managing General Agents/Third Party Administrators No significant change. Note 20 - Fair Value Fair Value Measurements A. Fair Value Disclosures (1) Fair Value Measurements at Reporting The following tables present information about the Company s financial assets and liabilities carried at fair value and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value: Fair Value Measurements at Reporting March 31, 2017 Assets: (Level 1) (Level 2) (Level 3) Total Bonds Industrial and miscellaneous $ - $ 15,133,790 $ - $ 15,133,790 States - 527,500-527,500 Derivatives Interest rate swaps - 8,186,696-8,186,696 Cross-currency swaps - 42,070,993-42,070,993 Interest rate swaptions - 265,333-265,333 Separate Account Assets 15,453,583,740 11,784,420,429 27,238,004,169 Total Assets: $ 15,453,583,740 $ 11,850,604,741 $ - $ 27,304,188,481 Liabilities: Derivatives Interest rate swaps $ - $ 14,895,221 $ - $ 14,895,221 Cross-currency swaps - 22,918,571-22,918,571 Separate Account Liabilities(1) 25,621 409,043,544 409,069,165 Total Liabilities: $ 25,621 $ 446,857,336 $ - $ 446,882,957 (1) Includes only separate account instruments which are carried at the fair value of the underlying invested assets owned by the separate accounts. Fair Value Measurements at Reporting December 31, 2016 Assets: (Level 1) (Level 2) (Level 3) Total Bonds Industrial and miscellaneous $ - $ 1,380,475 $ - $ 1,380,475 States - 581,290-581,290 Derivatives - Interest rate swaps - 8,981,640-8,981,640 Cross-currency swaps - 50,018,186-50,018,186 Interest rate swaptions - 353,503-353,503 Separate Account Assets 15,007,781,529 11,667,474,932-26,675,256,461 Total Assets: $ 15,007,781,529 $ 11,728,790,026 $ - $ 26,736,571,555 Liabilities: Derivatives Interest rate swaps $ - $ 13,340,405 $ - $ 13,340,405 Cross-currency swaps - 16,646,775-16,646,775 Separate Account Liabilities(1) 55,168 336,468,084-336,523,252 Total Liabilities: $ 55,168 $ 366,455,264 $ - $ 366,510,432 (1) Includes only separate account instruments which are carried at the fair value of the underlying invested assets owned by the separate accounts. (2) Fair Value Measurements in (Level 3) of the Fair Value Hierarchy As of March 31, 2017 and December 31, 2016, there were no transfers into or out of Level 3. (3) Policies for Determining When Transfers between Levels are Recognized Overall, transfers between levels are attributable to a change in the observability of inputs. Assets and liabilities are transferred to a lower level in the hierarchy when a significant input cannot be corroborated with market observable data. This may occur when market activity decreases and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in the quoted prices, thereby affecting transparency. Assets and liabilities are transferred to a higher level in the hierarchy when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity including recent trades, a specific event, or one or more significant input(s) becoming observable. All transfers between levels are recognized at the beginning of the reporting period in which the transfer occurred. Q07.4

NOTES TO FINANCIAL STATEMENTS (4) Techniques and Inputs in Fair Value Measurements Certain assets and liabilities are recorded at fair value on the Company s Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company categorizes its assets and liabilities measured at fair value into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The Company s assets and liabilities have been categorized based upon the following fair value hierarchy: Level 1 inputs, which are utilized for separate account assets and liabilities, utilize observable, quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs, which are utilized for general and separate account assets and liabilities, include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. The fair values for some Level 2 securities are obtained from pricing services. The inputs used by the pricing services are reviewed at least quarterly or when the pricing vendor issues updates to its pricing methodology. For bond and separate account assets and liabilities, inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, evaluated bids, offers and reference data including market research publications. Additional inputs utilized for assets and liabilities classified as Level 2 are: Asset-backed, residential mortgage-backed, commercial mortgage-backed securities and collateralized debt obligations new issue data, monthly payment information, collateral performance and third party real estate analysis. U.S. states and their subdivisions material event notices. Derivative instruments trading activity, swap curves, credit spreads, currency volatility, net present value of cash flows and news sources. Separate account assets and liabilities various index data and news sources, amortized cost (which approximates fair value), trading activity, swap curves, credit spreads, recovery rates, restructuring, net present value of cash flows and quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3 inputs are unobservable and include situations where there is little, if any, market activity for the asset or liability. In general, the prices of Level 3 securities are obtained from single broker quotes and internal pricing models. If the broker s inputs are largely unobservable, the valuation is classified as a Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The policies and procedures utilized to review, account for and report on the value and level of the Company s securities were determined and implemented by the Finance division. The Investments division is responsible for the processes related to security purchases and sales and provides valuation and leveling input to the Finance division when necessary. Both divisions within the Company have worked in conjunction to establish thorough pricing, review, approval, accounting and reporting policies and procedures around the securities valuation process. In some instances, securities are priced using external broker quotes. In most cases, when broker quotes are used as pricing inputs, more than one broker quote is obtained. External broker quotes are reviewed internally by comparing the quotes to similar securities in the public market and/or to vendor pricing, if available. Additionally, external broker quotes are compared to market reported trade activity to ascertain whether the price is reasonable, reflective of the current market prices and takes into account the characteristics of the Company s securities. B. Fair Value Reporting Under Other Accounting Pronouncements NONE Q07.5

NOTES TO FINANCIAL STATEMENTS C. Aggregate Fair Value for All Financial Instruments The following tables summarize the fair value hierarchy for all financial instruments and invested assets: Assets: Fair Value of Financial Instruments March 31, 2017 Aggregate Fair Value Admitted Assets (Level 1) (Level 2) (Level 3) Not Practicable () Bonds $ 20,783,477,877 $ 20,039,545,678 $ - $ 20,750,739,470 $ 32,738,407 $ - Mortgage loans 3,777,533,818 3,707,242,805-3,777,533,818 - - Real estate 137,454,500 37,295,410 - - 137,454,500 - Cash, cash equivalents and short-term investments 576,273,314 576,320,062 167,963,769 408,309,545 - - Contract loans 3,991,181,580 3,991,181,580-3,991,181,580 - - Other long-term invested assets 379,745,421 312,280,238-340,019,709 39,725,712 - Securities lending reinvested collateral assets 88,811,176 88,811,176-88,811,176 - - Collateral under derivative counterparty collateral agreements 79,037,268 79,037,268 79,037,268 - - - Receivable for securities 62,649,824 61,321,783-62,649,824 - - Derivative instruments 129,975,183 117,991,305 70,371 129,904,812 - - Separate account assets 28,170,973,030 28,157,016,585 15,455,490,030 12,715,483,000 - - Total assets $ 58,177,112,991 $ 57,168,043,890 $ 15,702,561,438 $ 42,264,632,934 $ 209,918,619 $ - Liabilities: Deposit-type contracts $ 235,452,592 $ 221,836,854 $ - $ 235,452,592 $ - $ - Commercial paper 98,644,819 98,644,819-98,644,819 - - Payable under securities lending agreements 88,811,176 88,811,176-88,811,176 - - Collateral under derivative counterparty collateral agreements 79,037,268 79,037,268 79,037,268 - - - Payable for securities 38,847,554 38,847,554 38,847,554 - - Derivative instruments 47,178,456 40,711,496 23,243 47,155,213 - - Dollar reverse repurchase agreements 1,098,252,836 1,098,252,836-1,098,252,836 - - Separate account liabilities 409,069,165 409,069,165 25,621 409,043,544 - - Total Liabilities $ 2,095,293,866 $ 2,075,211,168 $ 79,086,132 $ 2,016,207,734 $ - $ - Assets: Fair Value of Financial Instruments December 31, 2016 Aggregate Fair Value Admitted Assets (Level 1) (Level 2) (Level 3) Not Practicable () Bonds $ 20,165,962,794 $ 19,521,021,937 $ - $ 20,131,576,806 $ 34,385,988 $ - Mortgage loans 3,436,848,763 3,419,606,165-3,436,848,763 - - Real estate 137,454,500 37,427,337 - - 137,454,500 - Cash equivalents and short-term investments 186,878,464 186,909,520 151,022,800 35,855,664 - - Contract loans 3,993,638,120 3,993,638,120-3,993,638,120 - - Other long-term invested assets 367,429,396 309,700,924-330,280,780 37,148,616 - Collateral under derivative counterparty collateral agreements 103,213,854 103,213,854 103,213,854 - - - Receivable for securities 17,637,188 15,300,498-17,637,188 - - Derivative instruments 144,792,199 133,811,691-144,792,199 - - Separate account assets 27,501,700,736 27,495,359,101 15,016,707,388 12,484,993,348 - - Total assets $ 56,055,556,014 $ 55,215,989,147 $ 15,270,944,042 $ 40,575,622,868 $ 208,989,104 $ - Liabilities: Deposit-type contracts $ 240,965,514 $ 224,774,825 $ - $ 240,965,514 $ - $ - Commercial paper 99,049,285 99,049,285-99,049,285 - - Collateral under derivative counterparty collateral agreements 103,213,854 103,213,854 103,213,854 - - - Payable for securities 42,348,396 42,348,396-42,348,396 - - Derivative instruments 36,688,653 30,379,021-36,688,653 - - Separate account liabilities 336,523,252 336,523,252 55,168 336,468,084 - - Total Liabilities $ 858,788,954 $ 836,288,633 $ 103,269,022 $ 755,519,932 $ - $ - Bonds The fair values for bonds are generally based upon evaluated prices from independent pricing services. In cases where these prices are not readily available, fair values are estimated by the Company. To determine estimated fair value for these instruments, the Company generally utilizes discounted cash flows with market observable pricing inputs such as spreads, average life, and credit quality. Fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Mortgage loans Mortgage loan fair value estimates are generally based on discounted cash flows. A discount rate matrix is used where the discount rate valuing a specific mortgage generally corresponds to that mortgage s remaining term and credit quality. Management believes the discount rate used is comparable to the credit, interest rate, term, servicing costs and risks of loans similar to the portfolio loans that the Company would make today given its internal pricing strategy. Q07.6

NOTES TO FINANCIAL STATEMENTS Real estate The estimated fair value for real estate is based on the unadjusted appraised value which includes factors such as comparable property sales, property income analysis, and capitalization rates. Cash, cash equivalents, short-term investments, collateral receivable and payable under securities lending agreements, receivable and payable for securities, dollar reverse repurchase agreements, and commercial paper The amortized cost of cash, cash equivalents, short-term investments, collateral receivable and payable under securities lending agreements, receivable and payable for securities, dollar reverse repurchase agreements, and commercial paper is a reasonable estimate of fair value due to their short-term nature and the high credit quality of the issuers, counterparties and obligor. Contract loans The Company believes the fair value of contract loans approximates book value. Contract loans are funds provided to contract holders in return for a claim on the contract. The funds provided are limited to the cash surrender value of the underlying contract. The nature of contract loans is to have a negligible default risk as the loans are fully collateralized by the value of the contract. Contract loans do not have a stated maturity and the balances and accrued interest are repaid either by the contractholder or with proceeds from the contract. Due to the collateralized nature of contract loans and unpredictable timing of repayments, the Company believes the fair value of contract loans approximates carrying value. Other long-term invested assets The fair values of other long-term invested assets are based on the specific asset type. Other invested assets that are held as bonds, such as surplus notes, are primarily valued the same as bonds. For low-income housing tax credits, amortized cost approximates fair value. Limited partnership interests represent the Company s minority ownership interests in pooled investment funds. These funds employ varying investment strategies that primarily make private equity investments across diverse industries and geographical focuses. The estimated fair value is determined using the partnership financial statement reported capital account or net asset value adjusted for other relevant financial information which may impact the exit value of the investments. Distributions by these investments are generated from investment gains, from operating income generated by the underlying investments of the funds and from liquidation of the underlying assets of the funds, which are estimated to be liquidated over the next one to 10 years. Collateral under derivative counterparty collateral agreements Included in other assets is cash collateral received from or pledged to derivative counterparties and included in other liabilities is the obligation to return the cash collateral to the counterparties. The carrying value of the collateral is a reasonable estimate of fair value. Derivative instruments The estimated fair values of OTC derivatives, primarily consisting of cross-currency swaps, interest rate swaps and interest rate swaptions, are the estimated amount the Company would receive or pay to terminate the agreements at the end of each reporting period, taking into consideration current interest rates and other relevant factors. Separate account assets Separate account assets include investments in mutual funds, bonds and short-term securities. Mutual funds are recorded at net asset value, which approximates fair value, on a daily basis. The bonds and short-term investments are valued in the same manner, and using the same pricing sources and inputs as the bonds and short-term investments of the Company. Deposit-type contracts Fair values for liabilities under deposit-type insurance contracts are estimated using discounted liability calculations, adjusted to approximate the effect of current market interest rates for the assets supporting the liabilities. D. Financial Instruments for which an Estimated Fair Value is Not Practicable - NONE Note 21 - Other Items G. Retained Assets 1. The Company does not have retained asset accounts in which checkbooks or drafts are issued to the beneficiary. However, many of the Company s contracts contain a contractual provision which allows the beneficiary to leave the funds on deposit with the Company and receive interest. This option is also used for beneficiaries who have not yet reached the age of majority and for whom no trust or guardianship has been established. These amounts are paid out at age of majority. The interest rate paid varies by contract. There are a number of guaranteed rates: 3%, 3.5%, 4% or at the Company s declared delayed interest rate, which is determined quarterly. Beneficiaries can choose to have interest credited annually, semi-annually quarterly or monthly. Q07.7