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					2 0 0 8 A N N UA L R E P O R T
                     L E T T E R     T O    M E M B E R S

Richard Hemmings
Chairman and CEO


                   Dear Member:

                   I am pleased to be writing to you    thousands of Americans. As for
                   to thank you for your continued      Fidelity Life, the number of policy
                   trust in Members Mutual Hold-        and group certificate holders
                   ing Company (Members Mutual)         increased by over 12% in 2008 to
                   and in Fidelity Life Association     more than 84,000.
                   (Fidelity Life). If you are a new
                   Fidelity Life policyholder, we       The year 2008 is likely to be
                   welcome you as a new policy-         recorded as one of the most
                   holder and also as a member of       difficult years since the 1930s for
                   Members Mutual.                      the life insurance industry.
                                                        Fidelity Life was not immune to
                   Fidelity Life was established in     the deteriorating financial
                   1896 and has a long history of       conditions that have taken the
                   serving the life insurance needs     nation by storm since September,
                   of Americans. Fidelity Life          2008. However, Fidelity Life
                   policyholders are also members of    ended the year 2008 with a very
                   Members Mutual. In addition to       sound balance sheet and a
                   Fidelity Life, Members Mutual        business plan that remains very
                   owns Fidelity LifeCorp, America      likely to weather the storm better
                   Direct Insurance Agency              than many life insurance
                   (America Direct) and, as of          companies and other financial
                   August 2009, Efinancial, LLC, one    service businesses. The
                   of the fastest growing life insur-   challenges facing life insurance
                   ance distributors in the United      companies as well as individuals
                   States. The principal business of    and businesses in most every
                   these companies is serving your      sector of the economy are almost
                   life insurance needs. The life       unprecedented in our lifetimes.
                   insurance distribution companies
                   owned by Members Mutual              The difficulties facing the
                   represent Fidelity Life and          financial services sector are in
                   numerous other life insurance        large part a result of the
                   companies. Together, our group of    deterioration of asset values.
                   companies is meeting the life        Invested assets are used to
                   insurance needs of hundreds of       support obligations to customers.
Since Fidelity Life’s product           ordinary, working Americans in a       significant unmet need for life in-      modernize the life insurance sales
portfolio does not focus on the         country in the midst of great          surance because of an insufficient       transaction. That is where Fidelity
“spread business” in which many         change. Life insurance was then and    number of distributors of the            Life, Efinancial and our other
life companies compete, Fidelity        is now a cornerstone of family         product, prolonged sales processes       companies shine. With industry
Life’s investment portfolio is          financial planning. In fact, life      and a confusing variety of products.     leading technology, products and
simpler and more conservatively         insurance was the original financial   In a sense, the life industry has        processes, we are able to issue life
invested than most. Many life           services business in North             failed the insurance consuming           insurance as fast as or faster than
insurance companies are under           America, dating back to the time of    public by offering too many              anyone in the business.
severe stress with current market       Ben Franklin and Colonial times.       complicated products through an
conditions. While Fidelity Life’s       Before there were dozens of other      antiquated, time consuming sales         Fidelity Life’s strategy is based on
investment portfolio is not             competing financial products and       encounter. Almost every company          identifying underserved markets
immune to the current conditions,       services there were simple life        does business the same way. But          and concentrating its efforts on
we continue to maintain a very          insurance contracts protecting         not Fidelity Life, not on your life!     “Middle America”. We partner with
strong balance sheet with much          families against the risk of early     The mission of our group of              traditional agent sales and direct
lower than industry average             death of breadwinners. While the       companies is to find ways to             marketing capabilities to reach
leverage. Our assets exceed our         times have changed, our mission        innovatively meet the life insurance     these underserved markets.
liabilities by a ratio of more than     remains to protect families and        needs of middle Americans with
                                                                                                                        2008 marked Fidelity Life’s third
1.7 to 1. In contrast to many life      dependents from the loss of income     creative products and processes.
                                                                                                                        full year of operations since the
insurance companies that lost           caused by the untimely death of our
                                                                               Our business—in simplest terms—          company’s re-launch. A few of
significant capital in recent months    insureds.
                                                                               is to correct the industry imbalance     Fidelity Life’s accomplishments
due to toxic assets and economic
                                        According to current industry data,    and make available fairly priced,        this year are noted in the following
events, Fidelity Life continues to
                                        there are nearly 50 million house-     simple to understand life insurance      pages. Fidelity Life’s organic
maintain high risk adjusted capital
                                        holds in the U.S. with little or no    coverage for consumers. We can do        growth focus remains on building
and a very strong capital position.
                                        individual life insurance but with a   this by enabling life insurance          scale and increasing revenues with
We are in need of no government
                                        desire to either acquire life          agents to engage in an efficient,        profitable products that provide
loans, guarantees or capital relief
                                        insurance it or increase their         simple sales transaction with            value to our members. Thank you
programs.
                                        current protection. However, the       simple—but innovative—life               for the opportunity to be of service
Allow me to briefly explain our         ranks of life insurance sales agents   insurance products.                      during 2008.
business and why we are likely to       have been declining for years in
survive and thrive in this difficult    contrast to the population of the      Our motto, “Innovation is Our
economic period. Fidelity Life was      U.S., which has been increasing and    Policy,” reflects the fact that we are
originally organized in 1896 to serve   now numbers over 320 million. In       developing industry leading              Richard Hemmings
the life insurance needs of             other words, there is an increasing,   products and processes to                Chairman and CEO
Fidelity Life Association – Grounded in the past, working toward the future




      Fidelity Life is a life insurance         technology to make policy approval
                                                                                                                 Results-in-brief for 2008
      company and one of two principal          decisions in hours or days rather than
                                                                                                          New Product Introductions—3
      operating subsidiaries of Members         the weeks or months typical of the
                                                                                                          Distributors—12,000 in 2007 to 20,000 in 2008
      Mutual. The company does business         life insurance industry.
      in all states except New York and                                                                   Increase In Members—72,000 in 2007 to 84,000 in 2008

      Wyoming. Fidelity Life was originally     Members Mutual’s business strategy is                     Policies & Certificates Sold—28,517

      founded in 1896 as a fraternal benefit    to use its mutual holding company                         Life Insurance In Force—22.7 billion
      society dedicated to providing            structure to grow the business and
      financial security for the growing        our financial fundamentals in two
      middle class of the Midwest and           ways. Our investments in technology,
      Northern states.                          product innovation and distribution                                   Organizational Chart
                                                                                                                           (Updated August 2009)
                                                will allow us to grow our business
      In 2004, the Fidelity Life Board of       organically. We will then use our
      Directors determined that the             more flexible capital alternatives and                          Members Mutual Holding Company
      interests of the company and its          corporate organization to achieve
      members would be best served by           growth through combinations,
      ending the management agreement           partnerships or other strategic
                                                                                                                        Fidelity LifeCorp, Inc.
      under which the company operated          transactions. Our recent 2009
      for nearly 50 years.                      acquisition of EFinancial, a
                                                distribution and distribution support
      Having re-launched the company in         business exemplifies our flexibility              Fidelity Life Association                         Efinancial, LLC.
      2006, we are more committed than          and focus on changing the life
      ever to meeting the needs of today’s      insurance sales encounter with
      underserved and busy Middle               innovative products and processes.
                                                                                         America Direct Insurance Agency, Inc.
      Americans. Unencumbered by legacy
      issues facing most other companies,       All Fidelity Life policyholders
      Fidelity Life is building a new kind of   are members of Members Mutual
      life insurance company that is            while their policies are in force.
      leveraging the innovative use of
Dedicated to Providing for Underserved and Busy Middle Americans




      Most life insurance companies      Fidelity Life and EFinancial       insurance marketplace that
      focus their efforts on selling     are changing the market for        are overlooked or otherwise
      products to America’s most         Middle Americans. Now, life        not pursued by the majority of
      wealthy individuals. Policies      insurance in the amounts they      companies. We will continue to
      sold to more affluent cus-         need and can afford is avail-      develop innovative products
      tomers tend to have higher         able for purchase when they        and processes that are both
      premiums, face amounts and         want it. By utilizing              valuable to customers and
      commissions. Because of high       technology and creativity,         allow us to avoid entering
      front-end sales costs and          we created Rapid Decision          highly competitive, less
      time-consuming, costly policy      Term, a simplified application     profitable markets.
      approval processes, other          and underwriting process and
      companies and producers            a suite of products that can be    Fidelity Life’s Individual
      can’t afford to sell policies      issued in a matter of hours or
                                                                            Life Products Meet a
                                                                            Variety of Needs and
      targeted to Middle Americans.      days rather than the weeks or      Feature Our Revolutionary
                                         months typical of most other       Rapid Decision Application
      The industry’s focus on the        companies.                         and Underwriting Process
      affluent creates a real void for                                      Rapid Decision Term (RD
      most American families who         The Rapid Decision process         Term), was introduced by
      count on life insurance to pro-    has opened up a tremendous         Fidelity Life to the marketplace
      vide the financial security they   market opportunity for us.         in 2006. It was the first to
      need if they lose an important     It provides our distribution       utilize our innovative Rapid
      wage earner. In fact, recent in-   partners with very attractive      Decision application and
      dustry surveys indicate that       products to sell and, most im-     underwriting process and has
      nearly one-third of all Ameri-     portantly, allows families all     proven to be highly popular
      cans have no life insurance        across America to get the          with customers who are busy
      and, of those who do, most         peace-of-mind they seek,           and don’t wish to wait for
      feel they don’t have enough.       quickly and easily. As we move     coverage. RD Term is a series
                                         forward, our strategy is to con-   of term plans with a choice of
                                         tinue to find areas of the life    5, 10, 15, 20 or 30-year terms
that provide coverage for up to   Graded Death Benefit (GDB)        ees as part of their workplace    carriers who have one
$300,000 depending on age.        Term and Whole Life are two       benefit programs. In addition     traditional form of distribution,
                                  products designed for people      to worksite versions of Rapid     our customers can get our
Hybrid Life is an innovative      who have had trouble getting      Decision Term and GDB             products through many
level premium term policy         coverage due to health issues.    Whole Life, our featured          different sources:
designed for medical under-       Customers have partial            worksite product is Lifetime
                                                                                                       • Traditional life insurance
writing after policy issuance.    coverage in years one and two     Benefit Term.
                                                                                                         agents
Hybrid Life at policy issuance    with full coverage beginning
                                                                                                       • Direct-to-consumer
includes a blend of all cause     in year three. Term coverage is   Lifetime Benefit Term (LBT) is
                                                                                                         marketing companies
and accidental death coverage.    available for those wishing       a permanent term product
                                                                                                       • Brokerage
The insured has the option to     pure protection while the         which is very attractive in the
                                                                                                       • Worksite specialists
submit to a medical exam          Whole Life policy provides        worksite marketplace that
                                                                                                      In each of these distribution
within 6 months after policy      modest cash accumulation.         predominantly features
                                                                                                      channels we have engaged
issuance. Medical examination     Both GDB products utilize         universal life. LBT offers
                                                                                                      industry-leading marketing
results then allow for revision   the Rapid Decision process.       higher face amounts per pre-
                                                                                                      organizations that represent
of the blend of coverage, in                                        mium dollar than universal
                                                                                                      the elite agents in the life
most cases eliminating or         Accidental Death Benefit          life, coverage is portable and
                                                                                                      insurance industry. Many have
reducing the accident only        coverage can provide up to        can last through age 120.
                                                                                                      been chosen for their expertise
limitation and increasing the     $300,000 immediately for          During 2008, additional riders
                                                                                                      in a specific market niche, but
all cause coverage.               death due to an accident with     were added to LBT giving
                                                                                                      all have access to the full array
                                  no underwriting required.         employers greater options
                                                                                                      of Fidelity Life products.
Rapid Decision Mortgage                                             for their employees.
Term is a version of RD Term      Worksite and
                                  Sponsored Benefits                A Diversity of Distribution
developed especially to meet
the needs of people with          Beyond selling individual life    has Fueled Our Growth
                                  insurance policies, Fidelity      As with our product designs,
recent mortgages. Coverage is
                                  Life also works with special-     Fidelity Life brings
available up to $500,000
                                  ized distributors to make our     innovation to our distribution
depending on age and for
                                  products available to employ-     relationships. Unlike many
periods as long as 40 years.
2008 – Continued Growth




     Company Growth                    years to give our at-risk clients   Technology                         competitive advantage in
     Fidelity Life experienced         more options.                       Fidelity Life is committed to      issuing policies during the
     continued growth in 2008.                                             leveraging the use of              course of a single sales call.
     With the introduction of new      Lifetime Benefit Term (LBT),        technology to streamline the
                                       a worksite and sponsored                                               Distribution
     products, refinement to                                               underwriting process and
     existing products and our         benefits product expanded its       create efficiencies that benefit   Distributors across the
     continued commitment to           market share to the worksite        our members and                    country have recognized
     technology advances, Fidelity     producers. By adding addi-          distributors. In 2008 we           the benefits Fidelity Life can
     Life continues to stand by our    tional riders, employers can        introduced Rapid App II—an         bring to them. As a result,
     motto of “Innovation Is Our       personalize LBT to match the        online application system that     our distribution base increased
     Policy.” This commitment          needs of their staff. Employ-       allows agents to transact          from just over 12,000
     reached new heights with new      ees have the option to provide      business without being             individual producers to well
     products and new members.         additional coverage to their        physically present with the        over 20,000 during the year.
                                       spouse or dependent chil-           customer at the point of sale.
     New Products                      dren.                               This makes for a convenient        Sales
     Hybrid Life, mentioned                                                and easy purchase experience       Sales of new policies as
     earlier, was tested and refined   In 2008, the value of the LBT       that appeals to both agents        measured by paid premiums
     during 2008. This patent-         product along with the GDB          and customers. To date, we         increased 93 percent over 2007.
     pending product re-empha-         and RD Term was proven              have experienced a significant     We achieved an annualized
     sizes our commitment to           once again by one of Fidelity       increase in sales through this     sales rate of $20 million by
     meeting the needs of Middle       Life’s leading distribution         system.                            year-end of 2008.
     America.                          partners who offered these
                                       products to a large group of        We continue to build support-      Membership
     Our Graded Death Benefit          retirees. This campaign             ing technology and evaluate        Membership increased from
     (GDB) Term product added          offered the customers many          alternatives for automated         approximately 72,000 in 2007
     coverage periods of 20 and 30     options and proved to very          underwriting that will allow       to 84,000 in 2008.
                                       successful.                         Fidelity Life to maintain our
Members Mutual Holding Company                                                          and insurance sales operations. Net                 The mark to market adjustment re-
2008 Consolidated Financial Statements                                                  life insurance premium revenues in-                 lates to certain convertible securities
                                                                                        creased by 48% over 2007 reflecting                 and equity investments that had un-
                                                                                        the continued strong sales growth of                realized market losses but applicable
    The financial statements include the      asset decline was due to investment
                                                                                        FLA. Earned commissions at Amer-                    accounting methods require that un-
    consolidated accounts of the affili-      market conditions at year end. The
                                                                                        ica Direct increased 3% over 2007                   realized gains and losses be recorded
    ated companies comprising the             Company recorded unrealized in-
                                                                                        levels.                                             on the Statement of Operations. Real-
    Members Mutual group of compa-            vestment losses resulting from mark
                                                                                                                                            ized losses from sales of securities are
    nies. For the year 2008, the group        to market adjustments on its bond
                                                                                        Benefits and Expenses increased by                  available for carry back against federal
    was comprised of Members Mutual           portfolio of $(9.1) million which was
                                                                                        9.7% reflecting somewhat higher                     income taxes paid in prior years on
    and Fidelity LifeCorp—both holding        accounted for through accumulated
                                                                                        benefit costs and an increase in                    realized investment gains.
    companies that currently have no op-      other comprehensive income (loss)
                                                                                        amortization of deferred policy ac-
    erations and the operating sub-           in Equity. At year end 2007, the bal-
                                                                                        quisition costs due to the higher                   In summary, while the overriding
    sidiaries Fidelity Life and America       ance of accumulated other compre-
                                                                                        sales volumes of Fidelity Life over                 story for 2008 was created by invest-
    Direct. The 2008 financial state-         hensive income was a positive $3.3
                                                                                        the reporting periods.                              ment market conditions, the funda-
    ments are comprised almost entirely       million. The unrealized losses in
                                                                                                                                            mental operations of the Company
    of the accounts of Fidelity Life and      2008 resulted from the high interest
                                                                                        Eliminating the impacts of net real-                continued to grow and profitability
    its wholly owned subsidiary, America      rates that existed in the market at the
                                                                                        ized investment gains and losses, the               improved. The impacts on the Com-
    Direct.                                   end of the year which caused de-
                                                                                        Company showed increased income                     pany’s financial position were pro-
                                              clines in the fair market value of the
                                                                                        from operations. The increase in oper-              nounced but we fared better than
    The deterioration of the general          Company’s bond holdings.
                                                                                        ating profits was due to profit growth              many competitors. The Company
    economy and the unprecedented
                                                                                        at Fidelity Life and a reduced operating            remains poised for continued future
    events and volatility of the invest-      The decline in Equity during 2008
                                                                                        loss at America Direct during 2008.                 success. Many of the negative factors
    ment markets that occurred in the         (7.3%) was caused by the negative
                                                                                                                                            that impacted our investment portfo-
    last half of 2008 impacted the finan-     accumulated other comprehensive
                                                                                        The following table shows the com-                  lios in 2008 appear to have improved
    cial position of the life insurance in-   income from unrealized investment
                                                                                        ponents of Net Income (Loss) and                    or at least stabilized and values are re-
    dustry including Fidelity Life.           losses (see above) and the net loss
                                                                                        Net Realized Investment Gain (Loss)                 covering in 2009.
    However, we are pleased to report         for the year. The net loss shown on
                                                                                        of on an after tax basis and illustrate
    that Fidelity Life fared much better      the Consolidated Statements of
                                                                                        the effects of the investment market
    than many others in the industry          Operations for 2008 was also caused
                                                                                        on 2008 results.
    and made it through the difficult en-     by the investment environment in
    vironment, maintaining its excep-         the second half of 2008.                   Components of Net Income (Loss) & Net Realized Investment Gain (Loss)
    tionally strong risk adjusted capital                                                $ in thousands                                                2008                    2007
    relative to peer companies.               In spite of the challenges presented       Net Realized Investment Gains (Losses)                      $ (15,848)           $ 1,110
                                              by the economy and the investment          Operating Income                                                 2,893               641
                                                                                         Net Income (Loss)                                           $ (12,955)           $ 1,751
    Total Assets declined year over year      environment, the Company’s opera-
                                                                                         Mark to Market adjustment on trading portfolios             $  (1,485)            $    7
    due in part to reductions in the lia-     tions continued to show positive           Equity method accounting                                       (3,305)               424
    bility for policyholder account bal-      growth in 2008, reflecting excellent       Realized Gains (Losses) from sales of securities               (9,150)               678
    ances related to assumed annuities.       progress in achieving the organiza-        Other than temporary impairments (OTTI)                        (1,908)                 0
                                                                                         Net Realized Investment Gains (Losses)                      $ (15,848)           $ 1,110
    However the primary reason for the        tion’s focus on growing its insurance
           20008 Consolidated Balance Sheets – GAAP Basis As Of December 31, ($ in thousands)         Board of Directors
Assets                 Investments                                               2008      2007
                       Fixed maturities, available for sale, at fair value    $388,841   $409,761
                                                                                                      Richard Hemmings
                       Fixed maturities, trading, at fair value                 13,534     18,518     Chairman
                       Equity securities, trading, at fair value                16,542     29,021
                       Mortgage loans                                            9,230      5,711     Linda Walker Bynoe
                       Limited partnership interests                            26,053     28,793
                       Contract loans                                           14,465     14,820
                                                                                                      Director
                               Total Investments                             $468,665    $506,624
                       Cash and cash equivalents                                14,068     20,072     John Fibiger
                       Deferred policy acquisition costs                        46,034     33,197     Director
                       Accrued Investment Income                                 4,068      4,354
                       Commissions and agent balances receivable                 3,733      2,007
                       Current income taxes receivable                           5,402          -     Steven Groot
                       Deferred income taxes recoverable                         1,058          -     Director
                       Reinsurance Items                                       110,757    109,155
                       Other Assets                                              3,397      4,036
                               Total Assets                                  $657,182    $679,445
                                                                                                      James Schacht
Liabilities and Equity Liabilities                                                                    Director
                       Future policy benefits                                $175,776    $169,330
                       Policyholder Account Balances                          178,137     186,399
                       Other Policyholder Liabilities                          18,365      13,890
                       Current income taxes payable                                 -         520
                       Deferred income tax liability                                -       4,203
                       Other Liabilities                                        5,468       3,647
                               Total Liabilities                              377,746     377,989
                       Equity
                       Retained earnings                                      285,204     298,159
                                                                                                      Management
                       Accumulated other comprehensive income (loss)           (5,768)      3,297
                               Total equity                                   279,436     301,456     Richard Hemmings
                               Total Liabilities and Equity                  $657,182    $679,445     President and Chief Executive Officer
 Consolidated Statements of Operations– GAAP Basis for the Year Ended December 31, ($ in thousands)
                                                                                                      Ciaran Brady
                       Revenues                                                   2008       2007     Vice President, Operations
                       Life insurance premiums - net                          $31,224     $21,095
                       Net investment income                                    22,827     25,584
                       Net realized investment (losses) gains                 (24,381)      1,707     Jim Harkensee
                       Earned Commissions                                        2,859      2,777     Vice President,
                       Other income                                                 23        555     Product and Corporate Development
                       Total revenues                                           32,552     51,718
                                                                                                      President, America Direct
                       Benefits and Expenses
                       Life and annuity benefits - net                          18,832    16,324
                       Interest credited to policyholder account balances        7,031      7,386     Michael Honeysett
                       General operating expenses                               22,645    24,296      Vice President and Chief Marketing Officer
                       Amortization of deferred policy acquisition costs         2,432    (1,579)
                       Total benefits and expenses                              50,940    46,427
                       Income (loss) before income taxes                      (18,388)      5,291     Mark Wray
                       Income tax expense (benefit)                            (5,433)      3,540     Senior Vice President,
                       NET INCOME (LOSS)                                     $(12,955)    $1,751      Chief Financial Officer and Secretary
1211 West 22nd Street, Suite 209
Oak Brook, IL 60523




                                   M1006 August 2009