Cedar Rapids, Iowa by RodneySooialo

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									                                                                    Cedar Rapids, Iowa
                                                                     December 18, 2001

HONORABLE THERESE M. VAUGHAN
Commissioner of Insurance
State of Iowa
Des Moines, Iowa

Commissioner:

      In accordance with your authorization and pursuant to Iowa statutory
provisions, a market conduct examination has been made of the records, business and
marketing practices and statutory compliance of the:

                               PFL LIFE INSURANCE COMPANY

                                   CEDAR RAPIDS, IOWA

                                AS OF DECEMBER 31, 1999

      The examination was conducted at the Company's Home Office located at 4333
Edgewood Road Northeast, Cedar Rapids, Iowa.

                                      INTRODUCTION

      The report    by exception of this examination, containing applicable comments,
explanations and    findings is presented herein. Additional practices, procedures and
files subject to    review during the examination have been omitted from the report if
no improprieties   were found.

                                  SCOPE OF EXAMINATION

      PFL Life Insurance Company, hereinafter, the Company, was previously examined
as of December 31, 1995. This regular market conduct examination covered the
intervening period from December 31, 1995 to the close of business on December 20,
2000. It was conducted and performed solely for the Iowa Insurance Division by its
examiners. The examination was performed under the authority granted to the Iowa
Insurance Commissioner in accordance with Section 507.2, Iowa Code. A general review
and survey was made of the Company’s marketing operations, treatment of policyholders
and statutory compliance during the stated period with records and other supporting
evidences having been examined and evaluated to the extent deemed adequate.

                                        HISTORY

      The Company was originally licensed on March 19, 1962, following incorporation
on April 19, 1961, in the state of Wisconsin, as a legal reserve life insurance
company. The Company's original name was American Public Life Insurance Company, Inc.
and it operated as a member of the Northwestern National Insurance Group. At the
annual meeting of the shareholders held on April 9, 1968, the name change to NN
Investors Life Insurance Company, Inc. was approved.

      Life Investors Insurance Company of America acquired 100 percent of the
outstanding stock of the Company from NN Corporation on December 31, 1975 and the
executive office was moved to Cedar Rapids, Iowa. On June 30, 1976, the domicile of
the Company was changed from the state of Wisconsin to the state of Iowa pursuant to
the provisions of Chapter 508, Code of Iowa.
      At a special meeting of the shareholders on June 28, 1982, Articles of Merger
between the Company and Investors Fidelity Life Insurance Company were approved with
the Company being the survivor. The effective date of the merger was June 30, 1982,
and the assets were transferred at their pre-merger book value.

      During 1984, the directors of the Company declared a stock dividend on the then
issued capital stock of the Company of 150,000 common shares at par value of $10 per
share to the Company's sole stockholder.

      At a special meeting of the shareholders on September 30, 1985, Articles of
Merger between the Company and Investors Life of Florida Insurance Company were
approved with the Company being the survivor. The effective date of the merger was
January 24, 1986, with assets transferred at their book value before the merger.

      At the annual meeting on April 26, 1990, the shareholders approved changing the
name of the Company to PFL Life Insurance Company effective January 1, 1991. The
Company merged with two affiliated life insurers, National Old Line Life Insurance
Company, domiciled in the state of Arkansas and Pacific Fidelity Life Insurance
Company, domiciled in the state of California, with the Company being the surviving
entity. Effective dates of these mergers were January 1, 1991 and March 31, 1991,
respectively. The requisite approvals by the appropriate regulatory authorities were
obtained.

                           TERRITORY AND PLAN OF OPERATION

      The Company is authorized to transact business in 49 states, the District of
Columbia and Guam. The Company is not licensed to conduct its business in the state
of New York.

      The five states with the highest premiums, annuity considerations and deposit-
type funds by direct business:

State                      Direct Premium Collected                 Percent of Total

California                      $   229,777,451                           12.1%
Florida                             163,706,571                            8.7
Ohio                                144,728,100                            7.6
Texas                                94,678,266                            5.0
Arizona                              91,769,974                            4.9

                                 MARKETING AND SALES

Advertising

      The advertising file maintained at the Company's Home Office was in compliance
with the applicable Iowa Insurance Division Regulations. From a sample of fifty
advertisements reviewed, two ads did not contain the Company’s address. This is
contrary to Iowa Code Chapter 515.122 Advertisements, which states “Every agent of
any insurance company shall, in all advertisements of such agency, publish the
location of the company, giving the name of the city or village in which it is
located, and the state or government under the laws of which it is organized.”




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Agent Training

      The Company operates through several AEGON divisions, with the Financial
Markets Division being a primary channel. Through FMD, the Company distributes
principally individual non-qualified fixed and variable annuities through brokers,
banks and savings and loans.

                                 PRODUCER LICENSING

      A review of the Company’s agent licensing practices was conducted during this
examination. A comparison between listings provided by the Iowa Insurance Division
and the Company records was performed. The Company’s listing contained a few
discrepancies, which were satisfactorily resolved for this examination.

                                 COMPLAINT HANDLING

      An examination of the complaint register maintained by the Company was
performed which found that all complaints were resolved satisfactorily and timely.
The complaint register is in the format required by the regulations of the Iowa
Insurance Division.

                               UNDERWRITING AND RATING

      The Company’s underwriting practices were reviewed by this examination.
Standard and substandard ratings were tested and declinations were reviewed with no
exceptions noted.

                                   CLAIM HANDLING

Time Payment Study

      Life

      Company claim information data relating to claims paid through various offices
was utilized in conducting the claim time study. For this study, time is measured
from the date sufficient information was received to process settlement of the claim
to the date the check was issued.

Days to Pay                     Number of Claims                      Percentage

 0 - 7                                 39                               52.00%
 8 – 14                                26                               34.67
15 – 21                                 7                                9.33
22 – 30                                 2                                2.67
31+                                     1                                1.33

     Total                             75                              100.00%

      Documentation provided by the Company confirmed that legal action, to which the
Company was not a party, resulted in one claim being paid in excess of thirty days.




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      Accident and Health

      Company claim information data relating to claims paid through various offices
was utilized in conducting the claim time study. For this time study, time is
measured from the date sufficient information was received to process settlement of
the claim to the date the check was issued.

Days to Pay                     Number of Claims                      Percentage

 0 - 7                                 53                               70.67
 8 – 14                                16                               21.33
15 – 21                                 4                                5.33
22 – 30                                 2                                2.67
31+                                     0                                0.00

     Total                             75                              100.00%




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                                     CONCLUSION

      The cooperation and assistance extended by the officers and employees of the
Company during the course of this examination is hereby acknowledged.

      In addition to the undersigned, V. Marshall Norfleet, AFE, Holly Plagmann, Joe
Detrick, EDP Specialist, Mike Masuen, CFE, EDP Specialist, Esther Steward and Matt
Law, examiners for the Iowa Insurance Division, participated in the examination and
the preparation of this report.

                                   Respectfully submitted,




                                   MARK J. BRANDHORST, CIE
                                   Examiner-in-charge
                                   Iowa Insurance Division
                                   State of Iowa
                                   Representing the Midwestern Zone




            I, Norlyn D. Baker, CFE, have reviewed the Examination Report of the
Company, dated December 31, 1999, and accept it as my own.




                                   NORLYN D. BAKER, CFE, CPA
                                   Field Examination Coordinator
                                   Iowa Insurance Division
                                   State of Iowa




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