REPORT OF EXAMINATION by sofiaie

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									REPORT OF ASSOCIATION FINANCIAL EXAMINATION

           AS OF DECEMBER 31, 2008


 COLORADO BANKERS LIFE INSURANCE COMPANY

       5990 Greenwood Plaza Boulevard, #325
         Greenwood Village, Colorado 80111


            NAIC Company Code 84786
                Group Code 917




                  Conducted by:

      COLORADO DIVISION OF INSURANCE




                                              Fin 09-11
                                       CERTIFICATE OF COPY


I, Marcy Morrison, Commissioner of Insurance of the State of Colorado, do hereby certify that the
attached is a true and correct copy of the Financial Examination Report as of December 31, 2008 for
Colorado Bankers Life Insurance Company now on file as a record of this office.


IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal of office at the City
and County of Denver on this 22nd day of September 2009.




                                        Marcy Morrison
                                        Commissioner of Insurance
Report of Association Financial       Colorado Bankers Life Insurance
Examination as of 12/31/2008                    Company




                   REPORT OF ASSOCIATION FINANCIAL EXAMINATION


                                              OF


                     COLORADO BANKERS LIFE INSURANCE COMPANY

                              5990 Greenwood Plaza Boulevard, #325
                               Greenwood Village, Colorado 80111


                                            AS OF


                                     DECEMBER 31, 2008
 Report of Association Financial                               Colorado Bankers Life Insurance
 Examination as of 12/31/2008                                            Company                                                                             1

                                                             TABLE OF CONTENTS

                                                                                                                                                         Page
SALUTATION ............................................................................................................................................ 2
SCOPE OF EXAMINATION....................................................................................................................... 3
SUMMARY OF SIGNIFICANT FINDINGS .............................................................................................. 4
COMPANY HISTORY ................................................................................................................................ 5
    History ................................................................................................................................................... 5
    Capital.................................................................................................................................................... 5
CORPORATE RECORDS ........................................................................................................................... 5
    Shareholder Meetings ............................................................................................................................ 6
    Board of Directors Meetings ................................................................................................................. 6
    Committee Meetings.............................................................................................................................. 6
MANAGEMENT AND CONTROL ............................................................................................................ 7
    Board of Directors ................................................................................................................................. 7
    Officers .................................................................................................................................................. 7
    Committee Members ............................................................................................................................. 8
    Conflict of Interest ................................................................................................................................. 8
    Fidelity Bond and Other Insurance ........................................................................................................ 9
    Employees’ and Agents’ Welfare .......................................................................................................... 9
AFFILIATED COMPANIES ..................................................................................................................... 10
    Organizational Chart............................................................................................................................ 10
    Parent, Subsidiaries and Affiliates ....................................................................................................... 10
    Holding Company Filings ................................................................................................................... 11
    Service and Management Agreements ................................................................................................ 11
TERRITORY AND PLAN OF OPERATION ........................................................................................... 12
    Territory ............................................................................................................................................... 12
    Plan of Operation ................................................................................................................................. 12
GROWTH OF THE COMPANY ............................................................................................................... 13
    Business In Force by State................................................................................................................... 13
    Mortality and Loss Experience ............................................................................................................ 14
REINSURANCE......................................................................................................................................... 15
    Ceded ................................................................................................................................................... 15
    Assumed .............................................................................................................................................. 15
ACCOUNTS AND RECORDS .................................................................................................................. 16
STATUTORY AND SPECIAL DEPOSITS .............................................................................................. 18
FINANCIAL STATEMENTS .................................................................................................................... 19
  ASSETS, LIABILITIES, SURPLUS AND OTHER FUNDS................................................................. 20
  SUMMARY OF OPERATIONS ............................................................................................................. 22
  CAPITAL AND SURPLUS ACCOUNT ................................................................................................ 23
  RECONCILIATION OF CAPITAL AND SURPLUS ........................................................................... 24
  ANALYSIS OF EXAMINATION CHANGES ...................................................................................... 25
  COMPARATIVE FINANACIAL STATEMENTS ................................................................................ 26
NOTES TO FINANCIAL STATEMENTS ................................................................................................ 28
RECOMMENDATIONS ............................................................................................................................ 29
CONCLUSION ........................................................................................................................................... 30
 Report of Association Financial           Colorado Bankers Life Insurance
 Examination as of 12/31/2008                        Company                                       2



                                                                         Greenwood Village, Colorado
                                                                                       July 24, 2009
Honorable Marcy Morrison, Commissioner
Division of Insurance
State of Colorado
1560 Broadway, Suite 850
Denver, Colorado 80202

Honorable Morris Chavez, Superintendent
Secretary, Western Zone, NAIC
New Mexico Insurance Division
P.E.R.A. Building
1120 Paseo De Peralta
Santa Fe, New Mexico 87501

Honorable Alfred W. Gross, Commissioner
Chair, Financial Condition (E) Committee, NAIC
State Corporation Commission
Bureau of Insurance
1300 East Main St.
Richmond, Virginia 23219

Commissioners and Superintendent:

Pursuant to your instructions and in compliance with Section 10-1-201, et seq., C.R.S., an Association
financial examination has been made of the financial condition and affairs of:

                      COLORADO BANKERS LIFE INSURANCE COMPANY

                                        Statutory Home Office:
                                 5990 Greenwood Plaza Boulevard, #325
                                  Greenwood Village, Colorado 80111

and the report thereon is respectfully submitted.

Colorado Bankers Life Insurance Company, hereinafter referred to as the “Company,” was previously
examined as of December 31, 2005, under the Association Plan of the National Association of Insurance
Commissioners “NAIC”. That examination was conducted by the firm Bostick/Crawford Consulting
Group under the direction of the Division, hereinafter referred to as the “Division”.

This Association financial examination was conducted by the Division. No other states participated on
this examination.

All recommendations contained in the prior examination report have been addressed.
 Report of Association Financial          Colorado Bankers Life Insurance
 Examination as of 12/31/2008                       Company                                             3

                                      SCOPE OF EXAMINATION

This examination encompasses the period from January 1, 2006 through December 31, 2008. During the
course of the examination, assets were verified and valued and all known liabilities were established as of
December 31, 2008. Accounting and other pertinent records were reviewed to the extent deemed
appropriate. The work performed was in accordance with statutory requirements and followed procedures
prescribed in the Colorado Examiners Handbook and the NAIC Financial Condition Examiners
Handbook. The extent of review on any given account or activity was based on the results of a planning
process that included an evaluation of the Company’s internal controls, as well as other factors, which
included an analytical review of financial data, the Company's financial performance during the
examination period, prior examination findings and materiality. Consideration was also given to the use
of audit work performed by the Company’s independent accounting firm and where appropriate, has been
used herein. All phases of the examination were conducted to determine compliance with the insurance
laws and regulations of the State of Colorado. Specific details pertaining to the various phases of the
examination are set forth under the appropriate caption in subsequent sections of this report.

The determination to reflect financial adjustments in the financial statements was dependent upon: the
materiality of a particular adjustment; the materiality of the total of all immaterial adjustments; and/or
compliance with pertinent laws and regulations. Materiality was determined based on the Company’s
surplus, admitted assets and/or operating results.

Review or audit of the following matters, as called for in the Handbook, was not performed because they
were not applicable to the Company during the examination period:

                                         Acquisitions, mergers or sales
                                         Dividends to stockholders
                                         Surplus debentures

This examination does not address market conduct issues related to policy forms or rates, policyholder
treatment and claims settlement practices. These issues are addressed in separate market conduct
examinations conducted periodically by the Division.
Report of Association Financial        Colorado Bankers Life Insurance
Examination as of 12/31/2008                     Company                                           4

                            SUMMARY OF SIGNIFICANT FINDINGS

  1. The results of this examination disclosed that as of December 31, 2008, the Company had
     admitted assets of $144,870,640, liabilities of $127,386,147 and capital and surplus of
     $17,484,493. As a result of this examination, there was no adjustment to the capital and surplus,
     as reported in the Company’s 2008 Annual Statement.
    Report of Association Financial        Colorado Bankers Life Insurance
    Examination as of 12/31/2008                     Company                                             5

                                          COMPANY HISTORY




History

The Company was incorporated under the laws of the State of Colorado as a stock life insurance company
on May 28, 1974. The Articles of Incorporation state that the purposes of the Company will be as
follows:

     To make insurance or reinsurance upon the lives of persons, and every insurance pertaining thereto or
      connected therewith, including health and accident insurance and to grant, purchase or dispose of
      annuities.
     To impose restrictions upon the transfer of its own shares in the manner permitted and upon
      compliance with limitations imposed by law and upon such terms as its Board of Directors may
      direct.
     In general, to carry on any business or activity in connection with the foregoing and to have and
      exercise all of the powers and rights conferred by the laws of the State of Colorado upon corporations
      formed under such laws.

The Company is currently authorized to write the following lines of business in the State of Colorado:

                                                      Ordinary Life
                                                      Group Life
                                                      Accident and Health
                                                      Annuity Contracts

Capital

There were no changes in capital or gross paid-in and contributed surplus since the previous examination.
As of December 31, 2008, the Company’s capitalization was as follows:

           Number of authorized common capital shares                        5,000,000
           Number of shares issued and outstanding                           2,000,000
           Par value per share                                                   $1.25
           Total common capital stock                                       $2,500,000

All of the Company's outstanding stock is held by its parent, Preferred Financial Corporation..


                                         CORPORATE RECORDS

The Articles of Incorporation, by-laws, and all amendments thereto, as well as minutes of the
stockholders and board of directors for the period under examination were reviewed. There were no
changes to the Articles of Incorporation or the by-laws during the examination period. It was determined
that the Company is conducting its affairs in accordance with the provisions of its by-laws.

The Company’s board of directors approved an investment policy in September 2007, which appointed
the investment committee to oversee the execution of the policy on behalf of the board. The committee
 Report of Association Financial          Colorado Bankers Life Insurance
 Examination as of 12/31/2008                       Company                                             6

consists of the Chief Investment Officer (CIO) as chairman of the committee, the Chief Financial Officer
(CFO), the Chief Executive Officer (CEO) and the Chief Actuary. The CIO is responsible for the day-to-
day management of the investment function. The policy calls for the committee to meet “periodically (at
least twice a year)”. The CEO and the CIO approve any investment transactions as soon as possible after
the Company is notified of the transactions by the asset manager. All of the transactions are then ratified
by the board of directors at their regular meetings. A copy of the transactions ratified is attached to the
minutes of those regular meetings. These processes, however, do not satisfy the requirements of Section
10-3-234 (1)(b)(II), C.R.S.

 Recommendation No. 1:

 It is recommended that either the board of directors or the investment committee ratify the
 Company's investment transactions at least quarterly pursuant to Section 10-3-234 (1)(b)(II),
 C.R.S., and that this ratification be documented in writing as required 10-3-234 (2), C.R.S.

Shareholder Meetings

Shareholder meetings are to be held on the first Wednesday of April each year at the Denver office or
some other approved place in Colorado. Special meetings of the shareholder may be called by the board,
the chairman of the board or the president and shall be called if requested by no less than 10% of the
shareholders. A quorum consists of a majority of the shares in person or by proxy.

There were no special meetings of the shareholder held during the examination period. There was one
resolution adopted on May 15, 2007, which elected the Company’s new president and CEO, Stephen
Clabaugh, as a director of the Company.

The shareholder held three annual meetings during the examination period and adopted one additional
resolution in May 2007. This is in compliance with the Company’s by-laws.

Board of Directors Meetings

Per the Company’s by-laws, the board of directors is only required to meet annually at the same place and
directly after their election by the shareholder for the election and appointment of officers of the
Company. Special meetings may be called by the chairman of the board, the president or one-third of the
directors in office. The board held three annual meetings during the examination period, which were each
followed by a regular meeting of the board at which the operations of the Company are considered. There
were two other regular meetings held each year and there were two special meetings held. The meetings
held by the board of directors during the examination period were in compliance with the provisions of
the Company’s by-laws.

Committee Meetings

The by-laws provide that a majority of the board of directors may, by resolution, designate two or more
directors to constitute an executive committee. There was no executive committee during the
examination period. The by-laws further state that the board may appoint or authorize other committees.
The Company’s investment policy, effective as of September 1, 2007, calls for the establishment of an
investment committee. (See the “Management and Control” section of this report below.)
 Report of Association Financial           Colorado Bankers Life Insurance
 Examination as of 12/31/2008                        Company                                              7

                                   MANAGEMENT AND CONTROL

Board of Directors

The by-laws provide that the business and affairs of the Company will be managed by a board of directors
consisting of five members. Each member is elected annually by the Company’s shareholder to serve
until the next annual meeting of the shareholder of the Company or until their successors are duly elected.
The number of directors may be changed by amendment of the by-laws, but in no case shall the number
be less than three directors nor more than 21 directors.

Directors were duly elected and serving at December 31, 2008, together with their state of residence and
business affiliation, as follow:

 Name & Address                              Principal Occupation

 Anthony F. Trani                            President and CEO
 Chicago, IL                                 Fort Dearborn Life Insurance Company
 Paul E. Gauthier                            Vice President, CFO and Treasurer
 Lisle, IL                                   Fort Dearborn Life Insurance Company
 Gerard T. Mallen                            Finance Division SVP & Treasurer
 Chicago, IL                                 Health Care Service Corporation
 Victoria E. Fimea                           Vice President, General Counsel and Secretary
 Lisle, IL                                   Fort Dearborn Life Insurance Company
 Stephen J. Clabaugh                         President and CEO
 Centennial, CO                              Colorado Bankers Life Insurance Company

It is noted that the directors serving as of December 31, 2008 were still serving the Company as of the
date of this examination report.

Officers

Pursuant to the by-laws, the officers of the Company shall be elected annually by majority vote of the
board of directors and shall consist of a chairman of the board, a president, one or more vice presidents, a
controller, a secretary, a treasurer, an actuary, and such other officers as the board of directors may
determine. Any two or more offices may be held by the same person, except for the offices of president
and secretary. Each officer will hold office for the term for which he is elected and until his successor has
been elected and qualified, or until his death, resignation, or removal.

The officers elected by the board of directors in December 2008 follow:

 Officer                                        Title
 Anthony F. Trani                               Chairman of the Board
 Stephen J. Clabaugh                            President and CEO
 Victoria E. Fimea                              Corporate Secretary
 Craig K. Nordyke                               Chief Actuary
 Patricia A. Wells                              Vice President and CFO
    Report of Association Financial        Colorado Bankers Life Insurance
    Examination as of 12/31/2008                     Company                                              8

    Officer                                     Title

    Joanne E. Ashton                            Assistant Vice President and Treasurer
    Robert J. Schmitz                           Senior Vice President
    Timothy J. Catron                           Vice President-Administration
    Trevor J. Garbers                           Vice President-Sales
    Joseph D. Wieser                            Vice President-Marketing
    Sally D. Wilson                             Vice President Information Tech.

All of the above officers are still serving at the time of this report, with the exception of Robert Schmitz,
who retired.

Committee Members

The Company’s investment committee was formed when the board of directors approved the Company’s
2007 investment policy. Per the policy, the committee is to consist of the Company’s Corporate
Investment Officer (CIO), who is the chairman of the committee, the Chief Executive Officer (CEO), the
Chief Financial Officer (CFO) and the Chief Actuary. As of December 31, 2008, the committee was
composed of the following members:

    Name                                                Title
    Joanne Ashton                                       Corporate Investment Officer, Chair
    Stephen Clabaugh                                    Chief Executive Officer
    Patricia Wells                                      Chief Financial Officer
    Craig Nordyke                                       Chief Actuary

The purposes of the Investment Committee are as follows:

     To manage and monitor the investments of the Company in conjunction with the investment advisor;
     To verify that transactions completed by the investment advisor are in compliance with the approved
      written investment policy;
     To report investment transactions to the board for ratification.

The Company provided the minutes for the initial investment committee meeting in November 2007.
Since that time, the Company states that all meetings have been informal and no minutes were kept.

Conflict of Interest

The Company has a conflict of interest policy in place, which prohibits employees from engaging in any
activity, practice or conduct which conflicts with the interest of the Company, its affiliates, its customers
or its suppliers. Any conflict or potential conflict of interest must be disclosed.

The Company’s directors and senior officers completed their online conflict of interest statements in
October of each year of the examination period. There were no conflicts of interest noted in the review of
the current statements for the officers and directors in the Company’s files. No discrepancies were noted
in the response to the General Interrogatories regarding conflicts of interest as reflected in the Company’s
annual statements for the period under examination.
 Report of Association Financial         Colorado Bankers Life Insurance
 Examination as of 12/31/2008                      Company                                           9

Fidelity Bond and Other Insurance

The Company is covered by a fidelity and crime policy with a single limit of liability of $25M per loss
and a deductible for each and every loss of $500,000. The policy was issued by National Union Fire
Insurance Company of Pittsburgh, Pa, which is authorized to do business in Colorado. The policy was in
effect as of December 31, 2008 and was for the period from April 1, 2008 to April 1, 2009.

The Company is a named insured on policies covering professional liability, property and general
liability, and workers compensation. These are the hazards to which the Company could be exposed. The
companies providing these coverages are authorized to do business in Colorado.

The Company is a named insured on an errors and omissions policy with a limit of liability of $20M for
each claim and in the aggregate, with a $10,000 retention.

Employees’ and Agents’ Welfare

The Company’s employees are eligible for a basic benefits package including medical, dental, life and
short-term disability provided by the Company. Additional life insurance is available to the employee on
a contributory basis. Employees may participate in a 401(k) plan which contains partial matching by the
Company. No stock ownership plans or employment contracts are provided for employees. No benefits
are provided to agents.

The Company offers an incentive compensation program for officers and key employees and another
incentive compensation plan to all other employees. Both plans are based on achievement of Company-
wide performance goals. Incentive payments earned in 2008 and paid in 2009 were appropriately
reflected as liabilities in the annual statement.
 Report of Association Financial         Colorado Bankers Life Insurance
 Examination as of 12/31/2008                      Company                                            10

                                      AFFILIATED COMPANIES

Organizational Chart

The filed annual statement provides a complete organizational chart for the Health Care Services
Corporation, a Mutual Legal Reserve Company (HCSC), holding company group. The following
abbreviated organizational chart depicts the Company's relationship within the holding company system
as of December 31, 2008:

                                      Health Care Service Corporation,
                                      a Mutual Legal Reserve Company
                                                  (Illinois)

                                                100%

   Dental Network of America,                 Preferred Financial              Fort Dearborn Life Insurance
              Inc.                               Corporation                            Company
           (Delaware)                             (Colorado)                             (Illinois)
                                                100%

                                            Colorado Bankers Life
                                             Insurance Company
                                                 (Colorado)


Parent, Subsidiaries and Affiliates

The Company is a wholly owned subsidiary of Preferred Financial Corporation (PFC), a corporation that
also serves as the general agent for all of the Company’s business. In turn, PFC is 100% owned by
Health Care Service Corporation (HCSC), an Illinois-domiciled mutual life and accident & health
insurance company doing business as Blue Cross/Blue Shield of Illinois/Texas/New Mexico/Oklahoma.
HCSC is the ultimate controlling person of the holding company group and as of the examination date
had assets of $10.52 billion, liabilities of $4.42 billion and capital and surplus of $6.10 billion. HCSC
had 2008 net income of $7.43 million.

The Company has two affiliates with which it has management and/or service agreements, Fort Dearborn
Life Insurance Company (FDL) and Dental Network of America, Inc. (DNoA).

FDL is among the country's leading providers of group life insurance programs. Licensed in 49 states
(excluding New York), the District of Columbia and both the U.S. and British Virgin Islands, FDL
markets and administers group term life, long- and short-term disability, group dental and individual life
as well as fixed and index annuity programs.

DNoA is a wholly owned subsidiary of HCSC. DNoA functions as a third party administrator for all
HCSC dental programs, including the Company, and for other clients as well.
 Report of Association Financial         Colorado Bankers Life Insurance
 Examination as of 12/31/2008                      Company                                           11

Holding Company Filings

The Company is a member of an insurance holding company system as defined in Section 10-3-801(4),
C.R.S. As a member of an insurance holding company system, the Company filed Forms B and C with
the Division for all years under review in accordance with Section 10-3-804, C.R.S. The filings contained
the required information pertaining to transactions, relationships and agreements with affiliates.

Service and Management Agreements

The Company was party to the following service and/or management agreements with affiliates:

FDL Administrative Services Price Agreement:
   The Company entered into an administrative service price agreement with its affiliate, Fort Dearborn
   Life Insurance Company (FDL), effective January 1, 2001. The agreement calls for FDL to provide
   services to the Company based on a determination made before the beginning of each calendar year.
   The areas of service include actuarial, finance and accounting, electronic data processing, legal and
   compliance. The agreement called for settlement 20 days after each calendar quarter. The amount
   paid to FDL in 2008 was $754,520 and was paid in accordance with the agreement. NOTE: The
   Company’s Form B filing indicated that the amount paid was $636,326, but a formula error was noted
   subsequent to the filing, leaving out the amounts paid in January and February of 2008.

PFC Intercompany Agreement:
   The Company entered into an “Administrative Services Cost Sharing Agreement” effective January 1,
   1991 with its parent, PFC. This agreement was designed to allocate the costs incurred by the
   Company in providing administrative services to PFC including direct costs, variable costs, salary
   allocations and indirect overhead cost allocations. This agreement contains no provision for profit.
   Costs allocated to PFC include the costs associated with the insurance sales agency functions. These
   functions, performed by Company employees, are the same functions that PFC is responsible for
   under the above referenced Sales Agreement, and thus are allocated completely to PFC. Under this
   same agreement, PFC pays for the building rental and charges the Company a fee based upon a
   percent of usage. Settlements are made within 20 days after the end of each month. The amount
   received from PFC in 2008 was $466,858 and was paid in accordance with the agreement.

PFC Master GA Agreement:
   The Company entered into a “Sales Agreement” dated June 25, 1984 with its parent, Preferred
   Financial Corporation (PFC). Terms of the Sales Agreement call for PFC to operate as the
   Company’s general agent for the marketing of insurance products. PFC shall appoint, subject to the
   Company’s approval, agents who shall be licensed by PFC to represent the Company. PFC is liable
   to these agents for the payment of new and renewal commissions. PFC is not authorized to bind
   coverage or approve claim payments. The Company is obligated to pay commissions to PFC for the
   services provided. The Company is to settle commission payments, commission expense allowances
   and other amounts to PFC on a daily basis, with any month-end outstanding overage or shortage
   settled within 20 days after the end of each month. The amount paid to PFC in 2008 was $18,069,634
   and was paid in accordance with the sales agreement.

DNoA Service Agreement:
  The Company entered into an “Administrative Service Agreement” effective June 1, 1997 with its
  affiliate, DNoA for the sales and administration of the Company’s dental policies. DNoA performs
  all policy and claims administration for dental policies. The Company retains underwriting authority
  for the business covered by this agreement. DNoA may withdraw payments for commissions and
 Report of Association Financial         Colorado Bankers Life Insurance
 Examination as of 12/31/2008                      Company                                             12

    service fees on a monthly basis via a wire transfer. The amount paid to DNoA in 2008 was $141,928
    and was paid in accordance with the agreement.

Net amounts paid under these agreements were reported in the annual Form B filings as follows:

                 Administrative            Marketing              Investment              Short-term
 Year              service                  services                services                credit

 2006               $(179,107)            $12,861,483                  $0                     $0
 2007                 400,888              15,164,346                   0                      0
 2008                 429,590              18,069,634                   0                      0


                                 TERRITORY AND PLAN OF OPERATION

Territory

The Company is licensed to transact business in 48 states, the District of Columbia and Guam. The
Company is not licensed in New York or Vermont. Certificates of Authority and/or other evidence of
permission to do business in the respective states and territories were reviewed and found to be in proper
order and effect.

Plan of Operation

The Company’s production and field activities are conducted by PFC. In June of 1984, the Company
executed an agreement appointing PFC as its general agent (See the “Service and Management
Agreements” section of this report).

Under the terms of the agreement, PFC is to solicit and procure insurance on behalf of the Company.
Subject to the Company’s approval, PFC selects general agents and is responsible for training and
supervision. However, PFC is not authorized to bind, endorse or in any other way alter the Company’s
policies. Adherence to the Company’s underwriting rules and procedures is required under the
agreement. As its general agent, PFC’s production is placed with the Company.

PFC has recruited approximately 275 general agencies, amounting to approximately 3,400 active licensed
agents, who represent the Company. These general agencies are independent contractors working for
PFC. PFC determines the compensation formula and is directly responsible for all commissions earned
by these general agencies.

The Company pays PFC first year and renewal commissions based on a stated schedule. The commission
scheme does not incorporate minimum production and persistency standards.

The Company’s products traditionally have been designed and marketed to complement employer
sponsored benefit programs. PFC specializes in the development, administration and servicing of
employee payroll deduction, government allotment or ACH Bank Debit.
 Report of Association Financial          Colorado Bankers Life Insurance
 Examination as of 12/31/2008                       Company                                               13

                                      GROWTH OF THE COMPANY

The growth of the Company for the years under examination is presented in the following schedules,
which were prepared from information contained in the Company’s annual statements for the years
indicated.


    Year            Admitted assets           Liabilities             Capital                  Surplus

    2005*           $122,491,214           $106,296,406            $4,987,531               $11,207,277
    2006             132,203,894            113,709,539             4,987,531                13,506,825
    2007             140,920,112            119,657,508             4,987,531                16,275,073
    2008*            144,870,640            127,386,147             4,987,531                12,496,962

* - The amounts reported below for 2005 and 2008 were determined by examination.

A schedule of life insurance written or increased, terminated and in force for the years under examination
follows (in thousands):

                     Written or            Terminations              Other                    Insurance
 Year-end            increased               by death             terminations                 in force

   2005          $ 567,951,000             $ 5,021,000          $ 457,344,000              $2,210,694,000
   2006             843,862,000              8,917,000            (578,414,000)             3,624,053,000
   2007             996,023,000             10,268,000           2,179,336,000              2,430,472,000
   2008           1,273,006,000             12,575,000           1,032,568,000              2,658,335,000

A summary of premium income for the years under examination, as reported by line of business (net of
reinsurance ceded), is as follows:

                                                                  Accident &
  Year                Life                 Annuities                Health                     Total

  2005           $26,293,446              $11,060,073              $2,835,186               $40,188,705
  2006            28,855,218               11,421,503               3,083,639                43,360,360
  2007            32,237,391               12,607,762               3,317,478                48,162,631
  2008            37,995,835               14,876,437               3,443,969                56,316,241

Business in Force by State

Life insurance in force and premium collected for 2008 is allocated by state as follows:
 Report of Association Financial          Colorado Bankers Life Insurance
 Examination as of 12/31/2008                       Company                                               14


                                                                                                 Deposit-type
                        Life Insurance                       Annuity              A&H             Contract
       State               In-force       Life Premiums    Considerations       Premiums           Funds

Alabama               $ 117,172,745       $ 1,236,119        $     113,300      $      29,152     $     5,999
California              451,478,150         6,188,459            2,374,227          1,223,828         371,305
Florida                 242,635,841         3,066,055              499,755            165,341         298,153
Illinois                183,694,669         2,692,752            1,030,468            220,612         315,893
Maryland                378,382,617         5,103,470            3,422,281            832,409         136,252
Michigan                168,580,983         2,407,794              516,248            129,084          11,345
New Jersey               50,157,498         1,010,496              817,701             43,336          24,567
Ohio                    110,665,218         1,847,826            1,584,270             31,793          51,378
Texas                   125,202,861         1,768,971              544,175             19,252          56,989
All other states/
territories               824,671,577      11,061,016         3,777,606            776,883          392,511
Subtotal               $2,652,642,159     $36,382,958       $14,680,031         $3,471,690       $1,664,392
Premium or
annuity
considerations
waived under
disability or other
contract provisions                 0          79,035              69,802                  0               0
Totals (direct
business)              $2,652,642,159     $36,461,993       $14,749,833         $3,471,690       $1,664,392
Plus reinsurance
assumed                             0          87,114             126,812              2,624               0
Less reinsurance
ceded                               0       2,180,099                 0                  0                0
Totals                 $2,652,642,159     $34,369,008       $14,876,645         $3,474,314       $1,664,392

The above amounts were compiled from the Company’s 2008 annual statement. Premiums are allocated
based on the state to which premium notices are sent.

Mortality and Loss Experience

The mortality and loss experience on life and accident and health business is presented in the following
schedules:
                                             Life Policies


                 Death                           Net                  Net               Ratio of Net Actual
                Benefits       Reserves       Benefits           Tabular Cost               to Expected
  Year          Incurred       Released       (Actual)            (Expected)                 Mortality
  2005         $4,056,282      $ 51,960      $4,004,322           $5,866,043                   68.3%
  2006          4,664,935        79,126       4,585,809            6,290,178                   72.9
  2007          5,171,642        94,611       5,077,031            4,293,023                  118.3
  2008          6,671,197       100,758       6,570,439            8,888,568                   73.9
 Report of Association Financial            Colorado Bankers Life Insurance
 Examination as of 12/31/2008                         Company                                            15



                                        Accident &Health Policies


                                                                 Loss and
                               Losses and      Underwriting        loss
               Premiums       loss expenses      expense         expense      Underwriting      Combined
   Year         earned           incurred        incurred          ratio         ratio            ratio

   2005       $2,826,069       $1,103,521       $1,259,117        39.0%           44.6%            83.6%
   2006        3,173,263        1,432,709        1,194,581        45.2            37.6             82.8
   2007        3,284,972        1,637,644        1,473,610        49.9            44.8             94.7
   2008        3,415,743        1,825,848        1,526,468        53.4            44.7             98.1


                                              REINSURANCE

Ceded

The Company entered into a reinsurance agreement with Optimum Reinsurance Company (Optimum Re)
that was effective as of March 2, 2007 on policies with effective dates no earlier than January 1, 2007. The
reinsurance is applicable to the Company’s critical condition accelerated benefit riders. The Company’s
retention is 50% coinsurance up to $100,000 for any one applicable health occurrence, after which Optimum
is liable for the next $100,000 coverage, if applicable. Optimum Re is authorized to do business in Colorado.
The Company claimed $658,494 reserve credits in the 2008 Annual Statement. The Company ceded
$376,687 of premiums relating to this agreement in 2008.

The Company entered into a reinsurance agreement with its affiliate, Fort Dearborn Life Insurance Company
(FDL) that was effective as of January 1, 2008 for policies issued on or after that date. The reinsurance is
applicable to the Company’s modified premium whole life, ten-year renewable term policies and ten-year
renewable term and convertible riders. The Company’s retention is limited to $100,000 for any one life, after
which FDL is liable for the next $100,000 coverage, if applicable. FDL is authorized to do business in
Colorado. The Company claimed no reserve credits and ceded no premiums relating to this agreement in the
2008 Annual Statement.

The Company has other ceding reinsurance agreements on which new policies are no longer being issued.
The Company claimed $1,373,180 in reserve credits in the 2008 Annual Statement for these agreements for
policies previously issued pursuant to the terms of each agreement. The Company ceded $1,921,109 of
premiums relating to these agreements in 2008.

The Company does not reinsure any of its accident and health policies.

Assumed

The Company has not assumed any new business during the examination period. The current assumption
agreements relate to business generated by the Company through previously existing fronting
arrangements with the various ceding insurers. The Company reported assumed premiums of $213,732 in
2008.
 Report of Association Financial         Colorado Bankers Life Insurance
 Examination as of 12/31/2008                      Company                                           16

                                    ACCOUNTS AND RECORDS

The Company maintains the following automated accounting systems:

Policy Maintenance:
    The Company utilizes a policy management application to track policy records and to issue all
    checks. New business applications and payment records are recorded in this application. Policies are
    generated and issued to the policyholders. Premium payments received are entered into a suspense
    account and then processed. Requests for claim transactions are processed through the policy
    management application with a check request generated. All checks for claims and operating
    expenses are generated through automated processes.

    At various times during the year, electronic files of transactions are created and reports generated
    which are used by the Company’s accounting application. The interface between the policy
    management application and accounting application is manual. Management reports, financial
    statements, budgetary analysis and quarterly/annual statutory reports are generated from the
    accounting application.

General Ledger:
   The Company utilizes a commercial general ledger application, customized for the Company’s
   operations, including accounts payable, general ledger transactions and journal entries, maintenance
   of the chart of accounts, accounting bases, journal processing, etc., and access security. The general
   ledger is maintained on a statutory basis.

Commission Accounting:
   The Company has a general agent agreement with PFC, which allows PFC to recruit, train and
   supervise the general agencies that market the Company’s products. Commission accounting is
   performed by Company personnel on a daily basis as per the agreement.

Investment Accounting:
    The Company utilizes a commercial investment accounting application for maintaining purchase,
    sale, income and principal payment activities. The Company has an investment management
    agreement with Advantus Capital Management. The Company receives notice of any trade
    transactions entered into by Advantus as they are completed.

Reserve Accounting:
   The Company’s reserves are established by the Vice President and Chief Actuary of Fort Dearborn
   Life Insurance Company, an affiliate, based on policy information received directly from the above
   systems. The results are sent to the Company for inclusion in the general ledger and annual and
   quarterly statements.

Reinsurance Accounting:
   Reinsurance cessions are coded by policy at the inception of business and are part of the original
   policy record. Premium and policy activity is sent from the policy management system into the
   accounting system.

Expense Accounting:
   Requests for claim transactions are processed through the policy management application with a
   check request generated. All checks for claims and operating expenses are generated through
   automated processes.
 Report of Association Financial         Colorado Bankers Life Insurance
 Examination as of 12/31/2008                      Company                                          17

A trial balance was provided for the year ending December 31, 2008, and balances were traced to the
appropriate asset, liability and income and expense exhibits of the 2008 Annual Statement.

The Company filed its actuarial opinions in accordance with Colorado Insurance Regulation 3-1-3.

The Company’s financial statements are audited annually by an independent auditor and filed with the
Division in accordance with Colorado Insurance Regulation 3-1-4. The independent auditor’s 2007
workpapers were made available to the examiners for use during the examination.

The agreement with Wells Fargo was out of compliance with Colorado Insurance Regulation 3-1-16,
Section 5 (B), paragraphs, (10) and (15).

The Company’s custodial agreement with JPMorgan Chase Bank and Wells Fargo Bank were reviewed
for compliance with the requirements of Colorado Insurance Regulation 3-1-16, Section 5. The
agreement with JP Morgan Chase was in compliance with Colorado Insurance Regulation 3-1-16, Section
5 (B), with the exception of the requirement that the agreement be approved by a resolution of the board
of directors.

 Recommendation No. 2:

 It is recommended that the Company amend the Wells Fargo custodial agreement to be in
 compliance with Colorado Insurance Regulation 3-1-16, Section 5 (B), paragraphs (10) and (15).

 Recommendation No. 3:

 It is further recommended that the amended Wells Fargo agreement and the agreement with JP
 Morgan Chase be approved by resolutions of the Company's board of directors, as required by
 Colorado Insurance Regulation 3-1-16, Section 5 (B).

The Company has procedures in place for the identification of unclaimed property. Filings were made for
each of the years in the examination period, 2006-2008, with no unclaimed property escheated in any of
the years.
 Report of Association Financial           Colorado Bankers Life Insurance
 Examination as of 12/31/2008                        Company                                        18

                               STATUTORY AND SPECIAL DEPOSITS

In compliance with various statutory and special requirements, the Company maintained the following
deposits as of December 31, 2008:

Special Deposits (Not held for the protection of all policyholders):

                                   Security                             Statement          Market
       Location                     Type                  Par Value       Value            Value

 Denver, CO                US Treasury Note              $ 125,000     $ 125,012        $ 139,170
 Jacksonville, FL          US Treasury Bond                150,000       152,378          200,847
 Winston-Salem, NC
 (GA)                      Money Market Fund                 50,000       50,000            50,000
 Boise, ID                 US Treasury Note                 300,000      300,838           347,085
 Portland, ME (MA)         US Treasury Note                 150,000      156,976           178,318
 Tulsa, OK (NM)            US Treasury Note                 125,000      125,349           144,619
 Winston-Salem, NC         US Treasury                      260,000      257,884           306,964
                           Money Market Fund                150,000      150,000           150,000
 Charlotte, NC (SC)        US Treasury Note /               150,000      143,979           177,891
 Richmond, VA              US Treasury Note                 100,000      100,661           117,680
                           Money Market Fund                 10,000       10,000            10,000
 Westerville, OH
 (Guam)                    US Treasury Note                  30,000          30,084          34,709

  Total                                                  $1,600,000    $1,603,161       $1,857,283

All Other Deposits (Held for the protection of all policyholders)

                                    Security                            Statement          Market
          Location                   Type                 Par Value       Value            Value

 Denver, CO                  US Treasury Note            $1,125,000     $1,125,110       $1,252,530
 Denver, CO                  US Treasury Note             1,000,000      1,002,793        1,156,950
 Denver, CO                  US Treasury Note               400,000        402,644          470,720

  Total                                                  $2,525,000     $2,530,547       $2,880,200

The total deposits were reconciled to the Company’s records. The above deposit with Colorado complies
with the provisions of Sections 10-3-201, 10-3-206, 10-3-210 and 10-3-211, C.R.S., as well as Colorado
Insurance Regulation 3-1-2.
 Report of Association Financial        Colorado Bankers Life Insurance
 Examination as of 12/31/2008                     Company                                         19



                                    FINANCIAL STATEMENTS

The following pages present a statement of Assets, Liabilities, Surplus and Other Funds as of December
31, 2008 as determined by this examination. This statement is followed by supporting statements and
reconciliations presented in the following order:

       Summary of Operations, for the Year Ended December 31, 2008

       Capital and Surplus Account, for the Year Ended December 31, 2008

       Reconciliation of Capital and Surplus, December 31, 2005 through December 31, 2008

       Analysis of Examination Changes, as of December 31, 2008

       Comparative Financial Statements, as of December 31, 2005 and December 31, 2008
Report of Association Financial         Colorado Bankers Life Insurance
Examination as of 12/31/2008                      Company                                    20

                     ASSETS, LIABILITIES, SURPLUS AND OTHER FUNDS
                                   DECEMBER 31, 2008
                                          ASSETS

                                                                    Assets not      Net admitted
                                                        Assets      admitted           assets

Bonds                                                $125,944,734   $         0    $125,944,734
Cash and short-term investment                          3,376,249             0       3,376,249
Contract loans                                          1,859,175             0       1,859,175
Investment income due and accrued                       1,420,669             0       1,420,669
Premiums and considerations:
 Uncollected premium & agents' balances                   379,740           107         379,633
 Deferred premium                                       7,553,312             0       7,553,312
Reinsurance:
 Amounts recoverable from reinsurance                     282,207         29,688       252,519
 Other amounts receivable under
 reinsurance contracts                                    128,086            0          128,086
Current federal income tax recoverable                    338,148            0          338,148
Net deferred tax asset                                  6,819,564    3,264,106        3,555,458
EDP equipment and software                                162,763      123,498           39,265
Furniture and equipment                                   150,398      150,398                0
Receivables from parent, subsidiaries and affiliates    4,558,307    4,558,307                0
Aggregate write-ins for other than invested assets        252,065      228,673           23,392

Total assets                                       $153,225,417     $8,354,777     $144,870,640
Report of Association Financial          Colorado Bankers Life Insurance
Examination as of 12/31/2008                       Company                                 21

                    ASSETS, LIABILITIES, SURPLUS AND OTHER FUNDS (continued)
                                        DECEMBER 31, 2008
                             LIABILITIES, SURPLUS AND OTHER FUNDS


Aggregate reserve for life contracts                                       $116,701,215
Aggregate reserve for accident and health contracts                             854,542
Liability for deposit-type contracts                                          3,462,317
Contract claims:
  Life                                                                         2,757,682
  Accident and health                                                            265,809
Premiums and annuity considerations received in advance                           72,281
Contract liabilities not included elsewhere:
  Other amounts payable on reinsurance                                           193,348
  Interest Maintenance Reserve                                                   220,608
Commissions to agents due or accrued                                              24,270
General expenses due or accrued                                                1,564,252
Taxes, licenses and fees due or accrued                                          336,538
Remittances and items not allocated                                              348,608
Asset valuation reserve                                                            3,602
Payable to parent, subsidiaries and affiliates                                    29,204
Payable for securities                                                           525,793
Aggregate write-ins for liabilities                                               26,078
Total liabilities                                                          $127,386,147

Common capital stock                                                       $ 2,500,000
Gross paid-in and contributed surplus                                         2,487,531
Unassigned funds (surplus)                                                   12,496,962
Total capital and surplus                                                  $ 17,484,493

Total liabilities, capital and surplus                                     $144,870,640
Report of Association Financial           Colorado Bankers Life Insurance
Examination as of 12/31/2008                        Company                                          22

                                  SUMMARY OF OPERATIONS
                            FOR THE YEAR ENDED DECEMBER 31, 2008

Income:
Premiums and annuity considerations                                                        $56,316,241
Net investment income                                                                        7,183,370
Amortization of IMR                                                                             58,946
Miscellaneous income:
  Aggregate write-ins for miscellaneous income                                                 360,520
Total income                                                                               $63,919,077

Deductions:
Death benefits                                                                             $ 6,671,197
Disability benefits and benefits under accident and health policies                          1,910,123
Surrender benefits and withdrawals for life contracts                                       16,049,000
Interest and adjustments on policy or deposit-type funds                                       117,870
Increase in aggregate reserves for life and accident and health policies and contracts       6,868,518
Total deductions                                                                            31,616,708

Expenses:
Commissions on premiums, annuity considerations and deposit-type contracts                  18,185,677
Commissions on expense allowances on reinsurance assumed                                        16,736
General insurance expenses                                                                   9,214,869
Insurance taxes, licenses and fees                                                           1,459,711
Increase in loading on deferred and uncollected premiums                                     2,691,294
Aggregate write-ins for deductions                                                            (211,471)
Total deductions and expenses                                                              $62,973,524

Net gain from operations before dividends to policyholders and federal income
 taxes                                                                                     $   945,553
Dividends to policyholders                                                                           0
Net gain from operations after dividends to policyholders and before federal income
 taxes                                                                                     $   945,553
Federal income tax incurred                                                                    993,724
Net gain from operations after dividends to policyholders and federal income taxes
 and before realized capital gains or (losses)                                             $    (48,171)
Net realized capital gains or (losses) less capital gains tax and transferred to the IMR       (708,476)

Net income                                                                                 $ (756,647)
Report of Association Financial          Colorado Bankers Life Insurance
Examination as of 12/31/2008                       Company                                 23

                              CAPITAL AND SURPLUS ACCOUNT
                           FOR THE YEAR ENDED DECEMBER 31, 2008

Capital and surplus December 31, previous year                                   $21,262,597

Net income                                                        $ (756,647)
Change in net deferred income tax                                   2,524,616
Change in non-admitted assets                                      (5,855,303)
Change in AVR                                                         309,223
Change in capital and surplus for the year                                       $ (3,778,111)

Capital and surplus December 31, current year                                    $17,484,486
 Report of Association Financial          Colorado Bankers Life Insurance
 Examination as of 12/31/2008                       Company                                      24

                         RECONCILIATION OF CAPITAL AND SURPLUS
                       DECEMBER 31, 2005 THROUGH DECEMBER 31, 2008

                                                     2006             2007               2008

Capital and surplus, December 31, prior
 year                                            $16,194,808      $18,494,357      $21,262,601

Net income                                       $ 1,736,254      $ 1,496,604      $    (756,647)
Change in net deferred income tax                    510,281           79,933          2,524,616
Change in non-admitted assets and related
items                                                132,610        1,190,702          (5,855,303)
Change in asset valuation reserve                    (79,596)           1,005             309,223

Net change in capital and surplus for the year   $ 2,299,549      $ 2,768,244      $ (3,778,111)

Capital and surplus, December 31, current
 year                                            $18,494,357      $21,262,601      $17,484,490


The above amounts were extracted from the Company’s filed annual statements. The 2008 amounts were
determined by examination.
Report of Association Financial             Colorado Bankers Life Insurance
Examination as of 12/31/2008                          Company                                     25

                                ANALYSIS OF EXAMINATION CHANGES
                                        DECEMBER 31, 2008

                                                                                             Surplus
                                                           Per annual       Per              increase
                      Admitted Assets                      statement    examination        (decrease)

Total assets                                             $144,870,640   $144,870,640   $          0

                    Liabilities & Surplus


Total liabilities                                        $127,386,147   $127,386,147   $          0


Total surplus                                            $ 14,984,493   $ 14,984,493   $          0

Net change per examination                                                             $          0

Capital and surplus per annual statement                                               $17,484,490
Net change per examination                                                                       0

Capital and surplus per examination                                                    $17,484,490
Report of Association Financial       Colorado Bankers Life Insurance
Examination as of 12/31/2008                    Company                                   26

                         COMPARATIVE FINANACIAL STATEMENT
                        DECEMBER 31, 2005 AND DECEMBER 31, 2008
                                  ADMITTED ASSETS

                                                        December 31, 2005*   December 31, 2008*

Bonds                                                      $110,055,170          $125,944,734
Cash and short-term investment                                2,139,782             3,376,249
Contract loans                                                1,439,485             1,859,175
Investment income due and accrued                             1,442,868             1,420,669
Premiums and considerations:
 Uncollected premiums and agents' balances                      349,033               379,633
 Deferred premiums & installments booked but deferred         5,783,740             7,553,312
Reinsurance ceded:
 Amounts recoverable from reinsurance                            93,990               252,519
 Other amounts receivable under reinsurance contracts            70,103               128,086
Federal and foreign income taxes recoverable                          0               338,148
Net deferred tax asset                                        1,040,084             3,555,458
EDP equipment                                                    73,392                39,265
Aggregate write-ins for other than invested assets                3,567                23,392

Total assets                                               $122,491,214          $144,870,640

*As determined by examination
Report of Association Financial          Colorado Bankers Life Insurance
Examination as of 12/31/2008                       Company                                    27

                             COMPARATIVE FINANACIAL STATEMENT
                            DECEMBER 31, 2005 AND DECEMBER 31, 2008
                             LIABILITIES, SURPLUS AND OTHER FUNDS

                                                          December 31, 2005*   December 31, 2008*

Aggregate reserve for life contracts                         $ 99,142,834        $116,701,215
Aggregate reserve for accident and health contracts               589,571             854,542
Liability for deposit-type contracts                            2,523,994           3,462,317
Contract claims:
  Life                                                            1,382,577           2,757,682
  Accident and health                                                90,865             265,809
Premiums and annuity considerations received in advance              53,631              72,281
Policy and contract liabilities not included elsewhere
  Other amounts payable on reinsurance                              117,861             193,348
  Interest Maintenance Reserve                                      185,802             220,608
Commissions to agents due or accrued                                 24,443              24,270
General expenses due or accrued                                   1,320,473           1,564,252
Taxes, licenses and fees due or accrued                             311,213             336,538
Federal income taxes due or accrued                                 262,351                   0
Remittances and items not allocated                                       0             348,608
Asset valuation reserve                                             234,234               3,602
Payable to parent, subsidiary and affiliate                               0              29,204
Payable for securities                                                    0             525,793
Aggregate write-ins for liabilities                                  56,557              26,078
Total liabilities                                            $106,296,406        $127,386,147

Common capital stock                                         $    2,500,000      $    2,500,000
Gross paid-in and contributed surplus                             2,487,531           2,487,531
Unassigned funds (surplus) (Note 1)                              11,207,277          12,496,962
Total capital and surplus                                    $ 16,194,808        $ 17,484,493

Total liabilities, capital and surplus                       $122,491,214        $144,870,640

*As determined by examination
 Report of Association Financial         Colorado Bankers Life Insurance
 Examination as of 12/31/2008                      Company                                          28

                              NOTES TO FINANCIAL STATEMENTS


Note 1 – Surplus as Regards Policyholders

Pursuant to Section 10-3-201, C.R.S., and Colorado Insurance Regulation 3-1-11, the Company is
required to maintain a minimum surplus level of at least $1,500,000 or an amount equivalent to the risk-
based capital (RBC) requirements set forth in the regulation. As of December 31, 2008, the Company’s
“authorized control level” RBC was determined to be $2,242,416. As of December 31, 2008, the
Company’s adjusted capital and surplus of $17,488,095 was 780% of the calculated “authorized control
level”.
Report of Association Financial          Colorado Bankers Life Insurance
Examination as of 12/31/2008                       Company                                        29

                                       RECOMMENDATIONS


                                              REC.   PAGE
                  ISSUE                       NO.     NO.              RECOMMENDATION
The Company’s board of directors               1       6     It is recommended that either the board of
approved an investment policy in                             directors or the investment committee
September 2007, which appointed the                          ratify    the    Company's      investment
investment committee to oversee the                          transactions at least quarterly pursuant to
execution of the policy on behalf of the                     Section 10-3-234 (1)(b)(II), C.R.S., and
board. The policy calls for the committee                    that this ratification be documented in
to meet “periodically (at least twice a                      writing as required 10-3-234 (2), C.R.S.
year)”. All of the transactions are then
ratified by the board of directors at their
regular meetings. Neither the investment
committee nor the board of directors met
quarterly to approve the Company’s
investment transactions.        Also the
investment committee does not document
in writing the issues discussed at its
meetings.

The custodial agreement with Wells Fargo       2      17     It is recommended that the Company
was out of compliance with Colorado                          amend the Wells Fargo custodial
Insurance Regulation 3-1-16, Section                         agreement to be in compliance with
5(B), paragraphs (10) and (15).                              Colorado Insurance Regulation 3-1-16,
                                                             Section 5(B), paragraphs (10) and (15).

The custodial agreement with JP Morgan         3      17     It is further recommended that the
Chase was not in compliance with                             amended      Wells   Fargo    custodial
Colorado Insurance Regulation 3-1-16,                        agreement and the JP Morgan Chase
Section 5 (B), because the Company                           custodial agreement be approved by
failed to have the agreement approved by                     resolutions of the Company's Board of
a resolution of the board of directors.                      Directors, as required by Colorado
                                                             Insurance Regulation 3-1-16, Section 5
                                                             (B).
 Report of Association Financial        Colorado Bankers Life Insurance
 Examination as of 12/31/2008                     Company                                        30

                                          CONCLUSION

The courtesy, assistance and cooperation extended by the officers and employees of the Company during
the course of this examination are greatly appreciated.

Craig Chupp of the Colorado Division of Insurance conducted the actuarial phase of this examination.
Mr. Philip E. Gates of the Colorado Division of Insurance completed the information systems control
review for this examination.

In addition to the undersigned, Marcy Rivera, Roger Eichmann and Lixia Yang, examiners for the
Colorado Division of Insurance, participated in the examination.




                                                          Respectfully submitted,



                                                          _______________________
                                                          Julie A. Hansen, CFE
                                                          Examiner-in-Charge
                                                          Division of Insurance
                                                          State of Colorado

								
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