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MULTI-STATE TARGET MARKET CONDUCT EXAMINATION REPORT OF THE LIFE BUSINESS OF THE

MONUMENTAL LIFE INSURANCE COMPANY

Two East Chase Street Baltimore, Maryland 21202 NAIC COMPANY CODE: 66281 Report #: 789-00

STATE OF MARYLAND INSURANCE ADMINISTRATION STATE OF FLORIDA OFFICE OF INSURANCE REGULATION COMMONWEALTH OF PENNSYLVANIA INSURANCE DEPARTMENT And VIRGINIA STATE CORPORATION COMMISSION, BUREAU OF INSURANCE

On Site Examination Dates: Examination Survey Period: January 9, 2001 through June 8, 2001 October 3, 2002 through February 4, 2003 January 1, 1900 through September 30, 2000

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

The Honorable Alfred W. Redmer, Jr. State Insurance Commissioner of Maryland Maryland Insurance Administration 525 St. Paul Place Baltimore, Maryland 21202 Dear Commissioner Redmer: Pursuant to your instructions and authorization, the below listed agencies conducted a target multi-state examination of the market conduct affairs of Monumental Life Insurance Company, whose offices are located at 2 East Chase Street, Baltimore, Maryland, 21202. The purpose of this examination was to review the practices and procedures associated with race-based pricing of life insurance policies issued by Monumental Life Insurance Company (hereinafter referred to as the "Company") and blocks of business purchased directly and indirectly by the Company issued by 242 other insurers. Regulatory agencies participating in the multi-state examination with the Maryland Insurance Administration (the "Lead States") are: State of Florida Office of Insurance Regulation; Commonwealth of Pennsylvania, Insurance Department; and Virginia State Corporation Commission's Bureau of Insurance. The final report of such examination is herein respectfully submitted.

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MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Scope of Examination By letter dated December 1, 2000, the Commissioner of the Maryland Insurance Administration (hereafter referred to as "MIA") informed the Company of a proposed multi-state market conduct examination. The scope of the examination included a review of the Company's practices and procedures related to race-based pricing of life insurance policies during the Examination Survey Period. Specifically, the Lead States wanted to determine if certain policyholders were charged a higher premium than other policyholders based on race. The

Examination Survey Period was January 1, 1900 through September 30, 2000. This time period was deemed the most likely time that this kind of race-based pricing occurred and for which records still exist. In reviewing material for the examination, the examiners relied primarily on the records of the Company. It is important to note that during the survey period the Company acquired or assumed directly or indirectly 242 insurance companies. One challenge of the examination process was that the Company could not identify within its computerized records the direct writing company of some assumed in-force policies. Consequently, it could not be determined if the policy was issued by the acquired insurer or by another insurer previously acquired by the insurer acquired by Monumental without reviewing all applications. The Company provided the examiners with advertising materials, rate books, field underwriting guidelines, lists of actuarial notations, in-force policies, policies placed in non-forfeiture options, claims paid and a summary of litigation against the Company. The examiners reviewed all available advertising materials, rate books, litigation, and field underwriting guides. The examiners randomly selected and reviewed samples of the in-force policies, policies in non-forfeiture status and paid claims. However, for reasons explained later in this report, no claims were reviewed. In reviewing applications, inforce and terminated policies, particular attention was paid to the review date established by the Lead States for the purpose of adjusting the benefits paid or not paid to the policyholders and beneficiaries of life insurance policies which were subject to racebased pricing.

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The Lead States established a date of July 1, 1974 as the effective date for the adjustment of life insurance policies issued on a race-based pricing basis. This date was established pursuant to Sections 5(a)(7)(ii) and 5(a)(7)(iii) of the Commonwealth of Pennsylvania's Unfair Insurance Practices Act of 1974, which prohibit making or permitting any unfair discrimination between individuals of the same class and essentially the same hazard in the amount of premium, policy, fees or rates charged for any policy or contract of insurance, and making or permitting any unfair discrimination between individuals of the same class and essentially the same hazard with regard to underwriting standards and practices or eligibility requirements by reason of race. The impact of this date is that if a policy rate was based on race and was in- force on or after July 1, 1974, then the policy benefits are subject to an increase. This includes an increase in cash values and death benefits for all in-force policies and an additional death benefit payment for death benefits paid on or after July 1, 1974 on policies on which rates are based on race. The increase in death benefits and cash values shall be in an amount to ensure that white and non-white policyholders are treated equally. In the event the Company is unable to determine the appropriate increase in benefits to ensure non-whites are not charged more than whites, the Company agrees to increase the death benefit or cash value, whichever is applicable, by 33%. This percentage represents a typical amount of benefit increase for adjusted policies as used by the Company and verified by the MIA.

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Table of Contents

I. II. III. IV. V. VI. VII.

Definitions................................................................. Effects of Race-Based Pricing Practices........................... Background Information............................................... History of the Company............................................... Self-Audit.................................................................

6 9 11 13 14

Record Sampling ........................................................ 15 Litigation Review ...................................................... 20 21 22 25 28 29

VIII. Advertising Review .................................................... IX. X. XI. XII. Rate Book Review ...................................................... Application Review .................................................... Special Review ......................................................... Claim Review ............................................................

XIII. Plan Code Review ...................................................... 30 XIV. Actuarial Review ........................................................ 32

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JUNE 2, 2003

I. Definitions

For the purposes of his report, the following words are defined as follows:

Applicant ­ The individual applying for a life insurance policy. Application ­ A form completed by the producer and/or the applicant for the purpose of obtaining life insurance. The application usually contains the name, date of birth, plan of insurance, amount of insurance, proposed premium, occupation, beneficiary, owner, and health history of the applicant. Beneficiary ­ Person(s) named to receive benefits from a life insurance policy. Cash Value ­ The nonforfeiture benefit amount of a life insurance policy contained in a table within the policy to be paid in cash by the Company upon request by the owner. Claim ­ A notice completed by a claimant to the Company for policy benefits. In a life insurance claim, the file would contain a death certificate, an election of settlement option and a beneficiary statement and may contain other documents as well. Debit ­ The territory in which a producer sells industrial insurance and collects the premiums. Usually a Debit is a section of a city, town, county or other geographical area serviced by a producer. Endowment Contracts ­Policies of Life Insurance designed to provide a stated sum of money due on a specified date if the insured survives or to pay the face amount of insurance if the insured should die before that date. Extended Term ­ The nonforfeiture benefit of a Life Insurance policy, which when the policy lapses for non payment of premiums, provides for the face amount of the contract to be extended for a limited time period (term) specified in a table contained in the policy. Home Service Division ­ A marketing unit of the Company that writes, collects, markets, and otherwise services Industrial Life, Monthly Debit Ordinary and other insurance products of the Company sold to individuals in their home.

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Industrial Life Insurance ­ A contract of life insurance with the term "industrial" or "weekly premium" printed on the policy as part of the brief description and in which the amount of insurance provided usually does not exceed $ 1,000 and the premium mode is weekly. Life Insurance ­ A policy providing insurance coverage on the life of the insured individual for the term of the contract. Life insurance includes whole life, limited

payment life, endowments and term insurance contracts. Life Insurance Products ­ Plans of insurance sold by insurers as base policies including Whole Life, Endowment Plans, Term Life, Limited Payment Life (e.g. 10 year pay life, 20 year pay life), or as riders to include Waiver of Premium, Payor Benefit, Children's Rider, Loss of Income, Hospital Indemnity, etc. Limited Payment Life Insurance ­ A policy of Life Insurance with a limited premiumpaying period and providing insurance for the insured's lifetime provided all premiums are paid. Monthly Debit Ordinary (MDO) ­ Life Insurance providing for monthly premium payments. Mortality Table ­ Foundation for reserve and nonforfeiture benefits (e.g. 1941 Commissioners Substandard Industrial Table) adopted by State insurance departments. Nonforfeiture Benefits ­ Required benefits of a Life Insurance policy effective on termination of the contract for nonpayment of premium. Nonforfeiture options include Cash Value, Reduced Paid Up Insurance, and Extended Term Insurance. Occupation Based Premium Rating ­ Additional premium charged for a life insurance policy based on the insured's occupation. Plan Code ­ A six digit Alpha, numeric, or alphanumeric group of characters assigned to an insurance policy record to identify the product sold, the rate used, the time period when the policy was sold. (e.g. 110H13 identifies Monumental Life Insurance Company Whole Life Paid Up at age 75 issued from 1954 to 1972). Population ­ An entire group of records of the same type. (e.g. All In Force policies, or all Matured Endowments, or all Cash Surrenders, etc.)

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Premium Mode ­ Premium payment frequency. Most of the life insurance products in this examination are weekly or monthly premium, though some payments were quarterly, semiannual or annual. Producer ­ The agent, broker or person who proposes, sells and/or collects insurance premiums on behalf of the insurer. Race-Based Premium Rating ­ Premium Tables based on race of applicant. Rate Book ­ A card, chart, book, or binder consisting of one or more pages published by an insurer containing underwriting guidelines and premiums for its products. Reduced Paid Up ­ The nonforfeiture benefit of a life insurance policy providing for the continuation of a reduced amount in force for the term of the plan specified in a table contained in the policy following lapse for nonpayment of premium. Reserve Code ­ Alpha, numeric or alphanumeric group of characters assigned to identify the reserve basis, consisting of a mortality table, interest rate assumption, status, and computation basis of an insurance product. Rider ­ An amendment to a contract of insurance such as the addition of an accidental death benefit. Sample ­ A statistically acceptable set of records selected without bias to permit a representation of a population without reviewing the entire population. Substandard Rating ­ An additional premium added to an applicant's insurance premium because the risk of the applicant is deemed to be higher than average by the insurer. Term Insurance - A policy of life insurance providing coverage if the insured dies during a limited time period specified in the policy. United States ­ Includes the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, and the 50 United States, and other territories. Whole Life Insurance ­ A policy of life insurance providing coverage for the insured's lifetime.

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MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

II. Effects of Race-Based Pricing Practices

The practice of race-based pricing is evidenced by different premium rates or unequal treatment with regard to death benefits, based on the applicant's race. In some cases non-whites receive a reduced death benefit when compared to a white policyholder paying the same premium, and in other cases non-white policyholders are charged a higher premium for the same death benefit as a white policyholder. In the cases identified by the examiners, the difference in premiums or death benefits between white and non-white policyholders ranged widely with a median of approximately 33%. In some cases, the reserves and non-forfeiture values for race-based premium industrial life policies issued for non-whites was calculated using a substandard industrial mortality table. In some cases, reserves and non-forfeiture values for industrial life policies issued to whites were calculated based on a standard industrial mortality table. The following charts reflect the difference in total premium, cash values and extended term benefits for a $1,000 whole life policy issued to a white and a non-white policyholder after 30 years.1

$1,500 $1,000

$1,248

Total Premium after 30 years

Cash Value after 30 years

$600 $450 $300 $150 $0

White Applicant Non-White Applicant $482.69 $468.21

$500 $0

$936

White Applicant

Non-White Applicant

Extended Term Duration in Years

12 9 6 3 0

White Applicant Non-White Applicant

1

Calculations are based on a 30 year old applicant using Home Security Life Insurance Company's rate book (#HS1959). The illustrated cash values and extended term benefits are based on a 1941 substandard industrial mortality table and a 1941 standard industrial mortality table. The relationship of the white to non-white values will vary by policy duration. For example, at a ten-year duration, cash values for nonwhite applicants exceed cash values for white applicants.

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MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

These charts demonstrate that in this case not only did the white policyholder pay less premium for the same amount of basic death benefit, but also the underlying values per unit of the policy issued to the white policyholder yielded greater benefits at a 30-year policy duration for the same type of plan and face amount of insurance.

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MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

III. Background Information

On or about August 4, 2000, the Maryland Insurance Commissioner contacted each Maryland domestic life and health insurer concerning the issuance of life insurance policies on a race-based pricing basis.2 The inquiry included the insurers' entire life insurance portfolio issued within the United States including all policies in force, regardless of premium paying status (e.g. premium paying, paid up or in nonforfeiture status) and/or policies with claims incurred since July 1, 1974. Monumental Life Insurance Company responded affirmatively to the inquiry. The Company directly and indirectly acquired or assumed a number of blocks of life insurance that the Company suspected of having some elements of race-based pricing. In a letter dated August 31, 2000, the Company stated, Monumental (Life Insurance Company) has never marketed or issued life insurance policies with race-distinct premiums, and any business that may have been issued in this manner has been acquired by Monumental from other companies. Based on the Company's response, the Company was targeted for a multi-state examination. Through data provided by the Company, Florida, Pennsylvania, and Virginia were selected as the principal jurisdictions in which the Company and/or its acquired insurers operated during the period covered by the examination. These three states together with Maryland formed the task force for the Multi-State Examination. Each of the four states contributed personnel for the examination. Florida and Pennsylvania contributed one examiner each, Virginia contributed three examiners, and Maryland contributed six examiners. As the domestic regulator for the Company, and upon the agreement of the other Lead States, it was determined that the Maryland Insurance Administration would coordinate the examination. The examination and sampling methodologies follow standards established by the National Association of Insurance Commissioners ("NAIC") and other examination

2

On July 28, 2000, the President of the Company contacted the Maryland Insurance Commissioner to inform him that the Company's preliminary self-audit revealed some plan codes with race-based pricing for which the Company committed to make appropriate adjustments.

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procedures developed by the task force. The sampling techniques used during the examination provided a credible basis for the findings and recommendations contained in the report. The examination methodology employed by the examiners concentrated on a review of applications written during the examination time period of 1900 to the year 2000, a time span of 100 years; a review of the rate books, advertising, underwriting guidelines and bulletins supplied to agents, brokers and producers; claims files; actuarial notes and other calculations used in reserve and premium development; and a litigation summary and copies of pleadings. The initial examination plan was developed to evaluate the Company's advertising, underwriting and claim payments to detect any element of race-based pricing. The examiners were on site from January 9, 2001 to June 8, 2001, and again from October 3, 2002 to December 30, 2002. The examination was conducted at the Company's Home Office located at Two East Chase Street, Baltimore, Maryland 21202. All documents, including rate books, applications, legal actions, and reserve formulas were reviewed in a supervised examination room. The examiners could record their comments and findings but were not permitted to copy or remove any documents from the examination room because the Company was then the defendant in a raced-based premium class-action lawsuit and as such was required to protect all relevant documents from spoliation. During the final phase of the examination, the examiners were able to copy documents from the examination room. All unacceptable or non-compliant practices may not have been discovered or noted in the report. Failure to identify or criticize improper or non-compliant business practices does not constitute acceptance of such practices.

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MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

IV. History of the Company

On March 5, 1858, the Company was incorporated under the laws of Maryland as the "Maryland Mutual Life and Fire Insurance Company." Business was commenced on May 22, 1860. In 1870, the name of the Company was changed to "Mutual Life

Insurance Company of Baltimore." In 1928, the Company converted from the Mutual form of business to a stock company. In 1935, the present title, Monumental Life Insurance Company was adopted. In 1986, AEGON, n.v., a Netherlands Corporation, purchased the Company. In 1989, AEGON USA, Inc., became a wholly owned subsidiary of AEGON, n.v. In the same year the Company became a wholly owned subsidiary of AEGON USA, Inc. In 1992, the Company purchased a block of home service business from Commonwealth Life & Accident Insurance Company of St. Louis, Missouri and a block of home service business from Reliable Life Insurance Company. Another large block of business was purchased from Washington National Insurance Company of Evanston, Illinois in 1990. In 1997, AEGON, n.v. purchased the insurance operations of Providian Corporation, and in 1998, Commonwealth Life Insurance Company, Peoples Life Insurance Company and Capital Security Life Insurance Company were merged into the Company. These major acquisitions resulted in the Company's integrating information from 242 insurance companies. Attached is Appendix A "Monumental Acquired Companies," listing those insurers that link their relationships to the major acquisitions.

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MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

V. Self-Audit The Company advised the examiners prior to the start of the multi-state market conduct examination that it had begun a self-audit of race-based pricing practices in June and July 2000 and hired temporary employees to assist in the audit. The review revealed certain plan codes for which the Company believes that raced-based pricing likely (but not necessarily) occurred. The face amount of in-force policies in those plan codes has been increased by an average 27.4%. This adjustment has totaled $5,487,901. The Company acknowledged that, during the course of its self-audit as it determined adjustments were necessary, it adjusted the in-force business of various plan codes based on the likelihood that race was a factor, without knowing whether specific individuals were placed in a plan code based on race. The Company has assured the Lead States that the adjustment amount was sufficient to ensure that white and non-white policyholders are treated equally. In September 2002, the Company provided the examiners with the preliminary results of the self-audit. The Lead States advised the Company that the adjustments made as part of the self-audit are subject to review and verification by the examiners.

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MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

VI. Record Sampling On January 9, 2001, the Company provided the examiners with the following initial data blocks for developing samples: # Plan Codes3 8,049 2,147 7,697 7,808 5,750 295

Data Block In- Force Matured Endowments Lapsed Policies Claims Register Cash Surrenders Monumental Decades4 Total

2%

# Policies 5,017,302 163,282 3,259,178 1,095,130 1,217,375 215,591 10,967,858

11% 10%

46%

In-Force Matured Endowments Lapsed Policies Claims Register Cash Surrenders Special Monumental Decades

30% 1%

The examiners also received a listing of policies selected by the Company for its selfaudit. The examiners subtracted those policies from the populations to avoid duplication.

3

A plan code is used to identify a product or to associate a policy with the rate used and the time period when the policy was sold. Therefore, it is likely that a plan code would appear in the In-Force, Claims Register and Lapsed Policy data blocks. For example, if a plan code contained 500 policies, 250 of those policies could be in-force, 200 of the policies could have lapsed and 50 could have had death benefits paid. Therefore, the plan code would appear in all three data blocks.) A special review was conducted of those polices issued by Monumental Life Insurance Company. This is detailed in Section XI of the Report.

4

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The examiners took care in the development of the samples for each state in which the Company operates to obtain the best possible statistical basis that they could. Appendix B "Distribution of Initial Sample by State" contains a chart showing the distribution by state of the initial sample. Similar attention to the individual states was taken in the development of each additional sample. The Company explained that, as a result of numerous acquisitions, policy records are stored on various different computer platforms. Additionally, as part of the

acquisition process, new plan codes were often assigned to the acquired business. Thus, in certain cases, it was impossible to identify the original writing company. Therefore, the examiners were unable to ensure that records from each of the companies acquired or assumed by the Company were reviewed. The examiners generated random samples totaling 68,745 records from the six data blocks described above. The initial samples consisted of: 38,000 inforce policy applications; 1,670 matured endowment contracts; 10,000 lapsed policies; 10,025 claims paid; 8,500 policies surrendered for cash; and 550 Company applications (Special Sample). During the course of the onsite examination a determination was made by the Company that some of the policy/application files could not be located and that significant resources were expended to locate the current population. At that time, the examiners had reviewed 22,916 applications. Due to the overwhelming volume of

material under review, the Lead States determined that it was not necessary to review the remaining 45,829 applications that were not delivered. A majority of the outstanding applications represented applications from plan codes already reviewed by the examiners. However, the examiners wanted to ensure that they could review applications from as many of the identified plan codes as possible. Therefore, a significantly reduced number of additional applications were requested from plan codes the examiners had not yet reviewed as another part of the examination. As a result of that request, the examiners received and reviewed an additional 1,314 applications.

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The examiners are confident that with the additional applications provided, a sufficient review was conducted based on the current population of applications in addition to the other information produced as part of the examination.

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MARYLAND INSURANCE ADMINISTRATION

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Substandard Industrial Mortality Table Review

Historical information from the National Association of Insurance Commissioners and other states indicated that many industrial life policies issued to non-whites were race-based. Specifically, the examiners believed that the premiums, non-forfeiture values and reserves for industrial life policies issued to some non-whites were based on a substandard industrial mortality table rather than a standard industrial mortality table. Furthermore, the examiners believed race was a basis for using a substandard industrial mortality table. In using a substandard industrial mortality table, the insurer assumes that a policyholder is a higher risk than under a standard industrial mortality table. A

policyholder whose reserves and non-forfeiture values are calculated using the substandard industrial mortality table may pay more in premium for the same amount of insurance than a person whose reserves and non-forfeiture values are calculated using a standard industrial mortality table.5 In order to validate the examiners' concerns, the examiners requested and received a list of the Company's plan codes for which reserves and non-forfeiture values are based on a substandard industrial mortality table. The Company provided a list of 120,954 policies within these plan codes. The examiners randomly selected 5,197 policy applications for review. The examiners believed that, if a majority of the applications from a plan code using the substandard industrial mortality table reflected primarily non-white applicants, then non-white applicants' industrial life policy premiums were raced-based. The results of this review are shown in Appendix C "Substandard Plan Code Review". Of the 5,055 applications reviewed, the examiners identified 62 white

applicants. The remaining population was either non-white or unidentified. The review thus revealed that the majority of the applicants whose reserves and non-forfeiture values were calculated using the substandard industrial tables were non-white. Therefore, it appears that the calculation of reserves and non-forfeiture values using substandard industrial mortality tables was based largely, but not necessarily entirely, on the race of

5

Substandard industrial mortality tables are also used to determine reserves and non-forfeiture values for other risks, such as the health, hazardous occupations or habits of the insured.

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the applicant.

Given that some white applicants are found with reserves and non-

forfeiture values using the substandard industrial mortality table and that some non-white applicants are found with reserves and non-forfeiture values using standard industrial mortality tables, it cannot be determined on an individual basis whether race was the sole factor, but a likelihood of discrimination on a plan code basis can be determined.

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VII. Litigation Review In the original request for information, the examiners requested a listing of all litigation against the Company and its purchased insurers or blocks of business. The reason for the request was to allow the examiners to determine if litigation involved racebased pricing practices. The Company provided a list of 19 cases filed in various courts between November 1, 1993, and February 8, 2000. The list included the name and date filed with a short summary of each case. The examiners followed up the response with a specific request for all documents filed relative to a race-based pricing case active in Federal District Court in Louisiana. Several cases were combined into the one class action suit against the Company and First National Life Insurance Company. The Company informed the MIA about that litigation. In 2002, the Judge denied plaintiffs' motion for class certification. The Company

provided the examiners with a copy of the order issued on April 1, 2002 by U.S. District Judge Martin L. C. Feldman, identified as "the Civil Action MDL NO. 1371 and consolidated MDLs", wherein the Judge denied certification of the Class.

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VIII. Advertising Review The examiners requested a copy of all advertising documents. The Company directed the examiners to five cabinets containing advertising documents. The examiners reviewed the information to determine if any reference to race-based pricing practices was evident. No racial bias was discovered in any of the items reviewed.

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IX. Rate Book Review The Company provided the examiners with an initial list of 1,031 rate books garnered from its records in Maryland and files from sites in Kentucky and North Carolina. The Company cataloged and assigned identification numbers for each rate book prior to the examination. The rate books were kept in a secured room, which served as the work area for the examiners. The examiners developed a database and form to record the examiner comments and analysis of each rate book. The examiners reviewed 1,059 rate books from 94 insurers. The examiners found that 90 of the insurer names that appear on the rate books represent insurers owned by the Company. The remaining four rate books were not issued by insurers owned by the Company. The Company stated those rate books were held for market comparison purposes.

Premium Review

During the examination, the examiners and the Company identified 179 rate books containing different rates based on the race of the applicant6. The results of the findings appear in Appendix D "Rate Book Analysis." Many of the rate books reviewed contained specific instructions to agents on completing race-based applications and risk selection. Examples of the instructions include, but are not limited to the following: · · AL-1958a - Atlantic Life Insurance Company "show race of the applicant on back of application." PAL 1936a ­ Palmetto State Life Insurance Co ­ "Use separate app for `Colored' risks"

The Company printed all applications for Atlantic Life from microfilm records. The reverse sides of those applications were not reproduced for the examiners. The Company stated that the back side of the application was not microfilmed and therefore could not be provided. Consequently, the examiners believe a notation of race was made at the

6

Including similar policies with higher premium for similar benefits based on the race of the applicant.

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time of application; however the examiners were not always able to determine the race of the applicant for this insurer.

Occupation Review

In the 1940s and 50s some insurers continued to designate the race of the applicant on the applications and used rate books that contained two sets of premium rates, one for white applicants and one for non-white applicants. After the race question was deleted from the application in the 1960s, some insurers appeared to use occupation as a substitute for race. Below is a list of those insurers whose rate books were reviewed for the purpose of determining if occupation was used as a substitute for race. Carrier American Bankers Insurance Company Commonwealth Life Insurance Company Equitable Life Insurance Company Home Security Life Insurance Company National Standard Life Insurance Company National Trust Life Insurance Company Palmetto State Life Insurance Company Peoples Life Insurance Company Public Savings Life Insurance Company Reliable Life Insurance Company The occupations subject to a substandard rating included maids, bootblacks, busboys, car wash workers, garbage or ash collectors, and janitors. These occupations were rated the same as blasters, building wreckers, drillers using explosives, electric linemen (over 440 volts), oil well shooters, and handlers of explosives. Historically, nonwhite workers were disproportionately represented in the disadvantaged occupations. Additionally, the examiners noted that the substandard rate for occupations such as busboys and maids applied to the applicants spouse and family and that the substandard rating remained for the life of family members regardless of their occupation. The examiners conducted a review of rate books for the ten companies referenced above. After a thorough review, the examiners were able to determine that Peoples Life Insurance Company and Home Security Life Insurance Company likely replaced race

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with occupation in their respective rate books. The examiners based their conclusion on a finding that rate books that immediately followed race-based rate books; 1) removed reference to race, 2) added the occupational rating classification; and 3) made no other change to the rating methodology. Whether a specific individual, however, was placed in an occupational rating classification based on race cannot be determined. The examiners acknowledged the Company's position that the other companies referenced above likely engaged in permissible socio-economic underwriting.

Monumental Life Insurance Company (the Statutory Company)

As noted in Section II, by way of a letter dated August 31, 2000, the Company indicated that the statutory company Monumental Life Insurance Company7 never marketed or issued policies with race distinct premiums. However, rate books labeled ML1933 and ML1935 for Mutual Life Insurance Company of Baltimore contain a reference to a "race rating." Mutual Life Insurance Company of Baltimore is part of the statutory Monumental Life Insurance Company. The examiners requested an explanation from the Company as to why it maintains it never wrote race-based premiums on life insurance when two rate books contain a reference to "race rating." The Company believes that this was accidental and speculates that these rate books were copied from rate books of other insurers, but has verified that the non-white rates were never used by the Company. See Section XI of the report for additional comments on this matter.

7

The term `Company' in this context means the core direct home service business of the Monumental Life Insurance Company as evolved from the Mutual Life Insurance Company of Baltimore. This term does not include that business assumed from other insurers either through reinsurance transactions or other block insurance purchases.

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X. Application Review Initially, the examiners selected several random samples totaling 68,745 applications from a population of 10,967,858 applications. consisted of:

12% 1%

The examiners' selection

38,000 in force policies; 1,670 matured endowments; 10,000 lapsed policies;

15%

55% 15%

10,025 claims; 8,500 cash surrenders; and 550 Monumental Decade Review."

2%

In-Force Matured Endowments Lapsed Policies Claims Register Cash Surrenders Special Monumental Decades

At the beginning of the examination, the Company stated that they could retrieve over 1,000 applications per week for the examiners to review. The applications were delivered with a batch sheet listing the applications requested and the applications found. Midway through the examination the examiners determined that the Company was not able to retrieve the documents at the anticipated rate. Initially, the examiners planned to review and record from each application, the original writing company, policy number, applicant race, applicant gender, date of birth, plan of insurance, original amount of coverage applied, original premium, date of application and state of application. The plan code was recorded on the batch cover sheet. During the first phase of the examination, the examiners reviewed 23,790 applications from 115 different insurers. Applications were reviewed from 64 insurers

with rate books available and applications were seen from 51 insurers for which there was no rate book available.

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 25

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

During the second phase of the application review, 13,732 applications of the 23,790 applications reviewed included either a racial question or a reference to race elsewhere on the application such as in the Agent's or Home Office section of the application. The term "Race" was a common question on application forms from 1900 until the 1960s and 1970s. After 1970, the term "Race" was removed from the

application form of most insurers, however, some insurers retained an untitled space on the application where race had previously been asked. The following two charts, developed from data obtained from applications and rate books, show by decades the number of applications reviewed by the examiners and the number of applications containing a race question.

Chart One: Summary of Applications Containing a Race Notation Reviewed by Decade Application Date # Applications # of Applications with Racial Notation 1900 - 1909 76 75 1910 - 1919 302 247 1920 - 1929 1,666 1,292 1930 - 1939 2,594 2,304 1940 - 1949 3,167 2,983 1950 - 1959 4,356 3,141 1960 - 1969 4,357 3,175 1970 - 1979 2,906 213 1980 - 1989 2,970 27 1990 - 1999 890 9 Date of App Not Recorded 506 266 Total 23,790 13,732 % 99 82 78 89 94 72 73 7 1 1 53% 58%

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MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

The following chart summarizes the Response to the Race Questions on the Applications Reviewed:

Chart Two: Summary of Application Race Responses Race of Applicant Number of Applications 8 1 1 9 2 14 10 AA 1 Asian 2 Cajun 1 Colored (Black, Negro included) 3,519 Hispanic 14 White (Caucasian included) 9,780 Total 13,732

8

For certain companies, the application originally contained a race question. At some point the word "Race" was removed from the application, however, a blank unlabeled box remained on the application. In at least 16 of the applications reviewed the response options of 1,2 or AA appeared in the unlabeled box that was used to select race prior to the removal of the header. 9 See footnote 7. 10 See footnote 7. ______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 27

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

XI. Special Review

As previously discussed the Monumental Life Insurance Company (the statutory company) maintains that it never practiced race-based pricing and that the race of the applicant was never used as criterion. To validate that assertion, the examiners randomly selected for review 550 additional Company applications for the decade years under review. For this selection the Company provided a special list of policy numbers issued by the Company in the decade years 1900, 1910 1920, 1930, 1940, 1950, 1960, 1970, 1980, 1990 and 2000. The Company provided 440 of the 550 applications selected for review. The Company was unable to locate the 110 remaining applications. The 440 applications reviewed were from residents of 16 states and represented 93 different plan codes. There were 287 applications containing a question on race. Of the 440 applications reviewed, the examiners found only one non-white applicant insured prior to 1965. After a thorough review of 550 applications, the examiners were unable to identify actual policies where the Company used a race-based pricing system.

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MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

XII. Claim Review

Initially, the examiners planned to review claims files in conjunction with the review of the applications. However, it was later determined that a review of the claims was not necessary in order to identify Race-Based Plans. The Lead States are confident that they can identify plans where race was a factor without reviewing claim files. Therefore, it was agreed that the Company did not have to provide the original sample of 10,000 claims.

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 29

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

XIII. Plan Code Review During the pre-examination meetings, the Company stated that it has as many as 11,000 plan codes associated with the nearly 10,967,868 applications subject to review. The first list provided of the Company's in-force records from which the examiners selected the review samples described in the section of this report devoted to sampling contained 6,948 plan codes. Additional plan codes observed in other files such as the claims, lapsed policies and cash surrenders raised the total plan codes available to the examiners to 7,235. It was determined that approximately 3,800 of the plan codes represented optional benefit riders and were therefore eliminated from the plan code totals. While the

examiners determined that riders may have been excluded or limited to certain applicants based on race, there was no evidence that non-whites paid a higher premium for a policy rider than whites. Therefore, the examiners concentrated on plan codes that were

associated with policies. During the course of the review, the examiners reviewed applications from 2,330 different plan codes. The examiners did not review any applications from approximately 4,900 plan codes. Based on information provided by the Company, it was determined that many of the plan codes not reviewed had minimal policies in-force at the time of the examination11. The Company identified 773 plan codes for which the name of the insurer is not known. The Lead States determined that if the Company cannot identify the insurers so that the examiners can verify whether or not the insurer issued life insurance on a racebased pricing basis, the Company should consider all of those plan codes as race-based. The Company agreed to the Lead States' position. Based on plan code review, the examiners concluded that some companies subsequently acquired by the Company and some companies from which the Company acquired blocks of business engaged in the practice of pricing life insurance policies at rates that were based on a different premium rate attributable to race. A list of those

11

This would include plan codes with approximately 1 to 10 in-force policies.

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 30

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

companies appears in Appendix E "Companies For Which Designated Plan Codes Will Be Adjusted". The Company is directed to make appropriate adjustments for each plan code for which it is determined there is a likelihood of discrimination to ensure that white and non-white policyholders are treated equally for policies in-force on or after July 1, 1974. The examiners estimate that there are approximately 500,000 affected policies that have been adjusted or need to be adjusted.

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 31

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

XIV. Actuarial Review

In September 2002, the Company provided the examiners with a list of plan codes, which they asserted had been adjusted by another insurer prior to acquisition or for which the Company was proposing to make an adjustment as a result of their self-audit. However, the list did not describe the kind of adjustment made or whether the adjustment was in premiums or face amount of insurance. Throughout the adjustment process and subsequent to the completion of the adjustment, the examiners will review adjusted policies to verify that sufficient adjustments are made to ensure that white and non-white policyholders are treated equally.

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 32

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

ACKNOWLEDGEMENT

The courteous cooperation extended to the examiners by the Company's officers and employees during the course of this examination is gratefully acknowledged. In addition to the undersigned, Ann M. McClain, FLMI, AIE, AIRC, ACS, AIS of the Florida Office of Insurance Regulation; Nelson Ayling, FLMI, CIE; John Hyde; A. Anthony Stone, CIE; and William Rogers, AIE, AIRC, FLMI of the Maryland Insurance Administration; Daniel A. Stemcosky, FLMI, AIE, of the Commonwealth of Pennsylvania Insurance Department; and Charles Dickens, CLU, FLMI, LUTC, AIE; John Jezek, AIE, ALHC; and Scott Plum, AIE, FLMI of the Commonwealth of Virginia participated in this examination and in preparation of this report. Respectfully submitted,

Signature on file with original

P. Todd Cioni Associate Insurance Commissioner Compliance & Enforcement Maryland Insurance Administration

Signature on file with original Chester A. Derk, Jr. AIE, HIA Chief, Market Conduct Division Insurance Department Commonwealth of Pennsylvania Signature on file with original __________________ _______ H. Weldon Hazelwood ACS, FLMI, ALHC, CIE Supervisor, Market Conduct Section Life & Health Division, Bureau of Insurance State Corporation Commission Commonwealth of Virginia.

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 33

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Appendix A MONUMENTAL ACQUIRED COMPANIES Legend: R A ML PR Bold Name = = = = = Rate Books Reviewed by Examiners Applications Reviewed by Examiners Applications Located by Monumental Acquisition according to Providian History Direct Acquisition which included other companies listed Source ML

Monumental Life Insurance Company

R R R R

A A A A A A A A

Mutual Life Insurance Company of Baltimore (Original Name) Commonwealth Life & Accident Company American National Insurance Company Commercial Life Insurance Company Commercial State Life Insurance Company Great States Life Insurance Company National Savings Life Insurance Company World Service Life Insurance Company Providian Companies Adams Funeral Insurance Company Agricultural Life Insurance Company of America All American Insurance Company All States Life of Montgomery, AL Allied Life Insurance Company Allied Security Insurance Company American Citizens Life Insurance Company American Educational Life Insurance Company American Family Life Insurance Company American Mutual Life Insurance Company American National Life Insurance Company American Pioneer Life Insurance Company Arcadian National Life Insurance Company Atlantic American Life Insurance Company Atlantic Life Insurance Company Atlantic National Life Insurance Company Atlas Insurance Company Atlas Life Insurance Company Bankers Life Insurance Company Banner Life Insurance Company Benegeaheam Insurance Company Benge Burial Insurance Company PR PR ML/PR ML/PR PR ML/PR PR PR ML/PR ML ML/PR ML PR PR ML/PR PR PR ML/PR ML ML/PR PR PR ML ML ML ML ML ML ML

R

R

A A A

R

R R

A

R

A

R

A A

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 34

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Blue Ridge Life Insurance Company Business Men's Insurance Company Calhoun Life Insurance Company Capital City Benefit Society Capital City Life Insurance Company Capital Co-Operative Life Association Capital Life Insurance Company Capital Security Life Insurance Company Capitol Co-Operative Life Insurance Company Carolina Life Insurance Company Cincinnati Benevolent Burial Association Citizens Life Insurance Company Citizens Mutual Life Insurance Company Coastal Life Assurance Society Coastal Life Insurance Company Coastal States Assurance Society Coastal States Life Insurance Association Coastal States Life Insurance Company of GA Coastal States Life Insurance Company College Education Insurance Company Colonial South Life Insurance Company Columbia National Insurance Company Columbian National Life Insurance Company Columbus National Life Insurance Company Commercial National Insurance Company Commonwealth Life Insurance Company Darby Insurance Company Davis Lawhead Insurance Company Delta National Life Insurance Company Dixie Cooperative Insurance Company Dixie Life Insurance Company (GA) Dixie Life Insurance Company (NC) Dixie Life Insurance Company (SC) Dixie National Life Insurance Company Dixieland Insurance Company Dixieland Services Insurance Company Druid Life Insurance Company Durham Life Insurance Company Durham Mutual Life Insurance Company Durham Mutual Protective Association Empire Life & Accident Insurance Company Empire Life Insurance Company Employers Life Insurance Company Equitable Life Insurance Company Equity Life Insurance Company Eureka-Maryland Assurance Corporation

PR ML/PR ML/PR ML ML/PR PR ML/PR ML/PR PR ML/PR ML ML PR PR ML/PR PR PR PR ML/PR ML/PR ML/PR PR ML ML/PR ML/PR ML/PR PR PR PR PR ML/PR PR PR PR PR ML/PR ML/PR ML/PR PR PR ML/PR ML/PR PR ML/PR PR PR

R R

A A A

R R

A

R

A

R

A A A A A A

R R

R

A

R R

A

R

A

R R

A

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 35

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Faircloth Mutual Life Insurance Association Family Group Life Insurance Company Family Life Insurance Company Family Security Life Insurance Company Farmers National Life Insurance Company Federal Health and Accident Insurance Company Federal Health and Life Insurance Company Federal Union Life Insurance Company Fidelity Life Insurance Company Fireside Commercial Insurance Company Fireside Commercial Life Insurance Company First National Life Insurance Company Florida Parishes Insurance Company Franklin National Life Insurance Company Freedom Life Insurance Company Freemont Mutual Life Insurance Company Gay's Funeral Association Gay's Funeral Benefit Life Insurance Company Gay's Life Insurance Company General Assurance Corporation General Casualty & Surety Company General Life Insurance Company of America (GA) General Life Insurance Company of America (MI) General Life Insurance Company (SC) Gibraltar Fidelity Insurance Company Green Light Insurance Company Greensboro Life Insurance Company Greensboro Mutual Life Insurance Company Guaranty Life Insurance Company (FL) Guaranty Life Insurance Company (AL) Haven Insurance Company Hollabaugh-Seale Industrial Life Insurance Company Hollabaugh-Seale Insurance Company Hollabaugh-Seale Service Insurance Company Hollenbaugh-Spirdle Insurance Company Home Assurance Company Home Life Insurance Company of America Home Protective Life Insurance Company Home Security Life Insurance Company Immediate Benefit Life Insurance Company Independence Life Insurance Company Independent National Life Insurance Company Industrial Life Insurance Company Insurance Company of South Carolina International Life & Accident Insurance Company Investors Insurance Corporation

PR ML ML/PR ML/PR ML/PR ML ML PR PR PR ML/PR ML/PR PR ML/PR ML/PR PR ML PR ML PR PR ML/PR PR PR PR PR PR ML ML/PR PR PR ML PR ML PR ML ML/PR PR ML/PR ML/PR ML PR ML/PR ML ML/PR ML

R R A

R R

A A A

A A

A

R R R

A

A A R R R R

A A A

R

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 36

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Kenton & Campbell Benevolent Burial Association Kilpatrick Life Insurance Company Lafayette Life Insurance Company Life & Casualty Insurance Company Life Insurance Company of Florida Life Insurance Company of South Carolina Life Insurance Company of Washington, DC Lincoln Life Insurance Company of Georgia Lincoln National Life Insurance Company Louisiana State Life Insurance Company McCook Funeral Insurance Company Morgan Brothers Insurance Company Mutual Insurance Company Mutual Life Insurance Company National Burial Insurance Company National Burial Life Insurance Company National Savings Life Insurance Company National Life Health & Accident Insurance Company National Standard Life Insurance Company (FL) National Standard Life Insurance Company (TX) National Trust Life Insurance Company National Union Life Insurance Company New Frontier Life Insurance Company Newberry Life & Health Insurance Company Newport Benevolent Burial Association Oglethorpe Life Insurance Company Old South Life Insurance Company Orange State Life Insurance Company Ordinary Life Insurance Company Osborn Life Insurance Company Palmetto State Life Insurance Company Pee Dee Life Insurance Company Peninsular Life Insurance Company Peoples Life Insurance Company (DC) Peoples Life Insurance Company (SC) Peoples Mutual Benefit Insurance Company Peoples Protective Life Association Peoples Protective Life Insurance Company Peoples Security Life Insurance Company Peoples State Life Insurance Company Piedmont Life Insurance Company Piedmont-Southern Life Insurance Company Pioneer Assurance Company Pioneer Life Insurance Company Preferred Risk Life Assurance Company Progressive Life Insurance Company

ML/PR ML/PR ML ML/PR ML/PR PR PR ML/PR ML/PR PR PR PR PR ML ML ML/PR ML/PR ML ML/PR PR ML/PR ML/PR PR ML/PR ML/PR ML/PR ML/PR ML/PR ML ML/PR ML/PR PR ML/PR ML/PR PR ML/PR PR ML/PR ML/PR ML PR PR ML PR ML/PR ML/PR

R R R

A A A A A A A

R

A R A A A A

R R

R R

A A A

R

R

A A A A

R

R R R

A A

R

A

R

A

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 37

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Provident Indemnity Life Insurance Company Public Savings Fire & Casualty Company Public Savings and Security Insurance Company Public Savings Life Insurance Company Reliance Insurance Company Roosevelt Life and Health Insurance Company Security Life Insurance Company of Georgia Security Life Insurance Company Security Trust Life Insurance Company Seminole American Life Insurance Company Seminole Life Insurance Company Service Life & Health Insurance Company Slim Life Insurance Company South Atlantic Life Insurance Company Southeastern National Insurance Company Southern General Life Insurance Company Southern Industrial Life Insurance Company Southern Life Insurance Company of Georgia Southern Security Life Insurance Company Southern Standard Life Insurance Company Southwestern General Life Insurance Company Southwestern Life Insurance Company Standard American Life Insurance Company State Capital Life Insurance Company State Life Insurance Company Stonewall Life Insurance Company Sun Life Insurance Company of America Superior Life Insurance Company Sureway Life Insurance Company Tennessee Life & Service Insurance Company Terrebonne Funeral Insurance Company Terrebone Life Insurance Company Terrebonne Service Insurance Company Textile General Insurance Company Textile State Life Insurance Company Transouth Life Insurance Company U.A.I. Life Insurance Company Union Mutual Life Insurance Company Union Standard Life Insurance Company United Family Life insurance Company United Life & Casualty Insurance Company United States Guaranty Life Insurance Company Universal American Life Insurance Company Universal Life & Accident Insurance Company Universal Life Insurance Company Washington Security Insurance Company

ML/PR ML/PR ML ML/PR PR PR ML/PR PR ML/PR ML/PR ML/PR PR PR PR ML/PR ML/PR PR PR ML/PR ML/PR ML/PR ML/PR ML/PR ML/PR ML/PR PR ML/PR ML/PR ML/PR PR PR ML PR ML/PR ML ML/PR PR PR PR PR PR PR PR ML/PR ML/PR PR

R

A

R

A

R R

A A A A

R R R R R R

A A A A A

R R

A A

A

R

A

A

R R

A A

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 38

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Western States Life Insurance Company Young American Funeral Insurance Company Young American Life Insurance Company Reliable Life Insurance Company American Bankers Insurance Company American Service Life Insurance Company Cloverleaf Life and Casualty Insurance Company Cotton States Life Insurance Company Family Security Life Insurance Company Guardian Life Insurance Company of Texas Kentucky Central Life Insurance Company Liberty Life Insurance Company Mid-American Life Insurance Company National Equity Life Insurance Company Rio Grande Life Insurance Company Rio Grande National Life Insurance Company Rockford Life Insurance Company Southern Union Life & Casualty Insurance Company

ML/PR PR ML ML ML ML ML ML ML ML ML ML ML ML ML ML ML ML R R

A A

R R R

A A A A

R R R

A A A

Washington National Insurance Company Anchor Life & Accident Insurance Company Federal Reserve Life Insurance Company Fidelity Life and Accident Insurance Company Peoples Life and Accident Insurance Company Union National Life Insurance Company United States Life & Casualty Company United States National Life & Casualty Company Washington Fidelity National Insurance Company

ML ML ML ML ML ML ML ML ML

R

A A A A A A A A

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 39

MARYLAND INSURANCE ADMINISTRATION

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Appendix B Distribution of Initial Sample By State

Original Percent of # Apps Percent Number of Original Reviewed Reviewed Items 218 0.00% 6 0.03% 26,654 0.55% 115 0.55% 10,598 0.22% 28 0.13% 42,875 0.88% 236 1.12% 86,082 1.77% 594 2.82% 1,850 0.04% 8 0.04% 2,574 0.05% 4 0.02% 26,578 0.55% 313 1.49% 34,901 0.72% 173 0.82% 380,507 7.84% 139 0.66% 184,584 3.80% 204 0.97% 94 0.00% 0.00% 3,079 0.06% 66 0.31% 502 0.01% 2 0.01% 235,168 4.84% 2,132 10.13% 173,030 3.56% 877 4.17% 4,412 0.09% 56 0.27% 543,351 11.19% 1,388 6.59% 200,789 4.14% 594 2.82% 554 0.01% 9 0.04% 266,509 5.49% 2,447 11.62% 157 0.00% 0.00% 45,409 0.94% 457 2.17% 242 0.00% 0.00% 23,907 0.49% 498 2.37% 7,293 0.15% 6 0.03% 81 0.00% 0.00% 856,945 17.65% 2,162 10.27% 70 0.00% 0.00% 6,636 0.14% 42 0.20% 84 0.00% 0.00% 149,049 3.07% 945 4.49% 274 0.01% 0.00% 348 0.01% 3 0.01% 2,630 0.05% 6 0.03% 169,949 3.50% 1,304 6.19% 2,369 0.05% 18 0.09%

State AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 40

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State

PA PR RI SC SD TN TX UNKNOWN UT VA VI VT WA WI WV WY Total

Original Percent of # Apps Percent Number of Original Reviewed Reviewed Items 310,065 6.39% 2,344 11.13% 32 0.00% 0.00% 74 0.00% 2 0.01% 285,650 5.88% 533 2.53% 62 0.00% 0.00% 213,581 4.40% 723 3.43% 79,351 1.63% 428 2.03% 643 0.01% 0.00% 146 0.00% 0.00% 329,863 6.79% 1,528 7.26% 4 0.00% 0.00% 31 0.00% 0.00% 383 0.01% 0.00% 6,022 0.12% 38 0.18% 138,174 2.85% 628 2.98% 70 0.00% 0 0.00% 4,854,736 21,056

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Appendix C

SUBSTANDARD PLAN CODE REVIEW Legend: C = Colored W = White O= Other NR = Not Recorded CR = Could Not Read T = Total # of applications reviewed Plan Code Company C W O NR CR T

10652G Commercial Life Ins Co 10672C World Service Life Ins Co Commercial States Life 1290V4 Commonwealth Life & Acc 17002E Coastal States Life Ins Co 17003G Standard American LIC 17003P Farmers National 17003Q Farmers National 17003T Farmers National Southern Security Life Ins Co 17005F Security Life Insurance Co 17006C Security Life Ins. Co 17006D Security Life Ins Co 17009D Universal Life Ins Co 17009V Atlantic Life Ins Co Southwestern Life Ins Co 17009X Atlantic Life Ins Co Universal Life Ins Co 17009Y Atlantic Life Ins Co Universal Life Ins Co 17031B Lincoln Life Ins Co 17031U All States Life Ins Coastal States Life Progressive Life Ins Co of Florida 17033G Standard American LIC 17033N Farmers National LIC 17036C Security Life Ins Co

14 13 73 11 17 7 1

1

15 13 3 76 16 18 19 14 19 2 22 19 8 34 29 19 18 24

2 1

3 12 13 18

1 2 22 19 8 34 29 19 18 24

11 12 29

1 9

12 21 29

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MARYLAND INSURANCE ADMINISTRATION

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Atlantic Life Ins Co Dixie Life Insurance Co Durham Life Ins Co Durham Life Ins. Co All American Progressive Standard of America Dixie Coastal Life Ins Co 17053F Standard American LIC 17053I Seminole Life Ins. Co Seminole American LIC 17053N Farmers National 17055O Coastal Life Ins Co Life Ins Co of Florida 17055T Peoples Protective LIC 17055Y Southern Standard LIC 17056C Security Life Ins 17059V Atlantic Life Universal Life 17059X Atlantic Life Ins Co 170H1V Peninsular Life Ins Co Progressive Life Ins Co All American LIC 170H5N Coastal States LIC Life Insurance Co of Florida 170H5V Peoples Protective Life Ins Co 170H7A Durham Life Ins Co 170H7B Durham Life Ins Co 170H7I State Capital Life Ins. Co 170H7K State Capital Life Ins Co 170H7M State Capital Life Ins Co 18AC9T Atlantic Life Ins Co 18AM9X Atlantic Life Ins Co Universal Life Ins Co 18AP7A Durham Life Insurance Co 18FD7A Durham Life Insurance Co 18FD9S Atlantic Life Ins 1P053Y Southwestern National LIC 1X712B US National Life & Cas Washington Fidelity Nat 200320 US National Life & Cas Washington Fidelity Nat Washington National Ins. 201232 Washington Fidelity National

17039S 17042B 17047B 17047G 17051U

18 4 925 31

1 241 1

18 5 241 925 32

33 25 6 17 19 19 36 44 28 38

1 1 9 1 1

34 26 15 18 20 19 36 44 28 38

14 16 420 98 40 39 20 8 32 36 20 8 17 2 29

14 16 420 98 40 39 20 8 34 36 20 8 17 2 29

2

20

20

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 43

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

201436 27F05I 27I01Z

27I02B 27I02F 27I03I

27I05A 27I05M 27JH2B 2I3800 2J0900 2J1100 2J2900 500320 501232 503148 50652G 50672C 57003G 57003P 57003Q 57003T 57006C 57006D 57009D 57009V 57009X 57009Y 57031B 57031U 57033G 57036C

Washington National Ins Washington National Guaranty Life Coastal Life Ins Co Progressive Life Ins Co Columbus National Dixie Life Ins Co Durham Life Coastal States Life Ins Co Coastal States Life Ins Co Coastal States Life Ins Co Seminole Life Ins Seminole American LIC American Family LIC Guaranty Life Ins All States Life Ins Co American Bankers Ins Co The Reliable Life Ins Co The Reliable Life Ins Co The Reliable Life Ins Co Washington Fidelity Nat LIC Washington National Ins Co Washington National Ins Co Washington National Ins Co Commercial Life Ins Co of MO Commercial Life Ins Co Commercial Life & Acc I Co Standard American LIC Farmers National Farmers National Southern Security LIC Security Life Ins Co Security Life Ins Co Security Life Ins Co Atlantic Life Ins Co Southwestern Life Ins Co Atlantic Life Ins Co Universal Life Ins Co Atlantic Life Ins Co Universal Life Ins Co Lincoln Life Ins Co Coastal States Life Ins Co Progressive Life Ins Co Standard American LIC Security Life Ins Co

17 13 76

1 1 3 6 2

18 18 83

11 11 14

1

12 11 14

12 39 24 6 19 19 20 28 25 14 19 34 11 16 6 14 30 10 28 17 18 17 20 10 16 19

1 7

1 7

2

12 39 26 20 19 19 20 30 25 17 20 34

3 1

1 9

10 1 2 6

21 18 17 20 30 10 28 17 18 17 20 12

2 4

20 19

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Atlantic Life Ins Co Durham Life Ins Co Durham All American Life Ins Co Coastal States Life Ins Co 57053F Guaranty Life Ins Co Security Life Standard American 57055O Durham Life Ins Co Life Insurance Co of FL 57056C Security Life Insurance Co 57059V Atlantic Life Ins Co Universal Life Ins Co 57059X Atlantic Life Ins Co Southwestern Life Ins Co 570H1V All American Life Ins Co 570H5N Life Ins Co of Florida 570H7B Durham Life Ins Co 570H7M State Capital Life Ins Co 57F02J Coastal States Life Ins Co Progressive Life Ins Co 57F05I Guaranty Life Ins Co 57G03I Dixie Life Ins Co Seminole Life Ins Co 57I01Z Coastal States Dixie Life Ins Co Seminole Life Ins Co 57I02B Coastal States Life Ins Co 57I02F Dixie Life Ins Co 57I03I Seminole Life Ins Co Seminole American 57I03K Coastal States LIC Columbus National Seminole Life Ins Co 57I05M Guaranty Life Ins Co 57JH2B All States Life Ins co 5880V4 Commonwealth Life & Acc 58AC9T Atlantic Life Southwestern Life 58AM9X Universal Life 58AP7A Durham Life Ins Co 58FD7A Durham Life Ins Co 58FD9S Atlantic Life Southwestern Life 58FE9S Atlantic Life

57039S 57047A 57047B 57051U

13 18 19 17

13 18 19 17

14 17 17 19 19 1 19 19 10 22 17 23

14 17 17 19 19 1 19 20 10 22 17 23

1

11 1 18 10

1

1 2

1 1

11 1 21 13

31 10 12 10 10 20 16 17 4

31 10 12 10 10 20 16 17 4

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58FW9S Atlantic Life Southwestern Life Ins Co Southwestern General 58U97A Durham Life 58UA7A Durham Life 5I3248 Rockford Life Ins Co 5I3348 Rockford Life Ins Co 5J0900 Name Missing 5X712B U S Nat Life & Casualty Co

1010VH 10662I 10671E 152700 17002J 17003H Commonwealth Life & Accident Ins. Co. Commercial Life Ins. Co. Commercial Life Ins. Co. Name Missing Name Missing Farmers National Life Ins. Co. Standard American Life Ins. Co. Farmers National Life Ins. Co. American Family Life Ins. Co. Banner Life Ins. Co. Peoples Protective Life Ins. Co. Provident Indemnity Life Ins. Co. Universal Life And Accident Ins. Co. Sureway Life Ins. Co. Name Missing Name Missing Freedom Life Ins. Co. Coastal States Life Ins. Co. Durham Life Ins. Co. Palmetto State Life Ins. Co. Universal Life And Accident Ins. Co. Name Missing Name Missing Name Missing Southeastern National Ins. Co. Coastal States Life Ins. Co.

8

1

9

15 2 17 20 19 27

1 3 1

3 1

15 2 20 22 19 31

17003R 17005A 17005C 17005V 17007R 17009E 1700CJ 1700CQ 17032M 17034B 1703CR 17047A

17049D 17052T 17052W 17053G 17053X 17054B

Freedom Life Ins. Co. 17055H Allied Security Ins. Co.

170H2F All States Life Ins. Co.

170H2T 18FD3S 18FD5F 18Z41A 18Z43N Name Missing Farmers National Life Ins. Co. Name Missing Lincoln Life Ins. Co. Name Missing

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 46

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1I3248 1I3348 1J01AC 1P003U 1P053Z 210320 27F03A 27F05A 27F05O 27F05Y 27F53U 27F55D 27I02I 27I03J 27JH4A 2E0900

Rockford Life Ins. Co. Rockford Life Ins. Co. Reliable Life Ins. Co. Name Missing Name Missing Name Missing Name Missing American Family Life Ins. Co. Life Insurance Co. Of Florida Name Missing Southeastern National Ins. Co. Druid Life Ins. Co. Coastal States Life Ins. Co. Seminole Life Ins. Co. Name Missing Reliable Life Ins. Co. National Equity Life Ins. Co. Reliable Life Ins. Co. Name Missing Reliable Life Ins. Co. Rockford Life Ins. Co. Reliable Life Ins. Co. Name Missing Reliable Life Ins. Co. Washington National Ins. Co. Commercial Life Ins. Co. Farmers National Life Ins. Co. Standard American Life Ins. Co. American Family Life Ins. Co. Banner Life Ins. Co. Security Life Ins. Co. Of Georgia Universal Life And Accident Ins. Co. Southern Security Life Ins. Co. Freedom Life Ins. Co. Dixie Life Ins. Co. Universal Life And Accident Ins. Co. Farmers National Life Ins. Co. Allied Security Ins. Co. Name Missing All States Life Ins. Co. Name Missing Life Insurance Co. Of Florida Name Missing Name Missing

2E11PU 2G0900 2H2455 2I5148 2J29PU 2J4100 2J4400 501436 50671E 57003H

57005A 57005C 57005F 57009E 57033N 57034B 57042B 57049D 57053N 57055H 570F5V 570H2F 570P9D 57F05O 57F05V 57F55V

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 47

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

57I02I 57I03A 57I05A 57I05O 57I05Z 57JH4A 58FD3S 5E0900

Coastal States Life Ins. Co. Name Missing Security Life Ins. Co. Of Georgia Name Missing Name Missing Name Missing Farmers National Life Ins. Co. Reliable Life Ins. Co. National Equity Life Ins. Co. Name Missing Reliable Life Ins. Co. American Bankers Ins. Co. Rockford Life Ins. Co. Rockford Life Ins. Co. Reliable Life Ins. Co. Reliable Life Ins. Co. Reliable Life Ins. Co. Name Missing Name Missing Southeastern National Ins. Co.

5G0900 5H2455 5I3800 5I5148 5I9900 5J01AC 5J1100 5J2900 5J3400 5J4500 5P053Y

3583

20

49

344

14

4010

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 48

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Appendix D Ratebook Analysis Below is a list of rate books that contain different rates based on the race of the applicant: Carrier All American Insurance Company All States Life of Montgomery, Alabama Atlantic Life Insurance Company Atlantic Life Insurance Company Atlantic Life Insurance Company Atlantic Life Insurance Company Atlantic Life Insurance Company Atlantic Life Insurance Company Atlantic Life Insurance Company Atlantic Life Insurance Company Atlas Insurance Company Business Men's Insurance Company Business Men's Insurance Company Business Men's Insurance Company Capital Life Insurance Company Coastal Life Insurance Company Coastal States Life Insurance Co Coastal States Life Insurance Co Dixie Life Insurance Company Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Ratebook VAR-1948 VAR-1948 AL-1951 AL-1953 AL-1957 AL-1958 AL-1958d AL-1959 AL-1960 AL-1961 VAR-1958a BM-1923 BM-1924 BM-1928 VAR-1948 CST-Unknown a CSL-1960 CSL-1964 DXL-1927 DHM-1917 DHM-1920a DHM-1923a DHM-1923b DHM-1924 DHM-1930 DHM-1937 DHM-1938 DHM-1941 DHM-1943 DHM-1948 DHM-1952

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 49

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Durham Life Insurance Co Durham Life Insurance Co Durham Life Insurance Co Empire Life & Accident Insurance Co. Empire Life & Accident Insurance Co. Empire Life & Accident Insurance Co. Empire Life & Accident Insurance Co. First National Life Insurance Co. First National Life Insurance Co. Franklin National Life Insurance Co Franklin National Life Insurance Co Greensboro Life Insurance Co. Greensboro Life Insurance Co. Greensboro Life Insurance Co. Greensboro Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Guaranty Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co.

DHM-1953 DHM-1954 DHM-1955 ELA-1937 ELA-1948 ELA-1954 ELA-1956 FNL-1965A FNL-Unknown B FRK-1940 FRK-Unknown GL-1928 GL-1929 GL-1929a GL-1930 GL-Unknown GTL-1937 GTL-1942 GTL-1944 GTL-1946 GTL-1946a GTL-1947 GTL-1948 GTL-1951 GTL-1954 GTL-1955 GTL-1956 GTL-1957 GTL-1960 HS-1919 HS-1927 HS-1935 HS-1940 HS-1940a HS-1941 HS-1945 HS-1948 HS-1948A

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 50

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Home Security Life Insurance Co. Kentucky Central Life Insurance Co. Lafayette Life Insurance Company Life & Casualty Insurance Company of Tenn Life & Casualty Insurance Company of Tenn Lincoln Life Insurance Co Lincoln Life Insurance Co National Standard Life Ins Co National Trust Life Insurance Co. Newberry Life & Health Ins. Co. Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company

HS-1949 HS-1949a HS-1952 HS-1953 HS-1955a HS-1955b HS-1956 HS-1957d HS-1959 HS-1959a HS-1959e HS-1963 HS-1963a HS-1964b RL-4 LFL-1923 L&C-1953 L&C-1959 LCN-1941 VAR-1948 NSL-1959 NTR-Unknown b NEW-Unknown PAL-1928 PAL-1931 PAL-1933 PAL-1934 PAL-1936a PAL-1938 PAL-1943 PAL-1944 PAL-1944a PAL-1944b PAL-1948 PAL-1950 PAL-1951a PAL-1952 PAL-1952b

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 51

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Palmetto State Life Insurance Company Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Peoples Life Insurance Co. Progressive Life Insurance Co. Progressive Life Insurance Co. Public Savings Life Insurance Company Public Savings Life Insurance Company Public Savings Life Insurance Company Public Savings Life Insurance Company Public Savings Life Insurance Company Reliable Life Insurance Co Reliable Life Insurance Co Reliable Life Insurance Co Reliable Life Insurance Co Reliable Life Insurance Co Reliable Life Insurance Co Security Life Insurance Company of Georgia Security Life Insurance Company of Georgia Security Life Insurance Company of Georgia Security Life Insurance Company of Georgia Security Life Insurance Company of Georgia

PAL-1955 PAL-1955a PAL-1957 PAL-1957a PAL1957b PAL-Unknown a PLI-1923 PLI-1955b PLI-1955c PLI-1955d PLI-1955e PLI-1961 PLI-1961a PLI-1964 PLI-1966b PLI-1973 PLI-1973b PLI-1973c PLI-1973d PLI-JAN-78 PRG-1931 VAR-1948 PSV-1942 PSV-1946 PSV-1952 PSV-1956 PSV-Unknown RL-20 RL-23 RL-24 RL-29 RL-32 RL-33 SLF-1955 SLF-1959 SLF-1960 SLF-1960a SLF-1961

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 52

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Security Life Insurance Company of Georgia Security Life Insurance Company of Georgia Security Life Insurance Company of Georgia Security Life Insurance Company of Georgia Southern General Life Insurance Co Southwestern Life Insurance Co Southwestern Life Insurance Co State Capital Life Insurance Co State Capital Life Insurance Co State Capital Life Insurance Co State Capital Life Insurance Co State Capital Life Insurance Co State Capital Life Insurance Co State Capital Life Insurance Co State Capital Life Insurance Co Superior Life Insurance Company Superior Life Insurance Company Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Universal Life & Accident Ins Co Washington National Insurance Company Total Ratebooks

SLF-1964 SLF-1966 SLF-Unknown SLF-Unknown a SGL-Unknown SWN-1962 SWN-1963 SC-1937 SC-1937a SC-1946 SC-1949 SC-1949a SC-1954b SC-1954c SC-1960 SUP-1954 SUP-1955 UNI-1929 UNI-1930 UNI-1931 UNI-1932 UNI-1933 UNI-1935b UNI-1936 UNI-1941 UNI-1943 UNI-1947 UNI-1949 UNI-1949a UNI-1950 UNI-1950a UNI-1956 UNI-1960a WTN-24 179

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 53

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Appendix E

Companies For Which Designated Plan Codes Will Be Adjusted All American Insurance Company All States Life Insurance Company Allied Security Insurance Company American Bankers Insurance Company American Family Life Insurance Company American National Insurance Company Atlantic Life Insurance Company Atlas Life Insurance Company Banner Life Insurance Company Business Men's Insurance Company Calhoun Life Insurance Company Capital City Life Insurance Company Coastal States Life Insurance Company College Education Insurance Company Columbian National Life Insurance Company Columbus National Life Insurance Company Commercial Life Insurance Company Commercial State Life Insurance Company Commonwealth Life & Accident Insurance Company Dixie Life Insurance Company Druid Life Insurance Company Durham Life Insurance Company Empire Life And Accident Insurance Company Farmers National Life Insurance Company First National Life Insurance Company Franklin National Life Insurance Company Freedom Life Insurance Company Guaranty Life Insurance Company Home Security Life Insurance Company Immediate Benefit Life Insurance Company Life Insurance Company of Florida Lincoln Life Insurance Company National Equity Life Insurance Company National Standard Life Insurance Company Newberry Life And Health Insurance Company Orange State Life Insurance Company Palmetto State Life Insurance Company Peninsular Peoples Life And Accident Insurance Company Peoples Life Insurance Company Peoples Mutual Benefit Insurance Company

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 54

MARYLAND INSURANCE ADMINISTRATION

JUNE 2, 2003

Peoples Protective Life Insurance Company Progressive Life Insurance Company Provident Indemnity Life Insurance Company Public Savings Life Insurance Company Reliable Life Insurance Company Rockford Life Insurance Company Security Life Insurance Company of Georgia Seminole American Seminole Life Insurance Company Southeastern National Insurance Company Southern Security Life Insurance Company Southern Standard Life Insurance Company Southwestern Life Insurance Company Standard American Life Insurance Company State Capital Life Insurance Company Superior Life Insurance Company Sureway Life Insurance Company United States National Life And Casualty Company Universal Life And Accident Insurance Company Universal Life Insurance Company Washington Fidelity National Insurance Company Washington National Insurance Company World Service Life Insurance Company

______________________________________________________________________________________ MONUMENTAL MULTI-STATE REPORT 789-00 PAGE 55

IN THE MATTER OF THE MULTI-STATE EXAMINATION OF MONUMENTAL LIFE INSURANCE COMPANY (NAIC #66281) * * * * * *

* * * * * * * * * CONSENT ORDER: MIA-2003-06-001

AND NOW, this 12th day of June, 2003, (the "Effective Date") this Consent Order is hereby issued by the Maryland Insurance Commissioner in disposition of the matter captioned above. FINDINGS OF FACT 1. Respondent is Monumental Life Insurance Company, which maintains its address as 2 East Chase Street, Baltimore, MD 21202. At all relevant times herein, Respondent has been a licensed insurer domesticated in the State of Maryland. On or about August 4, 2000, the Maryland Insurance Administration (the "Administration") initiated a survey of all Maryland domiciled insurers inquiring as to whether any such company issued life insurance policies utilizing race as a factor. In its response, Respondent acknowledged that certain companies, from which Respondent acquired blocks of business or which were subsequently acquired by Respondent, may have sold life insurance policies charging certain policyholders a higher premium based upon their race. Commencing on January 9, 2001, the States of Maryland and Florida and the Commonwealths of Pennsylvania and Virginia (the "Lead States") conducted a multi-state examination (the "Examination") of the Respondent with regards to life policies in-force on or after July 1, 1974 which charged higher premiums based on race (the "Affected Policies"). As the domestic state for Respondent, and upon agreement of the Lead States, the Administration coordinated the Examination, as well as the negotiation and finalization of this Consent Order.

2.

3.

4.

5.

6.

During the Examination, Respondent notified the Lead States that it had commenced a broad-based adjustment effort to increase death benefits and cash values on in-force Affected Policies identified by Respondent to ensure that white and non-white policyholders are treated the same. In making the adjustments, the Respondent increased death benefits and cash values for Affected Policies in force on the date of adjustment. Respondent stated it has adjusted its electronic business records to reflect the increased death benefits and cash values for those in-force Affected Policies adjusted as part of the Respondent's adjustment effort. Throughout both the self-audit and the Examination, the Respondent diligently sought to identify as best it could those companies listed in Exhibit A and agreed to the adjustments resulting from the Examination. The Examination confirmed that some companies subsequently acquired by Respondent and some companies from which Respondent acquired blocks of business engaged in the practice of pricing life insurance policies at rates that were based on a different premium rate attributable to race. In some cases non-whites received a reduced death benefit compared to white policyholders paying the same premium, and in other cases non-white policyholders were charged a higher premium for the same death benefit as a white policyholder. A list of those companies confirmed in the Examination is attached hereto, and incorporated in its entirety by reference herein, as Exhibit A. The Examination, the details of which are provided in Examination Report #789-00 (the "Report"), concluded that the activities described in paragraph 7 above constitute unfair discrimination between individuals of the same class and hazard. This conclusion is directed exclusively at those companies listed in Exhibit A.

7.

8.

ORDER

WHEREAS it is stipulated and agreed upon by and between the several states and Respondent and ORDERED as follows: A. Respondent agrees to accept the Report as a final report and waives any and all rights to a hearing on the report. Respondent does not admit any wrongdoing or violation of any insurance law or regulation, but is foregoing its right to a hearing and is entering into this Consent Order in exchange for releases granted herein. The Administration acknowledges that the Respondent's practices

2

at issue did not constitute intentional or willful violations of any state insurance code. B. Respondent shall complete its adjustment effort as described herein and shall not make or permit any unfair discrimination between individuals of the same class and hazard by reason of race. The Respondent shall, within 90 days of the Effective Date, adjust and increase death benefits and cash values on all Affected Policies in-force as of the Effective Date, except those Affected Policies that have been adjusted by the Respondent prior to the Effective Date or will be adjusted by the Respondent at the time of claim. The increased death benefits and cash values shall be in an amount to ensure that white and non-white policyholders are treated the same. All electronic records of the Respondent shall be adjusted to reflect the increased death benefits and cash values for the Affected Policies in-force as of the Effective Date. Consistent with the records retained by the Respondent, Respondent shall, within 120 days from the Effective Date, provide written notice, in a form acceptable to the Administration, at the last known address of record to all policyholders of in-force Affected Policies adjusted by the Respondent, except those Affected Policies that will be adjusted by the Respondent at the time of claim, informing them of the increased death benefit. Within 180 days of the Effective Date, Respondent shall pay an increased death benefit for claims made on Affected Policies, which terminated by reason of death claim between July 1, 1974 and the Effective Date and for which the Respondent has complete records, except those Affected Policies that have been adjusted by the Respondent prior to the Effective Date or will be adjusted by the Respondent at the time of claim. The increased death benefit shall be an amount to ensure that white and nonwhite policyholders are treated the same. Respondent shall provide written notice of the increased death benefit, in a form acceptable to the Administration, at the last known address of record to all policyholders, or beneficiaries where applicable, of Affected Policies, which terminated by reason of death claim between July 1, 1974 and the Effective Date and for which the Respondent has complete records, except those Affected Policies that have been adjusted by the Respondent prior to the Effective Date or will be adjusted by the Respondent at the time of claim. Respondent shall make the payment upon verification of the beneficiaries' address. Evidence of payment, satisfactory to the

C.

D.

E.

3

Lead States, shall be submitted to the Administration no later than 270 days after the Effective Date. F. In order to locate those individuals who are no longer at the address of record maintained by Respondent, Respondent shall develop and implement an internal locator plan satisfactory to the Administration. In the event Respondent is unable, following the implementation of the internal locator plan, to locate individuals who are due monies, said monies shall be escheated to the applicable state in accordance with that state's applicable law. With respect to funds submitted to a state escheat program, at the time such funds are submitted, the Company will provide to the state agency to which the funds are being submitted, as well as to the insurance regulator for the state, the following information: (1) the policy number and issue date, (2) the name and last known address of the policyholder and (3) the escheat amount both, to the extent practicable, in the aggregate and as to each policy. Respondent acknowledges that it does not have complete records regarding Affected Policies. Therefore, Respondent is unable to identify or locate all individuals who are due monies based on its records. Respondent shall issue a public notice, in a form approved by the Administration, notifying individuals who may be due monies under Affected Policies of their potential right to an increased death benefit. The notice shall be published once a week for four (4) consecutive weeks in the publications approved by the Administration. Respondent shall submit the form of public notice for approval by the Administration within thirty (30) days from the Effective Date. Publication shall commence within 120 days from the Effective Date of this Order. In the event Respondent is unable to determine an actual ratio for increasing benefits for Affected Policies to ensure non-whites are not charged more than whites, Respondent agrees to increase the benefits by 33%, which is within the range of actual ratios used by the Respondent to adjust Affected Policies. Respondent shall provide any necessary reports and documentation to the Administration, in a manner and form acceptable to the Administration, evidencing that the notices and adjustment efforts as described herein have been made. For a period of 12 months from the date on which the Respondent issues the public notice described in paragraph G, Respondent shall honor all legitimate claims, providing the appropriate level of increased coverage, for Affected Policies terminated by reason of

G.

H.

I.

J.

4

a death claim between July 1, 1974 and the Effective Date. Respondent shall pay all such legitimate claims within 30 days from the date of the receipt of satisfactory proof thereof. K. Respondent shall, on the 15th day of each month, provide to the Administration, in a format approved by the Administration, a report detailing the total amount of adjustment made on a stateby-state level as of the last day of the prior month. Respondent shall establish an additional adjustment fund in the amount of $5,000,000. This is the estimated amount of money necessary to cover the adjustments due to those individuals who are entitled to adjustment but for whom Respondent no longer has records. Respondent agrees that this money is owed to individuals, some of whom may be identified as a result of the requirements in paragraph G. Those monies not paid out at the end of the timeframe provided in paragraph J of this Order shall be paid to the States, which are a party to this Order. Payment shall be made as directed by the Lead States. Unless otherwise directed by a State as to its portion, Respondent agrees to pay an aggregate sum of $2,000,000 to the states in accordance with the State Allocation Formula Chart to be provided by the Lead States. The monies may be used in a manner directed by the states, including but not limited to contributions to charities serving the needs or interests of AfricanAmericans or in accordance with applicable state laws. This amount shall be paid within 15 business days after demand by the States after allocation by the Lead States but no later than January 15, 2004. This Consent Order shall be binding on Respondent and on the respective states executing this Consent Order. Any State that wishes to become a party to this Order shall execute a State Amendment page within 60 days from the Effective Date. As to any state that does not execute this Consent Order, the Respondent shall not be obligated to make a contribution to a charity in that state or otherwise pay the state, or its insurance regulator. Rather, that State's portion shall be allocated among the participating States by the Lead States. Each of the signatories to this Consent Order, on behalf of his/her State, hereby gives express assurance that under their applicable state laws, regulations and judicial rulings, they have the authority to enter into this Consent Order and bind that party now and in the

L.

M.

N.

O.

P.

5

future. By execution of this Consent Order with the Respondent, each signatory acknowledges that he/she has reviewed and agrees with the terms and conditions as set forth herein. Q. If Respondent defaults with any respect to any obligation under the Consent Order and such default is not remedied within thirty (30) business days following personal delivery or delivery by facsimile of written notice specifying such default (during which period the Lead States and Respondent shall make reasonable efforts to resolve any disputes regarding the default), the Lead States may seek judicial enforcement of this Consent Order. This Consent Order was negotiated in an effort to conclude with finality all regulatory allegations involving the impact of race on life insurance underwriting, sales, pricing, or policy benefits on policies that were issued, assumed, acquired, or administered by the Respondent prior to the date of this Consent Order. With respect to all matters addressed by the Report or this Consent Order, the States executing this Consent Order release and forever discharge the Respondent from all civil, administrative, criminal, or quasi-criminal causes, actions, claims, damages, fines, sanctions, losses, demands, or other liability that the Insurance Department of the States could pursue or seek based upon distinctions in the terms or benefits of insurance policies based upon the race of the insured where such liability arises under the insurance and anti-discrimination laws and regulations of each state related or applicable to the marketing, solicitation, application, underwriting, benefit payment, acceptance, sale, purchase, operation, retention, or administration of all life insurance policies sold, issued, assumed or administered by the Respondent prior to the date that this Consent Order is signed. This Consent Order and its attachments constitute the entire agreement of the parties with respect to the matters referenced herein, and may not be amended or modified except by an amended order signed by all parties hereto, however, the Lead States and the Respondent may mutually agree to any reasonable extensions of time that might become necessary to carry out the provisions of this Consent Order.

R.

S.

6

IN WITNESS WHEREOF, the several states and Respondent have executed this Consent Order. Changes in the language of this Consent Order required by any participating state to satisfy that state's particular statutory and/or regulatory requirements shall be attached as amendments hereto and incorporated herein as to that state's requirements upon acknowledgment and agreement thereto by Respondent. Those amendments shall have an effect only for the amended state and shall have no other effect on any other participating state. Consented to in form and content: MONUMENTAL LIFE INSUANCE COMPANY Signature on file with original BY: Signature Henry G. Hagan Name President, C.E.O. Title BY: Alfred W. Redmer, Jr. Insurance Commissioner MARYLAND INSURANCE ADMINISTRATION Signature on file with original

7

Exhibit A Companies For Which Designated Plan Codes Will Be Adjusted

Carrier All American Insurance Company All States Life Insurance Company Allied Security Insurance Company American Bankers Insurance Company American Family Life Insurance Company American National Insurance Company Atlantic Life Insurance Company Atlas Life Insurance Company Banner Life Insurance Company Business Men's Insurance Company Calhoun Life Insurance Company Capital City Life Insurance Company Coastal States Life Insurance Company College Education Insurance Company Columbian National Life Insurance Company Columbus National Life Insurance Company Commercial Life Insurance Company Commercial State Life Insurance Company Commonwealth Life & Accident Insurance Company Dixie Life Insurance Company Druid Life Insurance Company Durham Life Insurance Company Empire Life And Accident Insurance Company Farmers National Life Insurance Company First National Life Insurance Company Franklin National Life Insurance Company Freedom Life Insurance Company Guaranty Life Insurance Company Home Security Life Insurance Company Immediate Benefit Life Insurance Company Life Insurance Company of Florida 8

Lincoln Life Insurance Company National Equity Life Insurance Company National Standard Life Insurance Company Newberry Life And Health Insurance Company Orange State Life Insurance Company Palmetto State Life Insurance Company Peninsular Peoples Life And Accident Insurance Company Peoples Life Insurance Company Peoples Mutual Benefit Insurance Company Peoples Protective Life Insurance Company Progressive Life Insurance Company Provident Indemnity Life Insurance Company Public Savings Life Insurance Company Reliable Life Insurance Company Rockford Life Insurance Company Security Life Insurance Company of Georgia Seminole American Seminole Life Insurance Company Southeastern National Insurance Company Southern Security Life Insurance Company Southern Standard Life Insurance Company Southwestern Life Insurance Company Standard American Life Insurance Company State Capital Life Insurance Company Superior Life Insurance Company Sureway Life Insurance Company United States National Life And Casualty Company Universal Life And Accident Insurance Company Universal Life Insurance Company Washington Fidelity National Insurance Company Washington National Insurance Company World Service Life Insurance Company

9

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