REPORT OF EXAMINATION

OF THE

ALLIANCE UNITED INSURANCE COMPANY

AS OF

DECEMBER 31, 2015

Filed on January 20, 2017

TABLE OF CONTENTS PAGE

SCOPE OF EXAMINATION ............................................................................................ 1

COMPANY HISTORY: .................................................................................................... 2 Capitalization ............................................................................................................. 4 Dividends ................................................................................................................... 5

MANAGEMENT AND CONTROL:................................................................................... 5 Management Agreements .......................................................................................... 7 Corporate Records ..................................................................................................... 9

TERRITORY AND PLAN OF OPERATION ................................................................... 10

REINSURANCE: ........................................................................................................... 10 Assumed .................................................................................................................. 10 Ceded ...................................................................................................................... 10

ACCOUNTS AND RECORDS: ...................................................................................... 11 Information Systems Controls .................................................................................. 11 Taxes, Licenses, and Fees ...................................................................................... 12

FINANCIAL STATEMENTS: ......................................................................................... 12 Statement of Financial Condition as of December 31, 2015 .................................... 13 Underwriting and Investment Exhibit for the Year Ended December 31, 2015 ........ 14 Reconciliation of Surplus as Regards Policyholders from December 31, 2011

through December 31, 2015 ............................................................................... 15

COMMENTS ON FINANCIAL STATEMENT ITEMS: .................................................... 16 Receivables from Parent, Subsidiaries and Affiliates ............................................... 16 Losses and Loss Adjustment Expenses .................................................................. 16 Other Expenses ....................................................................................................... 16

SUBSEQUENT EVENTS .............................................................................................. 17

SUMMARY OF COMMENTS AND RECOMMENDATIONS: ........................................ 17 Current Report of Examination ................................................................................ 17 Previous Report of Examination .............................................................................. 18

ACKNOWLEDGMENT .................................................................................................. 19

Los Angeles, California November 18, 2016

Honorable Dave Jones Insurance Commissioner California Department of Insurance Sacramento, California

Dear Commissioner:

Pursuant to your instructions, an examination was made of the

ALLIANCE UNITED INSURANCE COMPANY

(hereinafter also referred to as the Company) at its home office located at 5300 Adolfo

Road, Suite 200, Camarillo, California 93012.

SCOPE OF EXAMINATION

We have performed our single-state examination of the Company. The previous

examination of the Company was as of December 31, 2011. This examination covered

the period from January 1, 2012 through December 31, 2015.

The examination was conducted in accordance with the National Association of

Insurance Commissioners Financial Condition Examiners Handbook (Handbook). The

Handbook requires the planning and performance of the examination to evaluate the

Company’s financial condition, assess corporate governance, identify current and

prospective risks, and evaluate system controls and procedures used to mitigate those

risks. An examination also includes identifying and evaluating significant risks that

could cause an insurer’s surplus to be materially misstated both currently and

prospectively.

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All accounts and activities of the Company were considered in accordance with the risk-

focused examination process. This may include assessing significant estimates made

by management and evaluating management’s compliance with Statutory Accounting

Principles. The examination does not attest to the fair presentation of the financial

statements included herein. If, during the course of the examination, an adjustment is

identified, the impact of such adjustment will be documented separately following the

Company’s financial statements.

This examination report includes findings of fact and general information about the

Company and its financial condition. There might be other items identified during the

examination that, due to their nature (e.g., subjective conclusions, proprietary

information, etc.), were not included within the examination report but separately

communicated to other regulators and/or the Company.

COMPANY HISTORY

The Company was incorporated in California on December 17, 1997, as Millennium

Insurance Company, and commenced transacting private automobile insurance on

June 30, 1998. In January 2004, Alliance United Group (AUG) purchased the Company

from GuideOne Financial Group, Inc., and changed the name of the Company to

Alliance United Insurance Company.

In August 2006, the California Department of Insurance (CDI) approved a request from

Platinum Group of Companies (Platinum) and Mr. David Mandel, the ultimate controlling

individual of Platinum, to acquire indirect control of the Company through the purchase

of 42,932 shares or 56% of the authorized but unissued class A common stock of AUG.

Concurrent to the approval, the CDI entered into a Regulatory Agreement with Mr.

Mandel, Platinum, and the Company, setting conditions for control of the Company.

These conditions include, but are not limited to; maintaining a risk-based capital of

300% or greater, maintaining a premium to surplus ratio of no greater than 3 to 1; no

dividends declared the first three years following acquisition of control; no written

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business other than automobile insurance without prior consent from the CDI; and

attempt to retain senior management for five years following acquisition of control. In

July 2012, the Company requested that the CDI amend the Regulatory Agreement to

increase the premium to surplus ratio from 3 to 1 to 3.5 to 1. The request was approved

by the CDI on December 21, 2012.

In 2011, after several stock repurchase programs to retire outstanding shares, Platinum

owned an estimated 78% of the outstanding shares of AUG. During 2012, several key

employees exercised their AUG stock options which resulted in Platinum owning an

estimated 75% of the total outstanding shares of AUG.

On November 1, 2012, the Company created a wholly-owned subsidiary, Alliance

United Properties, LLC (AUP), a California domiciled non-insurance company with

100,000 shares of $1,000 par value class A common stock authorized and 100 shares

issued and outstanding. The investment in AUP was disposed of on April 30, 2015. The

carrying value of the investment in AUP at the time of disposal was $8,872,696.

On September 1, 2013, AUG purchased West Palmdale Plaza, LLC (WPP), a

subsidiary of Platinum and contributed 100% of the common stock of WPP to the

Company. On October 1, 2013, the Company contributed 100% of common stock of

WPP to AUP, making WWP an indirect wholly-owned subsidiary of the Company.

Effective April 30, 2015, AUG was acquired by Kemper Corporation (Kemper) through a

reverse subsidiary merger transaction between Kemper, Kemper Acquisition

Corporation, a newly formed California corporation and subsidiary of Kemper, AUG, and

Platinum. The transaction was a cash transaction for a total purchase price of

$71 million, subject to certain post-closing indemnifications. As a result of the

transaction, Kemper became owner of 100% of the issued and outstanding shares of

AUG common stock, thereby becoming indirect sole shareholder of the Company and

its former affiliate, Alliance United Insurance Services (AUIS), a California corporation.

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On June 3, 2015, the board of directors of AUG authorized a capital contribution of all

the common stock of AUIS to the Company. The contribution was made on

June 5, 2015, and as a result, AUIS became a wholly-owned subsidiary of the

Company. The value of AUIS at the time of contribution was $3.9 million. The

California Secretary of State approved the conversion of AUG and AUIS from California

corporations to California limited liability companies, effective June 15, 2015 and

June 22, 2015, respectively.

Capitalization

The Company is authorized to issue 100,000 shares of $1,000 par value common stock.

As of December 31, 2015, there were 2,600 shares outstanding.

The Company received capital contributions from AUG as shown in the schedule below:

Year Amount

2012 $ 14,500,000

2013 $ 17,500,000(a)

2015 $127,355,776(b)

(a) Capital contribution included a cash contribution of $15,471,866 and $2,028,134 of 100% common

stock of WPP.

(b) Capital contribution included a cash contribution of $98,501,086; $3,854,690 of 100% common

stock of AUIS; and $25,000,000 capital contribution receivable.

On December 30, 2015, the CDI approved the admissibility of a $25 million capital

contribution from AUG as a contribution receivable in the Company’s statutory financial

statements as of December 31, 2015, pursuant to the Statements of Statutory

Accounting Principles No. 72, Surplus and Quasi-Reorganizations. The capital

contribution was recorded as a receivable in the Company’s filed 2015 financial

statement and was received on February 11, 2016.

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The Company made capital contributions to its former subsidiary, AUP, as shown in the

schedule below:

Year Amount

2012 $ 100,000

2013 $7,525,573(a)

2014 $1,000,000

(a) Capital contribution included a cash contribution of $5,500,000 and $2,025,573 of 100% common

stock of WPP.

Dividends

No dividends were paid by the Company during the examination period.

In 2015, AUIS made approximately $29.6 million from its own business activities and

distributed $22,040,000 to the Company as shown below:

Date Amount

09/25/2015 $ 2,040,000

09/29/2015 $ 3,000,000

11/09/2015 $10,000,000

12/31/2015 $ 7,000,000

MANAGEMENT AND CONTROL

The Company is a member of an insurance holding company system of which Kemper

Corporation (Kemper) is the ultimate controlling entity. Kemper is incorporated in the

state of Delaware. Following is an abridged organizational chart showing the entities

the Company had interrelationships with during the examination period. All ownership

is 100%.

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The seven members of the board of directors, who are elected annually, manage the

business and affairs of the Company. Following are members of the board and principal

officers of the Company serving at December 31, 2015:

Directors

Name and Location Principal Business Affiliation

John M. Boschelli Geneva, Illinois

Senior Vice President and Chief Investment Officer

Kemper Corporation

Denise I. Lynch(a) Chicago, Illinois

Vice President and Property and CasualtyGroup Executive

Kemper Corporation

Kemper Corporation

(Delaware)

KAHG LLC

(Illinois)

Kemper CorporateServices, Inc.

(Illinois)

United InsuranceCompany of America

(Illinois)

Alliance United Group,LLC

(California)

Alliance UnitedInsurance Company

(California)

Alliance UnitedInsurance Services, LLC

(California)

Trinity UniversalInsurance Company

(Texas)

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Name and Location Principal Business Affiliation

David Mandel Studio City, California

President Alliance United Insurance Company

Maxwell T. Mindak Elmhurst, Illinois

Vice President, Financial Planning and Analysis

Kemper Corporation

Christopher L. Moses Chicago, Illinois

Vice President and Treasurer Kember Corporation

Richard Roeske Naperville, Illinois

Vice President and Chief Accounting Officer

Kemper Corporation

Dennis J. Sandelski Valparaiso, Indiana

Vice President, Tax and Corporate Development

Kemper Corporation

Principal Officers

Name Title

David Mandel President Andrew D. MacDonald Senior Vice President Judy L. Fuller Secretary Clark H. Roberts Chief Financial Officer

The following changes in management occurred subsequent to the examination date: (a) Denise Lynch resigned as a member of the board of directors, effective December 31, 2015, and

was replaced by Joseph W. Metz, effective February 10, 2016.

Management Agreements

Administrative Service Agreement: The Company had an Administrative Service

Agreement, effective January 1, 2004, with its affiliate, Alliance United Insurance

Services (AUIS). Under the terms of the Agreement, AUIS provided facilities, insurance

administrative, and management support services continuously for the Company to

conduct its business. Services included, but were not limited to, financial reporting, tax,

treasury services, budget and cost accounting, human resources, payroll, electronic

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funds transfer, legal, office services, actuarial, investment management, computer,

marketing, corporate affairs, and graphic arts. AUIS also provided office space for the

Company. The Company reimbursed AUIS for actual expenses incurred on a monthly,

basis. AUIS received payments of $416,172, $578,633, $1,540,681, and $518,738, for

2012, 2013, 2014, and 2015 respectively. The California Department of Insurance

(CDI) approved the Agreement on February 12, 2004. This Agreement terminated

when Kemper acquired AUG on April 30, 2015.

Agency Agreement: On January 1, 2004, the Company entered into an Agency

Agreement with AUIS. Under the terms of the Agreement, AUIS has authority to

process policies, collect premiums, and perform responsibilities typical of a servicing

general agent. Premium payments are settled within thirty days after each month of

collection. For services provided, AUIS received commissions which totaled

$27,985,659, $32,404,981, $43,787,000, and $53,984,000 in 2012, 2013, 2014, and

2015, respectively. The CDI approved this Agreement on February 12, 2004. An

amendment to reflect the Company’s current name was approved on March 30, 2008,

by the CDI.

Tax Sharing Agreement: The Company and its former affiliates were party to a Tax

Sharing Agreement with its parent, AUG, dated January 1, 2004, amended

March 9, 2009, to reflect the Company’s current name. Under the terms of the

Agreement, allocation of taxes was based upon separate return calculations with

intercompany tax balances settled in the quarter subsequent to the filing of the

consolidated return. During 2012, 2013, and 2014, the Company paid/recovered

federal income taxes of ($155,568), $1,118,946, and $1,590,300, respectively. The

Company received federal income taxes of $595,000 between January 1, 2015 through

April 30, 2015. The CDI approved this Agreement on February 12, 2004. This

Agreement was terminated when Kemper acquired AUG on April 30, 2015.

Federal Income Tax Agreement: The Company entered into a Federal Income Tax

Agreement with Kemper Corporation (Kemper), its ultimate parent, on May 1, 2015.

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Under the terms of the Agreement, the Company will pay Kemper the amount of regular

income tax it would pay the Internal Revenue Service as if filing separately. The

Company’s regular income tax liability shall not be greater nor less than the regular

income tax liability would be if the Company had filed separate tax return for all years in

the consolidated period. During the period of May 1, 2015 through December 31, 2015,

the Company paid $0 in federal income taxes. This Agreement was approved by the

CDI on June 3, 2015.

General Service Agreement: The Company entered into a General Service Agreement

with Merastar Insurance Company (Merastar), an affiliate, effective May 1, 2015. Under

the terms of the Agreement, Merastar administers the new and renewal property and

casualty lines insurance business of the Company and provides certain services and

facilities to the Company. Services include, but not limited to, marketing, underwriting,

supervision of the adjustment of claims, payment of expenses, and staffing. In 2015,

the Company incurred expenses of $48,309,000. The CDI approved this Agreement on

June 25, 2015.

Service Agreement: Effective May 1, 2015, a Service Agreement was executed

between the Company and Kemper Corporate Services, Inc. (KCSI), an affiliate. Under

the terms of the Agreement, KCSI will provide accounting and financial services,

accounts payable and administrative services, cash management and financial planning

services, human resource services, legal and risk management services, and

miscellaneous services. In 2015, the Company incurred expenses of $4,605,000 for

services provided by KCSI. The CDI approved this Agreement on June 25, 2015. An

amendment to include additional services provided by KCSI was approved on

November 10, 2015, by the CDI.

Corporate Records

California Insurance Code (CIC) Section 735 states that the Company must inform the

board members of the receipt of the examination report. The board should be informed

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of the report both in the form first formally prepared by the examiners and in the form as

finally settled and officially filed by the commissioner. The board must also enter that

fact in the board minutes. A review of the board minutes disclosed that, while the

previous officially filed report as of December 31, 2011 was presented to the board, the

first formally prepared draft by the examiners of that report was not submitted to the

board. It is recommended that the Company implement procedures to ensure future

compliance with CIC Section 735.

TERRITORY AND PLAN OF OPERATION

The Company is licensed to write Fire, Marine, Disability, Plate Glass, Liability,

Common Carrier Liability, Boiler and Machinery, Burglary, Sprinkler, Team and Vehicle,

Automobile, and Miscellaneous coverage solely in California.

Business is produced by a network of insurance agencies through its affiliated general

agent, Alliance United Insurance Service, LLC, it wholly-owned subsidiary. In 2015, the

Company wrote $415.84 million of direct premiums. Of the direct premiums, 66.71%

was private passenger automobile liability and 33.29% was automobile physical

damage.

REINSURANCE

Assumed

The Company does not assume any reinsurance.

Ceded

On December 31, 2014, the Company terminated its 38% quota share reinsurance

agreement with Maiden Reinsurance North America (Maiden Re) on a cut-off basis.

The Company then entered into a 3% quota share reinsurance agreement with Maiden

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Re on January 1, 2015 which was terminated on a cut-off basis on April 30, 2015, as a

result of the acquisition. In July 2015, the Company and Maiden Re, entered into a

Commutation and Release Agreement whereby both parties agreed to settle and

commute all past, present, and future obligations and liabilities connected with the

reinsurance agreements the parties had previously entered. Under the terms of the

agreement, Maiden Re paid a settlement amount of $28,695,150 to the Company for

related reinsurance balances on July 30, 2015.

On April 30, 2015, the Company was added to Kemper Corporation’s property and

casualty catastrophe reinsurance program. Following is a summary of reinsurance

contracts as of December 31, 2015:

Line of Business and Type of Contract

Reinsurer’s Name

Company’s Retention

Reinsurer’s Limit

Casualty:

Per Risk Excess of Loss 1st Layer and 2nd Layer

Various domestic, foreign, and alien companies led by Swiss Re Underwriters Agency, Inc.

$2 million

1st Layer – 100% of $5.5 million x $2 million

2nd Layer – 100% of

$7.5 million x $7.5 million

Property:

Property – Per Risk XOL 1st Layer and 2nd Layer

Various domestic, foreign, and alien companies led by Swiss Re Underwriters Agency, Inc.

$50 million 1st Layer - $5 million 2nd Layer - $10 million

1st Layer – 95% of $100 million x $50 million

2nd Layer – 95% of

$200 million x $150 million

ACCOUNTS AND RECORDS

Information Systems Controls

During the course of the examination, a review was made of the Company’s general

controls over its information systems. As a result of this review, some findings were

noted and were presented to the Company along with recommendations to strengthen

its controls. The Company should evaluate the recommendations and make

appropriate changes to strengthen its information systems controls.

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Taxes, Licenses, and Fees

California Insurance Code (CIC) Section 734 states that the Company shall provide

examiners access to books and records of the Company being examined within a timely

and convenient manner. In addition, CIC Section 1872.8 states, in part, that each

insurer doing business in the state of California must pay an annual “Vehicle Fraud

Assessment Fee (VFAF)” for each vehicle insured under an insurance policy it issues in

California. The fee provides funding for the investigation and prosecution of fraudulent

automobile insurance claims and automobile theft in the state of California.

During the course of the examination, it was noted that the Company was unable to

provide and maintain detailed supporting documentation for the VFAF remitted to the

California Department of Insurance (CDI) as required by CIC Sections 734 and 1872.8.

It is recommended that the Company establish and implement procedures to ensure

that adequate documentation is maintained to support its filings with the CDI.

FINANCIAL STATEMENTS

The following financial statements are based on the statutory financial statements filed

by the Company with the California Department of Insurance and present the financial

condition of the Company for the period ending December 31, 2015. The

accompanying comments to the amounts reported in the annual statement should be

considered an integral part of the financial statements. There were no examination

adjustments made to surplus as a result of the examination.

Statement of Financial Condition as of December 31, 2015 Underwriting and Investment Exhibit for the Year Ended December 31, 2015 Reconciliation of Surplus as Regards Policyholders from December 31, 2011 through December 31, 2015

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Statement of Financial Condition as of December 31, 2015

Ledger and Nonledger Assets Not Net Admitted Assets Assets Admitted Assets Notes Bonds $ 260,400,945 $ $ 260,400,945 Common stocks 39,470,712 39,470,712 Cash and short-term investments 44,636,416 44,636,416 Other invested assets 7,014,984 7,014,984 Investment income due and accrued 2,576,613 2,576,613 Premiums, agents’ balances and installments booked but deferred and not yet due (including $0 earned but unbilled premiums) 69,149,040 42,366 69,106,674 Amount recoverable from reinsurers 46,813 46,813 Current federal and foreign income tax recoverable and interest thereon 10,721,803 10,721,803 Net deferred tax asset 15,756,289 777,253 14,979,036 Electronic data processing equipment and software 1,658,757 1,260,317 398,440 Furniture and equipment 605,789 605,789 Receivable from parent, subsidiaries and affiliates 25,000,000 25,000,000 (1) Aggregate write-ins for other than invested assets 8,866,110 8,866,110

Total assets $ 485,904,271 $ 18,566,819 $ 467,337,452

Liabilities, Surplus and Other Funds

Losses and loss adjustment expenses $ 206,546,210 (2) Other expenses 17,243,672 (3) Taxes, licenses and fees 2,726,611 Unearned premiums 97,836,547 Ceded reinsurance premiums payable 147,555 Amounts withheld or retained by company for account of others 21,179 Payable to parent, subsidiaries and affiliates 6,462,775 Aggregate write-ins for liabilities 1,117,946

Total liabilities 332,102,495

Common capital stock $ 2,600,000 Gross paid-in and contributed surplus 178,255,776 Unassigned funds (surplus) (45,620,819) Surplus as regards policyholders 135,234,957

Total liabilities, surplus, and other funds $ 467,337,452

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Underwriting and Investment Exhibit for the Year Ended December 31, 2015

Statement of Income

Underwriting Income

Premiums earned $ 394,770,161

Deductions:

Losses and loss expenses incurred $ 365,615,981 Other underwriting expenses incurred 101,580,218 Total underwriting deductions 467,196,199 Net underwriting loss (72,426,038)

Investment Income

Net investment income earned $ 27,365,978 Net realized capital loss (673,409) Net investment gain 26,692,569

Other Income

Net loss from agents’ or premium balances charged off (amount recovered $0 amount charged off $2,667) $ (2,667) Aggregate write-ins for miscellaneous income 3,500

Total other income 833

Net income after dividends to policyholders, after capital gains tax and before federal and foreign income taxes (45,732,636) Federal and foreign income taxes incurred (8,728,634)

Net loss $ (37,004,002)

Capital and Surplus Account

Surplus as regards policyholders, December 31, 2014 48,876,990

Net loss $ (37,004,002) Change in net unrealized capital gains less capital gain tax of $(323,426) 2,566,694 Change in net deferred income tax 10,434,963 Change in nonadmitted assets (16,995,464) Surplus adjustments: Paid-in 127,355,776

Change in surplus as regards policyholders for the year 86,357,967

Surplus as regards policyholders, December 31, 2015 $ 135,234,957

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Reconciliation of Surplus as Regards Policyholders from December 31, 2011 through December 31, 2015

Surplus as regards policyholders, December 31, 2011 $19,795,549

Gain in Loss in Surplus Surplus

Net loss $ $ 42,306,995 Net unrealized capital gains 2,268,378 Change in net deferred income tax 13,791,937 Change in nonadmitted assets 18,291,223 Cumulative effect of changes in accounting principles 137,257 Surplus adjustments: Paid-in 159,355,776 Aggregate write-ins for gains and losses in surplus 484,278

Total gains and losses $ 176,037626 $ 60,598,218

Net increase in surplus as regards policyholders 115,439,408

Surplus as regards policyholders, December 31, 2015 $ 135,234,957

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COMMENTS ON FINANCIAL STATEMENT ITEMS

(1) Receivables from Parent, Subsidiaries and Affiliates

On December 30, 2015, the California Department of Insurance approved the

admissibility of $25,000,000 capital contribution as a contribution receivable in the

Company’s statutory financial statements as of December 31, 2015, pursuant to

Statements of Statutory Accounting Principles No. 72, Surplus and Quasi-

Reorganizations. Accordingly, the statutory financial statements include a $25,000,000

contribution receivable from Alliance United Group as of December 31, 2015.

(2) Losses and Loss Adjustment Expenses

Based on an analysis by a Casualty Actuary for the California Department of Insurance,

the Company’s loss and loss adjustment expense reserves as of December 31, 2015,

were found to be reasonably stated and have been accepted for purposes of this

examination.

(3) Other Expenses

The Company is party to a class action lawsuit filed in the state of California. The

plaintiffs alleged wrongful and unlawful employment practices under California law

including failure to pay employee wages earned upon separation of employment, failure

to provide meal and rest periods, and failure to provide wage statements. In May 2015,

the Company established a $5 million accrual to cover costs associated with the lawsuit.

During the second quarter of 2016, the Company reached a class settlement in the

amount of $6 million with the plaintiffs and is seeking court approval.

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SUBSEQUENT EVENTS

The Company received a cash capital contribution of $25 million from its parent,

Alliance United Group (AUG) on February 11, 2016. The California Department of

Insurance previously approved admissibility of this capital contribution as a contribution

receivable in the Company’s 2015 filed financial statement.

On March 30, 2016, the Company received a cash distribution of $9.7 million from its

subsidiary, Alliance United Insurance Services, LLC (AUIS).

On May 6, 2016, AUG made an additional $5 million cash capital contribution to the

Company.

On June 29, 2016, AUIS made a cash distribution of $11.6 million to the Company.

On August 10, 2016, AUG made an additional $15 million cash capital contribution to

the Company.

On September 29, 2016, AUIS made a cash distribution of $9.7 million to the Company.

SUMMARY OF COMMENTS AND RECOMMENDATIONS

Current Report of Examination

Corporate Records (Page 9): It is recommended that the Company implement

procedures to ensure future compliance with California Insurance Code Section 735.

Accounts and Records – Information System Controls (Page 11): As the result of the

review of the Company’s information systems controls, recommendations for improving

these controls were presented to the Company. The Company should evaluate these

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recommendations and make appropriate changes to strengthen its controls over its

information systems.

Accounts and Records – Taxes, Licenses, and Fees (Page 12): It is recommended that

the Company establish and implement procedures to ensure that adequate

documentation is maintained to support its filings with the California Department of

Insurance.

Previous Report of Examination

Comments on Financial Statement Items – Taxes, Licenses, and Fees (Page 11): It

was recommended that the Company file amended premium tax returns for 2010 and

2011 with the California Department of Insurance. The Company has complied with this

recommendation.

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ACKNOWLEDGMENT

The courtesy and cooperation extended by the Company’s officers and parent’s

employees during the course of this examination are hereby acknowledged.

Respectfully submitted,

__/S/_______________________

Anjanette Briggs, CFE Examiner-In-Charge Senior Insurance Examiner Department of Insurance State of California __/S/_______________________

Don Woo, CFE Bureau Chief Department of Insurance State of California