REPORT ON EXAMINATION OF THE SAGICOR ALLNATION INSURANCE COMPANY AS OF DECEMBER 31, 2006 I, Matthew Denn, Insurance Commissioner of the State of Delaware, do hereby certify that the attached REPORT ON EXAMINATION, made as of DECEMBER 31, 2006 of the SAGICOR ALLNATION INSURANCE COMPANY is a true and correct copy of the document filed with this Department. ATTEST BY: _____________________________________ DATE: 16 JUNE 2008 In Witness Whereof, I have hereunto set my hand and affixed the official seal of this Department at the City of Dover, this 16TH day of JUNE 2008. ________________________________________ Insurance Commissioner REPORT ON EXAMINATION OF THE SAGICOR ALLNATION INSURANCE COMPANY AS OF December 31, 2006 The above captioned Report was completed by examiners of the Delaware Insurance Department. Consideration has duly been given to the comments, conclusions, and recommendations of the examiners regarding the status of the Company as reflected in the Report. This Report is hereby accepted, adopted, and filed as an official record of this Department. ____________________________________ MATTHEW DENN INSURANCE COMMISSIONER DATED this 16TH Day of JUNE 2008. TABLE OF CONTENTS SCOPE OF EXAMINATION.................................................................................................................. 1 HISTORY.................................................................................................................................................. 3 CAPITALIZATION ................................................................................................................................. 4 Surplus Notes.................................................................................................................................... 4 MANAGEMENT AND CONTROL........................................................................................................ 5 HOLDING COMPANY SYSTEM.......................................................................................................... 8 MANAGEMENT AND SERVICE AGREEMENTS............................................................................. 9 Agreements with Affiliates.............................................................................................................. 9 Agreements with Non-affiliates ...................................................................................................... 9 FIDELITY BOND COVERAGE........................................................................................................... 10 TERRITORY AND PLAN OF OPERATIONS................................................................................... 11 Territory ......................................................................................................................................... 11 GROWTH OF COMPANY................................................................................................................... 11 REINSURANCE ..................................................................................................................................... 12 ACCOUNTS AND RECORDS .............................................................................................................. 13 FINANCIAL STATEMENTS................................................................................................................ 13 Assets............................................................................................................................................... 14 Liabilities, Surplus and Other Funds........................................................................................... 15 Statement of Income...................................................................................................................... 16 Capital and Surplus Account........................................................................................................ 17 NOTES TO FINANCIAL STATEMENTS .......................................................................................... 18 Note 1. Bonds.................................................................................................................................. 18 Note 2. Amounts Recoverable from Reinsurers.......................................................................... 18 Note 3. Claims Unpaid................................................................................................................... 18 Unpaid Claims Adjustment Expenses.......................................................................................... 18 Aggregate Health Policy Reserves................................................................................................ 18 COMPLIANCE WITH PRIOR EXAMINATION RECOMMENDATIONS.................................. 19 SUMMARY OF RECOMMENDATIONS........................................................................................... 20 CONCLUSION ....................................................................................................................................... 20 SUBSEQUENT EVENTS....................................................................................................................... 21 i ALLNATION INSURANCE COMPANY February 22, 2008 Honorable Matthew Denn Insurance Commissioner Delaware Department of Insurance 841 Silver Lake Boulevard Dover, Delaware 19904 Dear Commissioner: In compliance with instructions and pursuant to statutory provisions contained in Certificate of Authority No. 07-049, dated September 5, 2007, an Association examination has been made of the affairs, financial condition and management of the SAGICOR ALLNATION INSURANCE COMPANY hereinafter referred to as “Company,” incorporated under the laws of the State of Delaware as a stock company with its home office located at 801 West Street, Second Floor, Wilmington, Delaware. The examination was conducted at the main administrative office of the Company, located at 1511 North West Shore Boulevard, Suite 820, Tampa, Florida. The report of such examination is submitted herewith. SCOPE OF EXAMINATION The last examination was conducted as of December 31, 2003. This examination covered the period from January 1, 2004 through December 31, 2006, and consisted of a general survey of the Company’s business policies and practices, management, and corporate matters thereto, including verification, and evaluation of assets, and a determination of liabilities. Transactions subsequent to the latter date were reviewed where deemed necessary. In addition to the noted items in this report, the following were reviewed without exception and are included in the files of this examination: Corporate Records Officers’, Employees’, and Agents’ Welfare and Pension Plans Conflict of Interest Legal Actions NAIC Financial Ratios All Asset and Liability Items not Mentioned Workpapers prepared by the Company’s external accounting firm, Pricewaterhouse- Coopers, Jacksonville, Florida, in connection with the annual audit, were reviewed and relied upon to the extent deemed possible. INS Consultants, Inc. was retained by the Delaware Department of Insurance to assist the Examiner In-Charge in the actuarial phase of this Financial Condition Examination. This report is presented on an exception basis. It is designed to set forth the facts with regard to any adverse findings disclosed during the examination. If necessary, comments and recommendations have been made in those areas needing correction or improvement. In such cases, these matters were thoroughly discussed with responsible personnel and/or officials during the course of this examination. The general procedures of the examination followed the rules established by the Committee on Financial Condition Examiners Handbook of the National Association of Insurance Commissioners and generally accepted statutory insurance examination standards consistent with the Insurance Laws and Regulations of the State of Delaware. The examination 2 was conducted in accordance with the Association Plan of Examination guidelines established by the National Association of Insurance Commissioners. HISTORY Sagicor Allnation Insurance Company was originally incorporated under the laws of Delaware on December 21, 1977, under the name The EPIC Corporation. The initial certificate of incorporation called for a stockholder-run closed corporation. In October 1984, the stockholders voted to accept an offer to sell the common stock. The sale was not consummated until March, 27, 1986, at which time the Company became a wholly owned subsidiary of Blue Cross & Blue Shield of Delaware, Inc. On October 30, 1986, the Company’s name was changed to Allnation Liability Insurance Company. On March 27, 1997, the Company’s name was changed to Allnation Insurance Company and Amended and Restated Articles of Incorporation were adopted. On November 3, 2004, the Company’s name was changed to Sagicor Allnation Insurance Company and Amended and Restated Articles of Incorporation were adopted. The Company is now a direct subsidiary of Sagicor Life Inc., formerly known as Barbados Mutual Life Assurance Society. When the Barbados Mutual Life Assurance Society demutualized on December 6, 2002, the name Sagicor Life Inc. was adopted. Sagicor Life Inc. entered into an agreement to purchase the Company from Blue Cross & Blue Shield of Delaware, Inc. on February 1, 2001. Following approval by the Delaware Department of Insurance, the purchase was consummated on October 31, 2001, retroactive to February 1, 2001. Following the sale