Financial Strength

Fidelity Life offers the security of an A- (Excellent) rating from A.M. Best, the leading provider of ratings, news and financial data for insurance companies. This rating was reaffirmed on June 2, 2010, with a Stable Outlook.*

A.M. Best financial strength ratings are based on evaluations of a company’s balance sheet, operating performance and business profile, and constitute an opinion of an insurer’s financial strength and ability to meet obligations to its policyholders.

Fidelity Life continues to maintain a strong capital position. Over the past 2 years, both Total Assets and Capital and Surplus declined primarily from two distinct events. During 2009, Company paid a $ 30 million extraordinary dividend to its parent company, Fidelity LifeCorp. The proceeds from the dividend were used to fund the acquisition of Efinancial, LLC and to provide working capital to the parent. The 2008 was a result of the extreme market conditions in the world economy that resulted in lower market values of assets.

The Company continues to project year to year declines in Total Assets and Capital and Surplus resulting from the continued growth in life insurance sales combined with the planned run off of past annuity business. The projected declines from the growth in sales are the result of required statutory accounting practices related to the acquisition costs of new insurance policies sold, which are required to be expensed as incurred. Under Generally Accepted Accounting Principles (GAAP) incremental first year policy acquisition costs are recorded as an asset and recorded as expense over the anticipated premium period of the underlying insurance contracts.

Even with the projected declines, Fidelity Life’s statutory Capital and Surplus remains well in excess of required levels to support its assets and liabilities.

The summarized financial information shown in the table below is taken from the statutory basis financial statements filed annually with the Illinois Department of Insurance. These financial statements are prepared on the basis of statutory accounting practices which differ from financial statements prepared in accordance with GAAP. For information on the GAAP basis consolidated financial statements of the MMHC Group, please see the 2009 Annual Report.

Selected Financial Information AS OF DECEMBER 31 (IN MILLIONS)
	2005	2006	2007	2008	2009
Total Assets	$579	$553	$538	$515	$485
Capital and Surplus	$267	$279	$275	$257	$220
All amounts are based on Statutory Accounting Practices

*For the latest rating, access www.ambest.com