PROSPECTOR PARTNERS, LLC

INVESTMENT MANAGEMENT AGREEMENT

PROSPECTOR PARTNERS, LLC, a Delaware limited liability company (the “Adviser”),
having an address at 370 Church Street, Guilford, Connecticut 06437, and Symetra
Financial Corporation, a Delaware corporation (“Symetra”), having an address at
777 108th Avenue N.E., Suite 1200, Bellevue, WA 98004-5135, hereby enter into
this Investment Management Agreement, effective as of July 1, 2010 (this
“Agreement”), and hereby agree that the Adviser shall act as discretionary
adviser with respect to the specified assets of Symetra and/or each of its
subsidiaries who are signatories to this Agreement (each, a “Client”) on the
following terms and conditions:

  1)   Investment Accounts. The investment account of each Client (each an
“Investment Account”) shall consist of cash and securities in an amount equal to
at least $50,000,000 (the “Minimum Account Amount”), or such other amount as may
be agreed to by the Adviser, initially furnished by the Client for investment
pursuant to this Agreement, as well as all other assets which become part of
each Investment Account as a result of trading therein or additions thereto,
except for amounts withdrawn therefrom and paid to the Client. Each Client may
make additions to the Investment Account in amounts exceeding $100,000, or in
such other amount as may be agreed to by the Adviser; provided that the Adviser
shall have received prompt written notice of such additions. Each Client may
make withdrawals from its Investment Account in such amounts as it shall
determine upon not less than 30 days prior written notice thereof to the Adviser
and provided that the withdrawal shall not cause the assets in the Investment
Account to fall below the Minimum Account Amount, unless otherwise agreed to by
the Adviser.

  2)   Services of Adviser. By execution of this Agreement the Adviser accepts
appointment as adviser for each Investment Account with full discretion and
agrees to supervise and direct the investments of each Investment Account in
accordance with the investment objective, policies and restrictions attached
hereto as Schedule 1, and as may be modified from time to time (“Investment
Guidelines”). Adviser acknowledges that Clients are bound by state insurance
laws regarding permissible investments and Clients’ own adopted Statement of
Investment Policy, including any Addendums, attached hereto as Schedule 2, and
as may be modified from time to time, applicable to Clients’ aggregate
investable assets (the “Investment Policy”). Adviser has read the Investment
Policy and understands that Clients’ Investment Guidelines, to be furnished to
Adviser from time to time, will not deviate from the Investment Policy but will
only summarize the provisions and limitations applicable to each Investment
Account. In the performance of its services, the Adviser will not be liable for
any error in judgment or any acts or omissions to act except those resulting
from the Adviser’s gross negligence, willful misconduct or malfeasance. Nothing
herein shall in any way constitute a waiver or limitation of any right of any
person under the federal securities laws. The Adviser shall have no
responsibility whatsoever for the management of any assets of Clients other than
such entities’ Investment Account.

  3)   Discretionary Authority. Subject to the Investment Guidelines, the
Adviser shall have full discretion and authority, without obtaining any prior
approval, as the Client’s agent and attorney-in-fact: (a) to make all investment
decisions in respect of each Investment Account on the Client’s behalf and at
the sole risk of the Client; (b) to buy, sell, exchange, convert, liquidate or
otherwise trade in any stock, bond and other securities or financial instruments
in respect of each Investment Account; (c) to place orders with respect to, and
to arrange for, any of the foregoing; and (d) in furtherance of the foregoing,
to do anything which the Adviser shall deem requisite, appropriate or advisable
in connection therewith, including, without limitation, the selection of such
brokers, dealers, and others as the Adviser shall determine in its absolute
discretion.

  4)   Custody. The assets of each Investment Account shall be held in one or
more separately identified accounts in the custody of one or more banks, trust
companies, brokerage firms or other entities designated by the Client and
acceptable to the Adviser. The Adviser will communicate its investment purchase,
sale and delivery instructions directly with the party identified by the Client
or other qualified depositories. The Client shall be responsible for all
custodial arrangements and the payment of all custodial charges and fees, and
the Adviser shall have no responsibility or liability with respect to custody
arrangements or the acts, omissions or other conduct of the custodians.

  5)   Brokerage. When placing orders for the execution of transactions for an
Investment Account, the Adviser may allocate all transactions to such brokers or
dealers, for execution on such markets, at such prices and commission rates, as
are selected by the Adviser in its sole discretion. In selecting brokers or
dealers to execute transactions, the Adviser need not solicit competitive bids
and does not have an obligation to seek the lowest available commission cost. It
is not the Adviser’s practice to negotiate “execution only” commission rates,
and, in negotiating commission rates, the Adviser shall take into account the
financial stability and reputation of brokerage firms and brokerage and research
services provided by such brokers. An Investment Account may be deemed to be
paying for research provided or paid for by the broker which is included in the
commission rate although the Investment Account may not, in any particular
instance, be the direct or indirect beneficiary of the research services
provided. Research furnished by brokers may include, but is not limited to,
written information and analyses concerning specific securities, companies or
sectors; market, finance and economic studies and forecasts; financial
publications; statistics and pricing services; discussions with research
personnel; and software and data bases utilized in the investment management
process. Symetra acknowledges on behalf of each Client that since commission
rates are generally negotiable, selecting brokers on the basis of considerations
which are not limited to applicable commission rates may at times result in
higher transaction costs than would otherwise be obtainable. The Adviser is
hereby authorized to, and Symetra acknowledges on behalf of each Client that the
Adviser may aggregate orders on behalf of each Investment Account with orders on
behalf of other clients of the Adviser. In such event, allocation of the
securities purchased or sold, as well as expenses incurred in the transaction,
shall be made in a manner which the Adviser considers to be the most fair and
equitable to all of its clients, including the Clients.

  6)   Representations and Warranties

  a)   Symetra represents, warrants and agrees that:

  i)   it has full legal power and authority to enter into this Agreement;

  ii)   the appointment of the Adviser hereunder is permitted by each Client’s
governing documents and any investment management agreement between Symetra and
the Clients to this Agreement and has been duly authorized by all necessary
corporate or other action; and

  iii)   it will indemnify the Adviser and hold it harmless against any and all
losses, costs, claims and liabilities which the Adviser may suffer or incur
arising out of any material breach of these representations and warranties of
Symetra.

  b)   The Adviser represents, warrants and agrees that:

  i)   it has full legal power and authority to enter into this Agreement;

  ii)   it is registered as an investment adviser with the Securities and
Exchange Commission pursuant to the Investment Advisers Act of 1940, as amended
(the “Advisers Act”);

  iii)   entering into this Agreement has been duly authorized by all necessary
action; and

  iv)   it will indemnify Symetra and hold it harmless against any and all
losses, costs, claims and liabilities which Symetra or any Client may suffer or
incur arising out of any material breach of any representations and warranties
of the Adviser.

  7)   Reports. The Adviser shall provide Symetra with reports containing the
status of the Investment Account at least monthly (i.e. “Flash Report”), and
will provide written advisory report letters on a quarterly basis. All records
maintained pursuant to this Agreement shall be subject to examination by Symetra
and by persons authorized by it, or by appropriate governmental authorities, at
all times upon reasonable notice. The Adviser shall provide copies of trade
tickets, custodial reports and other records Symetra reasonably requires for
accounting, tax, regulatory, or audit purposes.

  8)   Management Fee and Expenses

  a)   The Adviser will be paid a quarterly management fee (the “Management
Fee”) for its investment advisory services provided hereunder, determined in
accordance with Exhibit A to this Agreement. During the term of this Agreement,
the Management Fee shall be billed and payable in arrears on a quarterly basis
within 10 days after the last day of each calendar quarter based upon the value
of the Investment Accounts as of the last day of the immediately preceding
calendar quarter, and showing that portion of the Management Fee attributable to
each Investment Account. The Management Fee shall be pro-rated for any partial
quarter. It is understood that, in the event that the Management Fee is to be
paid by the custodian out of the Investment Accounts, Symetra or the Clients
will provide written authorization to the custodian to pay the Management Fee
directly from the Investment Accounts.

  b)   Each Investment Account shall be responsible for all expenses incurred
directly in connection with transactions effected on behalf of the Investment
Account pursuant to this Agreement and shall include: custodial fees; PAM
accounting service fees, investment expenses such as commissions; Infomediary
transactions fees and other expenses reasonably related to the purchase, sale or
transmittal of Investment Account assets (other than research fees and expenses
with respect to the Investment Account).

  9)   Confidential Relationship.

  a)   The Parties hereby agree that all of the information provided to Symetra
by the Adviser and to the Adviser by Symetra shall be considered proprietary and
confidential in nature (hereinafter, the “Confidential Information”) and, as
such, shall not be disclosed or revealed or caused to be disclosed or revealed,
in any manner, to any non-party to this Agreement, except:

  i)   as may be required by law or any judicial, regulatory or self-regulatory
authority (including without limitation any required filing with the SEC or any
state insurance regulator), provided that notice of any such disclosure is at
the time sent to the other party, except that no notice will be required for
routine SEC or department of insurance filings,

  ii)   as either party may consent to specifically in advance in writing;
provided, however, that

  iii)   any such Confidential Information may be disclosed to each party’s
officers, directors, employees, consultants, contractors, advisors, and
fiduciaries (“Representatives”) who need to know such information in order to
carry out the purpose of the disclosure and so long as they agree to keep it
confidential;

  iv)   “Confidential Information” does not include any information which (A) is
or subsequently becomes published or available to the public other than by
breach of this Agreement, (B) is received by receiving party from a non-party
not in breach of any obligation of confidentiality, (C) is independently
developed by receiving party, or (D) was in receiving party’s possession or
known to receiving party before disclosing party disclosed it to receiving
party; and

  v)   Adviser Confidential Information does not include the identification of
Symetra as a Client or a Client’s investments as of a given point in time (which
is consistent with (iv) (A) above).

  b)   Symetra agrees that:

  i)   Adviser may disclose that Symetra (and each of the Clients) is a client
of the Adviser and to the inclusion of Symetra on a list of representative
clients of the Adviser or in other marketing materials;

  ii)   Adviser shall be permitted to retain copies of all documentation
necessary under the Advisers Act to support the track record or otherwise
required to be retained under the Advisers Act and related rules, but only for
such period as required to be retained; and

  iii)   Symetra shall not allow the Confidential Information to be used to
purchase, sell, trade or invest in any securities, instruments or other
investments owned by the Account without obtaining the prior written consent of
the Adviser, unless such consent is impossible or impractical due to an event of
force majeure that interferes with Adviser’s performance under this Agreement;
and further acknowledges that:

  iv)   the provisions of (b) are reasonable and necessary for the protection of
the Adviser and its affiliates, and

  v)   the Adviser or its affiliates will be irrevocably damaged if the
covenants herein are not specifically enforced and, accordingly, Symetra hereby
further agrees that, in addition to any other relief or remedies available to
the Adviser, the Adviser shall be entitled to seek and obtain an appropriate
injunction or other equitable remedy from a court with proper jurisdiction for
the purposes of restraining Symetra from any actual or threatened breach of such
covenant, and no bond or security will be required in connection therewith. In
any event, Symetra shall be responsible for any breach of this Agreement by any
of Symetra’s Representatives, and Symetra agrees, at its sole expense, to take
all reasonable measures (including, without limitation, court proceedings) to
restrain its Representatives from prohibited or unauthorized disclosure or use
of the Confidential Information or any other breach of the terms of this
Agreement.

  c)   Adviser agrees that:

  i)   Symetra shall be permitted to report the Investment Track Record (on a
stand-alone basis, as part of its total portfolio return or otherwise) with
respect to the Investment Accounts in any internal or external reports of it or
its affiliates; and

  ii)   Symetra and/or its affiliates will be irrevocably damaged if the
covenants herein are not specifically enforced and, accordingly, Adviser hereby
further agrees that, in addition to any other relief or remedies available to
Symetra, Symetra shall be entitled to seek and obtain an appropriate injunction
or other equitable remedy from a court with proper jurisdiction for the purposes
of restraining Adviser from any actual or threatened breach of such covenant,
and no bond or security will be required in connection therewith. In any event,
Adviser shall be responsible for any breach of this Agreement by any of its
Representatives, and Adviser agrees, at its sole expense, to take all reasonable
measures (including, without limitation, court proceedings) to restrain its
Representatives from prohibited or unauthorized disclosure or use of the
Confidential Information or any other breach of the terms of this Agreement.

  10)   Non-Assignability. No “assignment”, as that term is defined in the
Advisers Act, of this            Agreement shall be made by the Adviser or
Symetra without the written consent of the other party.

  11)   Directions to the Adviser. All directions by Symetra by or on behalf of
the Clients to the Adviser shall be in writing signed by or on behalf of
Symetra. The Adviser shall be fully protected in relying upon any such writing
which the Adviser believes to be genuine and signed or presented by the proper
person or persons, shall be under no duty to make any investigation or inquiry
as to any statement contained therein and may accept the same as conclusive
evidence of the truth and accuracy of the statements therein contained.

  12)   Consultation with Counsel. The Adviser may consult with legal counsel
(who may be counsel to Symetra) concerning any question that may arise with
reference to its duties under this Agreement, and the opinion of such counsel
shall be full and complete protection in respect of any action taken or omitted
by the Adviser hereunder in good faith and in accordance with such opinion.

  13)   Services to Other Clients. It is understood that the Adviser acts as
investment adviser to other clients and may give advice and take action with
respect to such clients that differs from the advice given or the action taken
with respect to the Investment Accounts. Nothing in this Agreement shall
restrict the right of the Adviser, its members, managers, officers, employees or
affiliates to perform investment management or advisory services for any other
person or entity, and the performance of such service for others shall not be
deemed to violate or give rise to any duty or obligation to the Client.

  14)   Investment by the Adviser for Its Own Account. Nothing in this Agreement
shall limit or restrict the Adviser or any of its members, managers, officers,
employees or affiliates from buying, selling or trading any securities for its
or their own account or accounts. Symetra on behalf of each Client acknowledges
that the Adviser and its members, managers, officers, employees, affiliates and
other clients may at any time have, acquire, increase, decrease or dispose of
securities which are at or about the same time acquired or disposed of for the
account of a Client. The Adviser shall have no obligation to purchase or sell
for the Investment Accounts or to recommend for purchase or sale by the
Investment Accounts any security that the Adviser or its members, managers,
officers, employees or affiliates may purchase or sell for itself or themselves
or for any other client.

  15)   Proxies. Subject to any other written instructions of Symetra, the
Adviser is hereby appointed Symetra’s agent and attorney-in-fact in its
discretion to vote, convert or tender in an exchange or tender offer any
securities in the Investment Accounts, to execute proxies, waivers, consents and
other instruments with respect to such securities, to endorse, transfer or
deliver such securities and to participate in or consent to any plan of
reorganization, merger, combination, consolidation, liquidation or similar plan
with reference to such securities.

  16)   Sarbanes-Oxley Compliance. Symetra is subject to certain regulations
(“SOX”) that require management to assess the effectiveness of its internal
controls over financial reporting and state in its annual report whether such
internal controls are effective.  Because Adviser will perform trading execution
functions for Symetra’s Investment Accounts as described in this Agreement,
certain procedures performed by Adviser are relevant to Symetra’s evaluation of
its internal controls.  Having acknowledged the foregoing, Adviser agrees to
cooperate with Symetra as reasonably necessary to facilitate Symetra’s ability
to comply with its regulatory obligations.

  17)   Operational Audits. Upon Symetra’s request, but no more often than once
annually except (a) as necessary for Symetra or Client to respond to any
regulatory requirement or inquiry, or (b) as deemed reasonably necessary by
Symetra as a result of Symetra’s good faith belief that Adviser has breached any
of its obligations hereunder, Adviser shall allow Symetra and/or any independent
third party (“Third Party Representatives”) selected by Symetra to perform
operational audits with respect to Adviser’s performance of its obligations
hereunder.  Adviser shall grant Symetra and its Third Party Representatives
access to Adviser’s facilities, personnel, and all books, records and other
documents of Adviser related to trade execution it performs for Symetra under
this Agreement (not otherwise provided under section 7) (“Documentation”) as may
be required in order for Symetra to ascertain that trades (i) are conducted by
authorized personnel, (ii) are completed, and (iii) reconcile to the accounting
and custody records of Symetra and its other service providers, and such other
facts relative to Adviser’s performance hereunder. Symetra acknowledges that to
the extent such Documentation contains aggregated data for multiple clients of
Adviser, Adviser may redact certain information contained in the Documentation
as reasonably necessary to meet its confidential obligations to other clients.
Adviser shall provide Symetra, or its Third Party Representatives, such
information and assistance as requested in order to perform such audits,
including access to Adviser’s personnel to explain the control environment by
means of operational walk throughs or other means; provided, however, that the
Parties shall endeavor to arrange such assistance in such a way that it does not
interfere with Adviser’s performance of the Agreement.  Notwithstanding anything
to the contrary in section 17, no amendment to this Agreement shall be required
where the Parties mutually agree to change the scope of audits under this
section to permit Symetra to comply with SOX and related laws as enacted or
amended from time to time.

  18)   Notices. All notices and instructions with respect to securities
transactions or any other matters contemplated by this Agreement shall be deemed
duly given when delivered in writing or deposited by first-class mail to the
following addresses: (a) if to the Adviser, at its address set forth above,
Attention: Peter N. Perugini, CFO, or (b) if to Symetra, at its address set
forth above, Attention: Margaret Meister, CFO. The Adviser or the Client may
change its address or specify a different manner of addressing itself by giving
notice of such change in writing to the other party.

  19)   Entire Agreement; Amendment. This Agreement sets forth the entire
agreement of the parties with respect to management of the Investment Account
and shall not be amended except by an instrument in writing signed by the
parties hereto.

  20)   Termination. This Agreement shall continue in force from the date hereof
for an initial fixed term of three years (“initial term”), which may be extended
by Symetra in its sole discretion for an additional one year (“fourth year
extension”) at/prior to the end of the second year of the initial term, and if
so extended, then, again in Symetra’s sole discretion, for an additional year
(“fifth year extension”) at/prior to the end of the initial
term.    Notwithstanding the foregoing, during the initial term and any
extensions, this Agreement shall be terminable without penalty by Symetra upon
written notice to the Adviser at least thirty (30) days prior to the date upon
which such termination is to become effective (i) for cause (including material
non-performance by the Adviser), (ii) if either John Gillespie or Richard Howard
are no-longer affiliated with the Adviser, or (iii) if there is a change in
control of the Adviser. Following the end of the initial term and any
extensions, this Agreement may be terminated without penalty by either party on
60 days written notice. Each Client shall honor any trades executed but not
settled before the date of any termination under this Agreement. The fee for the
calendar quarter during which any termination of this Agreement shall occur
shall be paid as of the date of termination and prorated if the effective date
does not coincide with the end of the quarter.

  21)   Governing Law. To the extent that the interpretation or effect of this
Agreement shall depend on state law, this Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut.

  22)   Effective Date. This Agreement shall become effective on the date first
written above.

  23)   Receipt of Disclosure Statement. Symetra acknowledges receipt of a copy
of Part II of the Adviser’s Form ADV in compliance with Rule 204-3(b) under the
Advisers Act more than 48 hours prior to the date of execution of this
Agreement. The Adviser shall annually and without charge, upon request by
Symetra, deliver to Symetra the current version of such form or a written
document containing at least the information then required to be contained in
such form.

  24)   Counterparts. This Agreement may be executed in two counterparts, each
one of which shall be deemed to be an original.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized representatives as of the date first written
above.

      ADVISER:  
CLIENT:
PROSPECTOR PARTNERS, LLC  
SYMETRA FINANCIAL CORPORATION
By:  
By:
   
Margaret A. Meister
Title:
Date:  
Executive Vice President, Chief
Financial Officer
Date:
       
     

     
SYMETRA LIFE INSURANCE COMPANY
 

By:
 

Margaret A. Meister
 

Executive Vice President, Chief
Date:      
  Financial Officer

EXHIBIT A

FEE SCHEDULE TO THE INVESTMENT MANAGEMENT AGREEMENT, EFFECTIVE JULY 1, 2010
BETWEEN PROSPECTOR
PARTNERS, L.L.C. AND SYMETRA FINANCIAL CORPORATION

Each term used in this Exhibit A but not defined herein shall have the meaning
assigned to that term in the Investment Management Agreement, effective July 1,
2010 (the “Agreement”), between Symetra Financial Corporation (“Symetra”) and
Prospector Partners, L.L.C., the adviser (the “Adviser”).

1. The Adviser shall be paid a Management Fee (pro rated for periods less than a
full calendar quarter) computed in accordance with the table below based on the
value of the aggregate net assets (including cash and cash equivalents) of all
Investment Accounts and the net assets of each Client (such collective aggregate
net assets shall be referred to as the “Aggregate Net Assets”), determined in
accordance with paragraph Section 2 below. Each Client will bear and be billed
its proportionate share of the Management Fee.

          Aggregate Net Assets   Annual Fee   Quarterly Fee Up to $200 million  
100 basis points
(1.00% or 0.0100)
  25 basis points
(0.25% or 0.00250) Greater than $200 million  
50 basis points
  12.50 basis points

2. For all purposes under the Agreement, including the determination of the
Management Fee, the market value of securities shall be as follows: securities
that are listed on a national securities exchange shall be valued at their last
sales price on the date of determination and securities that are not so listed
shall be valued at their last sales price on the date of determination, or if no
sales of such securities occurred on the date of determination, such securities
shall be valued at the last “bid” price at the close of business on such day (or
if sold short at the last “asked” price at the close of business on such day)
quoted by the National Association of Securities Dealers, Inc.’s Automatic
Quotation System or, if not quoted on such system, by one of the principal
market makers in such securities selected by the Adviser. Notwithstanding the
foregoing, if the securities to be valued constitute a block which, in the
judgment of the Adviser, could not be liquidated in a reasonable time without
depressing the market, such block shall then be valued by the Adviser but not at
a unit value in excess of the quoted market price for such security. All other
assets of the Investment Accounts shall be assigned such value as the Adviser
may reasonably determine.

Schedule 1

TO INVESTMENT MANAGEMENT AGREEMENT, EFFECTIVE JULY 1, 2010 BETWEEN PROSPECTOR
PARTNERS, L.L.C. AND
SYMETRA FINANCIAL CORPORATION

Investment Guidelines

Investment Objective

The Adviser’s objective is to achieve consistent positive returns and to
maximize long-term total returns within prudent levels of risk through capital
appreciation on a diversified portfolio of investments.

Performance Objectives

The Adviser will report to Symetra on a quarterly basis to review the Adviser’s
total investment performance. It is understood that there are likely to be
short-term periods during which performance deviates from market indices. During
such times, greater emphasis shall be placed on performance comparisons with
investment managers employing similar styles. The overall performance of the
Adviser’s Investment Accounts will be measured by referencing broad equity
market indices over a 3-year rolling period.

Guidelines

The Adviser must remain a registered adviser under the Investment Advisors Act
of 1940. Whenever these guidelines contain a limitation expressed as a
percentage of the portfolio assets, that percentage shall be measured solely
with reference to the assets that are under the Adviser’s control. Subject to
these guidelines, the Adviser shall have full discretion, subject to Symetra’s
written notice of limitation constraints, to manage each Investment Account’s
assets.

  1)   The Adviser may not purchase securities on margin, sell short, or enter
into derivative transactions in an Investment Account without the written
consent of Symetra.

  2)   The Adviser may purchase Rule 144A securities provided such securities
are judged by the Adviser to be liquid and do not in the aggregate exceed 20% of
the market value of each Investment Account. The Adviser shall also be able to
purchase securities if such securities are convertible into publicly traded
securities.

  3)   At least 95% of each Investment Account will consist of securities of
companies having a market capitalization of $100 million or greater.

  4)   Each Investment Account may include domestic and non-domestic securities
(common stocks, bonds, securities that are convertible to common stocks,
preferred stocks, warrants and rights to subscribe to common stocks) that are
listed on registered exchanges or actively traded in the over-the-counter
market.

  5)   Issuers of securities located in countries other than the United States,
including emerging market countries, shall not exceed 40% of the market value of
each Investment Account.

  6)   In terms of diversification, investments shall be allocated with the
intent to minimize the risk of large losses to each Investment Account. The
maximum total investment in any one security shall be limited to 10% of an
Investment Account at the time of purchase, and 25% of the market value of such
Investment Account.

  7)   If the aggregate investment in an Investment Account of the equity
securities of any one company exceeds 5% of that company’s outstanding shares of
all classes of stock of that issuer, the Adviser will notify Symetra.

Additional State Law Guidelines for Insurance Company Investment Accounts

  1)   Investment in preferred stock with voting rights plus common stock in the
same issuer is limited to 15% of the issuer’s outstanding shares having voting
rights.

  2)   Investment is limited to 10% of the outstanding common stock of the same
issuer.

  3)   No investment in the securities issued by an insolvent corporation is
permitted. For purposes of this section 3, “insolvent corporation” is a
corporation for which bankruptcy, receivership, insolvency, reorganization or
other similar proceedings have been instituted by or against such corporation
under any section or chapter of the United States Bankruptcy Code, as amended,
or under any similar laws or statutes of the United States (or any state
thereof).

SECURITIES LENDING PROGRAM

First Symetra National Life Insurance Company of New York, Symetra Life
Insurance Company, and Symetra National Life Insurance Company (collectively
“the Companies”) have adopted this Securities Lending Program to supplement the
Companies’ Statement of Investment Policy. The Companies and their agents will
adhere to the following procedures under the Program to govern their securities
lending practices:

(1) The Companies shall receive collateral having a fair value as of the
transaction date at least equal to 102 percent (or as otherwise established by
the Statements of Statutory Accounting Principles (“SSAP”)) of the fair value of
the loaned securities at that date. If at any time the fair value of the
collateral is less than 100 percent of the fair value of the loaned securities,
the counterparty shall be obligated to deliver additional collateral, the fair
value of which, together with the fair value of all collateral then held in
connection with the transaction at least equals 102 percent (or as otherwise
established by the SSAP) of the fair value of the loaned securities. The
collateral may consist of cash, letters of credit from authorized banks, or
securities issued or guaranteed by the United States government or one of its
agencies or instrumentalities, or any combination thereof. The collateral will
be received by the Companies’ custodian concurrently with delivery of the loaned
securities and kept in a segregated account. The Companies will monitor
collateral levels via reports provided by the custodian on a monthly basis. Any
non-compliance issues will be elevated to the Chief Financial Officer or his
designee and to the custodian for corrective action.

(2) Loans may be made only to reputable borrowers that, in the Companies’
opinion, are of sound financial condition. The custodian will maintain a list of
approved borrowers and will monitor the creditworthiness of such approved
borrowers on an on-going basis. The Companies will obtain an updated borrower
list on a quarterly basis. Any deletions required will be communicated to the
custodian using the agreed upon methodology as outlined in the agreement.

(3) No loan of securities may be made to any borrower if, within the meaning of
the Insurance Company Holding Act, such borrower would be an affiliated person
of the Companies.

(4) Loans must be callable at any time. If a loan is terminated by the
Companies, the borrower must return the loaned securities within five business
days. If the borrower fails to deliver the loaned securities within five days
after receipt of notice of termination, the Companies may use the collateral to
replace the securities and hold the borrower liable for the excess of
replacement cost exceeding the collateral.

(5) The Companies may pay fees to a lending agent or other intermediary for the
following: (a) reasonable custodial fees; and (b) fees for the arranging of
portfolio loans, provided that the Companies have determined in each case that
the fee is reasonable and based solely on the services rendered. In addition,
the Companies must receive a reasonable fee for lending their securities.

(6) Loans of securities must be made pursuant to written contracts which have
been approved and executed on behalf of each Company by a duly authorized
officer and which are designed to assure that these procedures will be complied
with in connection with such loans. Information concerning each loan will be
provided by the custodian upon request.

(7) The Companies’ board
will periodically review
lending activities
affecting the Companies’
portfolios.
Schedule 2

Statement of Investment Policy
Symetra Financial

Overview

This investment policy and its associated guidelines apply in aggregate to the
investable general account and guaranteed separate account assets of Symetra
Financial Corporation and its subsidiaries (“Symetra Financial”). These
guidelines are established by the boards of directors, or their designated
committees, of Symetra Financial companies. These guidelines should be used in
conjunction with any specific supplementary guidelines established for each
major business line, as well as any additional investment guidelines for certain
separate account contracts (e.g. BOLI). Any deviations from these guidelines
must be approved by the appropriate company’s board of directors or by its
designee and reported to the Symetra Financial Corporation board of directors
quarterly.

Investment Objective

Support optimizing the economic value of the company across a broad range of
interest rate and economic environments, while complying with applicable
regulations, management initiatives and rating agency requirements.

The management of the portfolio will be primarily driven by asset/liability
management, regulatory and general management considerations rather than total
return benchmarks or other measures. However, to aid in the assessment of
investment performance, the total return for the overall portfolio will be
compared over multiple timeframes with relevant customized benchmarks having
duration and yield characteristics consistent with the liabilities.

Duration/Convexity

Duration and convexity management are particularly important for liabilities
with cash flows that can not be adjusted to reflect investment experience, but
whose profitability is driven by the net interest spread (“fixed liabilities”).
For example, fixed liabilities include structured settlements, income annuities,
and fixed annuities with a set crediting rate for a specified period of time
(not including annuities with regular credited rate resets). Many other
Retirement Services and Life liabilities require less precise, although still
fairly constrained, duration and convexity characteristics. Many of these other
liabilities have regular credited rate resets, minimum credited rate guarantees
as well as the option to withdraw the cash value at book value, with or without
a fixed surrender charge.

For fixed liabilities (defined above) other than the very long duration
structured settlements/income annuities, the effective asset duration should be
within +/- 0.5 of the effective liability duration. For parallel yield curve
shocks of +/- 1%, this difference should be no more than +/- 0.75. Larger
parallel yield curve shocks will also be monitored for potential dislocations.
Also, although there are currently no set guidelines,

1

partial asset and liability durations at significant points along the yield
curve will be monitored to ensure a reasonable balance. For non-fixed Retirement
Services and Life liabilities as well as for structured settlements and income
annuities, the effective asset duration should be within +/- 1.0 of the target
portfolio duration for each major liability group (determined in conjunction
with each business line and summarized in a separate document). For parallel
yield curve shocks of +/- 1%, this difference should be no more than +/- 1.25.

Unlike most of the Company’s other liabilities, the products in the Group
business line are driven by underwriting rather than investment results. Also,
projected liability cash flows (including new premium) are positive in most
plausible scenarios. Because of these attributes, additional flexibility around
portfolio duration is reasonable. The effective asset duration should be within
+/- 2.0 of the Group portfolio’s target duration. As with other business lines,
parallel and non-parallel yield curve shock analysis will be performed to test
for possible dislocations.

The Corporate Surplus portfolio will not have pre-set duration targets. It will
be driven by overall corporate requirements and any additional needs of the
business lines.

Asset Allocation
Asset allocation is driven by the interest sensitive or guaranteed nature of
many of the company’s liabilities, regulatory and rating agency requirements as
well as the need for reasonably consistent income and surplus growth. Given
these considerations, the portfolio will consist mostly of a diversified mix of
investment grade fixed income securities. As capital levels and rating agency
considerations permit, relatively small allocations to equities, alternatives
and high yield will be used to increase expected returns, diversify risks and
better match very long duration liabilities (e.g. structured settlements). The
following asset allocation limits are based on market values.

                 
Asset Type
  Maximum
Allocation   Illustrative
Long-term
Target*
 
               
Fixed Income
Corporate Bonds
MBS/CMO
Asset Backed Securities
CMBS
Commercial Mortgages
Other Investment Grade
Below Investment Grade
  100%
70%
20%
15%
12%
10%
10%
7%   96%
55%
10%
12%
7%
7%
2%
3%
Equity/Alternatives
Public/Private Equity
Hedge Funds
Real Estate
Other
  5%
3%
3%
2%
2%   4%
1.5%
1.5%
0.5%
0.5%
Cash & short-term purchases
    2 %     0 %

• Illustrative long-term targets are based on the 2004 liability mix.

2

Liquidity

Cash on hand plus projected asset cash flows will be greater in aggregate than
projected cash flows on current liabilities over the next 12 months. In
addition, reasonable overall portfolio liquidity will be maintained to cover
unanticipated liability cash flows and portfolio rebalancing needs.
Specifically, liquid assets will comprise at least 50% of the Corporate Surplus
and Structured Settlement/Income Annuity portfolios. All other portfolios will
have at least 75% liquid assets (except BOLI separate accounts, which will have
at least 90% liquid assets), recognizing the surrenderable nature of many of the
other liabilities. Liquid assets are defined as government/agency, public
investment grade fixed income and public equity securities which are sellable
within 90 days for at least 95% of the most recently traded price.

Asset Quality

Fixed income investments will be focused on investment grade securities. The
market value of BBB-rated fixed income securities (excluding commercial mortgage
whole loans) will not exceed 40% of the aggregate market value of the portfolio.
Similarly, the market value BB and B-rated (and lower) fixed income securities
will not exceed 5% and 2%, respectively, of the aggregate market value of the
portfolio. Purchases will not be made which either cause a quality limit to be
violated or increase exposure in cases where the limit is already exceeded. In
the event that quality downgrades cause a limit to be exceeded, the investment
manager will use reasonable judgment in reducing exposure below the limit as
market conditions permit.

Ratings used in these guidelines are from Moody’s if available, then S&P, Fitch
and the NAIC, in that order. If none of these ratings are available, an internal
rating generally consistent with the methodology used by these major rating
agencies will be used.

Concentration Limits

The following concentration limits deal with diversification by individual
entity. As with the asset quality limits, purchases will not be made which
either cause a concentration limit to be violated or increase exposure in cases
where the limit is already exceeded. In the event that a quality downgrade
causes a limit to be exceeded, the investment manager will use reasonable
judgment in reducing exposure below the limit as market conditions permit.

Issuer – Fixed Income

Management will closely monitor firm-wide investment concentrations in
individual issuers (U.S. Government and GSE securities excepted) to ensure
adequate diversification. The limits below apply to the senior debt rating of
the issuer, and are based on the aggregate market value of all fixed income
securities from a single issuer as a percentage of the Company’s Statutory
Surplus plus Asset Valuation Reserve (AVR). In addition, any fixed income
securities of an issuer rated below its senior debt rating (“junior securities”)
must also comply with the limits below, based on the ratings of the junior
securities. Also, in the case of securitized investments backed by collateral
pools, the credit rating of each individual security will be used in the table
below, provided that the aggregate market value of fixed income securities
backed by any single pool of collateral does not exceed the AAA limit below.
Ratings are defined as described in the Asset Quality section above.

         
Senior
Debt Rating
  Market Value as a %
Surplus + AVR   Approximate % of
Total Market Value *
 
       
AAA
AA
A
BBB
BB
< BB
  12 %
10 %
8 %
6 %
3 %
2 %   0.7%
0.6%
0.5%
0.4%
0.2%
0.1%

• As of 12/2003

Issuer – Equity

Equity securities of a single issuer are limited by the table below, which
varies by the senior debt rating class of the issuer.

         
Senior
Debt Rating
  Market Value as a %
Surplus + AVR   Approximate % of
Total Market Value *
 
       

Investment Grade 3 % 0.2% Below Inv. Grade 1% 0.1%

• As of 12/2003

Insurer

The aggregate market value of securities insured by a single entity is limited
to 4 times the fixed income issuer limit (above), based on the senior debt
rating of the insurer. In the event that any of the insured securities would not
have an investment grade rating on a stand-alone basis (without the insurance),
the insurer’s fixed income issuer limit (before multiplying by the factor of 4)
will be reduced by the market value of such securities.

Servicer

The market value of non-US Government/GSE securities serviced by one servicing
agent is limited to 25% of Statutory Surplus plus AVR.

Funds

Private fund investments such as private equity or hedge funds will be limited
as follows.

     
Type
  Market Value as a %
Surplus + AVR
 
   
Single Fund
Single Manager
  5%
10%

3

Other Diversification

Within the corporate bond portfolio, the market value of securities within a
single major industry class will not exceed 20%. Although there are no pre-set
limits, asset backed and commercial mortgage backed securities will be
reasonably diversified by collateral type. Also, commercial mortgage exposure
(CMBS and whole loan in aggregate) will be reasonably diversified by geographic
region.

Currency

The currency denomination of the assets (incorporating any currency hedges) will
be the same as the denomination of the associated liabilities, which in most if
not all cases will be U.S. dollars. The Surplus portfolio will also be
denominated in U.S. dollars. However, up to an aggregate market value of 1% of
total assets may be denominated in un-hedged G-7 currencies.

Derivatives

The use of derivatives will be governed by the Derivatives Use Plan filed with,
and approved by, any appropriate insurance regulatory agencies as well as the
boards of directors of Symetra Financial companies.

Investment Managers

White Mountains Advisors LLC (“WMA”) will be the primary investment manager for
Symetra Financial and its affiliates. WMA may engage other investment managers
to manage discrete portions of the Symetra Financial portfolios. However, WMA
will be responsible for engaging, monitoring and terminating such managers, and
for ensuring the overall portfolio is invested in accordance with this
investment policy. All transactions will be promptly and accurately recorded as
they occur.

ADDENDUM
TO
SYMETRA FINANCIAL CORPORATION
STATEMENT OF INVESTMENT POLICY

DERIVATIVES USE PLAN

Adopted by the Board of Directors on November 14, 2006

TABLE OF CONTENTS

                  I.  
POLICY..........
        1   II.   DERIVATIVE INSTRUMENTS AND STRATEGIES
           
A.
  DERIVATIVE INSTRUMENT DEFINITIONS     1  

  B.   EXCHANGE TRADED VERSUS OVER-THE-COUNTER TRANSACTIONS  

  C.   STRATEGIES  

D. DUTY TO CONSIDER RISKS INHERENT IN DERIVATIVE TRANSACTIONS.

              E.RISK/EXPOSURE MEASUREMENT   6
III.
  LIMITATIONS AND PARAMETERS  

  A.   QUANTITATIVE AND OTHER LIMITATIONS  

  B.   DOCUMENTATION OF OTC DERIVATIVE TRANSACTIONS  

                  IV.   OVERSIGHT, INTERNAL CONTROL PROCEDURES AND REPORTING    
9       A.  
DELEGATION OF RESPONSIBILITY
    9  

  B.   DAY-TO-DAY RESPONSIBILITY – INVESTMENT MANAGER  

  C.   INTERNAL CONTROL PROCEDURES – PROCESS FOR APPROVAL AND MONITORING OF
INDIVIDUAL TRANSACTIONS  

      D.MANAGEMENT OVERSIGHT OF DERIVATIVES PROGRAM   12 E.RECORDS AND
DOCUMENTATION   13 F.SEPARATION OF TRADING AND SETTLEMENT FUNCTIONS   13
G.ACCOUNTING AND FINANCIAL REPORTING   13
EXHIBIT A – SAMPLE DERIVATIVE TRANSACTION CONTROL SHEET
EXHIBIT B – LIST OF COMPANIES
EXHIBIT C – SAMPLE EFFECTIVENESS SUMMARY
  A-1
B-1
C-1

I. POLICY

The purpose of this Plan is to set forth the guidelines and parameters for the
use of derivative transactions by Symetra Financial Corporation, a state of
Delaware-domiciled corporation, and each of its subsidiaries identified on
Exhibit B hereto (each a “Company” or collectively the “Companies”). As
contemplated in this Plan, the Companies’ use of derivative transactions shall
be in conformance with applicable law and with the Companies’ general philosophy
of managing their investments and overall balance sheet in a prudent and
conservative manner, with the goals of preserving the capital and financial
strength of the Companies, while seeking adequate returns on their investments
and operations. In that regard, the Companies’ use of derivative transactions
under this Plan is expected to help manage the Companies’ investments.
Derivatives, however, will not be used for speculative purposes.

The Companies recognize that, while derivative transactions are useful risk and
portfolio management tools, as with any investment practice, the use of
derivative transactions exposes the Companies to certain risks. Nevertheless,
the risks associated with derivative transactions are not inherently different
than those present in other, more traditional forms of investments, and, with
proper use and careful management, such derivative transactions can be utilized
safely, as part of the overall investment and risk management strategy of the
Companies. Therefore, in order to ensure the proper use of derivative
transactions and to mitigate the risks associated with such use, this Plan
establishes internal controls and reporting with respect to the use of
derivative transactions.

II. DERIVATIVE INSTRUMENTS AND STRATEGIES

  A.   Derivative Instrument Definitions.

Derivative instruments and transactions can be structured in numerous forms with
various characteristics. For the purposes of this Plan, the Companies recognize
the two following industry definitions of “derivative instrument”:

  1.   The definition according to Generally Accepted Accounting Principles
(GAAP):1

A financial instrument or other contract with all three of the following
characteristics:

  •   It has (1) one or more underlyings and (2) one or more notional amounts or
payment provisions or both.

  •   It requires no initial net investment or an initial net investment that is
smaller than would be required for other types of contracts that would be
expected to have a similar response to changes in market factors.

  •   Its terms require or permit net settlement, it can readily be settled net
by a means outside the contract, or it provides for delivery of an asset that
puts the recipient in a position not substantially different from net
settlement.

  2.   The regulatory definition:2

An agreement, option, instrument or a series or combination thereof:

  (a)   To make or take delivery of, or assume or relinquish, a specified amount
of one or more underlying interests, or to make a cash settlement in lieu
thereof; or

  (b)   That has a price, performance, value or cash flow based primarily upon
the actual or expected price, level, performance, value or cash flow of one or
more underlying interests.

Examples of derivative instruments include, but are not limited to, options,
warrants used in a hedging transaction and not attached to another financial
instrument, caps, floors, collars, swaps, swaptions, forwards, futures and other
agreements, options or instruments substantially similar thereto or any series
or combination thereof. The following are regulatory definitions3 with respect
to each of the foregoing instruments:

“Cap” means an agreement obligating the seller to make payments to the buyer
with each payment based on the amount by which a reference price or level or the
performance or value of one or more underlying interests exceeds a predetermined
number, sometimes called the strike rate or strike price.

“Collar” means an agreement to receive payments as the buyer of an option, cap
or floor and to make payments as the seller of a different option, cap or floor.

“Floor” means an agreement obligating the seller to make payments to the buyer
in which each payment is based on the amount by which a predetermined number,
sometimes called the floor rate or price, exceeds a reference price, a level, or
the performance or value of one or more underlying interests.

“Forward” means an agreement (other than a future) to make or take delivery of,
or effect a cash settlement based on the actual or expected price, level,
performance or value of, one or more underlying interests, but shall not mean or
include spot transactions effected within customary settlement periods,
when-issued purchases, or other similar cash market transactions.

“Future” means an agreement, traded on a qualified exchange or qualified foreign
exchange, to make or take delivery of, or effect a cash settlement based on the
actual or expected price, level, performance or value of, one or more underlying
interests.

“Option” means an agreement giving the buyer the right to buy or receive (a
“call option”), sell or deliver (a “put option”), enter into, extend or
terminate or effect a cash settlement based on the actual or expected price,
level, performance or value of one or more underlying interests.

“Swap” means an agreement to exchange or to net payments at one or more times
based on the actual or expected price, level, performance or value of one or
more underlying interests.

“Swaption” means an option to enter into a Swap.

“Warrant” means an instrument that gives the holder the right to purchase an
underlying financial instrument at a given price and time or at a series of
prices and times outlined in the warrant agreement. Warrants may be issued alone
or in connection with the sale of other securities, for example, as part of a
merger or recapitalization agreement, or to facilitate divestiture of the
securities of another business entity.

  B.   Exchange Traded versus Over-the-Counter Transactions.

Derivative transactions may be traded through an exchange or through the more
specialized over-the-counter (“OTC”) market. While derivative exchanges provide
ease of access to a ready market for derivative transactions, a higher degree of
liquidity and the mitigation or elimination of counterparty credit risk,
exchanges require uniformity of terms among transactions and therefore, may not
always accomplish the underlying investment objective. In contrast, while OTC
transactions are generally less liquid and expose the parties to counterparty
credit risk, they allow counterparties to structure more customized transactions
to accomplish more closely the objective for entering into the derivative
transaction. In addition, the wide use of standardized documentation, such as
the forms of Master Agreements published by the International Swaps and
Derivatives Association, Inc. (“ISDA”), has created a certain degree of
uniformity and standardization in OTC transactions. The Investment Manager shall
evaluate the characteristics of an exchange-traded versus OTC derivative
transaction, including underlying counterparty credit exposure, before engaging
in a derivative transaction.

As a general rule, the Investment Manager will emphasize the use of
exchange-traded derivatives and reasonably liquid OTC derivatives, while taking
advantage of less liquid, customized OTC derivatives only when appropriate.

  C.   Strategies (All life insurance company strategies will conform to
applicable state statutes).

Derivative instruments can be used in conjunction with various strategies to
affect a desired purpose or objective; however, as a general rule, derivative
transactions are primarily focused on three basic strategies: hedging (including
replication), income generation, and speculation. The Companies will be focused
on hedging (including replication) strategies to manage exposure to changes in
interest rates, spreads, equity returns, currencies, and credit quality and on
income generation.

  1.   Derivative Transactions for Hedging Purposes

Derivative transactions are widely used as a tool to reduce and hedge against
risks faced by companies in the marketplace. In that regard, the use of hedging
transactions is an important and essential part of the Companies’ overall risk
management program.

For purposes of this Plan, the definition of “hedging transaction” is a
derivative transaction which is entered into and maintained to reduce:

  (a)   The risk of a change in the value, yield, price, cash flow, or quantity
of assets or liabilities that the insurer has acquired or incurred or
anticipates acquiring or incurring; or

  (b)   The currency exchange rate risk or the degree of exposure as to assets
or liabilities that the insurer has acquired or incurred or anticipates
acquiring or incurring.

The Companies’ use of derivative transactions for hedging purposes may also
include replication transactions. For purposes of this Plan, the definition of
“replication transaction” is “a derivative transaction or combination of
derivative transactions effected either separately or in conjunction with cash
market investments included in the insurer’s investment portfolio in order to
replicate the investment characteristic of another authorized transaction,
investment or instrument and/or operate as a substitute for cash market
transactions.” In certain circumstances, replication transactions can provide a
more cost-effective means of investing in a given asset or group of assets, in
effect, by synthetically replicating the characteristics and performance of the
assets. Replication transactions can also be used to replicate certain desired,
rather than all, characteristics of an asset. The Investment Manager shall
structure the Companies’ replication transactions so that the potential exposure
with respect to a replication transaction is directly related to the risks
associated with the asset characteristics being replicated.

Given the nature and purpose of a hedging transaction, the potential exposure
associated with such transactions is generally limited. If a hedging transaction
is structured properly as an effective hedge, any losses realized with respect
to the asset or activity that was the subject of the hedge should be matched or
offset, entirely or in part, by gains in the transaction. In that regard, a
crucial element of the Companies maintaining a successful hedging program using
derivative transactions is the Companies’ implementation of appropriate
procedures and guidelines to evaluate the effectiveness or efficacy of specific
hedging transactions (see Section IV G Accounting and Financial Reporting for
specific guidance).

  2.   Income Generation

Income generation transactions allow the Companies to earn income through the
use of derivative transactions. However, income generation for the purposes of
this Plan will only be permitted through the sale of call options on securities,
provided that the Companies hold, or can immediately acquire through the
exercise of options, warrants or conversion rights already owned during the
entire period the option is outstanding (i.e., covered options).

  D.   Duty to Consider Risks Inherent in Derivative Transactions.

As with any investment, the use of derivatives entails certain risks. At a
minimum, the following significant risks shall be considered by the Investment
Manager prior to engaging in a particular derivative transaction.

      Basis Risk

The effectiveness of any hedging strategy is dependent upon the matching of the
risks being hedged with the instruments and strategies used to mitigate such
risks, creating a corresponding offsetting position. “Basis risk” is the risk of
loss resulting from a hedging transaction that is imperfectly matched or
correlated to the subject risk exposure. The Investment Manager will
continuously monitor the Companies’ hedging transactions to ensure that they
continue to be effective. Should the effectiveness of the hedge position shift
significantly the Investment Manager will seek to either modify or terminate the
transaction. The foregoing concept can also apply to replication transactions,
where basis risk can exist between the subject derivative transaction and the
asset/assets intended to be replicated.

  3.   Counterparty Exposure Risk

Counterparty exposure risk relates to the risk of loss resulting from a default
by a counterparty of its obligations under a derivative transaction. Where a
derivative transaction is entered into through a qualified exchange, the
counterparty exposure risk is limited by the financial stability of the exchange
and its clearing system. Conversely, if a derivative transaction is an OTC
transaction, the counterparty exposure amount will depend largely upon the
creditworthiness of the counterparty to the transaction.

With respect to OTC transactions and transactions entered through non-qualified
exchanges, the Investment Manager shall seek to mitigate counterparty exposure
by (i) evaluating and monitoring the financial qualifications of counterparties
to ensure that they meet the counterparty requirements set forth in Section IV.A
of this Plan, and (ii) to the extent appropriate, requiring counterparties to
provide the Companies with sufficient collateral security and other financial
assurances, such as the posting of collateral or letters of credit.
Specifically, the Investment Manager shall request collateral in the event that
total net exposure to such counterparty exceeds an amount based on the following
schedule:

      -
-
-
-
-
-  
$25 million for a counterparty with a AAA rating
$20 million for a counterparty with a AA rating
$15 million for a counterparty with a A rating
$5 million for a counterparty with a BBB+ rating
$2.5 million for a counterparty with a BBB rating
$0 for BBB- and lower

In the event that collateral is required, the Investment Manager will request
either a letter of credit from an acceptable bank or collateral consisting of
cash or high quality securities for at least 100% of the amount of net exposure
exceeding the amount outlined above.

  4.   Liquidity Risk

As with any form of investment, derivative instruments pose a certain degree of
liquidity risk. Although exchange-traded derivatives are generally considered
liquid instruments, certain specialized or customized OTC derivatives may be
relatively illiquid. The liquidity of a derivative instrument also generally
decreases during volatile market conditions, with the liquidity of certain
investments, such as OTC derivatives, being affected more severely during such
volatile market conditions, particularly when one wants to sell or close a
position. While this is a risk in the market, it can also be exploited as an
opportunity.

  5.   Systemic Risk

Systemic risk is the risk that a major failure or disruption in one institution
or segment of the market will affect other institutions, leading ultimately to a
breakdown of the financial system. The use of derivative transactions and the
potential of failures within the derivatives markets can contribute to this
overall systemic risk. Given the continued and increasing oversight of the
derivatives markets, this risk is fairly remote.

  6.   Operational Risk

The use of derivative instruments is also subject to the risk of human error,
mismanagement and system and control failures. To minimize its operational
risks, the Companies and the Investment Manager shall have in force at all times
the internal control procedures set forth in Section IV hereof, which provide
multiple levels of oversight, appropriate checks and balances, and periodic
audits and reviews of specific transactions and the system. Furthermore, the
Companies and the Investment Manager shall utilize the knowledge of suitably
qualified individuals who have knowledge and experience in the use of derivative
instruments.

  E.   Risk/Exposure Measurement.

In order to quantify the various types of risks associated with derivative
transactions, the Investment Manager shall apply industry-accepted models to
every applicable derivative transaction. In that regard, the Investment Manager
is authorized to use the models available through systems such as Bloomberg,
Derivative Solutions or other similar industry-accepted models.

III. LIMITATIONS AND PARAMETERS

  A.   Quantitative and Other Limitations.

The Companies recognize the importance of diversification and credit quality.
Unless otherwise provided for under the applicable law, the Companies’ limits
for different derivative strategies and instruments are as follows:

  1.   Limitations Relating to Strategies and Instruments (to be applied on a
per-Company basis)

In addition to the limitations relating to counterparties and the other
limitations set forth in subsection 2 below, the Companies and the Investment
Manager shall comply with the limitations set forth in subsections 1(a)-(c)
below specifically applicable to the strategies of hedging, replication and
income generation. In addition, while the Companies do not have any guidelines
limiting the maximum allowed term for derivative transactions, to the extent
possible, the Investment Manager generally will have the term of the derivative
transaction be less than or equal to the anticipated duration of the risk.

(a) Hedging.

The Companies may engage in hedging transactions, provided that the hedge
continues to be effective according to the Companies’ evaluation procedures
(which will incorporate certain derivative related information provided by the
Investment Manager) and each Company complies with the following quantitative
limitations:

  •   The aggregate financial statement value of options, swaptions, caps,
floors and warrants not attached to another financial instrument that are
purchased by a Company and used in hedging transactions shall not exceed 7.5% of
the market value of such Company’s invested assets (admitted assets for life
insurance companies).

  •   The aggregate financial statement value of options, swaptions, caps and
floors written by a Company for hedging transactions shall not exceed 3% of the
market value of the such Company’s invested assets (admitted assets for life
insurance companies).

  •   The aggregate potential exposure of collars, swaps, swaptions, forwards
and futures used in hedging transactions shall not exceed 6.5% of a Company’s
invested assets (admitted assets for life insurance companies).

(b) Replication.

The Companies may engage in replication transactions provided that the Companies
would otherwise be authorized to invest their funds in the assets being
replicated, the replication continues to be effective and each Company complies
with the following quantitative limitations:

  •   A Company shall aggregate all replicated investment positions with their
direct investments as if such Company had invested in the replicated asset
directly in determining its compliance with applicable quantitative limitations.

  •   The aggregate financial statement value of assets being replicated shall
not exceed 10% of the market value of a Company’s invested assets (admitted
assets for life insurance companies).

  (c)   Income Generation.

A Company may engage in income generation transactions provided that such
transactions may only involve the sale of call options on securities that such
Company holds (or can immediately acquire through the exercise of options,
warrants or conversion rights already owned) during the entire period the option
is outstanding (i.e., covered options), and each Company complies with the
following quantitative limitations:

  •   The aggregate financial statement value of options written by a Company
for income generation transactions shall not exceed 1% of the market value of
such Company’s invested assets (admitted assets for life insurance companies).

  2.   Limitations Relating to Counterparties

The Investment Manager shall monitor the credit quality of counterparties and
regularly analyze and review the Companies’ counterparty exposure. The
Investment Manager shall use a mark-to-market value to determine a Company’s
counterparty exposure, net of any collateral held. The Investment Manager will
also analyze “expected values” to determine total exposure. Furthermore, a
Company shall limit its individual counterparty exposure under one or more
derivative transactions to (a) 1% of its market value of invested assets
(admitted assets for life insurance companies) for any single counterparty rated
less than AA-/Aa3 and (b) 3% of its market value of invested assets for
counterparties AA-/Aa3 or better. In addition, a Company’s counterparty exposure
shall be deemed to be an obligation of the institution to which such Company is
exposed to credit risk and shall be included in determining compliance with any
single or quantitative limitation applicable to such Company’s investments.

  B.   Documentation of OTC Derivative Transactions.

All OTC derivative transactions entered into by the Companies shall be
documented on an appropriate form of the ISDA Master Agreement (“Master
Agreement”). Each transaction shall be based upon the Master Agreement and
include negotiated schedules. Prior to the execution of any OTC derivative
transaction, a Master Agreement between the Company(ies) and the subject
counterparty must be in place. Each derivative transaction shall be documented
on a standard confirmation which references the Master Agreement between the
Company(ies) and the counterparty.

IV. OVERSIGHT, INTERNAL CONTROL PROCEDURES AND REPORTING

  A.   Delegation of Responsibility.

The ultimate responsibility for the use of derivative transactions is vested in
each Company’s Board of Directors (“Board”). In discharging its duties with
regard to derivative transactions, each Board shall act in good faith with that
degree of care that an ordinary, prudent person in like circumstances would use
under similar circumstances. This Plan may be amended only by the Board.

The Board may delegate the day-to-day oversight regarding the Company’s use of
derivative instruments as outlined in this Plan to an Investment Manager. The
Board shall choose an Investment Manager that possesses such expertise and
experience necessary to appropriately manage the day-to-day derivative
operations in a prudent manner, in compliance with this Plan.

  B.   Day-to-Day Responsibility – Investment Manager.

All oversight of day-to-day decisions regarding a Company’s use of derivative
instruments will be vested in the Investment Manager. In overseeing the
day-to-day derivative activities of the Companies, the Investment Manager will
comply with all the terms of this Plan and the investment policy established by
each Company’s Board. In addition, the Investment Manager will provide certain
trade date documentation and derivative modeling results (described below) to
help support each Company’s accounting and reporting policies and
responsibilities related to derivative investments, both on a GAAP and Statutory
accounting basis.

  1.   Review and Documentation of Derivative Transactions

A member of the Investment Manager authorized to initiate derivative
transactions will review each potential derivative transaction entered into by
the Companies in accordance with the terms of this Plan.

The Investment Manager shall prepare reports pursuant to Section D hereof for
the purpose of facilitating the Companies’ review of such derivative
transactions.

  C.   Internal Control Procedures – Process for Approval and Monitoring of
Individual Transactions.

The Investment Manager will maintain a list of personnel authorized to initiate
derivative transactions. In examining whether a Company should engage in a
particular derivative transaction, an authorized member of the Investment
Manager will consider (i) the guidelines set forth herein, (ii) the intended
purpose of the transaction, (iii) the incremental risk to the Company caused by
engaging in such derivative transaction, and (iv) alternative mechanisms for
achieving the same purpose. All proposed derivative transactions will be
documented on the trade date on a Derivative Transaction Control Sheet (“Control
Sheet”), substantially in the form attached hereto as Exhibit A. The Control
Sheet may be updated from time to time to reflect changing information
requirements from regulators or as best practices evolve. A Control Sheet will
not be deemed complete unless a draft of the underlying confirmation is attached
thereto and the Control Sheet contains the following information:

  •   type of derivative instrument(s) to be used;

  •   type of strategy to be undertaken;

  •   underlying investment position or other balance sheet or income statement
item to which the derivative transaction relates;

  •   description of the transaction, its purpose and its intended effect,
including a precise identification of the risks being hedged or replicated, if
applicable;

  •   identity of the counterparty or, with respect to exchange-traded
transactions, the identity of the exchange and the name of the firm that handled
the trade;

  •   notional amount of the transaction;

  •   consideration for the transaction;

  •   any additional collateral or other credit support taken or provided; and

  •   Investment Manager’s recommendation for the most appropriate method for
assessing effectiveness based on acceptable choices provided by a Company in the
event hedge accounting is to be used (final determination to be made by a
Company for accounting/tax purposes).

On the date of a derivative transaction, two members of the Investment Manager
must sign the Control Sheet, one of whom is authorized by the Investment Manager
to initiate derivative transactions and the other of whom is in the Operations
area responsible for settling all derivative transactions. Prior to the end of
the day on which a derivative transaction has occurred, the Investment Manager
will ascertain that:

  •   the Control Sheet is complete;

  •   the derivative transaction complies with this Plan, including a Company’s
established quantitative and qualitative limits/parameters;

  •   the transaction is reasonably expected to perform as intended, as
demonstrated through stress testing and other techniques designed to vary market
performance and conditions as appropriate;

  •   the counterparty is included on the Investment Manager’s list of approved
derivative counterparties for such Company;

  •   Such Company has received a copy of the completed Control Sheet so that it
can complete any additional required hedge designation documentation, including
the anticipated accounting and tax treatment for such derivative transactions.
In the event that the transaction is not of the type where standard language has
been provided to the Investment Manager by such Company, a minimum of 1 day
prior notice must be given to such Company to allow adequate time to complete
the derivative documentation in a timely manner. In all other cases the Control
Sheet will be provided to such Company by noon on the transaction date.

The Investment Manager will be responsible for ensuring the proper monitoring of
the performance of each derivative transaction during its duration to make
certain that each derivative transaction continues to perform as originally
intended and each such transaction remains in compliance with (i) all applicable
laws and regulations, (ii) the terms of this Plan, and (iii) the underlying
transaction documentation. A derivatives committee established by the Investment
Manager will review the performance, potential risk and overall compliance of
each derivative transaction on at least a monthly basis. Committee meeting
minutes will be kept with copies provided to the Investment Manager and to the
Companies. Any derivative transaction that is no longer performing in a manner
consistent with its original purpose or is no longer in compliance with the
aforementioned laws, regulations, Plan or underlying documentation will be
terminated as soon as practicable.

The Investment Manager will be responsible for reviewing and approving its
summary report information generated with respect to all derivative
transactions. The Investment Manager will ensure information provided in such
reports agrees with supporting documentation and systems backup information used
in its risk measurement. The Investment Manager will be responsible for ensuring
and assessing the effectiveness of internal controls over any models or system
software used in the derivative transactions.

The Investment Manager will be responsible for providing certain information
relating to derivative transactions necessary for the Companies’ assessment of
the effectiveness of internal controls over investment accounting and financial
reporting (see Section IV.G Accounting and Financial Reporting).

Every quarter, the Investment Manager will be responsible to report any internal
control weaknesses or significant deficiencies as they relate to internal
controls over the derivative transaction process. The Investment Manager shall
prepare and deliver to the Companies a detailed plan that is reasonably
acceptable to the Companies for promptly correcting all such deficiencies and
exceptions (“Corrective Plan”). The Investment Manager shall deliver such
Corrective Plan to the Companies promptly following the identification of the
internal control weakness.

In the event that either the Companies or Investment Manager identify any
weaknesses in the internal controls and procedures involving any material aspect
of its respective derivative responsibilities, such weaknesses will be promptly
communicated to the other party and no incremental derivative exposure effected
by such weaknesses will be added until both the Investment Manager and the
Companies are satisfied that the weaknesses have been sufficiently addressed.

  D.   Management Oversight of Derivatives Program.

In order to enable the Companies and the Investment Manager to meet the
Companies’ management and oversight standards as set forth in this Plan or
required by law, the Companies and the Investment Manager shall be responsible,
through their designated personnel, for generating a detailed Derivatives Report
containing information pertaining to a Company’s derivative activities during
the prior quarter or other relevant period. The Report will contain a summary of
each derivative transaction and a copy of each Control Sheet with respect to
each derivative transaction effected during the relevant period. In addition,
the Report will contain the following information:

  •   outstanding derivative positions and unrealized gains or losses on such
positions, if any;

  •   derivative transactions opened and/or closed during the quarter and
realized gains and losses on such transactions, if any;

  •   a performance review of the derivative transactions;

  •   an evaluation of the risks and benefits of the derivative transactions,
including whether a derivative transaction entered into for hedging purposes
continues to be an effective hedging tool;

  •   an assessment of future or “potential” risk exposure;

  •   a review of all counterparty exposure amounts outstanding;

  •   a valuation of the derivative transactions, including a mechanism for
compensating for any lack of independence in valuing trading positions;

  •   any other reports, documentation or analysis deemed necessary by a Company
or the Investment Manager to ascertain whether all derivative transactions have
been made in accordance with the delegations, standards, limitations and
objectives contained in this Plan.

  E.   Records and Documentation.

The Investment Manager will ensure that original documentation is maintained
with respect to each derivative transaction prior to and following the
termination of each such transaction, in accordance with a Company’s record
retention policies and procedures. All reports and documentation maintained by a
Company regarding its derivative transactions will be available for (i) review
by its Board, and (ii) independent audit and regulatory examination. The
Investment Manager, under Company direction, will use such records to prepare
and maintain summary report information with respect to all derivative
transactions, in sufficient form and detail to allow the preparation of the
Companies’ Annual and Quarterly Statements in compliance with applicable laws
and regulations.

F. Separation of Trading and Settlement Functions.

The Investment Manager will maintain a clear separation of the trading and
settlement functions as another control measure. These two functions will be
performed by separate areas and personnel.

G. Accounting and Financial Reporting.

The Companies will have responsibility for Accounting and Financial Reporting
relating to derivatives. The Companies will provide the Investment Manager with
accounting and tax wording for some of the more probable types of derivatives
that will be used. This information will be included in the Control Sheet. The
Investment Manager will provide certain derivative related information to the
Companies to support these activities as outlined below:

  •   The Investment Manager will prepare and provide the Companies, on the
trade date, with copies of the completed Control Sheet (see Exhibit A) relating
to each derivative transaction. The Companies will use the information on the
Control Sheet as part of their hedge designation documentation. The designation
documentation supporting the hedge must be formal, be contemporaneous (i.e.,
prepared at inception of the hedge), identify the hedged item, the hedging
instrument, the nature of the hedging relationship (e.g. fair value, cash flow,
net investment), the Companies’ overall risk management objectives and strategy
for undertaking the hedge. The Investment Manager will suggest the most
appropriate method for determining how hedge effectiveness will be assessed. As
part of the Financial Reporting designated documentation, a statement must be
included that identifies the hedging transaction for tax purposes. This will be
provided by the Companies.

  •   The designation documentation must include support provided by the
Investment Manager (e.g., correlation statistics such as r-squared using
statistical analysis or observations of how effectively the hedging instrument
achieved the dollar offset with the hedged item in the income statement) for why
the hedge is expected to be “highly effective” at inception and on a go-forward
basis.

  •   To be determined to be a “highly effective” hedging transaction, such
transaction must be measured on a dollar offset approach and recorded within an
80-125% effectiveness range.

  •   The designation documentation must define and document the method the
Companies (provided by the Companies) will use to assess the hedge effectiveness
for both prospective considerations and retrospective considerations: either a
dollar-offset approach or a regression or other statistical analysis approach.
However, when it comes to actually recording the amount of ineffectiveness
during a period, the dollar-offset method must be used.

  •   Investment Manager will provide the Companies with the data supporting the
amount of ineffectiveness and the ongoing assessment.

  •   The Companies will prepare a summary similar to Exhibit C summarizing the
measurement of hedge effectiveness / ineffectiveness on quarterly basis. See
Exhibit C.

  •   Investment Manager will provide the Companies, when reasonably requested,
a quantitative and sensitivity analysis of the hedge transaction and market risk
(equity and interest risks) as required in Management Discussion and Analysis.

EXHIBIT A

SAMPLE DERIVATIVE TRANSACTION
CONTROL SHEET

Attached Documentation

Attach a copy of the draft confirmation (attach final as soon as it is
available) of the derivative transaction to this Control Sheet. Also attach any
documentation specific to this transaction that is in addition to the Master
Agreement, schedule thereto and any credit support agreement.

Description of the Transaction

Please provide an appropriate answer to the information requested below
regarding the subject derivative transaction

  1.   Describe the derivative transaction, including the purpose (i.e.,
strategy) for engaging in the derivative transaction and the intended effect.
                 

  a.   Describe the underlying investment position or other balance sheet or
income statement item to which the derivative transaction relates.            
     

b. If the derivative transaction is entered into for hedging purposes, describe
the precise risk being hedged or replicated.            

  2.   Indicate the type of derivative instrument(s) used.                  

  3.   Indicate the notional amount of the derivative transaction.            
     

  4.   Indicate the consideration paid/received in connection with the
derivative transaction.           

  5.   Identify the counterparty to the derivative transaction, or, if the
derivative instrument is exchange traded, identify the exchange and the
brokerage firm that handled the trade.                  

  6.   Describe any collateral or credit support given or received in relation
to the derivative transaction that is in addition to collateral required by the
standard CSA.                          

  7.   Investment Manager’s recommendation for most appropriate method for
assessing hedge effectiveness from Companies’ list of approved methods
(Companies will make the final determination of the method to be used for
accounting/tax purposes)

           

Performance of the Derivative Transaction

Attach any analysis or testing performed regarding the anticipated performance
of the derivative transaction.

Investment Manager Approval

The undersigned (i) certify that, to the best of his/her knowledge, all of the
statements provided herein are true and correct in all material respects,
(ii) certifies that the derivative transaction is within the undersigned’s
authority level to approve, and (iii) approves the derivative transaction
described herein and set forth in the documentation attached hereto.

CH1 2768500v6

Authorized Trader’s signature

Member of Operations/Compliance Area

EXHIBIT B

      LIST OF COMPANIES   DATE ADOPTED BY THE BOARD
Symetra Life Insurance Company
  December 5, 2006

EXHIBIT C
SAMPLE EFFECTIVENESS SUMMARY

         
Company reporting date:
 

(Effectiveness must be assessed whenever financial statements or earnings
are reported, but at least every 3 months)
 

 
 

Company Calculation of:
 

 
 

Hedged Item Fair Value
  $ $  
 
       
Hedging Instrument Fair Value
  $ $  
 
       
Retrospective Effectiveness
 

 
 

Prospective Effectiveness
 

 
 

For cash flow hedge of a forecasted transaction, is the hedged item still
probable of occurring? (yes or no)
 

 
 

Company performed and documented assessment of hedge effectiveness in
accordance with the method defined in the hedge designation
documentation? (yes or no)
 

 
 

Company concluded that hedge meets criteria for hedge accounting? (yes
or no)
 

 
 

Comments/working paper reference
 

 
 

Supplementary Investment Guidelines
Symetra Life Insurance Company
Adopted by the Board of Directors on December 6, 2005, as last amended 1/20/2009

This supplement to the Company’s Statement of Investment Policy is to promote
compliance with statutory requirements for purchases or acquisitions of
investments by life insurers domiciled in the state of Washington and to
incorporate other Company investment policies as may be approved from time to
time by the Company’s Board of Directors. Statutory restrictions or investment
limits are in addition to any restrictions or limitations already required under
the Company’s general investment policies.

Chart of Statutory Investment Limits:
The Chart is intended as a summary only of the laws currently in force and does
not obviate the Company’s obligation to comply fully with all applicable laws at
the time of each transaction.

                                  Security   Requirement/Restriction   RCW      
        General Qualifications: Interest bearing or accruing or dividend or
income paying securities that are not in default and not priced above market
value.   100% of securities purchased or acquired must satisfy these
requirements. (Limited exceptions may apply.)   48.13.020               One
Entity: Any combination of investments in or loans upon the security of the
obligations, property, and securities of any one person, institution, or
municipal corporation.   Limited to 4% of assets without prior consent from OIC.
(Limit does not apply to general obligations of the U.S. government or U.S.
state governments.)   48.13.030(1) (See 48.13.273 for limits on medium and lower
grade obligations.)               Depository Institutions: Voting securities of
a depository institution or any company which controls a depository institution.
  Limited to 5% of admitted assets without prior consent from OIC.  
48.13.030(2)               Public Obligations: Bonds or other evidences of debt,
not in default as to principal or interest, that are obligations issued, assumed
or guaranteed by the U.S. or by any U.S. state or by any U.S. territory or
possession, or by the District of Columbia or by any county, city, town,
village, municipality or district therein or by any political subdivision
thereof or by any civil division or public instrumentality of one or more of the
foregoing.   Funds may be invested in public obligations payable (1) from taxes
levied or required to be levied upon all taxable property or all taxable income
within the jurisdiction of such governmental unit or, (2) from adequate special
revenues, but not including any obligation payable solely out of special
assessments on properties benefited by local improvements unless adequate
security is evidenced.   48.13.040               Corporate Obligations:
Obligations issued, assumed, or guaranteed by any solvent institution created or
existing under the laws of the U.S. or of any state, district or territory
thereof, and are qualified under any of the following:   (1) Obligations which
are secured by adequate collateral security and bear fixed interest. (2) Fixed
interest bearing obligations. (3) Adjustment, income or other contingent
interest obligations.   Section not applicable to mortgage related investments
authorized under RCW 48.13.110. In determining the adequacy of collateral
security, not more than 1/3 of the total value of such required collateral shall
consist of stock other than stock meeting the requirements of RCW 48.13.080
(preferred or guaranteed stocks). Eligible corporate obligations are subject to
issuer earnings requirements under RCW 48.13.050(1), (2) or (3)   48.13.050 See
limits under 48.13.273, for medium and lower grade obligations. See 48.13.060
and .070 for definition of “net earnings” and application of net earnings test
on securities of merged/reorganized institutions.               Preferred or
Guaranteed Stocks: Qualified preferred or guaranteed stocks or shares (other
than common stock) of solvent U.S. institutions.   Stocks or shares are
qualified if they meet the requirements of RCW 48.13.080(1)(a) for preferred
stocks, or (b) for guaranteed stocks. In addition, as of the date of
acquisition, all of the prior obligations and prior preferred stocks of the
institution must be eligible investments.   Limited to 10% of assets.
Institutions must satisfy net earnings requirements for preferred stock and RCW
48.13.050 for guaranteed stock. Subject to limitations of RCW 48.13.030 (single
issuer), investment in preferred stock with voting rights plus common stock in
same issuer (other than investment in certain subsidiaries of the insurer) is
limited to 15% of issuer’s outstanding shares having voting rights.   48.13.080
              Trustees’ or Receivers’ Obligations: Certificates, notes or other
obligations issued by trustees or receivers of U.S. institutions which, or the
assets of which, are court administered and which are adequately secured as to
principal and interest.   Limited to 2% of assets.
    48.13.090        
        Equipment Trust Certificates: Equipment trust obligations or
certificates which are adequately secured, or in other adequately secured
instruments evidencing an interest in transportation equipment wholly or in part
within the U.S. and the right to receive determined portions of rental, purchase
or other fixed obligatory payments for the use or purchase of such
transportation equipment.   Limited to 10% of assets.
    48.13.100        
        Mortgages, Deeds of Trust, Mortgage Bonds, Notes, Contracts: (1)(a)
Bonds or evidences of debt which are secured by first mortgages or deeds of
trust on improved unencumbered real property located in the U.S.; (1)(b) chattel
mortgages in connection therewith; (1)(c) the equity of the seller of any such
property in the contract for a deed, covering the entire balance due on a bona
fide sale of such property. (2) Money mortgages or like securities received upon
the sale or exchange of real property acquired pursuant to RCW 48.13.160.
(3) Bonds or notes secured by mortgage or trust deed guaranteed or insured by
the FHA. (4) Bonds or notes secured by mortgage or trust deed guaranteed or
insured as to principal in whole or in part by the VA. (5) Evidences of debt
secured by first mortgages or deeds of trust upon leasehold estates, except
agricultural leaseholds executed pursuant to RCW 79.11.010. (6) Evidences of
debt secured by first mortgages or deeds of trust upon agricultural leasehold
estates executed pursuant to RCW 79.11.010.  
(1)(b) Chattel mortgages are subject to requirements of RCW 48.13.150. (1)(c)
Seller’s equity in any one such deed covering the balance due on sale of such
property is limited to the greater of $10,000 or the amount permissible under
RCW 48.13.030.   (5) Leasehold estates must run for at least 15 years beyond the
maturity of the loan as made or as extended, in improved real property, be
otherwise unencumbered, and the mortgagee must be entitled to be subrogated to
all the rights under the leasehold. (6) Agricultural leasehold estates must be
otherwise unencumbered, and the mortgagee must be entitled to be subrogated to
all the rights under the leasehold. Except for investments made under (3) and
(4) and guaranteed by FHA or VA, investments are limited to 75% of the fair
value of the property as of the date of investment (80% of market value for
certain loans secured by first mortgages on single-family residential
buildings). RCW 48.13.120 Exceptions for certain securities received on the sale
or exchange of real property acquired under RCW 48.13.160.

  48.13.110 See 48.13.125 for limitation on amortization of loans on one-family
dwellings. See 48.13.130 for definition of encumbrance. See 48.13.140 for
appraisal of property, insurance requirements and the limit on loans upon the
security of any one parcel of real property (the greater of $25,000 or the
amount permissible under 48.13.030. See 48.13.265 for limits on investments
secured by real estate.      
        Real Property Owned – Home Office Building: (1) insurer home and branch
office buildings; (2) real property acquired in satisfaction or on account of
loans, mortgages etc. previously owing to the insurer in the course of its
business; (3) real property (a) required for convenient transaction of
business;(b) acquired by gift or devise; (c) acquired in exchange for real
property owned by insurer; (d) acquired through a lawful merger or consolidation
with it of another insurer, (e) requisite or desirable for the protection or
enhancement of the value of other real property owned by the insurer;
(4) income-producing property.   (1) OIC approval required if investment in home
office etc. exceeds 10% of assets. (3) Investment in real property can include
repair, alteration, furnishing, or improvement thereof and is subject to the
requirements of RCW 48.13.160(3). See statute for complete description,
including when OIC approval may be required. (4) Investment in income producing
property is subject to the requirements of RCW 48.13.160(4). See statute for
complete description with respect to insurer asset size, capital and surplus,
and other conditions for investment that must be met.
    48.13.160        
        Disposal of Real Property — Time Limit:   Real property acquired by an
insurer pursuant to loans, mortgages, liens, judgments, or other debts, or under
RCW 48.13.160(3)(a);(b), (c), (d), and (e).   Property acquired under RCW
48.13.160(3)(a) must be disposed of within 5 years of ceasing to be of use in
the transaction of business. Property acquired pursuant to loans, mortgages,
liens, judgments, or other debts, or under RCW 48.13.160(3)(b), (c), (d), and
(e) must be disposed of within 5 years of acquisition, unless OIC approves a
longer time.
    48.13.170        
        Foreign Securities: Obligations of foreign governments including
provinces, counties, municipalities, or similar entities, and obligations and
securities of foreign corporations, which have not been in default during the
five years next preceding date of acquisition, and if the foreign jurisdiction
has a sovereign debt rating of SVO 1.   Limited to 10% of assets. Investment
made in any one foreign country is limited to 5% of assets.
    48.13.180        
        Policy Loans: Loans to policyholders upon the pledge of the policy as
collateral.   Amount of respective loan cannot exceed the legal reserve
maintained on the policy.
    48.13.190        
        Savings and Share Accounts: Share or savings accounts of savings and
loan associations or savings accounts of banks.   Amount deposited in any one
institution is limited to amount insured by FSLIC or FDIC.
    48.13.200        
        Insurance Stocks: Stocks of U.S. domiciled insurers that also meet the
qualifications for stocks under RCW 48.13.220.  
Limited to the lesser of 5% of assets or 25% of surplus over its capital stock
and other liabilities. Unless a subsidiary, investment is limited to 5% of the
voting stock of any one insurer and RCW 48.13.030.

  48.13.210 Note: Limits do not apply to OIC approved mergers and stock
dividends on shares already owned.      
        Limitation on Insurer Loans or Investments (Investment in Non-Insurer
Subsidiaries): Common stock, preferred stock, debt obligations, and other
securities of one or more subsidiaries as defined in RCW 48.31B.005.  
Limited to the lesser of 10% of assets, or 50% of its surplus as regards
policyholders.

  48.13.218 Note: Subsidiaries that are insurers, healthcare service providers
and HMOs are excluded.      
        Common Stocks: Common shares of stock in solvent U.S. corporations that
qualify as a “sound investment.”  
Must first satisfy requirements of RCW 48.13.260 for investment of capital and
reserves. Limited to 50% of surplus over the minimum required surplus. Subject
to limitations of RCW 48.13.030 (single issuer), investment is limited to 10% of
the outstanding common stock of same issuer (exception for stock of certain
subsidiaries of the insurer).

  48.13.220 Note: 90 days notice to OIC is required prior to acquisition of a
majority of the total outstanding common shares of any corporation.      
        Collateral Loans: Loans upon the pledge of securities or evidences of
debt eligible for investment.   Limited to 90% of the market value of such
collateral pledged, except that loans upon pledges of U.S. government bonds may
be equal to the market value of the bonds pledged, subject to the maximums under
RCW 48.13.030.
    48.13.230        
        Miscellaneous Investments: Loans or investments not otherwise eligible
for investment and not specifically prohibited by RCW 48.13.270 and not
described in RCW 48.12.020 (non-allowable assets).   Limited to the lesser of
10% of assets or 50% of surplus over capital and other liabilities.
                     
        Special Consent Investments:   Investments not otherwise eligible, but
still qualified under RCW 48.13.020 (general qualifications) and for which
advance approval from the OIC is obtained.   The approval from the OIC will
specify whether the investment may be credited to required minimum capital or
surplus investments, or to investments of reserves.
    48.13.250        
        Required Investments for Capital and Reserves:   for Capital: Cash or
investments eligible under RCW 48.13.040 (public obligations), and mortgage
loans on real property located within this state, pursuant to RCW 48.13.110.  
for Reserves: Cash or premiums in course of collection or investments under RCW
48.13:   .040 (public obligations),   .050 (corporate obligations),   .080
(preferred or guaranteed stocks), .090 (trustees’ or receivers’ obligations),  
.100 (equipment trust certificates),   .110 (mortgages, loans and contracts),  
.150 (auxiliary chattel mortgages),   .160 (real property home office bldg.
etc.),   .180 (foreign securities),   .190 (policy loans),   .200 (savings and
share accounts),   .220 (common stocks),   .230 (collateral loans),   .250
(special consent investments).   Not less than 100% of the investments required
for capital and reserves.
    48.13.260        
        Investments Secured by Real Estate – Amount Restricted: real estate,
real estate contracts, and notes, bonds and other evidences of debt secured by
mortgage on real estate as described in RCW 48.13.110 and .160.   Limited to 65%
of assets-all investments in mortgage-backed securities qualifying under the
secondary mortgage market enhancement act of 1984 are included in determining if
an insurer has exceeded the 65% limit.
    48.13.265        
        Acquisition of Medium and Lower Grade Obligations: Medium obligations
are rated 3 by the NAIC’s securities valuation office. Lower grade obligations
are rated 4, 5 or 6 by the NAIC’s securities valuation office.  
Investment in medium and lower grade obligations is limited to 20% of admitted
assets. (Limited to 1% in obligations issued, guaranteed, or insured by one
institution.) Investment in lower grade obligations is limited to 10% of
admitted assets. (Limited to 0.5% in obligations issued, guaranteed, or insured
by 1 institution.) Investment in lower grade obligations rated 5 or 6 is limited
to 3% of admitted assets. Investment in lower grade obligations rated 6 is
limited to 1% of admitted assets.

  48.13.273 Note: If insurer intends to invest more than 2% of admitted assets
in medium and lower grade obligations, the BOD must approve a written plan for
making those investments.      
        Obligations Rated by the Securities Valuation Office: Obligations rated
1 or 2 by the NAIC’s securities valuation office.   Investment subject to the
limitations under RCW 48.13.030 (single issuer).
    48.13.275        
        Derivative Transactions:   Options, warrants used in hedging
transactions and not attached to another financial instrument, caps, floors,
collars, swaps, forwards, futures, and any other agreements, options, or
instruments substantially similar thereto or any series or combination thereof
and any agreements, options, or instruments permitted under rules adopted by the
OIC. Income generation transactions: (1) Sales of covered call options on
noncallable fixed income securities, callable fixed income securities; (2) Sales
of covered call options on equity securities, (3) Sales of covered puts on
investments that the insurer is permitted to acquire under Chapter 13, (4) Sales
of covered caps or floors.  
Aggregate statement value (“ASV”) of options, caps, floors, and warrants not
attached to a financial instrument purchased and used in hedging transactions is
limited to 7.5% of admitted assets. (ASV of options, caps, and floors written in
hedging transactions is limited to 3% of admitted assets.) The aggregate
potential exposure of collars, swaps, forwards, and futures used in hedging
transactions is limited to 6.5% of admitted assets. For income generation
transactions, the ASV of fixed income assets subject to call or that generate
cash flows for payments under the caps or floors, plus the face value of fixed
income securities underlying a derivative instrument subject to call, plus the
amount of the purchase obligations under the puts, is limited to 10% of admitted
assets. (1) Permitted if the option expires by its terms prior to the end of the
noncallable period, or derivative instruments based on fixed income securities.
(2) Permitted if the insurer holds or can immediately acquire through the
exercise of options, warrants, or conversion rights already owned, the equity
securities subject to call during

  48.13.285 Note: Permitted only to engage in hedging transactions and certain
income generation transactions, not for speculation.   Insurer must be able to
demonstrate to the OIC the intended hedging characteristics and the ongoing
effectiveness of the derivative transaction(s) through cash flow testing or
other appropriate analysis.         th  
e complete term of the
  call option                        
sold. (3) Permitted if the i
  nsurer has                        
escrowed, or entered i
  nto a custodian                        
agreement segregating,
  cash or cash                        
equivalents with a mar
  ket value equal to                        
the amount of its purc
  hase obligations                        
under the put during t
  he complete term                        
of the put option sold
    .                          
(4) Permitted if the i
  nsurer holds the                        
investments generating
  the cash flow to                        
make the required paym
  ents under the                        
caps or floors during
  the complete term                        
that the cap or floor
  is outstanding.              
        Prohibited Investments:   (1) Issued shares of its own capital stock.
(2) Securities issued by any corporation if a majority of its stock having
voting power is owned directly or indirectly by or for the benefit of any one or
more of the insurer’s officers and directors. (3) Any investment or loan
ineligible under the provisions of RCW 48.13.030 (single issuer or depository
institution).   (4) Securities issued by any insolvent corporation.
(5) Obligations contrary to the provisions of RCW 48.13.273 (medium and lower
grade obligations).   (6) Any investment or security found by the OIC to be
designed to evade prohibition of the Insurance Code.     48.13.270   Securities
Underwriting, Agreements to Withhold or Repurchase – Prohibited:   No insurer
shall: (1) participate in the underwriting of the marketing of securities in
advance of their issuance or enter into any transaction for such underwriting
for the account of such insurer jointly with any other person; or (2) enter into
any agreement to withhold from sale any of its property, or to repurchase any
property sold by it.     48.13.280   Disposal of Ineligible Property or
Securities:   (1) Any ineligible personal property or securities acquired by an
insurer may be required to be disposed of within the time not less than six
months specified by order of the commissioner, unless before that time it
attains the standard of eligibility, if retention of such property or securities
would be contrary to the policyholders or public interest in that it tends to
substantially lessen competition in the insurance business or threatens
impairment of the financial condition of the insurer. (2) Any personal property
or securities acquired by an insurer contrary to RCW 48.13.270 shall be disposed
of forthwith or within any period specified by order of the commissioner.  
(3) Any property or securities ineligible only because of being excess of the
amount permitted under Chapter 13 to be invested in the category to which it
belongs shall be ineligible only to the extent of such excess.     48.13.290    
        Authorization of Investments:   No investment, loan, sale or exchange
thereof shall, except as to the policy loans of a life insurer, be made unless
authorized or approved by the insurer’s board of directors or by a committee
charged by the board of directors or the bylaws with the duty of making such
investment, loan, sale or exchange. The minutes of any such committee shall be
recorded and reports thereof shall be submitted to the board of directors for
approval or disapproval.     48.13.340             Record of Investments:   A
written record in permanent form showing the authorization of each investment or
loan shall be made and signed by an officer of the insurer or by the chair of
such committee authorizing the investment or loan. Records shall contain: (a) In
the case of loans: the name of the borrower; the location and legal description
of the property; a physical description, and the appraised value of the
security; the amount of the loan, rate of interest and terms of repayment.
(b) In the case of securities: the name of the obligor; a description of the
security and the record of earnings; the amount invested, the rate of interest
or dividend, the maturity and yield based upon the purchase price. (c) In the
case of real estate: the location and legal description of the property; a
physical description and the appraised value; the purchase price and terms.
(d) In the case of all investments: (i) the amount of expenses and commissions
if any incurred on account of any investment or loan and by whom and to whom
payable if not covered by contracts with mortgage loan representatives or
correspondents which are part of the insurer’s records; (ii) the name of any
officer or director of the insurer having any direct, indirect, or contingent
interest in the securities or loan representing the investment, or in the assets
of the person in whose behalf the investment or loan is made, and the nature of
such interest.     48.13.350            

Policy for Investment in Affiliates:

The Company will not invest in affiliates to the extent that such investment
would be reportable under the Insurer Holding Company Act or the Disclosure of
Material Transactions Model Law, or to the extent that such investment might, in
the opinion of management, materially affect the overall liquidity of the
Company’s assets.

Approval Procedures for Mortgage Loans:

Subject to any statutory restrictions, any two members of the Mortgage Loan
Committee may approve mortgage loans less than or equal to $10 million.

Mortgage loans greater than $10 million and less than or equal to $20 million
require the approval of all Committee members.

Loans in excess of $20 million must be approved by the Company’s shareholder (in
addition to the general requirement of Board approval for all investments).

1 FASB statement No. 133 “Accounting for Derivative Instruments and Hedging
Activities.”

2 Based on the NAIC’s Derivative Instruments Model Regulation and Statements of
Statutory Accounting Principals (“SSAPs”).

3 These definitions are based in whole or in part on definitions found in
Washington state insurance laws as may be amended from time to time.

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