The North West Life Assurance Company of Canada - Page 8

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            does not pay any interest on the funds in the operating account.                           
            Petitioner invests the premiums in the Seattle trust account in                            
            U.S. dollar-denominated assets and retains the earnings in the                             
            same account.  As a general business practice, during the years                            
            at issue, petitioner did not withdraw assets until they matured                            
            or rely upon assets outside of the trust account to cover the                              
            liabilities incurred by its U.S. branch.                                                   
                  In 1987, petitioner transferred between $7 and $8 million in                         
            Canadian dollar-denominated bonds from its Canadian business to                            
            the Seattle bank trust account in order to increase its surplus                            
            assets held in the United States relative to the proportion of                             
            its surplus held in the Canadian operation.  In 1988, petitioner                           
            sold stock in a related domestic company for its original cost to                          
            Industrial Alliance Life Insurance Co., petitioner's Canadian                              
            parent corporation.  The stock had been recorded on the books of                           
            petitioner's U.S. branch and included in the Seattle trust                                 
            account.                                                                                   
                  F.    Mandatory Filings                                                              
                  The insurance commissioner of each State in which petitioner                         
            is licensed to carry on an insurance business requires                                     
            petitioner's U.S. branch to file certain annual statements                                 
            reflecting its U.S. branch operations.  To standardize reporting                           
            requirements, all States require reporting on the annual                                   
            statement forms developed by National Association of Insurance                             





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Last modified: May 25, 2011