I’m proud to announce that 2011 was a great year for the Companion Life family of companies.

Despite the struggling economy, we experienced another year of growth and prosperity.

This continued success is no accident. It springs from a core philosophy. Quite simply, we position

our company to succeed by providing our customers with excellent products and superior service. Our goal

is to exceed expectations.

Our 2011 business model saw us acquire, create and partner to further expand the markets we

serve. In February we purchased Total Dental Administrators, Inc. (TDA). Based in Arizona and Utah,

TDA off ers comprehensive dental care through both traditional and managed care programs. You may

remember we created Niagara Life and Health in 2010. Now licensed in New York and Connecticut,

Niagara Life actually began selling in July 2011. We are excited about our partnership with Assist America

— a provider of global emergency medical services for travelers. Companion is the fi rst and only national

carrier to include this service with all our dental plans.

We revised and enhanced benefi ts to increase overall value for our partners and clients. We also

augmented our small group Life and Short Term Disability product and improved our Long Term Dis-

ability product. We even redesigned our website to make it easier to use for producers, providers, group

administrators and insureds.

Experts agree that ancillary and voluntary products will play a major role as health care reform

mandates more benefi ts. That’s why we refi ned and expanded lines — including some that fall outside the

realm of health care reform — to allow employers to diff erentiate their plans. And while we’ve witnessed

continued growth in specialty markets, the successful execution of our product diversifi cation strategy has

been phenomenal.

For the eleventh straight year, Companion Life has achieved an A+ (Superior) rating from A.M.

Best. In 2011, our gross collected premiums totaled $510 million — surpassing the record we set in 2010

by $102 million.

Already poised for the future and the new health care reform environment, we continue to bring

distinction to the Companion Life family not only through superior products and services, but by main-

taining strong relationships with all our partners — from brokers, agents and underwriters to health plan

partners and providers. It’s about being positioned to succeed … and striving to exceed expectations.

Trescott N. Hinton, Jr.President, Companion Life

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LETTER

LIfE INSURANCE

Group Term Life Insurance and Accidental Death and Dismemberment (AD&D) A variety of plans

that work for groups of all sizes. This program is fl exible in design, with competitive rates and guaranteed

issue amounts.

Voluntary Group Term Life Companion Choice Plus is a freestanding program for groups with as few as

fi ve enrollees. It provides broad coverage for families — depending on the level of employee participation

and group size — and also has an AD&D option.

DISABILITY INCOME PLANS

Short Term Disability (STD) Flexible STD plans for when employees become sick or injured and aren’t

able to earn income. Plans are available as a freestanding product or as a part of a larger benefi ts package.

Voluntary Short Term Disability Available to most employee groups, this voluntary plan off ers high

benefi t levels with a wide choice of elimination periods and durations. Under this plan, Companion Life

pays benefi ts when an employee is disabled because of injury or illness. Voluntary STD plans include

partial disability and age entry freeze in most states.

Long Term Disability (LTD) Available to groups of all sizes; can be off ered as a freestanding product or

part of a benefi ts package. The True Group LTD plan features competitive rates, a variety of designs, and

options such as cost-of-living increases, “own occupation to age 65,” residual benefi ts and benefi t indexing.

All LTD plans also include DisabilityGuidance, an employee assistance program that helps members cope

with job pressures, fi nancial or legal diffi culties and stress in the home.

Voluntary Long Term Disability Comprehensive voluntary LTD coverage funded through payroll

deduction with our Companion Cornerstone Plan. All LTD plans include DisabilityGuidance.

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LIfE INSURANCELIfE INSURANCE

Group Term Life Insurance and Accidental Death and Dismemberment (AD&D

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DENTA L PL A NS

Dental by Design® An innovative portfolio of dental insurance products that lets employers with

groups of 10 or more create their own plans. Includes three standard base plan options — all allow

members to use their dentists of choice. Employers can also customize any plan for their employees by

modifying many core policy provisions. Retiree dental option allows retiring employees to continue

their dental coverage at home.

Dental “Cents” Small Group Dental Plan A comprehensive dental benefits plan for groups of two

to nine employees. It offers freedom of choice when it comes to dentist preference and plan choice.

Employers choose between three plans for their active, full-time employees working at least 30 hours

a week.

Voluntary Dental Insurance Groups of three employees or more, or 20 percent of the eligible group

participating, whichever amount is greater, are eligible to choose between two affordable plan options.

The Advantage Plan pays 100 percent of allowable charges for preventive services such as routine

cleanings, 80 percent of allowable charges for basic services such as fillings, and 50 percent of

allowable charges for covered major services such as root canals, after a combined $100 lifetime

deductible (for all covered services).

The Premier Plan offers all Basic Plan coverage plus comprehensive coverage of major services, has

a lifetime deductible of $100 and can include takeover benefits from other plans.

Companion Global Dental® An option for dental care that offers services at accredited international

medical facilities. Patients enjoy significant savings, and Companion Global Dental works with agents,

employers, individuals and third party administrators to make the process easy. Companion Global

Dental comes with all Companion Life Dental plans.

VISION PL A NS

Vision Discount Plan This EyeMed Vision Care® plan is provided at no additional cost with all

Companion Life dental plans as a value-added benefit, even if dental groups don’t purchase a funded

vision plan.

Vision by Design® Created in collaboration with EyeMed, whose network includes more than

18,000 private practice and major optical retail locations in the U.S. Groups can offer Vision by Design

products on a voluntary basis or on an employer-paid basis. Options are flexible and fit nearly any

size budget.

HE A RING

Hearing Services Plan This plan is provided at no additional cost to employees enrolled in any

Companion Life dental plan. It combines unlimited choice with quality and value, and may be

extended to any family member.

SPECIALTY MARKET PRODUCTS

Specific and Aggregate Medical Stop Loss Flexible coverage for self-insured companies wanting to assume part of the risk for their employees’ health care claims. Includes extensive choices with specific plan limits. Aggregate stop loss is available to cover the employer’s risk once all employee claims accumu-late and reach a selected amount.

Major Medical Flexible, comprehensive health plan options for small and large employers.

Limited Benefit Health Plan Indemnity structured plans for small employers seeking a more affordable health plan, larger employers seeking an affordable way to insure part-time and temporary employees, or professional associations looking to provide additional benefits to members.

Student Accident and Sickness Flexible health plan options offered to colleges and universities to provide health insurance benefits for their students. The benefits are offered for both domestic and international students and are available on a mandatory, hard waiver or voluntary basis.

Aggregate Only A transitional stop loss product. It helps a small employer transition from fully insured benefits to a self funded plan.

Occupational Accident insurance provides workplace injury coverage for an employer that has non-subscribed or “opted-out” of the Texas Workers’ Compensation system. Standard coverage includes accident medical expense, AD&D and accident disability.

Short Term Medical Designed to provide individuals with comprehensive medical coverage on a short-term basis. Coverage could be for days or up to several months. It provides affordable insurance options for individuals who are unemployed or recently graduated, or as an alternative to COBRA.

Critical Illness Created to complement the mini-med plans and offer employers additional flexibility by providing coverage for catastrophic illness.

STATEMENTS Of ADMITTED ASSETS, LIABILITIES AND SURPLUS STATUTORY BASIS (IN THOUSANDS )

December 31,

2011 2010 ASSETS

Bonds $ 81,603 $ 79,751

Common stocks 43,759 31,496

Cash 49,071 36,379

Short-term investments 1,632 3,952

Reinsurance receivables and reinsurance funds held 788 811

Net deferred tax recoverable 1,427 1,169

Premiums due, deferred and uncollected 609 506

Investment income due and accrued 1,000 1,001

Other assets 6,907 5,020

Total assets $ 186,796 $ 160,085

LIABILITIES

Aggregate reserves for future policy benefits:

Life, annuity and supplementary contracts $ 7,932 $ 7,404

Accident and health 16 17

Policy claim reserves:

Life 3,291 3,200

Accident and health 19,163 17,423

Premiums received in advance 747 377

Commissions to agents due or accrued 1,947 1,851

Experience rating refunds 1,382 1,212

Taxes (excluding federal income), licenses and fees 10,283 8,218

Asset valuation reserve 4,175 4,041

federal income taxes 2,347 1,696

funds held under coinsurance 15,570 11,792

Other liabilities 9,869 11,035

Total liabilities $ 76,834 $ 68,266

STOCKHOLDER’S EQUITY

Common capital stock 2,500 2,500

Contributed capital 20,452 11,100

Unassigned surplus 87,010 78,219

Total stockholder’s equity 109,962 91,819

Total liabilities and stockholder’s equity $ 186,796 $ 160,085

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STATEMENTS Of ADMITTED ASSETS, LIABILITIES AND SURPLUS STATEMENTS Of ADMITTED ASSETS, LIABILITIES AND SURPLUS STATUTORY BASIS (IN THOUSANDS ) STATUTORY BASIS (IN THOUSANDS )

December 31,

2011 2010 ASSETSASSETS

STATEMENTS Of OPERATIONS

STATUTORY BASIS (IN THOUSANDS)

Year Ended December 31,

2011 2010REVENUES

Premiums $ 177,776 $ 161,486

Net investment income 4,371 2,920

Net realized capital (losses) gains (459) 1,554

Other revenues 12,891 9,526

Total revenues $ 194,579 $ 175,486

BENEfITS AND ExPENSES

Death, annuity and accident and health benefits $ 120,092 $ 109,532 Increase in aggregate reserves

for future policy benefits 560 563

Commissions 31,591 28,606

Salaries and general insurance expenses 24,172 22,702

Taxes (excluding federal income), licenses and fees 4,380 1,989

Increase (decrease) in loading 2 (26)

Total benefits and expenses $ 180,797 $ 163,366

Income before federal income taxes $ 13,782 $ 12,120 Provision for federal income tax $ 5,085 $ 3,672 Net income $ 8,697 $ 8,448

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REGIONAL OffICES

Fred Wise, Director of Marketing

Lebanon, Ohio

888-470-4212

Fax: 888-470-4715

Charles Gragg, Director of Marketing

Nashville, Tennessee

888-472-7150

Fax: 888-472-7118

Jim Walter, Director of Marketing

Overland Park, Kansas

800-276-1249

Fax: 800-315-1793

Jack Trook, Director of Marketing

Phoenix, Arizona

800-705-5964

Fax: 866-618-7879

Al Curnow, Director of Marketing

East Greenwich, Rhode Island

877-803-5799

Fax: 401-886-7475

Brian Siegenthaler, Director of Marketing

New Glarus, Wisconsin

888-527-4050

Fax: 803-870-8690

Everett “Skip” Eynon, III, Director of Marketing

Columbia, South Carolina

800-753-0404, ext. 45012

803-735-0736

J.C. Preas, Jr., VP of Field Sales

Brad Wells, Director of Marketing

Roanoke, Virginia

800-556-2541

Fax: 800-447-6483

SPECIALTY MARKET PRODUCTS

Roy Hutchison, VP of Specialty Markets

Phil Gardham, VP of Specialty Markets

Austin Scott, Director of Marketing

Columbia, South Carolina

800-753-0404

Fax: 803-264-8232

COMPANION LIfE INSURANCE COMPANY

P.O. Box 100102 Columbia, SC 29202-3102

phone: 800-753-0404 fax: 803-735-0736

email: C.Life@CompanionGroup.com

website: www.CompanionLife.com

MISSION

To be a well-managed, customer-focused organization acting in the best interests of our policyholders

and marketing partners, operating on a financially sound, growing and diversified basis.

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