10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30, 2002. [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from N/A to N/A. Commission file number 333-02491*. KEMPER INVESTORS LIFE INSURANCE COMPANY (Exact name of registrant as specified in charter) ILLINOIS (State of Incorporation) 36-3050975 (I.R.S. Employer Identification Number) 1600 McCONNOR PARKWAY SCHAUMBURG, ILLINOIS (Address of Principal Executive Offices) 60196-6801 (Zip Code) Registrant's telephone number, including area code: (847) 874-4000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of August 1, 2002, 250,000 shares of common stock (all held by an affiliate, Kemper Corporation) were outstanding. There is no market value for any such shares. * Pursuant to Rule 429 under the Securities Act of 1933, this Form 10-Q also relates to Commission file numbers 333-22389, 333-32632 and 333-54252. KEMPER INVESTORS LIFE INSURANCE COMPANY AND SUBSIDIARIES FORM 10-Q

-2- Kemper Investors Life Insurance Company and Subsidiaries Consolidated Balance Sheets (in thousands, except share data)

-3- Kemper Investors Life Insurance Company and Subsidiaries Consolidated Balance Sheets (continued) (in thousands, except share data)

See accompanying notes to consolidated financial statements. -4- Kemper Investors Life Insurance Company and Subsidiaries Consolidated Statements of Operations (in thousands) (unaudited)

See accompanying notes to consolidated financial statements. -5- Kemper Investors Life Insurance Company and Subsidiaries Consolidated Statements of Comprehensive Income (in thousands) (unaudited)

See accompanying notes to consolidated financial statements. -6- Kemper Investors Life Insurance Company and Subsidiaries Consolidated Statements of Cash Flows (in thousands) (unaudited)

-7- Kemper Investors Life Insurance Company and Subsidiaries Consolidated Statements of Cash Flows (continued) (in thousands) (unaudited)

See accompanying notes to consolidated financial statements. -8- Kemper Investors Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements (unaudited) 1. Kemper Investors Life Insurance Company is incorporated under the insurance laws of the State of Illinois and is licensed in the District of Columbia and all states, except New York. Zurich Life Insurance Company of New York, formally Zurich Kemper Life Insurance Company of New York, a wholly-owned subsidiary, received its license from the State of New York early in 2001 and began writing business in May of 2001. Kemper Investors Life Insurance Company and its subsidiaries (collectively, "KILICO" or "the Company"), are wholly-owned by Kemper Corporation ("Kemper"), a non-operating holding company. Beginning in 2002, the Company is included in the consolidated federal income tax return of Zurich Holding Company of America ("ZHCA"), an upstream holding company above Kemper Corporation. As such, the Company's 2002 GAAP tax rate is equal to the ZHCA group rate. 2. In the opinion of management, all necessary adjustments consisting of normal recurring accruals have been made for a fair statement of the results of KILICO for the periods included in these financial statements. These financial statements should be read in conjunction with the financial statements and related notes in the 2001 Annual Report on Form 10-K. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. 3. The Company, Federal Kemper Life Assurance Company ("FKLA"), Zurich Life Insurance Company of America ("ZLICA"), and Fidelity Life Association ("FLA"), operate under the trade name Zurich Life ("ZL"). Prior to 2002, the Company had managed its operations along Strategic Business Units ("SBUs"). Each SBU concentrated on a specific customer market. However, the SBUs were not managed at the legal entity level, but rather at the Zurich Life level. Zurich Life's SBUs cross legal entity lines as certain similar products are sold by more than one legal entity. Recently, management has shifted its focus from SBU performance to a line of business performance within each legal entity. The SBUs are now primarily responsible for product development and sales. The Company now has two operating segments, life insurance and annuities, that offer different types of products and services. These two operating segments reflect the way the Company manages its operations and makes business decisions. In the following table, the Company uses the caption "net operating income" as an operating measure of segment performance. Net operating income is calculated by deducting net realized investment gains or losses, net of related income taxes, and the cumulative effect of a change in accounting principle, net of tax, from net income. Net realized investment gains or losses are excluded from net operating income because they can, in part, be discretionary and are not indicative of operational trends. -9- Prior period information has been restated to conform to the new composition of the Company's segments.

4. In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 142 ("SFAS 142"), Goodwill and Other Intangible Assets. SFAS 142 primarily addresses the accounting that must be applied to goodwill and intangible assets subsequent to their acquisition. Effective January 1, 2002, SFAS 142 requires that goodwill and indefinite-lived intangible assets no longer be amortized, but be tested for impairment at the reporting unit level. In conjunction with management's new focus on line of business operations, the Company's goodwill was tested for impairment at the life insurance and annuities operating segment level based on the guidance under SFAS 142. As a result of the testing performed an impairment of $21.9 million has been recorded in the annuities segment. The fair value of that segment was estimated using expected present value of future cash flows for both current business in-force and future production estimates. The following table shows net income for the periods ended June 30, 2002 and 2001 as reported and adjusted for prior year goodwill amortization.

-10- MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Kemper Investors Life Insurance Company and subsidiaries (collectively, "KILICO", "the Company", "we", "our" or "us") recorded a net loss of $6.6 million in the first six months of 2002, compared with net income of $13.5 million for the first six months of 2001. The following table reflects the components of net income (loss): Net income (in millions) Six Months Ended June 30 ------------------- 2002 2001 ------- ------ Operating earnings before amortization of goodwill and other intangibles $ 8.9 $ 13.9 Amortization of goodwill and other intangibles (.4) (7.0) Realized capital gains (losses), net of tax 6.8 6.6 Cumulative effect of accounting change, net of tax (21.9) - ------ ------ Net income (loss) $ (6.6) $ 13.5 ====== ====== The following table reflects the major components of net realized capital gains and losses included in net income (loss): Net realized capital gains (losses) (in millions)

-11- The realized results include $17.9 million of net gains from securities sold during the period. The $7.6 million of writedowns are primarily related to our securitized financial assets, namely collateralized debt obligations and are due to a change in our future expectation of cash flows from these securities. The decrease in amortization of goodwill and other intangibles is due to Statement of Financial Accounting Standards 142 ("SFAS 142")Goodwill and Other Intangible Assets, issued in July 2001. SFAS 142 primarily addresses the accounting that must be applied to goodwill and intangible assets subsequent to their acquisition. Effective January 1, 2002, SFAS 142 requires that goodwill and indefinite-lived intangible assets no longer be amortized, but be tested for impairment at the reporting unit level. In conjunction with management's new focus on line of business operations, the Company's goodwill was tested for impairment at the life insurance and annuities operating segment level based on the guidance under SFAS 142. As a result of the testing performed an impairment of $21.9 million has been recorded in the annuities segment. The fair value of that segment was estimated using expected present value of future cash flows for both current business in-force and future production estimates. Operating earnings before amortization of goodwill and other intangibles decreased to $8.9 million in the first six months of 2002, compared with $13.9 million in the first six months of 2001. This decrease was primarily due to: . a decrease in spread revenue (net investment income less interest credited to policyholders) . an increase in claims incurred and other policyholder benefits . an increase in commissions and operating expenses, net of the deferral of insurance acquisition costs, and . an increase in income tax expense, offset by . an increase in other income . an increase in separate account fees and charges, and . a decrease in the amortization of deferred insurance acquisition costs. -12- The following table reflects our sales: Sales (in millions)

Sales of annuity products consist of total deposits received, which are not recorded as revenue within the consolidated statements of operations. Variable annuity deposits, including deposits under the fixed account option, decreased $334.2 million in the first six months of 2002, compared with the first six months of 2001. The decrease is primarily due to lower sales of our DESTINATIONS/(SM)/ product. In the fourth quarter of 2001, we discontinued offering the guaranteed retirement income benefit ("GRIB") option with the DESTINATIONS/(SM)/ product due to the continued decline in the stock market. Sales of the DESTINATIONS/(SM)/ product will be substantially lower in 2002 because of this decision. The GRIB is an optional benefit available for an additional asset-based fee. It provides a minimum fixed annuity guaranteed lifetime income to the annuitant. The income is based on the GRIB base. The GRIB Base prior to attained age 80 is the greatest of: . the contract value (account value) . the greatest anniversary value before the exercise (annuitization) date, or . purchase payments minus previous withdrawals, accumulated at 5 percent interest per year to the annuitization date. -13- Fixed annuity deposits decreased $2.4 million in the first six months of 2002, compared with the first six months of 2001, as we selectively exited a few distribution channels and certain investors sought a more competitive return on their investments as interest rates declined over the past 12 months. The decrease in BOLI sales in 2002 was, in part, due to the nature of the BOLI product - high dollar volume per sale, low frequency of sales. Also, impacting sales of this institutional product are our lower ratings. Please see the discussion included in the "Ratings" section. The following table reflects our assets under management: Assets Under Management (in millions) June 30 December 31 June 30 2002 2001 2001 ---------- ----------- ---------- General account /(1)/ $ 3,298.1 $ 3,815.8 $ 3,705.0 Separate account - BOLI 7,959.9 7,598.9 7,159.3 Separate account - non-BOLI 5,292.9 5,509.8 4,623.9 ---------- ---------- --------- Total $ 16,550.9 $ 16,924.5 $15,488.2 ========== ========== ========= (1) June 30, 2002 excludes $184.0 million in receivables for securities sold. Total assets under management decreased $373.6 million from December 31, 2001, to June 30, 2002, reflecting the exclusion of $184.0 million in receivables for securities sold, the decline in equity markets and the invested asset transfer discussed below. The level of policyholder surrenders, withdrawals and death benefits also directly impacts the level of assets under management from year to year. Spread revenue decreased in the first six months of 2002, compared with the same period in 2001, due to a decrease in investment income, slightly offset by a decrease in interest credited to policyholders. The decrease in investment income was primarily due to a declining general account invested asset base and the reinvestment of 2001 and 2002 sales proceeds, maturities and prepayments in lower yielding securities due to the lower interest rate environment. The declining invested asset base is primarily attributable to the transfer of invested assets that supported the BOLI funds withheld account ("FWA"). During the first quarter of 2002, we amended our BOLI reinsurance agreement with Zurich Insurance Company, Bermuda Branch ("ZICBB"). Under the amended agreement, the balance in the FWA was transferred to a trust account that acts as security for the reinsurance agreement. On January 25,2002, approximately $222.5 million of invested assets were transferred to the trust account. The trust account is not reflected in our consolidated financial statements. -14- The decrease in interest credited in the first six months of 2002, compared with the same period in 2001, was due to lower average interest crediting rates, somewhat offset by higher average policyholder account balances. Separate account fees and charges consist of the following as of June 30, 2002 and 2001: (in millions) Six Months Ended Three Months Ended June 30 June 30 ------------------- ------------------ 2002 2001 2002 2001 ------- ------- ------- ------- Separate account fees on non-BOLI variable life and annuities $ 44.8 $ 33.4 $ 22.8 $ 17.9 BOLI cost of insurance charges and fees - direct 87.4 79.4 44.2 38.9 BOLI cost of insurance charges- ceded/(1)/ (83.8) (82.0) (41.9) (40.6) BOLI premium tax expense loads/(2)/ 3.5 4.0 1.6 1.9 ------ ------ ------ ------ Total $ 51.9 $ 34.8 $ 26.7 $ 18.1 ====== ====== ====== ====== ----------------------------------------------- /(1)/ Includes $.7 million and $7.0 million of cost of insurance charges ceded, related to appreciation of the BOLI funds withheld account for the six months ended June 30, 2002 and 2001, respectively. /(2)/ There is a corresponding offset in taxes, licenses and fees. Separate account fees on non-BOLI variable life and annuities increased in the first six months of 2002, compared with the first six months of 2001, primarily due to the volume of new sales during 2001 and 2002. This increase was somewhat offset by a decrease in fees related to the drop in the stock market, as the fees are primarily asset-based. Net BOLI cost of insurance charges and fees increased $6.2 million in the first six months of 2002, compared with 2001. The increase is primarily related to the transfer of the assets supporting the FWA to a trust, as previously discussed. Prior to the transfer, we ceded additional cost of insurance charges due to appreciation of the FWA. Other income increased $1.4 million in the first six months of 2002, compared with the same period in 2001. The increase was primarily due to an increase in surrender charges. -15- Policyholder surrenders, withdrawals and death benefits were as follows: (in millions) Six Months Ended Three Months Ended June 30 June 30 --------------------- --------------------- 2002 2001 2002 2001 -------- -------- -------- -------- General account $ 192.2 $ 200.3 $ 99.8 $ 96.3 Separate account 284.2 282.6 173.5 92.7 ------- ------- ------- ------- Total $ 476.4 $ 482.9 $ 273.3 $ 189.0 ======= ======= ======= ======= Reflecting the current interest rate environment and other competitive market factors, we adjust our crediting rates on interest-sensitive products over time in order to manage spread revenue and policyholder surrender and withdrawal activity. Spread revenue can also improve over time by increasing investment income. General account surrenders, withdrawals and death benefits decreased $8.1 million in the first six months of 2002, compared with the first six months of 2001 as equity markets remained volatile. Separate account surrenders, withdrawals and death benefits increased $1.6 million in the first six months of 2002, compared with the first six months of 2001 as investors sought more stable returns during a period of stock market volatility. Claims incurred and other policyholder benefits increased $15.1 million for the period ended June 30, 2002, compared to the same period in 2001. The increase is primarily due to higher mortality experience in the first six months of 2002, compared with the same period in 2001, and higher guaranteed minimum death benefits due to increasing variable annuity business in-force and a lower stock market. We reserve for death benefit guarantees in our variable annuities. A further decline in the stock market would have the impact of increasing the reserves. GRIB reserves have been established for policies that have withdrawn a substantial portion of their contract values, exposing a proportionately large GRIB benefit in relation to the account value. These policies were deemed to have elected annuitization and a reserve has been established to cover the present value of future benefits. No additional liabilities for future policy benefits related to guaranteed living benefits have been established. Had such reserves been established for living benefits, the reserve at year end 2001 would have been $7.8 million higher, and at June 30, 2002, would have been $10.5 million higher. Commissions and operating expenses, net of the deferral of insurance acquisition costs, increased in the first six months of 2002, compared with the first six months of 2001. The increase is due to an increase in operating expenses of $2.4 million, primarily due to an increase in salaries and related benefits and consulting fees. -16- Income tax expense increased in the first six months of 2002, compared with the same period in 2001, primarily due to higher pre-tax income and a favorable settlement with the Internal Revenue Service in the first six months of 2001, which reduced the 2001 income tax expense. In compliance with the Internal Revenue Code, we were not allowed to be included in the consolidated federal income tax return of Zurich Holding Company of America ("ZHCA"), an upstream holding company above Kemper Corporation, until 2002. As such, our 2002 GAAP tax rate is no longer based on a separate return filing, but is equal to the ZHCA group rate. The Company, Federal Kemper Life Assurance Company ("FKLA"), Zurich Life Insurance Company of America ("ZLICA"), and Fidelity Life Association ("FLA"), operate under the trade name Zurich Life ("ZL"). Prior to 2002, the Company had managed its operations along Strategic Business Units ("SBUs"). Each SBU concentrated on a specific customer market. However, the SBUs were not managed at the legal entity level, but rather at the Zurich Life level. Zurich Life's SBUs cross legal entity lines as certain similar products are sold by more than one legal entity. Recently, management has shifted its focus from SBU performance to a line of business performance within each legal entity. The SBUs are now primarily responsible for product development and sales. The Company now has two operating segments, life insurance and annuities, that offer different types of products and services. These two operating segments reflect the way the Company manages its operations and makes business decisions. In the following table, the Company uses the caption "net operating income" as an operating measure of segment performance. Net operating income is calculated by deducting net realized investment gains or losses, net of related income taxes, and the cumulative effect of a change in accounting principle, net of tax, from net income. Net realized investment gains or losses are excluded from net operating income because they can in part, be discretionary and are not indicative of operational trends. Prior period information has been restated to conform to the new composition of the Company's segments.

-17- Total operating revenues for the life insurance segment decreased $1.9 million in the first six months of 2002, compared with the same period in 2001, primarily due to a decrease in investment income. The decrease in investment income was primarily attributable to a declining general account invested asset base as well as the reinvestment of 2001 and 2002 sales proceeds, maturities and prepayments in lower yielding securities, as previously discussed. Total operating revenues for the annuities segment increased $9.8 million in the first six months of 2002, compared with the same period in 2001, primarily due to an increase in separate account fees, as previously discussed. Net operating income, before the cumulative effect of an accounting change, for the life insurance segment decreased $1.3 million for the first half of 2002, compared to the same period in 2001, primarily due to the decrease in investment income. Net operating income, before the cumulative effect of an accounting change, for the annuities segment increased $2.9 million for the first half of 2002, compared to the same period in 2001. The increase is primarily due to the increase in separate account fees, somewhat offset by an increase in guaranteed minimum death benefits, as previously mentioned. -18- INVESTMENTS Our principal investment strategy is to maintain a balanced, well-diversified portfolio supporting the insurance contracts written. We make shifts in our investment portfolio depending on, among other factors: . our evaluation of risk and return in various markets, . consistency with our business strategy and investment guidelines approved by the board of directors, . the interest rate environment, . liability durations, and . changes in market and business conditions. Invested assets and cash (in millions)

----------------------------------------------------- (1) National Association of Insurance Commissioners ("NAIC"). -- Class 1 = A- and above -- Class 2 = BBB- through BBB+ -19- Fixed maturity securities We carry our fixed maturity securities investment portfolio, which is considered available for sale, at estimated fair value. The aggregate unrealized appreciation or depreciation is recorded as a component of accumulated other comprehensive income (loss), net of any applicable income tax expense on unrealized appreciation. The aggregate unrealized appreciation on fixed maturity securities at June 30, 2002 was $23.6 million. The aggregate unrealized appreciation on fixed maturity securities at December 31, 2001 was $24.3 million. We do not record tax benefits related to aggregate unrealized depreciation on investments. Fair values are sensitive to movements in interest rates and other economic developments and can be expected to fluctuate, at times significantly, from period to period. At June 30, 2002, investment-grade fixed maturity securities, cash and short-term investments accounted for 80.6 percent of invested assets and cash, compared with 83.5 percent at December 31, 2001. At June 30, 2002, approximately 11.8 percent of investment-grade fixed maturity securities were mortgage-backed securities, down from 22.0 percent at December 31, 2001, primarily due to significant sales of mortgage-backed securities in the second quarter. Approximately 14.7 percent of the investment-grade fixed maturity securities at June 30, 2002 consisted of corporate asset-backed securities, compared with 15.3 percent at December 31, 2001. The majority of investments in asset-backed securities were backed by commercial mortgages, home equity loans, collateralized loan and bond obligations and manufactured housing loans. Real estate-related investments The $177.7 million real estate portfolio, consisting of joint venture and third-party mortgage loans and other real estate-related investments, constituted 5.4 percent of cash and invested assets at June 30, 2002, compared with $176.4 million, or 4.6 percent, at December 31, 2001. Real estate outlook Loans to a master limited partnership (the "MLP") between subsidiaries of Kemper Corporation and subsidiaries of Lumbermens Mutual Casualty Company, a former affiliate, amounted to $97.3 million at June 30, 2002. The MLP's underlying investment primarily consists of a water development project located in California's Sacramento River Valley. On February 15, 2001, the State of California's State Water Resources Control Board ("SWRCB") approved the project's water right permit. The SWRCB issued the permit in July 2001. Additionally, the Army Corps of Engineers issued required permits on June 26, 2002. Various local permits are/may be required in addition to the state and federal permits. -20- Troubled real estate-related investments consisted of loans on nonaccrual status, before reserves and write-downs, totaling $10.6 million at June 30, 2002 and $13.0 million at December 31, 2001. Loans on nonaccrual status, after reserves and write-downs, amounted to $5.0 million at June 30, 2002 and $7.4 million at December 31, 2001. Net investment income Pre-tax net investment income totaled $115.9 million in the first six months of 2002, compared with $126.8 million in the first six months of 2001. This includes our share of operating gains and losses from equity investments in real estate consisting of other income less other expenses. Total foregone investment income before tax on both nonaccrual real estate-related investments and nonperforming fixed maturity securities was as follows: Six Months Ended June 30 ------------------------- 2002 2001 -------- -------- Real estate-related investments $ .5 $ 4.4 Fixed maturities 1.8 - ------- ------- Total $ 2.1 $ 4.4 ======= ======= Foregone investment income is primarily due to certain real estate-related investments that have been placed on nonaccrual status and bonds that are in default. Any increase in nonperforming securities and either worsening or stagnant real estate conditions, would increase the expected adverse effect on future investment income and realized investment results. Interest rates In the first six months of 2002, the Federal Open Market Committee met four times but left interest rates unchanged. Interest rate fluctuations can cause significant fluctuations in both future investment income and future realized and unrealized investment gains and losses. -21- LIQUIDITY AND CAPITAL RESOURCES We carefully monitor cash and short-term investments to maintain adequate balances for timely payment of policyholder benefits, expenses, taxes and policyholders' account balances. In addition, regulatory authorities establish minimum liquidity and capital standards. The major ongoing sources of liquidity are deposits for fixed annuities, premium income, investment income, separate account fees, other operating revenue and cash provided from maturing or sold investments. We also continuously monitor capital resources. Our adjusted capital and surplus (statutory accounting basis) is compared with required capital under the National Association of Insurance Commissioners risk-based capital ("RBC") approach. During the second quarter our RBC ratio declined, but is still considered more than adequate. One source of the decline in the capital ratio has been the requirement to establish additional reserves for guarantees on the DESTINATIONS/(SM)/ product. These reserves are driven by the decline in the stock market and additional deposits into existing contracts. Further market declines will require establishment of additional reserves. Ratings Our Standard & Poor's ("S&P") rating was coupled with ZFS through December 31, 2001 due to the financial strength of ZFS and Zurich Life and the designation of Zurich Life as one of ZFS's core businesses. In September 2001, S&P announced that it was downgrading several insurance groups based on the potential catastrophic losses from the September 11, 2001 terrorist attacks on the United States of America, and the subsequent fall in the equity markets. At that time, ZFS was placed on CreditWatch with negative implications and its rating, and therefore ours, was downgraded from "AA+" to "AA", S&P's third highest rating. In February of 2002, ZFS received another downgrade to "AA-" and remained on CreditWatch with negative implications. During 2001, ZFS considered the divestiture of Zurich Life. Although ZFS made the decision to retain Zurich Life in December 2001, S&P decided to uncouple Zurich Life's ratings from ZFS in March 2002, primarily due to ZFS's consideration of the Zurich Life divestiture and we received a rating of "A+", reflecting the non-supported strength of Zurich Life and we were taken off CreditWatch. In August 2002, the outlook for ZFS was revised from stable to negative and concurrently our A+ rating was placed on a negative outlook. We share our A.M. Best rating with ZFS. In the fall of 2001, A.M. Best placed ZFS under review with developing implications but did not change its ratings. In March 2002, ZFS's A.M. Best A+ (Superior) financial strength rating was affirmed, removed from under review and assigned a negative outlook. In June, 2002, Moody's Investors Service lowered our rating to A2, its sixth highest rating out of nineteen. The rating comes with a stable outlook and is no longer under review. -22- Our ratings as of June 30, 2002 are as follows: Ratings ------- A.M. Best Company . . . . . . . . . . . A+ (Superior) Moody's Investors Service . . . . . . . A2 (Good) Standard & Poor's . . . . . . . . . . . A+n (Strong) -23- PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Sole Shareholder of KILICO held on May 14, 2002, the following directors were elected: Martin D. Feinstein, Chairman Gale K. Caruso Frederick L. Blackmon Debra P. Rezabek Richard M. Sousa George Vlaisavljevich ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit No. Description 3(a) Articles of Incorporation are incorporated herein by reference to Exhibits filed with Registration Statement on Form S-1 (File No. 333-02491) filed on or about April 12, 1996. 3(b) Bylaws are incorporated herein by reference to Exhibits filed with Registration Statement on Form S-1 (File No. 333-02491) filed on or about April 12, 1996. 4(a) Variable and Market Value Adjusted Deferred Annuity Contract is incorporated herein by reference to Exhibits filed with Registration Statement on Form S-1 (File No.33-43462) filed October 23, 1991. 4(b) Certificate to Variable and Market Value Adjusted Deferred Annuity Contract and Enrollment Application is incorporated herein by reference to Exhibits filed with Registration Statement on Form S-1 (File No. 33-43462) filed October 23, 1991. -24- Exhibit No. Description 4(c) Individual Variable and Market Value Adjusted Annuity Contract and Enrollment Application is incorporated herein by reference to Exhibits filed with Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 for KILICO Variable Annuity Separate Account (File No. 33-43501) filed November 19, 1993. 4(d) Endorsement to Variable and Market Value Adjusted Deferred Annuity Contract is incorporated herein by reference to Exhibits filed with Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 for KILICO Variable Annuity Separate Account (File No. 33-43501) filed November 19, 1993. 4(e) Endorsement to Certificate to Variable and Market Value adjusted Deferred Annuity Contract is incorporated herein by reference to Exhibits filed with Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 for KILICO Variable Annuity Separate Account (File No. 33-43501) filed November 19, 1993. 4(f) Revised Variable and Market Value Adjusted Deferred Annuity Contract is incorporated herein by reference to Exhibits filed with Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 for KILICO Variable Annuity Separate Account (File No. 33-43501) filed November 19, 1993. 4(g) Revised Certificate to Variable and Market Value Adjusted Deferred Annuity Contract is incorporated herein by reference to Exhibits filed with Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 for KILICO Variable Annuity Separate Account (File No. 33-43501) filed November 19, 1993. 10 Distribution Agreement between Kemper Investors Life Insurance Company and Investors Brokerage Services, Inc. is incorporated herein by reference to Exhibits filed with Amendment No. 4 to Registration Statement on Form S-1 (File No. 33-43462) filed on April 14, 1995. 99.1 Certification of CEO Pursuant to 18 U.S.C. Section 1350, As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of CFO Pursuant to 18 U.S.C. Section 1350, As adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the three months ended June 30, 2002. -25- Kemper Investors Life Insurance Company and Subsidiaries FORM 10-Q For the fiscal period ended June 30, 2002 -------------------------------------------- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Kemper Investors Life Insurance Company (Registrant) Date: August 14, 2002 By: /s/GALE K. CARUSO ---------------------------------- Gale K. Caruso President, Chief Executive Officer and Director Date: August 14, 2002 By: /s/FREDERICK L. BLACKMON --------------------------------- Frederick L. Blackmon Executive Vice President, Chief Financial Officer and Director -26-

KEMPER INVESTORS LIFE INSURANCE CO 10-Q