EXHIBIT 10.35
CONFIDENTIAL TREATMENT*
*CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO THE RULES
AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION. BRACKETS AND "+" HAVE
BEEN USED TO IDENTIFY INFORMATION WHICH IS SUBJECT TO A CONFIDENTIAL REQUEST.
AMENDMENT NUMBER 6 TO THE
AUTOMATIC FLEXIBLE PREMIUM VARIABLE LIFE REINSURANCE AGREEMENT NUMBER 2
(REFERRED TO AS THE AGREEMENT)
BETWEEN
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
ST. PETERSBURG, FLORIDA
(REFERRED TO AS THE REINSURED)
and
GLOBAL PREFERRED RE LIMITED
(F/K/A WMA LIFE INSURANCE COMPANY LIMITED)
XXXXXXXX, BERMUDA
(REFERRED TO AS THE REINSURER)
Effective July 1, 2001
I. Article I, Basis of Reinsurance, Paragraph 3, is replaced by the
following:
3. Coverages. The individual Reinsured Plans reinsured as shown
in Schedule A, are the Financial Freedom Builder and Freedom
Elite Builder contracts and any riders, supplemental benefits
or endorsements attached thereto, with an issue date after
March 31, 1998. Reinsurance will be limited in percentage as
provided in Schedule B1, as amended. Only plans sold by a
Producer registered with an affiliated broker-dealer
identified in Exhibit A shall be reinsured under this
Agreement
II. Article XI, Reinsurance Reserves, Paragraph 6, is replaced by the
following:
6. The Letter(s) of Credit in favor of the Reinsured will be an
amount which at all times must equal or exceed the reinsurance
credits, net of policy loans, taken or reasonably estimated to
be taken by the Reinsured in connection with this Agreement
under Exhibit 8, and under Exhibit 11, Part 1, Column 3, Line
4c, and any other liabilities held for the Reinsured Policies
and reported on the Reinsured's statutory financial
statements. Subject to the approval of the State of Ohio
Department of Insurance, the amount of the Letter of Credit
may be reduced by the quota share percentage of the excess of
the Separate Account Value over the Separate Account Statutory
Reserve. Should the reinsurance credit not be allowed, as a
result of this reduction in any applicable jurisdiction, the
Letter of Credit will be restored to the value that it would
have been without this reduction.
III. Article XIII, General Provisions, Paragraph 3, is replaced by the
following:
3. Expenses. The Reinsurer will have liability equal to the quota
share percentage of any extra-contractual damages which are
rendered against the Reinsured as a result of acts, commission
or course of conduct committed by a Producer of World
Marketing Alliance, Inc. or its affiliates, in connection
with the Reinsured Plans. The Reinsurer will receive the
quota share percentage of any reimbursement that the
Reinsured collects from World Marketing Alliance, Inc. or its
affiliates. In no event whatsoever will the Reinsured have any
liability for extra-contractual damages assessed against the
Reinsurer as a result of acts, omissions, or course of conduct
committed by the Reinsurer in connection with the reinsurance
of the Reinsured Plans under this Agreement.
IV. Article XX, DURATION OF AGREEMENT, Paragraph 3, is replaced by the
following:
3. After the initial term of this Agreement, this Agreement may
also be canceled by either party, as it pertains to the
reinsurance of new:
(i) Financial Freedom Builder policies and
riders thereafter, by giving three hundred
sixty-five (365) days advance notice of
cancellation in writing. In such case, the
Reinsured shall continue to cede, and the
Reinsurer shall continue to accept
reinsurance, under this Agreement on new
Financial Freedom Builder policies and
riders issued during the three hundred
sixty-five (365) day period, and the
interest of the Reinsurer in new Financial
Freedom Builder policies and rider business
shall cease at the end of the three hundred
sixty-five (365) day period.
(ii) Freedom Elite Builder policies and riders
thereafter, by giving one hundred eighty
(180) days advance notice of cancellation in
writing before the initial term of the
agreement or subsequent termination date. If
neither party provides notice of
cancellation, the Reinsured shall continue
to cede, and the Reinsurer shall continue to
accept reinsurance, under this Agreement on
new Freedom Elite Builder policies and
riders, on a year-to-year basis after the
expiration of the initial term of this
agreement.
V. Exhibit A, PRODUCER, is replaced by the following:
Flexible Premium Variable Life policies, applicable riders, and
endorsements must be sold by and distributed through:
- WMA Securities, Inc. (and/or its successors) and its affiliates
- World Financial Group, Inc. (and/or its successors)
- World Group Securities, Inc. (and/or its successors)
VI. Schedule A, BUSINESS REINSURED, is amended to include the attached
"Schedule A1, BUSINESS REINSURED - Freedom Elite Builder Policies &
Riders".
VII. Schedule B1, AMOUNT OF REINSURANCE, is replaced by the following:
1. The Quota Share Percentage for Policy Issue Dates from:
- March 1, 1998 through December 31, 1998, shall be 20%, and
- January 1, 1999 through July 1, 2001, shall be 0%.
2. At any time, on or after July 1, 2001 and before April 1,
2003, the Reinsurer shall have the option (provided the
Reinsurer demonstrates sufficient capacity) to convert the
reinsurance on all policies and riders reinsured under the
Automatic Flexible Premium Variable Life Reinsurance Agreement
Number 3 ("FFB MRT Agreement"), issued from January 1, 1999 to
the date the Reinsurer elects to convert the reinsurance on
the policies and riders, to the Agreement. The Reinsurer shall
demonstrate its capacity by showing the Reinsured that its
unassigned invested securities, together with anticipated cash
flows (including retrocession facilities), will be sufficient
to meet expected reinsurance settlements, with regard to the
converted reinsurance on the policies and riders, for a period
of not less than twenty-four months following the date the
Reinsurer elects to convert the reinsurance of the policies
and riders from the FFB MRT Agreement to the Agreement. Upon
election to convert the reinsurance on the policies and
riders, the initial ceding allowance payable to the Reinsured
shall equal (a) less (b), where:
(a) equals settlements that would have otherwise occurred
under the Agreement, had the policies and riders been
reinsured under the Agreement from the policy issue
date to the date the Reinsurer elects to convert the
reinsurance on the policies and riders from the FFB
MRT Agreement, [+++++++++] and
(b) equals all settlements due or paid under the FFB MRT
Agreement from the policy issue date to the date the
Reinsurer elects to convert the reinsurance on the
policies and riders to the Agreement from the FFB MRT
Agreement, [+++++++++].
The initial ceding allowance shall be payable within 14 days
after the Reinsurer's election to convert the reinsurance of
the policies and riders.
3. At any time, on or after July 1, 2001 and before April 1,
2003, the Reinsurer shall have the option (provided the
Reinsurer demonstrates sufficient capacity) to effect
reinsurance up to a 20% Quota Share on all Freedom Elite
Builder policies, as shown in Schedule A and sold by a
Producer registered with an affiliated broker-dealer
identified in Exhibit A, issued from July 1, 2001 to the date
the Reinsurer elects to effect the reinsurance on the policies
and riders, to the Agreement, if the previous calendar year's
sales produced annual first year collected target premium
volume of VUL, issued by the Reinsured and AUSA Life Insurance
Company, Inc. and written by Producers registered with an
affiliated broker-dealer identified in Exhibit A, in the
aggregate, of at least $50 million in 2001 and increasing by
10% each year thereafter. The Reinsurer shall demonstrate its
capacity by showing the Reinsured that its unassigned invested
securities, together with anticipated cash flows (including
retrocession facilities), will be sufficient to meet expected
reinsurance settlements, with regard to the effected
reinsurance on the policies and riders, for a period of not
less than twenty-four months following the date the Reinsurer
elects to effect the reinsurance of the policies and riders to
the Agreement.
The Reinsurer's Quota Share of the Freedom Elite Builder
policies shall be net of the Reinsured's quota share cession
of mortality risk, if any, to a reinsurer, or reinsurers,
other than the Reinsurer. The initial ceding allowance shall
include the Reinsured's quota share reinsurance premiums paid
to its reinsurer(s), less applicable claims reinsured by such
reinsurer(s), multiplied by the Quota Share percentage.
Thereafter, expense allowances shall include the Reinsurer's
Quota Share percentage of reinsurance premiums paid by the
Reinsured to its reinsurer(s) and death claim amounts shall be
reduced by the Quota Share percentage of amounts ceded to such
reinsurer(s).
Upon election to effect the reinsurance on the policies and
riders, the initial ceding allowance payable to the Reinsured
shall equal settlements that would have otherwise occurred
under the Agreement, had the policies and riders been
reinsured under the Agreement from the policy issue date to
the date the Reinsurer elects to effect the reinsurance on the
policies and riders, [+++++++++].
The initial ceding allowance shall be payable within 14 days
after the Reinsurer's election to effect the reinsurance of
the policies and riders.
4. The Reinsurer agrees to exercise, in unison, its option to:
- Convert business reinsured under the FFB MRT
Agreement to the Agreement,
- Effect reinsurance on the Freedom Elite Builder
policies and riders, as shown in Schedule A and sold
by a Producer registered with an affiliated
broker-dealer identified in Exhibit A, to the
Agreement, and
- Prospectively increase its quota share on business
reinsured under the Automatic Variable Annuity
Reinsurance Agreement, subject to the limitations set
forth in that Agreement.
The Reinsurer shall exercise its options in a manner such that
the ratio of (i) to (ii) shall equal the ratio of (iii) to
(iv), where:
(i) Equals the initial ceding allowance due the Reinsured
on business:
(a) Converted under the FFB MRT Agreement, and
(b) Effected on the Freedom Elite Builder
policies and riders to the Agreement
(ii) Equals the initial ceding allowance otherwise due the
Reinsured if:
(a) All eligible in force business were
converted under the FFB MRT Agreement, and
(b) Reinsurance under the Agreement were
effected for all eligible Freedom Elite Builder
policies and riders in force.
(iii) Equals the initial ceding allowance due the Reinsured
on business subject to the quota share increase under
the Automatic Variable Annuity Reinsurance Agreement,
and
(iv) Equals the initial ceding allowance otherwise due the
Reinsured if the quota share were increased to the
maximum allowable under the Automatic Variable
Annuity Reinsurance Agreement on all in force
business issued on or after January 1, 1999.
For example, assume if on March 31, 2001:
- The Reinsurer were to convert all policies reinsured
under the FFB MRT Agreement to the Agreement and
reinsurance under the Agreement were effected for all
Freedom Elite Builder policies and riders in force,
the initial ceding allowance would equal $40,000,000,
and
- The Reinsurer were to increase the quota share on all
policies reinsured under the Automatic Variable
Annuity Reinsurance Agreement to the maximum
otherwise permitted, the initial ceding allowance
would equal $20,000,000, and
- The total combined initial ceding allowance to paid
by the Reinsurer is $30,000,000, then
- The Reinsurer would only be permitted to (a) convert
policies reinsured under the FFB MRT Agreement to the
Agreement and (b) effect reinsurance under the
Agreement for all Freedom Elite Builder policies and
riders in force, on a last in first out reinsured
basis, until the initial ceding allowance equals
$20,000,000 (2/3 of the total), and
- The Reinsurer would only be permitted to increase the
quota-share on policies reinsured under the Automatic
Variable Annuity Reinsurance Agreement to the maximum
otherwise permitted, on a last in first out reinsured
basis, until the initial ceding allowance equals
$10,000,000 (1/3 of the total).
5. The Reinsurer and the Reinsured will jointly determine the
quota share percentages for the balance of the calendar year
in which the Reinsured converts the reinsurance on the
policies and riders reinsured under the FFB MRT Agreement to
the Agreement. Thereafter, the Reinsurer and the Reinsured
will jointly determine the quota share percentages no later
than December 1st applicable to new Financial Freedom Builder
policy issues in the following calendar year. The determining
factors for the quota share percentage are the expected Total
Flexible Premium Variable Life First Year Target Premiums
Collected by the Reinsured for the calendar year that the
quota share percentage will be applicable. This determination
of the quota share percentage will be on a mutually acceptable
basis, recognizing the good faith nature of this Agreement,
and with references to the estimates made by both parties,
based on results from prior periods.
The Scheduled Quota Share Percentages, on Financial Freedom
Builder policies, for each threshold of expected Total
Flexible Premium Variable Life First Year Target Premiums
Collected by the Reinsured are shown in the following table:
--------------------------------------------------------
TOTAL FLEXIBLE PREMIUM VARIABLE LIFE SCHEDULED
FIRST YEAR TARGET QUOTA SHARE
PREMIUMS COLLECTED PERCENTAGE
BY THE REINSURED (IN MILLIONS)
--------------------------------------------------------
$ 50-149 20%
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$150-199 25%
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$200-249 30%
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$250-599 35%
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$ 600+ 40%
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VIII. Schedule B2, COMMISSION AND EXPENSE ALLOWANCES, is amended to include
the attached "Schedule B2 - Addendum, COMMISSION AND EXPENSE
ALLOWANCES, Freedom Elite Builder Policies & Riders"
* * * * *
Except as expressed herein, all terms, covenants and provisions of the
Agreement, as amended, that are not in conflict with the provisions of this
amendment shall remain unaltered and in full force and effect.
In witness of the above, the Reinsured and the Reinsurer, by their respective
officers have executed this amendment in duplicate at the dates and places
indicated and shall be effective as of July 1, 2001.
WESTERN RESERVE LIFE ASSURANCE GLOBAL PREFERRED RE LIMITED
CO. OF OHIO
at St. Petersburg, FL at Duluth, Georgia
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on December 31, 2001 on December 31, 2001
------------------------------------ -----------------------------------
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxx X. XxXxxxxx
------------------------------------ ----------------------------------
Title: VP and Managing Actuary Title: President and Actuary
By: /s/ ILLEGIBLE By: /s/ Xxxxxx X. XxXxxxx
----------------------------------- ----------------------------------
Attest: Attest: Director, Financial Projects
Schedule A1
BUSINESS REINSURED
Freedom Elite Builder Policies & Riders
FORM NUMBER DESCRIPTION
----------- -----------
FORM VL95 WRL FREEDOM ELITE BUILDER
ULB2.01.05.84 Accidental Death Benefit Rider Form #ULB2.01.05.84
ULR3.01.05.84 Children's Insurance Rider (Form #ULR3.01.05.84)
ULB4.01.03.86 Disability Waiver & Income Rider (Form #ULB4.01.03.86)
ULB1.01.05.84 Disability Waiver Rider (Form #ULB1.01.05.84)
LB02 Living Benefit Rider (LB02)
PIR12 Primary Insured Rider (Form #PIR12)
PIR13 Primary Insured Rider Plus (Form #PIR13)
WOIR Other Insured Rider (Form #WOIR)
VL95AL Alabama Xxxxx Xxxxxxxxx
XX00XX Xxxxxxxx Xxxxx Variation
VL95CO Colorado Xxxxx Xxxxxxxxx
XX00XX Xxxxxxxxxxx Xxxxx Variation
VL95FL Florida State Variation
VL95GA Georgia State Variation
VL95HI Hawaii State Variation
VL95ID Idaho State Variation
VL95IL Illinois State Variation
VL95IN Indiana Xxxxx Xxxxxxxxx
XX00XX Xxxxx Xxxxx Variation
VL95MN Minnesota State Variation
VL95MO Missouri State Variation
VL95NE Nebraska State Variation
VL95NV Nevada Xxxxx Xxxxxxxxx
XX00XX Xxx Xxxxxxxxx Xxxxx Variation
VL95NC North Carolina State Variation
VL95ND North Dakota State Variation
VL95OK Oklahoma State Variation
VL95OR Oregon State Variation
VL95SC South Carolina State Variation
VL95TN Tennessee State Variation
VL95TX Texas State Variation
VL95UT Utah State Variation
VL95VT Vermont State Variation
VL95VA Virginia Xxxxx Xxxxxxxxx
XX00XX Xxxxxxxxxx Xxxxx Variation
VL95WV West Virginia State Variation
SCHEDULE B2 - ADDENDUM
COMMISSION AND EXPENSE ALLOWANCES
FREEDOM ELITE BUILDER POLICIES & RIDERS
Due Reinsured
Commission and Expense Allowances(*)
1. Issue and Maintenance Expense Allowance
2. Sales and Marketing Premium Expense Allowance
3. Commission Allowance
4. Claim Expense Allowance
5. Target Surplus Allowance
6. DAC Proxy Tax Allowance
7. Mortality risk premiums on quota share cessions
(*) All multiplied by the quota share percentage.
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1. Issue and Maintenance Expense Allowances
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a. Issue Expense Allowance - $[+++++] base per policy
- $[+++++] per rider
- $[+++++] per unit, base & rider (unit=$1,000 of
specified amount / face amount)
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b. Maintenance Expense Allowance - $[+++++] per policy in force at end of each calendar month
(all years) - $[+++++] per rider in force at end of each calendar
- [+++++] of collected premium.
- $[+++++] per premium collection, estimated as $[+++++]
per policy in force at end of each calendar month
- [+++++] of Separate Account Value in force at the end of
each calendar quarter.
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c. Exhibit 6 Expense Allowance (Intended to reflect Exhibit 6 type expenses.)
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- Exhibit 6 Taxes Paid - [+++++] for 2001, to be reviewed annually. Amount due
the Reinsured is the quota share of the amount paid by the
Reinsured.
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- Other, including guaranteed fund Per the Reinsured Ledger
assessments
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d. Investment Operations Tax Accrued amount of reserve for any taxes that may result from
investment operations of sub-accounts
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e. Gains (Losses) All gains/(losses) incurred by Reinsured.
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2. Sales and Marketing Premium Expense Allowance
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a. Marketing Expense - X% of collected target premium, where X% is the
weighted average of the Total Percent from the following
table using the target premium weighted over the Bands 1
through 4:
Band Basic Advancing Total Percent
1 [+++] [+++] [+++]
2 [+++] [+++] [+++]
3 [+++] [+++] [+++]
4 [+++] [+++] [+++]
- [+++] of collected excess premium
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3. Commission Allowances
Actual commissions paid per the Reinsured Ledger. Commission schedules, for
information purposes only, are as follows:
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TARGET PREMIUM EXCESS PREMIUM
----------------------------------------------------------------------------------------------------
POLICY BANDS BAND BAND BANDS BANDS ASSET
YEAR 1 & 2 3 4 1 & 2 3 & 4 TRAIL*
----------------------------------------------------------------------------------------------------
1 [+++] [+++] [+++] [+++] [+++] [+++]
----------------------------------------------------------------------------------------------------
2 [+++] [+++] [+++] [+++] [+++] [+++]
----------------------------------------------------------------------------------------------------
3 [+++] [+++] [+++] [+++] [+++] [+++]
----------------------------------------------------------------------------------------------------
4 [+++] [+++] [+++] [+++] [+++] [+++]
----------------------------------------------------------------------------------------------------
5-10 [+++] [+++] [+++] [+++] [+++] [+++]
----------------------------------------------------------------------------------------------------
11+ [+++] [+++] [+++] [+++] [+++] [+++]
----------------------------------------------------------------------------------------------------
(*) Paid beginning of first anniversary on cash value of
policies with a cash value, net of policy loans, of
$5,000 or more.
-----------------------------------------------------------------------------------------------------------------
4. Claim Expense Allowance
-----------------------------------------------------------------------------------------------------------------
a. Death Claim Expense - [++++] per death claim on base policy, OIR and CIR ($0
on PIR)
-----------------------------------------------------------------------------------------------------------------
b. Lapse Termination Expense (CSV=0) - [++++] per lapse
-----------------------------------------------------------------------------------------------------------------
c. Surrender Termination Expense (CSV>0) - [++++] per surrender on base policy
- [++++] per surrender on rider
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5. Target Surplus Allowance Currently, [+ + + + +] of Separate Account Value less prior Target Surplus
balance accrued at an effective annual interest rate of [+ + + + +] (if
positive); if amount is negative, balance is paid to Reinsurer. If the
Reinsured's method or percent used in calculating Target Surplus on the
Reinsured Plans changes, which results in an immediate change in the
Target Surplus balance, the Reinsurer may request a grade in period of
no more than five (5) years.
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---------------------------------------------------------------------------------------------------------------------
6. DAC Proxy Tax - [+ + + + +] on Premiums and net transfers into Separate Account from
Fixed Account.
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7. Mortality Risk Premiums Paid to - If applicable, actual mortality risk premiums paid on quota
Reinsurer(s) share cessions to reinsurer(s), other than the Reinsurer, per the
Reinsured ledger. Mortality risk premium schedules, for information
purposes only, are as follows:
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