EXHIBIT (i)(1)
ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
AND
AMERICAN GENERAL LIFE COMPANIES
THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") made March 25, 2004 to
be effective as of February 1, 2004 (the "Effective Date") is by and between THE
UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK ("USL"), a New York
domiciled life insurance company, and AMERICAN GENERAL LIFE COMPANIES ("AGLC"),
a corporation organized pursuant to the laws of Delaware with its principal
place of business in Houston, Texas and formerly known as American General
Independent Producer Division.
RECITALS
WHEREAS, USL is a wholly-owned indirect subsidiary of AMERICAN INTERNATIONAL
GROUP, INC. ("AIG"), a Delaware corporation;
WHEREAS, AGLC is a wholly-owned indirect subsidiary of AIG; and currently has
employees in Houston, Texas; Dallas, Texas; Neptune, New Jersey; Chicago,
Illinois; Milwaukee, Wisconsin; New York, New York; Syracuse, New York; and
Springfield, Illinois;
WHEREAS, USL and AGLC are affiliates under the ultimate common control of AIG
pursuant to New York Insurance Law Section 1501;
WHEREAS, AGLC was formed to provide administrative and other services to
affiliated companies to attain synergies and expense savings;
WHEREAS, USL desires AGLC to perform certain administrative and other services
as set out below (the "Services") on behalf of USL and with respect to its
insurance business and operations;
WHEREAS, USL and AGLC contemplate that such an arrangement will achieve certain
operating economies and improve services to the benefit of USL and USL's
insureds;
WHEREAS, USL and AGLC wish to identify the respective Services to be provided to
USL by AGLC and to provide a method for identifying the charges to be assessed
against USL and compensation to be paid to AGLC with respect to the Services;
and
WHEREAS, USL and AGLC wish to assure that all charges for the services are
reasonable and in accordance with the applicable laws and regulations of the
State of New York, including, without limitation, the New York Insurance
Department Regulation No. 33, and to the extent practicable, reflect reasonable
costs and are determined in a fair and equitable manner.
NOW, THEREFORE, in consideration of the premises and of the mutual promises set
forth herein, and intending to be legally bound hereby, USL and AGLC agree as
follows:
1. SERVICES TO BE PROVIDED BY AGLC TO USL. Subject to the terms,
conditions, and limitations of this Agreement, AGLC shall, at USL's
request and direction, provide to USL the following services:
(a) DISTRIBUTION/PRODUCER MANAGEMENT. AGLC shall provide
administrative services relating to general agents and other
producers (collectively, "Producers") including: (i) recruiting
Producers for appointment by USL; (ii) providing general
administrative and managerial services to Producers in order to
assist Producers in the sale of USL products; (iii) assisting
with due diligence investigations of USL Producers and Producer
practices; (iv) developing alternative compensation, benefits
and financing plans for Producers; (v) administering Producer
licenses, contracts and compensation and maintaining a computer
database reporting license and contract statuses; (vi) providing
payroll services, including the calculation of commissions for
Producers and the generation and delivery of a single commission
check containing commissions generated by affiliate sales. As
commissions become due, USL will transfer commission monies into
an AGLC bank account and the amount of commission paid by USL
will be delineated to the Producer; (vii) planning Producer
conferences in accordance with New York Insurance Law Section
4228; (viii) supporting general agency communications; and (ix)
designing and assisting in implementation of training programs,
including ones related to product features, insurance industry
developments, legal compliance requirements, and the
ramifications of USL membership in the Insurance Marketplace
Standards Association.
(b) MARKETING SUPPORT/PRODUCT DEVELOPMENT AND ADMINISTRATION. With
the exception of all fixed annuity products issued by or assumed
by USL prior to the effective date of this Agreement or issued
by USL after the effective date of this Agreement (hereinafter
referred to as "all USL fixed annuity products"), AGLC shall
provide administrative services relating to marketing support
and product development and administration with respect to
insurance and variable annuity products, individual and group,
and registered and non-registered, including: (i) conducting
formal insurance market research; (ii) developing and designing
new products and obtaining regulatory approvals for
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such products; (iii) developing illustration and sales
materials; (iv) providing case design underwriting services; (v)
evaluating product performance based on production, expense,
persistency, investment and mortality levels; and (vi)
maintaining sales illustration, advertising materials and
re-projection software which are compliant with New York
Insurance Law Section 3209 and New York Insurance Regulation 74
and maintained in accordance with New York Insurance Regulation
152.
(c) REINSURANCE AND UNDERWRITING. AGLC shall: (i) advise with
respect to reinsurance retention limits; (ii) provide advice and
support with respect to the negotiation of reinsurance treaties;
(iii) provide advice and support with respect to the management
of reinsurer relationships; (iv) provide analyses of
underwriting standards; (v) assist and advise in the development
of appropriate underwriting standards; (vi) distribute to
corporate employers and/or agents underwriting guidelines
applicable to corporate executive benefit products; (vii) review
insurance, variable annuity and corporate executive benefit
applications for conformity with underwriting criteria; (viii)
perform all underwriting pertaining to those applications; (ix)
prepare and maintain life insurance binder agreements related to
corporate executive benefit products; and (x) designate as ready
for issue all insurance, variable annuity and corporate
executive benefit applications which clearly fall within
underwriting criteria. AGLC expressly understands that all
underwriting decisions shall ultimately be the responsibility of
USL and subject to the control and direction of USL.
(d) POLICYOWNER AND CONTRACT HOLDER SERVICES. With the exception of
all USL fixed annuity products, AGLC shall provide
administrative policyowner and contract holder ("Customer")
services including: (i) receiving and processing insurance
(including variable universal life), annuity and corporate
executive benefit product applications, amendments and riders,
physically generating the related insurance policies, annuity
contracts, amendments and riders on USL paper, and transmitting
all such USL policies, amendments and riders to Customers on USL
stationery; (ii) maintaining computerized and hard copy files
relating to insurance policies, annuity contracts and corporate
executive benefit products consistent with New York Insurance
Department Regulation 152; (iii) billing Customers; (iv)
preparing and updating Customer payment records to reflect
premiums and annuity considerations paid to USL and initially
received by Chase National Bank ("Chase") or another financial
institution of USL's choice pursuant to lockbox agreements among
Chase (or other financial institution), USL and AGLC as
contemplated in Section 1.(f) below; (v) handling Customer tax
issues such as processing requests related to XXX rollovers; and
(vi) administering requested policy modifications consistent
with underwriting guidelines subject to the control and
direction of USL. At all times that AGLC is providing the above
Customer services, it shall answer all telephone inquiries as
USL and when making communications with Customers in writing,
such communications shall be on USL stationery.
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(e) SAFEGUARDING CUSTOMER INFORMATION. AGLC shall implement and
maintain appropriate measures designed to meet the objectives of
Department Regulation No. 173, with respect to safeguarding
USL's customer information and customer information systems.
AGLC shall adjust its information security program at the
request of USL for any relevant changes dictated by USL's
assessment of risk around its customer information and customer
information systems. Confirming evidence that AGLC has satisfied
its obligations under this agreement shall be made available,
during normal business hours, for inspection by USL, anyone
authorized by USL, and any governmental agency that has
regulatory authority over USL's business activities.
(f) CLAIMS PROCESSING AND PAYMENT. With the exception of all USL
fixed annuity products, AGLC shall process claims, contestable
and non-contestable. AGLC will pay insurance and annuity
benefits with a check drawn on an USL bank account. At all times
that AGLC is providing claims processing and payment services,
AGLC will answer all telephone inquiries as USL and will use USL
stationery when communicating in writing with respect to a
claim. AGLC expressly understands that all claims decisions
shall ultimately be the responsibility of USL and subject to the
control and direction of USL. AGLC will comply with all
applicable licensing requirements.
(g) ACTUARIAL/FINANCIAL SERVICES. With the exception of all USL
fixed annuity products (i) AGLC shall provide actuarial and
financial services, including: (a) preparing actuarial reports,
opinions and memoranda and assisting with asset/liability
management and cash flow testing which will be provided in hard
copy annually; (b) conducting product experience studies which
will be provided in hard copy as required; (c) preparing reserve
calculations and valuations which will be provided in hard copy
annually; (d) assisting in the development of budgets and
business plans which will be provided in hard copy annually; (e)
preparation of books of account including general ledgers,
transaction registers and trial balances which will be reviewed
for accuracy by USL and provided in hard copy quarterly; (f)
preparing financial statements and reports, including, annual
and quarterly financial statements on both statutory and
generally accepted accounting principles ("GAAP") bases which
will be provided in hard copy; (g) preparing and disseminating
filings with regulatory entities and rating agencies which will
be provided in hard copy as required; (h) developing financial
models which will be provided in hard copy as required; (i)
analyzing capitalization level issues; (j) arranging for one or
more lockboxes owned and controlled by USL at a financial
institution of USL's choice to receive premiums or annuity
considerations paid to USL; (k) inputting into Customer records
information related to premiums or annuity considerations sent
to the financial institution lockbox, provided that USL verifies
that all such information is accurate and properly reflected in
USL's records; and;
(ii) arranging for bank accounts in the name and control of USL
and processing receipts and disbursements subject to the
direction and control of USL.
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Notwithstanding the foregoing, USL shall maintain its cash
concentration account in New York. AGLC will provide USL at
USL's principal office in New York, New York computer access to
the electronic system that generates the electronic records with
respect to USL's business. Computer access to the electronic
data media used to maintain the accounting records relating to
USL business will be readily available, easily accessible and in
a readable format during all normal business hours. AGLC will
maintain format integrity and compatibility of the electronic
records to insure such records which constitute the accounting
records relating to USL's business are current and accessible.
USL shall verify that all accounting transactions are accurately
prepared and reflected in USL's records. This shall be
accomplished through reconciliations of bank and other
accounting records provided by AGLC to USL and by review of
general ledgers.
(h) INFORMATION/TECHNOLOGY. With the exception of all USL fixed
annuity products, AGLC shall provide administrative services
relating to information technology, including: (i) developing
data processing systems strategy; (ii) implementing systems
strategy; (iii) programming computers; (iv) providing data
center services including maintenance and support of mainframe
and distribution process hardware and software; (v) managing
voice communication systems; (vi) managing data communications;
and (vii) providing data security. AGLC shall maintain an
effective disaster recovery program to recover USL's data in the
event of the loss of the physical data center, including daily
or periodic backup as needed. If the electronic data system
being used to maintain the records which comprise the book of
accounts of USL is to be replaced by a system incompatible with
the existing system, AGLC will convert all pre-existing data to
a format compatible with the new system.
(i) GENERAL SERVICES. With the exception of all USL fixed annuity
products, AGLC shall provide the following general
administrative services as to USL purchases and other
transactions: (i) performing document control and production of
standardized company forms; (ii) arranging for warehouse storage
space; (iii) distributing warehoused standardized forms and
other materials; (iv) arranging for travel services; (v)
providing management systems support; (vi) arranging for
commercial real estate brokerage services for the acquisition or
disposition of office space; (vii) arranging for space
programming, design, architectural, construction, environmental,
and property management services; (viii) providing
representation on the American General Purchasing Committee and
participating in national purchasing agreements; (ix) providing
standardized systems for purchasing; accounts payable; and fixed
asset management for office furniture, fixtures, equipment or
supplies; and (x) administering the lease, purchase, or sale of
company automobiles.
(j) REGISTERED AND NON-REGISTERED PRODUCT SERVICES. With respect to:
(i) the development, sale and servicing of products of USL that
are registered with the Securities and Exchange Commission (the
"SEC") as well as to "private placement" products which are not
registered with the SEC; and (ii)
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the administration of the SEC-registered and unregistered
separate accounts of USL, AGLC shall provide in addition to all
any and services described above, all related legal, accounting,
including daily pricing of the underlying divisions of the
Separate Account and preparation of the statutory and GAAP
financial statements, computer support and transfer agent
services.
(k) LEGAL SERVICES. With the exception of all USL fixed annuity
products, AGLC shall provide Legal Services, including: (i)
providing general advice and counsel with respect to applicable
state and federal legal requirements; (ii) assisting with
dispute resolution, including litigation: (iii) managing outside
counsel retained for the purpose of the prosecution, defense or
resolution of legal matters including litigation; (iv)
representing or serving as an advocate for USL in conjunction
with all legal matters; (v) providing tax advice and counsel;
and (vi) providing such other Legal Services as are reasonably
required or requested by USL.
(l) CONSUMER COMPLAINTS. With the exception of all USL fixed annuity
products, AGLC shall provide customer services including
responding to customer complaints and inquiries by letter or
telephone. At all times that AGLC is providing such customer
services, it shall answer all telephone inquiries as USL and
when making communications in writing, such communications shall
be on USL stationary.
(m) HUMAN RESOURCES. AGLC shall provide services including; (i)
general employee communications; (ii) employee training; and
(iii) employee benefit and personnel administration.
(n) ADMINISTRATIVE SERVICES. With the exception of all USL fixed
annuity products, AGLC will provide administrative services
necessary to the conduct of the services provided under this
agreement.
2. PERFORMANCE OF SERVICES. The performance of services by AGLC with
respect to the business and operations of USL shall at all times be
subject to the direction and control of the Board of Directors of USL.
Subject to the terms, conditions and limitations of this Agreement, AGLC
agrees to perform diligently and in a professional manner the services
set forth in Section 1 of this Agreement, and such other directly
related incidental services as USL determines to be reasonably necessary
in the conduct of its insurance operations. AGLC agrees that it will
obtain all licenses necessary for the performance of services pursuant
to the Agreement.
(a) CAPACITY OF PERSONNEL. Whenever AGLC utilizes its personnel to
perform services for USL pursuant to this Agreement, such
personnel shall at all times be subject to the direction and
control of AGLC, and USL shall not have liability to such
personnel for their welfare, salaries or fringe benefits or for
legally required employer contributions or tax obligations with
respect to such personnel.
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(b) EXERCISE OF JUDGMENT IN RENDERING SERVICES. In providing any
service hereunder which requires the exercise of judgment by
AGLC, AGLC shall perform its services in accordance with written
standards, guidelines and procedures USL develops, as
appropriate, and communicates to AGLC. In performing any
services hereunder, AGLC shall at all times act in a manner
reasonably calculated to be in, or not opposed to, the best
interests of USL.
(c) CONTROL. The performance of services by AGLC for USL pursuant to
this Agreement shall in no way impair the absolute control of
the business and operations of USL or AGLC by their respective
Board of Directors. AGLC and USL shall act hereunder so as to
assure the separate operating identity of USL.
3. CHARGES FOR SERVICES. USL agrees to reimburse AGLC for the Services
provided by AGLC pursuant to this Agreement at cost, consistent with
generally accepted accounting principles consistently applied. No
services rendered by AGLC shall be duplicative of any services preformed
by or provided to USL by any other affiliate.
Determination by AGLC of charges hereunder shall be presented to USL,
and if USL objects to such determination, it shall so advise AGLC within
thirty (30) days of receipt of notice of such determination. Unless the
parties can reconcile any such objection, they shall agree to the
selection of a firm of independent certified public accountants which
shall then determine the charges properly allocable to USL and shall,
within a reasonable time, submit such determination, together with the
basis therefore, in writing to AGLC and USL, whereupon such
determination shall be binding. The expenses of such a determination by
a firm of independent certified public accountants shall be borne
equally by AGLC and USL.
4. PAYMENT OF CHARGES. Within thirty (30) days after the end of each
calendar month, AGLC shall submit to USL a written statement of the
charges due from USL to AGLC for the services rendered and facilities
used during the preceding calendar month, including charges not included
in previous statements. All amounts due shall be paid within ten (10)
days following receipt of such statement. The amount transferred by USL
to AGLC shall be a net payment taking into account any amounts owed by
AGLC to USL during the calendar month provided, however, that the amount
of, and the transactions giving rise to, such net payment shall be
evidenced by appropriate documentation and records.
5. USE OF FACILITIES. Subject to the terms, conditions and limitations of
this Agreement, AGLC agrees to make available to USL such of its
facilities (whether leased or owned) as USL may determine to be
reasonably necessary to conduct its insurance operations, including data
processing equipment, business property and communications equipment.
Charges for such use shall be at cost consistent with generally accepted
accounting principles consistently applied. Notwithstanding the
foregoing, none of the facilities used by AGLC employees in performing
services for USL shall be deemed to be
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transferred, assigned or otherwise conveyed to USL as a result of any
performance or use pursuant to this Agreement.
6. SERVICES-RELATED ACCOUNTING RECORDS AND DOCUMENTS. AGLC shall be
responsible for maintaining full and accurate accounts and records of
the services rendered by AGLC and other additional information as USL
may reasonably request for purposes of its internal bookkeeping and
accounting operations. To the extent such accounts and records pertain
to AGLC's computation of charges, AGLC shall keep such accounts and
records available at its home offices for audit, inspection and copying
during reasonable business hours by USL, persons authorized by USL or
appropriate governmental agencies. USL and AGLC agree that records and
documents will be maintained consistent with New York Insurance
Department Regulation 152 entitled "General Records and Documents."
7. GENERAL RECORDS AND DOCUMENTS. Other books, records and files
established and maintained by AGLC with respect to its performance of
services under this Agreement which, absent this Agreement, would have
been held by USL, shall be deemed the property of USL and shall be
subject to examination during reasonable business hours by USL, person
authorized by USL or appropriate governmental agencies. USL and AGLC
agree that such records and documents will be maintained consistent with
New York Insurance Department Regulation 152 entitled "General Records
and Documents."
8. RIGHT TO CONTRACT WITH THIRD PARTIES. Nothing herein shall be deemed to
grant AGLC an exclusive right to provide services to USL, and USL
retains the right to contract with any affiliate or unaffiliated third
party for the performance of services and/or for the use of facilities,
as are available to or have been requested by USL pursuant to this
Agreement.
9. DISCLOSURE OF PROPRIETARY INFORMATION. USL and AGLC acknowledge that
during the course of the relationship established by this Agreement each
of them will be exposed to the confidential and proprietary information
of the other party (the "Confidential Information"). Each party agrees
to take all reasonable measures to prevent the Confidential Information
from being acquired by unauthorized persons to the same extent that it
protects its own confidential and proprietary information and will not
disclose the Confidential Information to third parties, except as
mandated by law, without the prior written consent of the other party.
This provisions survives the termination of this Agreement pursuant to
paragraph 11 of this Agreement.
10. INDEMNIFICATION. Both USL and AGLC have a duty to be aware of and comply
with all laws and regulations which may affect the parties' performance
of the terms of this Agreement. Both parties agree to comply with all
such laws and regulations.
(a) AGLC agrees to indemnify and hold USL harmless against all civil
liability or regulatory penalty, including attorneys' fees and
costs of investigation and defense incident thereto, arising as
a result of errors, omissions, negligence,
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misrepresentation, fault or wrongful action of AGLC, its
affiliates, agents, or any officer, director or employee of AGLC
or its affiliates or agents, including, but not limited to,
failure to comply with any applicable federal or state law or
regulation, administrative rule or regulation, in the
performance of obligations hereunder.
(b) USL agrees to indemnify and hold AGLC harmless against all civil
liability or regulatory penalty, including attorneys' fees and
costs of investigation and defense incident thereto, arising as
a result of errors, omissions, negligence, misrepresentation,
fault or wrongful action of USL, its affiliates, agents, or any
officer or director of USL or said affiliates or agents,
including, but not limited to, failure to comply with any
applicable federal or state law or regulation, administrative
rule or regulation, in the performance of obligations hereunder.
11. TERMINATION.
(a) This Agreement shall remain in effect until terminated by AGLC
or USL upon giving sixty (60) days or more advance written
notice, unless both parties agree in writing to a shorter
advance notice period.
(b) Upon termination of this Agreement, and subject to the terms
(including any limitations and restrictions) of any applicable
software or hardware licensing agreement then in effect between
AGLC and any licensor, AGLC shall grant to USL a license for any
software developed or used by AGLC in connection with the
services provided to USL hereunder; provided, however, that such
software is not commercially available and is necessary, in
USL's reasonable judgment, for USL's performance of the
functions which have been provided by AGLC hereunder.
(c) Upon termination, AGLC shall promptly deliver to USL all books
and records that are, or are deemed by this Agreement to be, the
property of USL.
(d) No later than ninety (90) days after the effective date of
termination of this Agreement, AGLC shall deliver to USL a
detailed written statement of the respective charges incurred
and not included in any previous statement. The amount owed
hereunder shall be due and payable within thirty (30) days of
receipt of such statement.
12. ASSIGNMENT. Except as provided below, this Agreement and any rights
pursuant hereto shall be assignable only upon the written consent of the
New York State Insurance Department and all of the parties hereto.
Except as and to the extent specifically provided in this Agreement,
nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto, or their respective legal
successors, any rights, remedies, obligations, or liabilities, or to
relieve any person other than the parties hereto or their respective
legal successors, from any obligations or liabilities that would
otherwise be applicable.
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13. ARBITRATION. Any unresolved dispute or difference between the parties
arising out of or relating to this Agreement, or the breach thereof,
shall be settled by arbitration in accordance with the Commercial
Arbitration Association and the Expedited Procedures thereof. The award
rendered by the Arbitrator shall be final and binding upon the parties,
and judgment upon the award rendered by the Arbitrator may be entered in
any Court of competent jurisdiction. The arbitration shall take place in
New York and the substantive law of New York shall apply in such
proceedings.
14. NOTICE. All notices, statements or requests provided for hereunder shall
be deemed to have been duly given when delivered by hand to an officer
of the other party, or when deposited with the U.S. Postal Service, vial
first-class certified or registered mail, with postage prepaid, or when
delivered by overnight courier service, telex or telecopier, addressed
as follows:
If to USL:
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: President
If to AGLC:
AMERICAN GENERAL LIFE COMPANIES
0000-X Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: President
or to such other persons or places as each party may from time to time
designate by written notice.
15. ENTIRE AGREEMENT. This Agreement, together with such amendments as may
from time to time be executed in writing by the parties, constitutes the
entire agreement and understanding between the parties in respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings related to the subject matter hereof.
16. SECTION HEADINGS. Section headings contained herein are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed in that state, without
regard to principles of conflict of laws.
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18. COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate by their respective officers, duly authorized to execute this
Agreement, and their respective corporate seal to be affixed hereto, as of the
date and year first above written.
THE UNITED STATES LIFE
INSURANCE COMPANY IN THE CITY
OF NEW YORK
By: /s/
---------------------------
[Seal]
Attest: /s/
---------------------------
Secretary
AMERICAN GENERAL LIFE
COMPANIES
By: /s/
---------------------------
[Seal]
Attest: /s/
---------------------------
Secretary
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