Exhibit 7(a)
AMENDMENT NO. 3
to the
REINSURANCE AGREEMENT NO. 2728
EFFECTIVE JANUARY 1, 1999
between
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
of
Wilmington, Delaware
and
ERC LIFE REINSURANCE CORPORATION
of
Jefferson City, Missouri
The attached Exhibits A and C -- Amended, reflecting revision to the plans
covered and revisions to Reinsurance Rates and Allowances, hereby replace
Exhibit A and C.
All terms, provisions and conditions of this Agreement will continue unchanged
except as specifically revised in this Amendment.
This Amendment is signed in duplicate at the dates and places indicated with an
effective date of August 1, 2001.
PROVIDENTMUTUAL LIFE ERC LIFE REINSURANCE
AND ANNUITY COMPANY CORPORATION
OF AMERICA
Approved By: [SIGNATURE] Approved By: [SIGNATURE]
--------------------- ---------------------
Title: Vice President - Actuary Title: AVP
--------------------------- ---------------------------
Date: 12-13-2001 Date: 12/10/01
--------------------------- ---------------------------
1
EXHIBIT A -- AMENDED
(EFFECTIVE AUGUST 1, 2001 -- AMENDMENT NO.3)
REINSURANCE COVERAGE
I. REINSURANCE COVERAGE
This Agreement will cover a 25% quota-share of
Life Benefits;
Disability Waiver Benefits issued with Life Benefits;
Other Supplementary Benefits or Riders issued with Life Benefits and
specifically listed below;
on the following policy forms:
PLANS
Options Premier
Whole Life 2
Portfolio 2
Special Term
Provflex Universal Life
Face Amount Increase
RIDERS
Additional Insurance Benefit
Other Insured Term
Waiver of Premium
Waiver of Monthly Deductions
Change of Insured
Guaranteed Purchase Option
Long Term Care Acceleration Benefit
Long Term Care Waiver
Accelerated Death Benefit
Reinsurance coverage will provide neither loan nor cash surrender values.
2
EXHIBIT A -- AMENDED - CONTINUED
(EFFECTIVE AUGUST 1, 2001 -- AMENDMENT NO.3)
II. RETENTION LIMITS OF CEDING COMPANY
A. LIFE
The Ceding Company will retain the first $300,000 of life benefits on any
one insured life.
Amounts over such retention will be reinsured on a first excess basis with
Provident Mutual Life Insurance Company. In no event will the sum of the
Ceding Company's retention and the first excess reinsurance exceed the
corporate retention in the following schedule:
Special Classes A-G Special Classes H-K
Age at Issue Standard Flat Extras $0-10.00 Flat Extras $10.01+
----------------- ---------- -------------------- -------------------
0-31 days $ 25,000 None None
32 days - 2 years 750,000 $500,000 $375,000
3-65 1,250,000 875,000 625,000
66-70 1,000,000 750,000 500,000
71-75 500,000 375,000 250,000
76-80 250,000 None None
81-85 125,000 None None
86+ None None None
The above limits may be exceeded by as much as $25,000 in order to avoid
reinsurance.
B. DISABILITY WAIVER
Same as Life; not to exceed face amounts of $5,000,000
C. ACCIDENTAL DEATH BENEFITS
Not reinsured under this Agreement
III. AUTOMATIC ACCEPTANCE LIMITS
A. LIFE
We will accept automatically the lesser of 4 times your retention or
$5,000,000 per insured life. However, the maximum amount of reinsurance
per life that we will accept under all automatic reinsurance agreements
written between our two companies will not exceed the largest
individual acceptance limit shown in the agreements.
3
EXHIBIT A -- AMENDED - CONTINUED
(EFFECTIVE AUGUST 1, 2001 -- AMENDMENT NO.3)
For the purposes of this Agreement, the maximum binding in all
reinsurers is $20,000,000.
The binding limits are exclusive of your retention
B. DISABILITY WAIVER
We will participate in Disability Waiver Benefits to a maximum
$5,000,000 of Benefit face amount per insured life.
IV. EXCLUSIONS TO AUTOMATIC REINSURANCE COVERAGE
Automatic reinsurance coverage will not be available in the following
situations:
1. The policy has been submitted on a facultative, facultative obligatory
or initial inquiry basis to us or to any other reinsurer;
2. The risk is categorized as a "Jumbo Risk", where your underwriting
papers indicate that the total life insurance in force and applied for
on the insured's life exceeds $50,000,000.
3. The policy is part of any special program that you offer, including:
a) experimental or limited retention programs, including but not
limited to cancer, diabetes, aviation or coronary risks;
b) external replacement and/or conversion programs other than
contractual conversions or exchanges of the original policy.
4. You have retained an amount less than your usual retention limits for
the age and table rating of the insured.
5. The policy is a result of a conversion from group insurance, unless we
agree otherwise.
4
EXHIBIT C -- AMENDED
(EFFECTIVE AUGUST 1, 2001 -- AMENDMENT NO.3)
REINSURANCE RATES AND ALLOWANCES
I. NET AMOUNT AT RISK CALCULATION
The Net Amount at Risk in any policy year will be the difference between
the face amount of life benefit reinsured and the proportionate cash value,
taken to the nearest dollar, as of the policy anniversary occurring in that
year. When the original policy is issued on a decreasing term plan or on a
level term plan with duration of twenty years or less, the cash values will
be disregarded.
II. RATES FOR LIFE REINSURANCE
The YRT Rates (the 1975-80 Select and Ultimate Mortality Tables) shown in
this Exhibit are annual rates for standard risks and are per $1,000 of the
life benefit reinsured. You will pay us these rates multiplied by the
following percentages:
PREFERRED STANDARD
YEAR NONSMOKER NONSMOKER SMOKER
---------- --------- --------- ------
1 0% 0% 0%
Thereafter 34% 48% 99%
The Additional Insurance Benefit and Other Insured Term Rider will be
covered, with rates determined in the same manner as for base insureds.
Long Term Care Acceleration Benefit and Long Term Care Waiver Riders will
be coinsured. You will pay us the appropriate portion of the annual premium
charged the insured less the following allowances:
RENEWAL
FIRST YEAR YEARS
---------- -------
75% 10%
5
EXHIBIT C -- AMENDED - CONTINUED
(EFFECTIVE AUGUST 1, 2001 -- AMENDMENT NO.3)
For Change of Insured Riders, you will pay us rates and percentages based
on the new insured's issue age and the duration of the policy at the time
the exchange was made, i.e. point-in-scale rates.
For Guaranteed Purchase Option Riders, you will pay us rates and
percentages based on the insured's issue age and the duration of the policy
at the time the option was exercised.
No premium will be payable for the Accidental Death Benefit Rider.
III. POLICY FEE
No Policy fee will be charged.
IV. RATES FOR SUBSTANDARD TABLE RATINGS
For substandard risks issued at table ratings, the standard rate will be
multiplied by the appropriate mortality factor:
TABLE MORTALITY
RATING FACTOR
----------- ---------
1 or A 125%
1 1/2 or AA 137.5%
2 or B 150%
2 1/2 or BB 162.5%
3 or C 175%
4 or D 200%
5 or E 225%
6 or F 250%
8 or H 300%
10 or J 350%
12 or L 400%
16 or P 500%
V. RATES FOR FLAT EXTRA RATINGS
Substandard risks issued at flat extra ratings will be coinsured. You will
pay us the appropriate portion of the flat extra premium charged the
insured less the following allowances:
DURATION FIRST YEAR RENEWAL YEARS
------------------ ---------- -------------
Over Five Years 75% 10%
Five Years or Less 10% 10%
6
EXHIBIT C -- AMENDED - CONTINUED
(EFFECTIVE AUGUST 1, 2001 -- AMENDMENT NO.3)
VI. RATES FOR DISABILITY WAIVER BENEFIT
Disability Waiver Benefits will be coinsured. You will pay us the
appropriate portion of the annual Disability Waiver Benefit premium
charged the insured less the following allowances:
FIRST YEAR RENEWAL YEARS
---------- -------------
75% 10%
VII. RATES FOR ACCIDENTAL DEATH BENEFIT
Accidental Death Benefits are not available under this Agreement.
VIII. PREMIUM TAXES
We will not reimburse premium taxes for reinsurance ceded under this
Agreement.
IX. RECAPTURE PERIOD
Recapture will be allowed after 10 years.
X. CONVERSIONS
For the purposes of this Agreement, and unless otherwise specifically
covered elsewhere, "conversions" will mean continuations, rollovers,
exchanges and/or internal replacements.
a) The rates charged for conversions to plans reinsured under this
Agreement will be based on the original issue age of the insured and
the current duration of the original policy at the time of the
conversion, i.e. point-in-scale basis.
b) Conversions from plans reinsured under this Agreement to plans
reinsured under other Reinsurance Agreements in force between us will
be subject to the provisions of the other Agreements, including
provisions covering rates, allowances and/or discounts. The rates
charged will be based on the original issue age of the insured and the
current duration of the original policy, i.e. point-in-scale basis.
7
EXHIBIT C -- AMENDED - CONTINUED
(EFFECTIVE AUGUST 1, 2001 -- AMENDMENT NO.3)
c) Conversions from plans reinsured under this Agreement to plans that we
do not reinsure will remain under this Agreement. Rates charged will
be the YRT Rates shown in this Exhibit, based on the original issue
age of the insured and the current duration of the policy at the time
of the conversion, i.e. point-in-scale basis.
d) Reinsurance under the provisions of this Agreement will include
coverage for conversions of the Step-1 Plan originally issued under
Automatic YRT Agreement No. 729 to plans of insurance covered under
this Agreement. Such conversions will not be subject to the
twenty-five percent quota share set forth in Article II. For
Conversions of policies originally ceded on an automatic basis, you
shall recapture at the time of conversion the excess of your retention
at issue on the policy being converted up to a maximum of the lessor
of:
i) the full face amount of the policy; or
ii) your retention at the time of conversion.
Premiums charges for such conversions will be the premiums set forth
in Exhibit C, based on the original issue age of the insured and the
current duration of the policy, i.e. point-in-scale basis. You shall
also pay to Phoenix Home Life Mutual Insurance Company a recapture
charge, which shall be a single premium calculated at the rates set
forth in Exhibit C, for an amount equal to the difference between the
amount retained by you at issue and the lesser of:
i) the full face amount of the policy; or
ii) your retention at the time of recapture.
The recapture charge will be payable to Phoenix Home Life Mutual
Insurance Company at the time the conversion is reported.
At the your option, an approximation of the above calculation may be
made.
For facultative business ceded under the provisions of Article III,
you will not recapture any insurance at the time of conversion.
8
EXHIBIT C -- AMENDED - CONTINUED
(EFFECTIVE AUGUST 1, 2001 -- AMENDMENT NO.3)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
SELECT & ULTIMATE ART
RECAPTURE CHARGES
FOR $1,000 RECAPTURES UPON CONVERSION
SMOKER
------
YEAR ISSUE TO
OF CONVERSION AGE 00 00-00 00-00 50-59 60+
------------- ----- ---- ----- ----- ----- -----
1 .95 1.23 2.28 5.15 8.25
2 1.10 1.42 2.64 5.97 9.57
3 1.18 1.52 2.82 6.39 10.23
4 1.22 1.57 2.91 6.59 10.56
5 1.14 1.47 2.73 6.18 9.90
6 1.06 1.37 2.55 5.77 9.24
7 .91 1.18 2.18 4.94 7.92
8 .65 .83 1.55 3.50 5.61
9 .23 .29 .55 1.24 1.98
NON-SMOKER
----------
YEAR ISSUE
OF CONVERSION AGE 00 00-00 00-00 50-59 60+
------------- ----- ---- ----- ----- ----- -----
1 .53 .69 1.27 2.88 4.62
2 .72 .93 1.73 3.91 6.27
3 .76 .98 1.82 4.12 6.60
4 .76 .98 1.82 4.12 6.60
5 .68 .88 1.94 3.71 5.94
6 .57 .74 1.37 3.00 4.95
7 .46 .59 1.09 2.47 3.96
8 .27 .34 .64 1.44 2.31
9 .08 .10 .18 .41 .66
9
EXHIBIT C -- AMENDED - CONTINUED
(EFFECTIVE AUGUST 1, 2001 -- AMENDMENT NO.3)
PROVIDENT MUTUAL LIFE INSURANCE COMPANY
SELECT & ULTIMATE ART
RECAPTURE CHARGES
FOR $1,000 RECAPTURES UPON CONVERSION
PREFERRED
---------
YEAR ISSUE
OF CONVERSION AGE 00 00-00 00-00 50-59 60+
------------- ----- ---- ----- ----- ----- -----
1 .46 .59 1.09 2.47 3.96
2 .61 .78 1.46 3.30 5.28
3 .67 .86 1.59 3.61 5.78
4 .65 .83 1.55 3.50 5.61
5 .61 .78 1.46 3.30 5.28
6 .53 .69 1.27 2.88 4.62
7 .42 .54 1.00 2.27 3.63
8 .27 .34 .64 1.44 2.31
9 .08 .10 .18 .41 .66
XI. EXPERIENCE REFUND
Reinsurance under this Agreement is not eligible for an Experience Refund.
10
