PARTIAL COMMUTATION AGREEMENT
EXHIBIT 10.2
This PARTIAL COMMUTATION AGREEMENT, dated as of April 1, 2014 (the “Execution Date”), (this “Agreement”) is made and entered into by and between Allstate Life Insurance Company, an insurance company organized under the laws of the State of Illinois (the “Reinsurer”), and Lincoln Benefit Life Company, an insurance company organized under the laws of the State of Nebraska (the “Company”).
WHEREAS, the Reinsurer owns 100% of the issued and outstanding capital stock of the Company;
WHEREAS, the Reinsurer, Resolution Life Holdings, Inc. (“Buyer”), a corporation organized under the laws of the State of Delaware, and, solely for purposes of Section 5.25 and Article X thereof, Resolution Life L.P., a Bermuda limited partnership and the sole owner of Buyer, have entered into a Stock Purchase Agreement dated as of July 17, 2013, as amended (the “Stock Purchase Agreement”), pursuant to which the Reinsurer proposes to sell, and Buyer proposes to purchase, 100% of the issued and outstanding capital stock of the Company;
WHEREAS, the Stock Purchase Agreement provides, among other things, for the Company and the Reinsurer to enter into this Agreement;
WHEREAS, the Reinsurer provides reinsurance coverage to the Company in accordance with the terms of the following reinsurance agreements: (i) a coinsurance agreement between the parties effective as of December 31, 2001 covering the Company’s general account liabilities for all policies and market value adjustment annuities (the “General Account Reinsurance Agreement”), (ii) a modified coinsurance agreement between the parties effective as of December 31, 2001 covering the Company’s separate account liabilities for variable life insurance policies (the “Variable Life Reinsurance Agreement, and together with the General Account Reinsurance Agreement, the “Subject Reinsurance Agreements”) and (iii) a modified coinsurance agreement between the parties effective as of December 31, 2001 covering the Company’s separate account liabilities for variable annuity insurance policies (the “Variable Annuity Reinsurance Agreement”);
WHEREAS, the Company and the Reinsurer desire to commute the Commuted Business (as defined below) currently ceded or retroceded under the Subject Reinsurance Agreements;
WHEREAS, the Company and the Reinsurer desire a full and final settlement, discharge and release of any and all of each of their respective liabilities, duties and obligations with respect to the Commuted Business except as expressly set forth below;
WHEREAS, the business reinsured pursuant to the Subject Reinsurance Agreements that is not commuted pursuant to this Agreement shall continue to be reinsured following the Effective Time pursuant to the terms of the Subject Reinsurance Agreements, as amended from time to time, until such time as such Subject Reinsurance Agreements are terminated, restated or replaced; and
WHEREAS, the Variable Annuity Reinsurance Agreement shall remain in full force and effect in accordance with its terms without amendment.
NOW, THEREFORE, the Company and the Reinsurer (each a “Party”, and together, the “Parties”) agree as follows:
Article I.
DEFINITIONS
Section 1.2. Definitions. For purposes of this Agreement, the following terms have the respective meanings set forth below:
“Adjusted Commutation Statement” has the meaning set forth in Section 3.3.
“Adjustment Report” has the meaning set forth in Section 3.3.
“Affiliate” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with, such first Person, and the term “Affiliated” shall have a correlative meaning. For the purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly through the ownership of voting securities, by contract, or otherwise, and the terms “controlling” and “controlled” have the meanings correlative to the foregoing.
“Applicable Law” means any law, statute, ordinance, regulation, order, injunction, judgment, decree, constitution or treaty enacted, promulgated, issued, enforced or entered by any Governmental Entity applicable to any Person or such Person’s businesses, properties, assets or rights, as may be amended from time to time.
“Books and Records” has the meaning given to such term in the Stock Purchase Agreement.
“Business Day” has the meaning given to such term in the Stock Purchase Agreement.
“Buyer” has the meaning set forth in the Recitals.
“Closing” has the meaning given to such term in the Stock Purchase Agreement.
“Closing Date” has the meaning given to such term in the Stock Purchase Agreement.
“Commutation Accounting Principles” means the principles, practices and methodologies set forth in Commutation Annex A.
“Commutation Amount” has the meaning set forth in Section 3.1.
“Commutation Balance Sheet” has the meaning set forth in Section 3.3.
“Commutation Balances” has the meaning set forth in Section 3.2.
“Commutation Closing Date” means the date of the closing of the transactions contemplated by this Agreement, which date shall be on or before the Closing Date.
“Commutation Consideration” has the meaning set forth in Section 3.1.
“Commuted Business” has the meaning set forth in Article II.
“Company” has the meaning set forth in the Preamble.
“Dispute Notice” has the meaning set forth in Section 3.3.
“Effective Time” has the meaning set forth in the Article II.
“Estimated Commutation Amount” has the meaning given to such term in the Stock Purchase Agreement.
“Estimated Commutation Statement” has the meaning given to such term in the Stock Purchase Agreement.
“Estimated Settlement Amount” has the meaning set forth in Section 3.3.
“Execution Date” has the meaning set forth in the Preamble.
“Exclusive Producer” means any Producer that markets, sells or administers business of the type written by the Reinsurer or any of its Affiliates exclusively for or on behalf of the Reinsurer and its Affiliates, notwithstanding whether such Producer also sells products of the type not written by the Reinsurer or any of its Affiliates on behalf of third parties.
“Final Adjustment Statement” has the meaning given to such term in the Stock Purchase Agreement.
“Final Balance Sheet” has the meaning given to such term in the Stock Purchase Agreement.
“Final Commutation Balance Sheet” has the meaning set forth in Section 3.3.
“Final Settlement Amount” has the meaning set forth in Section 3.3.
“Governmental Entity” means any domestic or foreign court, arbitral tribunal, federal, provincial, state or local government or administration, or regulatory or other governmental authority, commission or agency (including any industry or other self-regulating body).
“Illinois SAP” shall mean statutory accounting procedures and practices prescribed or permitted by the Director of Insurance of the State of Illinois.
“Independent Producer” means any Producer that is not an Exclusive Producer.
“Independent Accounting Firm” has the meaning set forth in Section 3.3.
“Net Commutation Balances Amount” has the meaning set forth in Section 3.2.
“Net Statutory General Account Reserves” shall mean the general account reserves of the Reinsurer in respect of the Commuted Business as would be reflected in lines 1 through 4 inclusive in the “Liabilities, Surplus and Other Funds” section of the NAIC statement blank used to prepare the Reinsurer’s statutory balance sheet as of December 31, 2012 (or if the line numbers are changed pursuant to relevant guidance from the NAIC, the successor to such line numbers) prepared in accordance with Illinois SAP. For the avoidance of doubt, Net Statutory General Account Reserves are net of reserve credit taken under Third Party Reinsurance. Such reserves shall expressly exclude any additional or voluntary actuarial reserves, if any, established by the Reinsurer under Illinois Administrative Code Section 1410.
“Parties” has the meaning set forth in the Preamble.
“Person” means an individual, corporation, partnership, joint venture, limited liability company, association, trust, unincorporated organization, Governmental Entity or other entity.
“Producer” means any producer, broker, agent, general agent, managing general agent, master broker agency, broker general agency, financial specialist or other Person responsible for marketing or producing insurance policies, annuity contracts, protection and retirement products on behalf of the Company.
“Reinsurer” has the meaning set forth in the Preamble.
“Representative” has the meaning given to such term in the Stock Purchase Agreement.
“Resolution Period” has the meaning set forth in Section 3.3.
“Review Period” has the meaning set forth in Section 3.3.
“Seller” means the Reinsurer in its capacity as Seller under the Stock Purchase Agreement.
“Specified Life Business” means, collectively, (i) the term life insurance policies written by the Company prior to the Execution Date that have been reinsured to the Reinsurer and retroceded by the Reinsurer to XXXX Reinsurance Company, (ii) the term life insurance policies of the type identified on Schedule 1 that were written by the Company and are reinsured by third party reinsurers and (iii) the life insurance policies (x) written by the Company through Producers that, at the time of sale of such policies, marketed, sold or administered on a non-exclusive basis business of the type written by Reinsurer or its Affiliates and (y) coded by the Company in its books and records with a distribution channel code of 601.
“Subject Reinsurance Agreements” has the meaning set forth in the Recitals.
“Statutory Book Value” means the amount carried in respect of such asset by the Reinsurer as an
admitted asset determined in accordance with Illinois SAP, but disregarding any permitted practices applicable to the Reinsurer, other than those of general applicability to life insurer in the State of Illinois. The Statutory Book Value of the assets to be transferred as part of the Commutation Consideration shall be determined as provided in the Commutation Accounting Principles.
“Stock Purchase Agreement” has the meaning set forth in the Recitals.
“Third Party Reinsurance” means all third-party reinsurance of the Company with respect to the Commuted Business in effect as of the Effective Time.
“Variable Annuity Reinsurance Agreement” has the meaning set forth in the Recitals.
Article II.
COMMUTATION
Effective as of 12:01 a.m. Central time on April 1, 2014 (the “Effective Time”), the Parties hereby commute one hundred percent (100%) of all liabilities ceded or retroceded to the Reinsurer under the Subject Reinsurance Agreements arising under (i) all of the fixed deferred annuity, value adjusted deferred annuity and indexed deferred annuity business written by the Company, (ii) all of the life insurance business written by the Company through Independent Producers, other than the Specified Life Business, and (iii) all of the net liability of the Company with respect to the accident and health and long-term care insurance business written by the Company, in each case as more particularly identified in Schedule 2 ((i), (ii), and (iii) collectively, the “Commuted Business”). For the avoidance of doubt, this Agreement does not apply to the Variable Annuity Reinsurance Agreement.
Article III.
COMMUTATION CONSIDERATION
Section 3.1. Commutation Consideration. Notwithstanding anything contained in the Subject Reinsurance Agreements to the contrary, as consideration for the Parties’ commutation of the Commuted Business, the Reinsurer shall transfer to the Company the policy loans included in the Commuted Business and outstanding as of the Effective Time and assets determined in accordance with Schedule 3 (the “Commutation Consideration”) with an aggregate Statutory Book Value, including investment income due, accrued and unearned, as of the Effective Time equal to the sum of (i) the Net Statutory General Account Reserves as of the Effective Time attributable to the Commuted Business minus (if positive) or plus (if negative) the absolute value of (ii) the amount of the final settlement in respect of the Commuted Business determined in accordance with Article V of the General Account Reinsurance Agreement and Article IV of the Variable Life Reinsurance Agreement for the period ending on March 31, 2014 (the “Commutation Amount”). The Commutation Amount shall be determined, and the Commutation Consideration shall be paid and adjusted, in accordance with Section 3.3.
Section 3.2. Interest Maintenance Reserve; Other Commutation Balances.
(a) As of the Effective Time, the Reinsurer shall transfer to the Company all liability for the interest maintenance reserve that is attributable to the Commuted Business at the point in time immediately prior to the consummation of the transactions contemplated by this Agreement, as well as any liability for the interest maintenance reserve that is attributable to the Commuted Business that is created following the Effective Time, in each case determined in accordance with the Commutation Accounting Principles. The interest maintenance reserve liability that is so attributable to the Commuted Business as of the Effective Time shall be determined pursuant to Section 3.3 and shall be reflected in the Final Commutation Balance Sheet.
(b) In addition to the Commutation Amount, all account balances (both assets and liabilities) related to the Commuted Business and ceded by the Company to the Reinsurer under the Subject Reinsurance Agreements (other than (i) those that are reflected in Net Statutory General Account Reserves and (ii) the liability for interest maintenance reserve related to the Commuted Business) will be transferred from the Reinsurer to the Company (the “Commutation Balances”) as of the Effective Time. The Commutation Balances shall be determined in accordance with the Commutation Accounting Principles and shall be paid in accordance with Section 3.3. Such Commutation Balances shall include, but are not limited to, uncollected premiums and agents’ balances, deferred premiums, policyholder dividends, premiums received in advance, commissions due and accrued, commissions and expense allowances on reinsurance assumed, general expenses due or accrued, transfers to separate accounts, taxes, licenses and fees due and accrued, amounts withheld or retained, remittances and items not allocated, liability for benefits for employees and agents, abandoned property, guaranty funds receivable or on deposit, guaranty funds payable, premium tax receivable, and accounts receivable and payable related to long-term care third party administration agreements, in each case to the extent attributable to the Commuted Business. The Commutation Balances shall also include amounts in respect of the Commuted Business that are paid to or received by the Reinsurer on behalf of the Company after the Effective Time but prior to the Commutation Closing Date. Upon transfer of these Commutation Balances, a net reinsurance recoverable or a reinsurance payable will be recorded by the Company in respect of the Commutation Balances (the “Net Commutation Balances Amount”). The Net Commutation Balances Amount shall be determined, settled and adjusted by the Reinsurer or the Company, as applicable, pursuant to Section 3.3.
Section 3.3. Pre-Closing and Post-Closing Payments.
(a) On the Commutation Closing Date but in any case prior to the Closing, the Reinsurer shall transfer to the Company all policy loans, investment assets, cash and other assets selected in accordance with Schedule 3 and included in the Commutation Consideration having an aggregate Statutory Book Value, including investment income due, accrued and unearned, as of the Effective Time equal to the sum of the Estimated Commutation Amount and the estimated Net Commutation Balances Amount (the “Estimated Settlement Amount”) set forth in the Estimated Commutation Statement prepared by the Reinsurer and previously delivered to the Company and Buyer pursuant to the terms of Section 2.4 of the Stock Purchase Agreement. In order to effectuate the transfer of such investment assets, cash or other assets, the Reinsurer and the Company shall execute an omnibus assignment agreement substantially in the form attached as Commutation Annex B.
(b) The sum of the final Commutation Amount and the final Net Commutation Balances Amount (the “Final Settlement Amount”) shall be determined as set forth in subsections (c) and (d) of this Section 3.3. If the Final Settlement Amount is greater than the Estimated Settlement Amount, then the Reinsurer shall transfer to the Company within five Business Days after the final determination thereof additional investment assets, cash and other assets selected in accordance with Schedule 3 and included in the Commutation Consideration having an aggregate Statutory Book Value as of the Effective Time equal to the amount by which the Final Settlement Amount exceeds the Estimated Settlement Amount. If the Estimated Settlement Amount is greater than the Final Settlement Amount, then the Company shall transfer to the Reinsurer within five Business Days after the final determination thereof cash and/or investment assets transferred by the Reinsurer to the Company on the Commutation Closing Date mutually agreed by the Parties that have an aggregate Statutory Book Value as of the Effective Time equal to the amount by which the Estimated Settlement Amount exceeds the Final Settlement Amount.
(c) No later than 90 days after the Closing Date, the Company shall deliver to the Reinsurer: (i) a statement (the “Adjusted Commutation Statement”) setting forth a proposed commutation balance sheet as of the Effective Time prepared in good faith from the Books and Records in accordance with the Commutation Accounting Principles, consistently applied (a “Commutation Balance Sheet”) and showing the Company’s calculations of (A) the Commutation Amount, including the amount of the Net Statutory General Account Reserves as of the Effective Time and (B) the Commutation Balances, and (ii) reasonable supporting documentation with respect to the calculations of the amounts set forth in the Adjusted Commutation Statement. In addition, the Adjusted Commutation Statement shall be prepared in a manner consistent with the preparation of the Final Adjustment Statement delivered to the Reinsurer by Buyer pursuant to Section 2.5 of the Stock Purchase Agreement. The Reinsurer shall, during such period of no longer than 90 days after the Closing Date, provide the Company and its Representatives with reasonable access to the employees of the Reinsurer to the extent such employees have knowledge about the Commuted Business and to all documentation, records and other information of the Company (to the extent in the possession of the Reinsurer) or the Reinsurer, as the Company or any of its Representatives may reasonably request and that are necessary to facilitate the preparation of the Adjusted Commutation Statement; provided, that such access does not unreasonably interfere with the conduct of the business of the Reinsurer and that such access and cooperation shall not, in the event of any dispute arising out of this Agreement, serve to prejudice the Reinsurer or any of its Affiliates.
(d) (i) The Reinsurer shall have 45 days from the date on which the Adjusted Commutation Statement is delivered to it to review the Adjusted Commutation Statement and the calculations of (A) the Commutation Amount, including the amount of the Net Statutory General Account Reserves as of the Effective Time and (B) the Commutation Balances (the “Review Period”). In furtherance of such review, the Company shall (and shall cause Buyer to) provide the Reinsurer and its Representatives with reasonable access during such 45 day period to the employees of Buyer and the Company (including to the Chief Financial Officer of Buyer) and to all documentation, records and other information of Buyer and the Company as the Reinsurer or any of its Representatives may reasonably request; provided, that such access does not unreasonably interfere with the conduct of the business of Buyer or the Company and that such access and cooperation shall not, in the event of any dispute arising out of this Agreement, serve to prejudice the Buyer, the Company or any of its Affiliates.
(ii) If the Reinsurer disagrees with the Adjusted Commutation Statement (including any amount or computation set forth therein) in any respect and on any basis, the Reinsurer may, on or prior to the last day of the Review Period, deliver a notice to the Company setting forth, in reasonable detail, each disputed item or amount and the basis for the Reinsurer’s disagreement therewith (the “Dispute Notice”). The Dispute Notice shall set forth, with respect to each disputed item, the Reinsurer’s position as to the correct amount or computation that should have been included in the Adjusted Commutation Statement and as to any calculations contained therein. Such Dispute Notice shall be included together with any Dispute Notice (as such term is defined in the Stock Purchase Agreement) delivered by Reinsurer, as Seller, to the Buyer under Section 2.5(c)(ii) of the Stock Purchase Agreement.
(iii) If no Dispute Notice is received by the Company with respect to any item in the Adjusted Commutation Statement on or prior to the last day of the Review Period, the amount or computation with respect to such item as set forth in the Adjusted Commutation Statement shall be deemed accepted by the Reinsurer, whereupon the amount or computation of such item or items shall be final and binding on the Parties subject to paragraph (ix) below.
(iv) For a period of 10 Business Days beginning on the date that the Company receives a Dispute Notice (the “Resolution Period”), if any, the Company and the Reinsurer shall endeavor in good faith to resolve by mutual agreement all matters identified in the Dispute Notice. In the event that the Parties are unable to resolve by mutual agreement any matter in the Dispute Notice within such 10 Business Day period, the Company and the Reinsurer shall jointly engage PricewaterhouseCoopers LLP (the “Independent Accounting Firm”) to make a determination with respect to all matters in dispute. If PricewaterhouseCoopers LLP is unwilling or unable to serve, the Reinsurer and the Company shall cooperate in good faith to appoint, within 30 days after the Reinsurer and the Company receive notice from PricewaterhouseCoopers LLP of its refusal or inability to act as the Independent Accounting Firm, an independent certified public accounting firm of national recognition mutually acceptable to the Company and the Reinsurer, in which event such firm shall be the “Independent Accounting Firm.” If the Reinsurer, as the Seller, and the Buyer have an unresolved dispute in respect of any Dispute Notice (as such term is defined in the Stock Purchase Agreement) delivered by Reinsurer, as Seller, to the Buyer under Section 2.5(c)(ii) of the Stock Purchase Agreement, then the accounting firm appointed by the Reinsurer, as Seller, and the Buyer under the Stock Purchase Agreement, shall be appointed by the Reinsurer and the Company hereunder as the “Independent Accounting Firm.” Such Independent Accounting Firm shall review any unresolved disputes submitted hereunder and under the Stock Purchase Agreement together and each of the Parties shall direct the
Independent Accounting Firm to render a determination hereunder at the same time as it delivers any determination under the Stock Purchase Agreement.
(v) The Reinsurer and the Company shall direct the Independent Accounting Firm to render a determination within 30 days after its retention (along with its determination of any dispute submitted to the Independent Accounting Firm under the Stock Purchase Agreement), and the Company, the Reinsurer and their respective employees and agents will cooperate with the Independent Accounting Firm during its engagement. The Company, on the one hand, and the Reinsurer, on the other hand, shall promptly (and in any event within 10 Business Days) after the Independent Accounting Firm’s engagement, each submit to the Independent Accounting Firm their respective computations of the disputed items identified in the Dispute Notice and information, arguments and support for their respective positions, and shall concurrently deliver a copy of such materials to the other Party. Each Party shall then be given an opportunity to supplement the information, arguments and support included in its initial submission with one additional submission to respond to any arguments or positions taken by the other Party in such other Party’s initial submission, which supplemental information shall be submitted to the Independent Accounting Firm (with a copy thereof to the other Party) within five Business Days after the first date on which both Parties have submitted their respective initial submissions to the Independent Accounting Firm. The Independent Accounting Firm shall thereafter be permitted to request additional or clarifying information from the Parties, and each of the Parties shall cooperate and shall cause their Representatives to cooperate with such requests of the Independent Accounting Firm. The Independent Accounting Firm shall determine, based solely on the materials so presented by the Parties and upon information received in response to such requests for additional or clarifying information and not by independent review, only those issues in dispute specifically set forth in the Dispute Notice and shall render a written report to the Company and the Reinsurer (the “Adjustment Report”) in which the Independent Accounting Firm shall, after considering all matters set forth in the Dispute Notice, determine what adjustments, if any, should be made to the amounts and computations set forth in the Adjusted Commutation Statement solely as to the disputed items and shall determine the appropriate Commutation Amount and Commutation Balances on that basis.
(vi) The Adjustment Report shall set forth, in reasonable detail, the Independent Accounting Firm’s determination with respect to each of the disputed items or amounts specified in the Dispute Notice, and the revisions, if any, to be made to the Adjusted Commutation Statement, together with supporting calculations. In resolving any disputed item, the Independent Accounting Firm (i) shall be bound to the principles of this
Article III and the terms of this Agreement, (ii) shall limit its review to matters specifically set forth in the Dispute Notice and (iii) shall not assign a value to any item higher than the highest value for such item claimed by either Party or less than the lowest value for such item claimed by either Party.
(vii) All fees and expenses relating to the work of the Independent Accounting Firm shall be shared equally by the Company and the Reinsurer. Subject to paragraph (ix) below, the Adjustment Report shall be final and binding upon the Company and the Reinsurer, and shall be deemed a final arbitration award that is binding on each of the Company and the Reinsurer, and, absent fraud, no party shall seek further recourse to courts, other tribunals or otherwise, other than to enforce the Adjustment Report.
(viii) The final form of the Commutation Balance Sheet as of the Effective Time as finally determined pursuant to this Article III is referred to herein as the “Final Commutation Balance Sheet”. Notwithstanding anything to the contrary contained in this Agreement but subject to paragraph (ix) below, the provisions of this Article III represent the sole and exclusive method for determining the Final Commutation Balance Sheet, including the Commutation Amount and the Commutation Balances derived therefrom.
(ix) Notwithstanding anything contained in this Agreement to the contrary, any items set forth in any Dispute Notice delivered pursuant to this Article III shall be resolved by the Parties or by the Independent Accounting Firm consistent with (and in conjunction with) the determination of the Final Balance Sheet pursuant to Section 2.5 of the Stock Purchase Agreement. In addition, if any adjustments to the Final Balance Sheet require corresponding adjustments to the Final Commutation Balance Sheet, final Commutation Amount or final Commutation Balances, such adjustments shall be made, and the Parties shall make any corresponding payments, whether or not a Dispute Notice was delivered pursuant to this Article III.
Section 3.4. Company Release of the Reinsurer with respect to the Commuted Business. In consideration of the receipt of the payments described in Section 3.1, the transfer of the Commutation Balances described in Section 3.2(b) and the release provided in Section 3.5, as of the Effective Time, the Company hereby forever releases and discharges the Reinsurer, and its predecessors, successors, affiliates, agents, officers, directors, employees and shareholders, from any and all past, present, and future obligations, adjustments, liability for payment of interest, offsets, actions, causes of action, suits, debts, sums of money, accounts, premium payments, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, damages, judgments, liens, rights, costs and expenses (including attorneys’ fees and costs actually incurred), claims and demands, liabilities and losses of any nature whatsoever, all whether known or unknown, vested or contingent, that the Company now has, owns, or holds or claims to have, own, or hold, or at any time had, owned, or held, or claimed to have had, owned, or held, or may after the execution of this Agreement have, own, or hold or claim to have, own, or hold, against the Reinsurer, arising from, based upon, or in any way related to the Commuted Business, it being
the intention of the Parties that this release operate as a full and final settlement of the Reinsurer’s current and future liabilities to the Company under and in connection with the Commuted Business, provided, however, that this release does not discharge obligations of the Reinsurer (i) that have been undertaken or imposed by the terms of this Agreement or any other agreement between the Parties other than the Subject Reinsurance Agreements or (ii) that have been undertaken or imposed by the terms of any other Transaction Agreements (as such term is defined in the Stock Purchase Agreement).
Section 3.5. Reinsurer Release of the Company with respect to the Commuted Business. In consideration of the commutation set forth in Article II, the transfer of the Commutation Balances described in Section 3.2(b) and the release provided in Section 3.4, as of the Effective Time, the Reinsurer hereby forever releases and discharges the Company, and its predecessors, successors, affiliates, agents, officers, directors, employees and shareholders, from any and all past, present, and future obligations, adjustments, liability for payment of interest, offsets, actions, causes of action, suits, debts, sums of money, accounts, premium payments, reckonings, bonds, bills, covenants, contracts, controversies, agreements, promises, damages, judgments, liens, rights, costs and expenses (including attorneys’ fees and costs actually incurred), claims and demands, liabilities and losses of any nature whatsoever, all whether known or unknown, vested or contingent, that the Reinsurer now has, owns, or holds or claims to have, own, or hold, or at any time had, owned, or held, or claimed to have had, owned, or held, or may after the execution of this Agreement have, own, or hold or claim to have, own, or hold, against the Company, arising from, based upon, or in any way related to the Commuted Business, it being the intention of the Parties that this release operate as a full and final settlement of the Company’s current and future liabilities to the Reinsurer under and in connection with the Commuted Business, provided, however, that this release does not discharge obligations of the Company (i) that have been undertaken or imposed by the terms of this Agreement or any other agreement between the Parties other than the Subject Reinsurance Agreements or (ii) that have been undertaken or imposed by the terms of any other Transaction Agreements (as such term is defined in the Stock Purchase Agreement).
Article IV.
MISCELLANEOUS
Section 4.1. Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be delivered personally or by overnight courier (providing proof of delivery) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):
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if to Company: |
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Lincoln Benefit Life Company |
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0000 Xxxxxxx Xxxx |
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Xxxxxxxxxx, Xxxxxxxx 00000 |
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Attention: Treasurer |
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(b) |
if to the Reinsurer: |
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Allstate Life Insurance Company |
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0000 Xxxxxxx Xxxx |
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Xxxxxxxxxx, Xxxxxxxx 00000 |
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Attention: Xxxx Xxxxxx |
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Email: Xxxx.Xxxxxx@xxxxxxxx.xxx |
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with copy to: |
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Allstate Life Insurance Company |
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0000 Xxxxxxx Xxxx |
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Xxxxxxxxxx, Xxxxxxxx 00000 |
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Attention: Xxxx Xxxxxx |
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Email: xxxxxxx@xxxxxxxx.xxx |
Notice given by personal delivery or overnight courier shall be effective upon actual receipt.
Section 4.2. Entire Agreement; Third Party Beneficiaries. This Agreement (including any annexes and schedules hereto) constitutes the entire agreement, and supersedes all prior agreements, understandings, representations and warranties, both written and oral, among the Parties with respect to the subject matter of this Agreement. Unless the Stock Purchase Agreement is terminated, the Buyer shall be a third party beneficiary under this Agreement. Except as provided in the immediately preceding sentence, this Agreement is not intended to confer upon any Person other than the Parties hereto any rights or remedies.
Section 4.3. Governing Law. This Agreement and any dispute arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof.
Section 4.4. Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise (other than following the Execution Date by operation of law in a merger or scheme of arrangement), by either Party without the prior written consent of the other Party, and any such assignment that is not consented to shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.
Section 4.5. Jurisdiction; Enforcement.
(a) Each of the Parties hereto hereby irrevocably and unconditionally submits to the exclusive jurisdiction of any court of the United States or any state court, which in either case is located in the City and County of New York (each, a “New York Court”) for purposes of enforcing this Agreement or determining any claim arising from or related to the transactions contemplated by this Agreement. In any such action, suit or other proceeding, each of the Parties hereto irrevocably and unconditionally waives and agrees not to assert by way of motion, as a defense or otherwise any claim that it is not subject to the jurisdiction of any such New York
Court, that such action, suit or other proceeding is not subject to the jurisdiction of any such New York Court, that such action, suit or other proceeding is brought in an inconvenient forum or that the venue of such action, suit or other proceeding is improper; provided, that nothing set forth in this sentence shall prohibit any of the Parties hereto from removing any matter from one New York Court to another New York Court. Each of the Parties hereto also agrees that any final and unappealable judgment against a Party hereto in connection with any action, suit or other proceeding will be conclusive and binding on such Party and that such award or judgment may be enforced in any court of competent jurisdiction, either within or outside of the United States. A certified or exemplified copy of such award or judgment will be conclusive evidence of the fact and amount of such award or judgment. Any process or other paper to be served in connection with any action or proceeding under this Agreement shall, if delivered or sent in accordance with Section 4.1, constitute good, proper and sufficient service thereof.
(b) The Parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that, without the necessity of posting bond or other undertaking, the Parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Agreement, this being in addition (subject to the terms of this Agreement) to any other remedy to which such Party is entitled at law or in equity. In the event that any Action is brought in equity to enforce the provisions of this Agreement, no Party hereto shall allege, and each Party hereto hereby waives any defense or counterclaim, that there is an adequate remedy at law.
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.5(c).
Section 4.6. Severability.
(a) Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.
(b) This Agreement may be amended or a provision hereof waived only by a written instrument signed by each of the Company and the Reinsurer.
(c) No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.
Section 4.7. No Offset. No Party to this Agreement may offset any amount due to the other Party hereto or any of such other Party’s affiliates against any amount owed or alleged to be owed from such other Party or its affiliates under this Agreement or any other agreement without the written consent of such other Party.
Section 4.8. Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the Parties and delivered to the other Party. Each Party may deliver its signed counterpart of this Agreement to the other Party by means of electronic mail or any other electronic medium utilizing image scan technology, and such delivery will have the same legal effect as hand delivery of an originally executed counterpart.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the Reinsurer and the Company have caused this Agreement to be signed by their respective duly authorized officers, all as of the date first written above.
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ALLSTATE LIFE INSURANCE COMPANY | ||||
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By: |
/s/ Xxxxx X. Xxxxxx |
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Name: |
Xxxxx X. Xxxxxx | |||
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Title: |
Senior Vice President and Chief Financial | |||
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Officer | |||
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By: |
/s/ Xxxxxx X. Xxxxxx |
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Name: |
Xxxxxx X. Xxxxxx | |||
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Title: |
Executive Vice President and Chief Risk | |||
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Officer, Allstate Insurance Company | |||
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LINCOLN BENEFIT LIFE COMPANY | ||||
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By: |
/s/ Xxxxx X. Xxxxxx |
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Name: |
Xxxxx X. Xxxxxx | |||
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Title: |
President, Chief Operating Officer and | |||
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Chief Financial Officer | |||
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By: |
/s/ Xxxxxx X. Xxxxxx |
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Name: |
Xxxxxx X. Xxxxxx | |||
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Title: |
Executive Vice President and Chief Risk | |||
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Officer, Allstate Insurance Company | |||
SCHEDULE 1
Certain Specified Life Business – Term Policies
The Company’s Guaranteed Term and 10 year level Best Term business sold from 2000 through 2009 as well as the Company’s 2006 era TrueTerm product sold in 2006 through 2009, with a limited number of policies having issue dates in 2010.
SCHEDULE 2
Commuted Business
“Commuted Business” includes policies with the following coding in the general ledger for company code
034. A code key is provided in the Commutation Accounting Principles.
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--------SAP Profit Center-------- |
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Statutory Balance Sheet Line |
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Channel |
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Market Center |
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Product Group | |
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611 |
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1E |
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31 | |
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611 |
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1E |
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699 |
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1E |
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611 |
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611 |
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1R |
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--------SAP Profit Center-------- |
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Statutory Balance Sheet Line |
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Channel |
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Market Center |
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Product Group |
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601 |
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1A |
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59 |
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611 |
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1E |
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52 |
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611 |
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58 |
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611 |
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1E |
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59 |
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Commuted Business excludes certain Specified Life Business return of premium riders coded to product group 63.
SCHEDULE 3
Commutation Consideration
The Commutation Consideration (as adjusted pursuant to Section 3.3) shall be (i) the investment assets set forth on attached electronic Excel file titled “Commutation Exhibit-LBL Assets 2013 12 31.xlsx”, with such additions or subtractions as agreed by the Parties to reflect the sale or maturity of such assets, plus (ii) cash in an amount equal to the excess of the Commutation Amount over the Statutory Book Value of such assets; provided that if the Statutory Book Value of such assets exceeds the Commutation Amount, assets as agreed by the Parties shall be subtracted as appropriate.
COMMUTATION ANNEX A
Commutation Accounting Principles
This Commutation Annex A sets forth the Commutation Accounting Principles referenced in the Agreement. Capitalized terms used and not otherwise defined in this Commutation Annex A have the respective meanings given in the Agreement.
The Commutation Balance Sheet includes the financial statement impacts related to the Commuted Business resulting from the execution of the Agreement. The Commuted Business is identified as set forth in Exhibit 1, Business Identification. The Commutation Balances are determined using the general ledger coding key as set forth in Exhibit 1.a. The general ledger accounts are summarized and reported in the Commutation Balance Sheet as set forth in Exhibit 1.b.
The Commutation Balance Sheet is prepared using Statutory Accounting Principles (“SAP”) defined as statutory accounting practices prescribed or permitted by the Nebraska Department of Insurance (except where noted otherwise) applied in a manner consistent with its application in the preparation of the Reference Balance Sheet (as such term is defined in the Stock Purchase Agreement). The Commutation Classification Method, Assumptions Utilized and Additional Notes used in the preparation of the Commutation Balance Sheet are set forth in Exhibit 2. The following columns comprise the Commutation Balance Sheet (Column 9):
Column 1 - Commutation Consideration equal to Investment Assets and Commuted Business as set forth in Exhibit 2 and as described in Section 3.1 of the Commutation Agreement.
Column 2 - Xxxx to Market Impact
Column 3 - Recognition of Historical IMR
Column 4 - IMR Transferred to Separate Account
Column 5 - Establish AVR
Column 6 - Statutory vs. Tax Reserves
Column 7 - Establish DTA
Column 8 - Transfer of Working Capital
The following columns comprise the LBL Balance Sheet after Commutation (Column 12):
Column 9 - Commutation Balance Sheet
Column 10 - LBL Balance Sheet
Column 11 - Blank
Column 12 - LBL Balance Sheet after Commutation
These Accounting Principles comprise the following Exhibits:
Exhibit 1 – Business Identification
Exhibit 1.a – Statutory Reserve General Ledger Coding Key
Exhibit 1.b – Statutory General Ledger Coding
Exhibit 2 - Assumptions
Exhibit 1 - Business Identification
Exhibit 1.a – Coding Key
|
G/L Accounts |
|
Account Descriptions |
|
M10010100 |
|
LONG TERM FEDERAL GOVERNMENT - U.S. |
|
M10010200 |
|
LONG TERM FEDERAL GOVERNMENT - CANADA |
|
X00000000 |
|
STATES, PROVINCIAL & MUNICIPALS - TAXABLE |
|
M10013100 |
|
CORPORATE BONDS |
|
M10013200 |
|
CORPORATE BONDS - PRIVATE PLACEMENTS |
|
M10020100 |
|
PASS THRU MORTGAGE BACKED SECURITIES |
|
X00000000 |
|
COLLATERAL MORTGAGE OBLIGATIONS (CMO’S) |
|
M10080000 |
|
SHORT TERM TIME DEPOSIT INVESTMENTS |
|
M10080200 |
|
SHORT TERM MONEY MARKETS |
|
M10080400 |
|
SHORT TERM TREASURY BILLS |
|
M10150231 |
|
XXXX-Xxxxxx ABO |
|
M10150257 |
|
XXXX-XXXXXX ZBA |
|
M10150375 |
|
Cash-Firstier Regular |
|
M10150376 |
|
CASH-US BANK-VA DEPOSITORY |
|
M10150407 |
|
CASH, USBANK #205700310407 FX DEP SWEEP |
|
M10150574 |
|
CASH-WACHOVIA NC - LBL Fixed Systems |
|
M10150575 |
|
CASH-WACHOVIA NC - LBL Fixed Manual |
|
M10150576 |
|
CASH-WACHOVIA NC - LBL Transcend Fixed |
|
M10150584 |
|
CASH-WACHOVIA ANNTY (VA) CDA 11475 |
|
X00000000 |
|
CASH-WACHOVIA ANNTY (VA) CDA 11476 |
|
M10150918 |
|
CASH-LBL Gen Disb-Dep 4443330998 |
|
M10150919 |
|
CASH-LBL Claims Disb 4443330956 |
|
M10150921 |
|
CASH-LBL PAC Dep Acct 4443331194 |
|
M10150922 |
|
CASH-LBL Money Mkt 12760740 |
|
M10150953 |
|
CASH LBL VA Oper UMB 9871645991 |
|
M10150954 |
|
CASH LBL VA Disb UMB 9871646009 |
|
M10150955 |
|
CASH LBL VA Disb UMB 5008012121 |
|
M10150956 |
|
CASH LBL VA Dep UMB 9871645983 |
|
M10151028 |
|
LBL Depository Fixed Chase 967384546 |
|
M10151029 |
|
LBL Depository Var Chase 967384553 |
|
M10156035 |
|
CASH,CITIBANK MMDA/LIQRES |
|
M10156096 |
|
INVESTMENT CASH |
|
M10160021 |
|
Investment in Partnership - EMA |
|
M10171020 |
|
PREMIUM INSTALLMENTS RECEIVABLE - DUE - Life |
|
M10171026 |
|
Reinsurance Premium Receivable |
|
M10190020 |
|
REINSURANCE RECOVERABLE ON PAID LOSS-Non Ledger |
|
M10191030 |
|
REINSURANCE RECEIVABLE/PAYABLE-INTERCOMPANY-XXXX |
|
M10191412 |
|
Reinsurance Receivable/Payable-I/C-LBRe |
|
X00000000 |
|
POLICY LOANS |
|
M10220100 |
|
INCOME RECEIVABLE FIXED INCOME SECURITIES |
|
M10220500 |
|
ACCRUED INTEREST FIXED INCOME SECURITIES |
|
M10227500 |
|
ACCRUED INTEREST SHORT TERM BONDS |
|
M10229200 |
|
POLICY LOAN ACCRUED INTEREST |
|
M10270004 |
|
ACCRUED PREMIUM TAX OFFSET - GFA |
|
M10270005 |
|
PREMIUM TAX DEDUCTIBLE - GFA |
|
M10300000 |
|
Intercompany Receivable |
|
M10300000 |
|
INTERCOMPANY RECEIVABLE |
|
M10330101 |
|
Separate Accounts-Common Stock |
|
M10340000 |
|
A/R, GENERAL |
|
M10340003 |
|
Premium Tax Refund |
|
M10340070 |
|
A/R, FIXED MANAGEMENT FEES |
|
M10360407 |
|
Reinsurance Recoverable - Expense Allowances |
|
G/L Accounts |
|
Account Descriptions |
|
M19990001 |
|
CLEARING ACCOUNT, GENERAL |
|
M20010000 |
|
Life Insurance Policy Benefit Reserves |
|
M20010010 |
|
Reserve for Accident and Health |
|
M20010030 |
|
Policy and Contract Claims - Life |
|
M20010040 |
|
Policy and Contract Claims - A & H |
|
M20010310 |
|
Unearned Premium - A & H |
|
M20060007 |
|
Reinsurance Premium Payable |
|
M20090400 |
|
Commissions On Reinsurance Assumed |
|
M20090600 |
|
AGENT COMMISSION PAYABLE, EMPLOYEE |
|
M20090601 |
|
Agent Commission Payable-Escrow Accrual |
|
M20110000 |
|
PREMIUM RECEIVED IN ADVANCE |
|
M20110107 |
|
Premium Deposit Fund - XXXX |
|
M20160001 |
|
Dividend and Coupon Accumulations |
|
M20160100 |
|
Dividend Due & Unpaid |
|
X00000000 |
|
Dividend - Provision |
|
M20200200 |
|
ACCRUED FIT - FEDERAL INCOME |
|
M20210104 |
|
Accrued Premium Tax |
|
M20210105 |
|
Accrued Premium Taxes |
|
M20210107 |
|
Accrued Muni Tax |
|
M20210300 |
|
ACCRUED STATE INCOME TAXES |
|
M20210800 |
|
ACCRUED TAXES - RETALIATORY |
|
M20320000 |
|
ACCRUED EXPENSE, GENERAL |
|
M20320064 |
|
ACCRUED EXPENSE, DELOITTE & TOUCHE - AUDIT |
|
M20320902 |
|
Unearned Investment Income |
|
M20400407 |
|
TEFRA WITHHOLDING - 1099 20% |
|
M20400500 |
|
FEDERAL TAX WITHHOLDING |
|
M20400501 |
|
FEDERAL TAX WITHHOLDING |
|
M20400502 |
|
FEDERAL BACKUP W/H |
|
M20400504 |
|
STATE W/H |
|
M20400690 |
|
Deferred Compensation-Agents |
|
M20410081 |
|
TPA-Lodger Payable |
|
M20490000 |
|
ABANDONED PROPERTY-CLEARING |
|
M21000200 |
|
CONSUMER’S SALES & USE TAX LIABILITY |
|
X00000000 |
|
A/P, TRADE PAYABLE - VENDOR |
|
M21010100 |
|
A/P, TRADE PAYABLE - EMPLOYEE |
|
M21020002 |
|
ACCRUED GUARANTY FUND ASSESSMENTS |
|
M29990100 |
|
LIFE APPLICATION DEPOSITS |
|
M29990152 |
|
POLICY BILLING SUSPENSE |
|
M29990154 |
|
CASH WITH APPLICATION DEPOSITS |
|
M29990200 |
|
POLICY SUSPENSE |
|
X00000000 |
|
DISBURSEMENT CLEARING |
|
M29990300 |
|
CASH CLEARING |
|
M29990316 |
|
CLEARING/SUSPENSE SEPARATE ACCOUNT |
|
M29990356 |
|
SAP / NE Cyberlife Intra-System |
|
M29990402 |
|
CyberNE Cash W/APP Suspense |
|
M29990403 |
|
CyberNe New Business Cash Suspense |
|
M29990430 |
|
CyberNE Unapplied Cash Suspense |
|
M29990444 |
|
Premium Suspense Credit Card |
|
M29990447 |
|
Intersystem Suspense Credit Card |
|
M29990456 |
|
CyberNE Misc Disburse Clear |
|
M29990502 |
|
Agent Bal Transfer Suspense |
|
M29990503 |
|
Surety Reverse Alliance Suspense |
|
G/L Accounts |
|
Account Descriptions |
|
M29990524 |
|
CyberNE Misc Suspense Control - Var |
|
M29990528 |
|
CyberNE Surrender Clearing - VAR |
|
M29990606 |
|
CyberNE Qual Group Premium Susp |
|
M29990608 |
|
CyberNE Return Check Suspense |
|
M29990621 |
|
CyberNE Premium Refund Suspense |
|
M29990622 |
|
CyberNE Daily Cycle Clearing |
|
M29990623 |
|
CyberNE Cash W/APP Clearing |
|
M29990624 |
|
CyberNE Misc Suspense Control |
|
X00000000 |
|
CyberNE Group Premium Suspense |
|
M29990626 |
|
CyberNE Term Mature Suspense |
|
M29990627 |
|
CyberNE Loan Disburse Clearing |
|
M29990628 |
|
CyberNE Surrender Disburse Clearing |
|
M29990629 |
|
CyberNE Death Claim Clearing |
|
M29990630 |
|
CyberNE Misc Checks Unappld -Terminated Policy |
|
M29990635 |
|
CyberNE Policy Reinstatements |
|
M29990888 |
|
CyberNE Term Conversion Suspense - Fixed |
|
M29990889 |
|
CyberNE Term Conversion Suspense - Var |
|
M29990990 |
|
PruVA Mapping Suspense |
|
M29990992 |
|
PruVA Disbursement Suspense |
|
M29990993 |
|
PruVA Deposit Suspense |
|
M29990998 |
|
Pru VA Outbound Returned Items |
|
M29999503 |
|
CyberNe New Business Cash Suspense - Var |
|
S10080805 |
|
SHORT-TERM BOND-BV CASH EQUIVALENT RECLASS |
|
S10157500 |
|
CASH, TIME DEPOSIT STAT RECL FROM ST INV’S |
|
X00000000 |
|
CASH, EQUIVALENT RECLASS FROM INVESTED ASSETS |
|
S10160003 |
|
LOW INCOME HOUSING STAT BV ADJ |
|
S10171020 |
|
Premium installments receivable - due- Life |
|
S10171030 |
|
Deferred Premium |
|
S10190020 |
|
Reins. Recoverable on Paid Loss-Non Ledger |
|
S10191030 |
|
REINSURANCE RECEIVABLE/PAYABLE-INTERCOMPANY-XXXX |
|
S10200000 |
|
Policy Loans |
|
X00000000 |
|
ACCRUED INTEREST SHORT TERM BONDS CASH EQUIV RECL |
|
S10229200 |
|
MISCELLANEOUS INVESTMENT ACCRUED INTEREST |
|
S10250220 |
|
Deferred Federal Income Tax Asset |
|
S10300000 |
|
Intercompany Receivable |
|
S10300000 |
|
INTERCOMPANY RECEIVABLE |
|
S20010000 |
|
Life Insurance Policy Benefit Reserves |
|
S20010010 |
|
Reserve for Accident and Health |
|
S20010103 |
|
Reserve - MVAA |
|
X00000000 |
|
Separate Accounts Reserves-VA/Variable |
|
S20010114 |
|
Separate Account Liability-CARVM |
|
X00000000 |
|
Unearned Premium - A & H |
|
S20020300 |
|
Interest Maintenance Reserve |
|
S20050000 |
|
Asset Valuation Reserve |
|
S20060110 |
|
Reinsurance in Unauthorized Companies |
|
X00000000 |
|
Agent Commission Payable, Non-Employee |
|
S20110000 |
|
Advance Premium |
|
S20270000 |
|
Intercompany Payable, General |
|
S20270000 |
|
Intercompany Payable, General |
|
S20420000 |
|
SEP ACCT-PAYABLE TO GENL ACCT |
|
CODES |
|
|
|
Distribution Channels |
|
Distribution Channel Description |
|
601 |
|
Allstate Agents |
|
611 |
|
Master Brokerage Agencies (MBA’s) |
|
646 |
|
Prudential |
|
649 |
|
Balance Sheet Entries |
|
650 |
|
Capital |
|
699 |
|
Total Market Center |
|
|
|
|
|
Market Center |
|
Market Center Description |
|
1A |
|
Allstate Agents |
|
1E |
|
Master Brokerage Agencies (MBA’s) |
|
1I |
|
Capital |
|
1P |
|
Prudential |
|
1R |
|
Closed Annuities |
|
|
|
|
|
Product Group |
|
Product Group Description |
|
|
|
Life Products |
|
31 |
|
Interest Sensitive Life |
|
32 |
|
Traditional Life |
|
33 |
|
Variable Universal Life |
|
34 |
|
Indexed Life |
|
63 |
|
Coinsured Term & XXXX Re ROP Rider |
|
3A |
|
SGUL pre 2013 |
|
3B |
|
ISL to LB Re pre 2013 |
|
3C |
|
SGUL post 2012 |
|
3D |
|
ISL post 2012 |
|
|
|
|
|
|
|
Annuity Products |
|
50 |
|
Fixed Annuities - 2010 |
|
51 |
|
Fixed Annuities |
|
52 |
|
MVA Annuities |
|
53 |
|
Indexed Annuities |
|
55 |
|
Variable Annuity |
|
58 |
|
Tactician Plus |
|
59 |
|
MVA 2009 |
|
69 |
|
Equity Indexed Annuities - 2010 |
|
|
|
|
|
00 |
|
Unallocated |
|
|
|
|
|
Reinsurance Categories |
|
Category Description |
|
DB |
|
Direct Business |
|
DR |
|
Direct Business Retained |
|
AE |
|
Assumed Business - External |
|
CL |
|
Ceded Business - External |
Exhibit 1.b – Statutory General Ledger Coding
For purposes of commutation from Allstate Life Insurance Company, queries obtained from the general ledgers of the Company and Reinsurer were utilized to support each financial statement line item. For the avoidance of doubt, the business was identified using Codes (see listing above - Business Identification). Items noted as “All” would include any component listed in the Codes. For reference, the account numbers as of March 31, 2013 are included in the listing. Certain transactions after March 31, 2013 may utilize additional account numbers associated with the Commuted Business or the Company.
|
|
|
--------SAP Profit Center-------- |
SAP |
| |||
|
|
Account |
|
Market |
|
Product |
Reinsurance |
Classification |
|
Page 2, Line 1-4 |
M10010100 |
|
All Company 034 |
|
1 | ||
|
|
M10010200 |
|
All Company 034 |
|
1 | ||
|
|
X00000000 |
|
All Company 034 |
|
1 | ||
|
|
M10013100 |
|
All Company 034 |
|
1 | ||
|
|
M10013200 |
|
All Company 034 |
|
1 | ||
|
|
M10020100 |
|
All Company 034 |
|
1 | ||
|
|
X00000000 |
|
All Company 034 |
|
1 | ||
|
Page 2, Line 5 |
M10080000 |
|
All Company 034 |
|
1 | ||
|
(S-T & cash equivalents) |
M10080200 |
|
All Company 034 |
|
1 | ||
|
|
M10080400 |
|
All Company 034 |
|
1 | ||
|
|
S10080805 |
|
All Company 034 |
|
1 | ||
|
|
X00000000 |
|
All Company 034 |
|
1 | ||
|
Page 2, Line 5 |
M10150231 |
|
All Company 034 |
|
1 | ||
|
(Cash & o/s checks) |
M10150257 |
|
All Company 034 |
|
1 | ||
|
|
M10150375 |
|
All Company 034 |
|
1 | ||
|
|
M10150376 |
|
All Company 034 |
|
1 | ||
|
|
M10150407 |
|
All Company 034 |
|
1 | ||
|
|
M10150574 |
|
All Company 034 |
|
1 | ||
|
|
M10150575 |
|
All Company 034 |
|
1 | ||
|
|
M10150576 |
|
All Company 034 |
|
1 | ||
|
|
M10150584 |
|
All Company 034 |
|
1 | ||
|
|
X00000000 |
|
All Company 034 |
|
1 | ||
|
|
M10150918 |
|
All Company 034 |
|
1 | ||
|
|
M10150919 |
|
All Company 034 |
|
1 | ||
|
|
M10150921 |
|
All Company 034 |
|
1 | ||
|
|
M10150922 |
|
All Company 034 |
|
1 | ||
|
|
M10150953 |
|
All Company 034 |
|
1 | ||
|
|
M10150954 |
|
All Company 034 |
|
1 | ||
|
|
M10150955 |
|
All Company 034 |
|
1 | ||
|
|
M10150956 |
|
All Company 034 |
|
1 | ||
|
|
M10151028 |
|
All Company 034 |
|
1 | ||
|
|
M10151029 |
|
All Company 034 |
|
1 | ||
|
|
M10156035 |
|
All Company 034 |
|
1 | ||
|
|
M10156096 |
|
All Company 034 |
|
1 | ||
|
|
S10157500 |
|
All Company 034 |
|
1 | ||
|
|
|
--------SAP Profit Center-------- |
SAP |
| ||||
|
|
Account |
|
Market |
|
Product |
|
Reinsurance |
Classification |
|
|
Number |
Channel |
Center |
|
Group |
|
Category |
Method |
|
Page 2, Line 6 |
X00000000 |
From detail policy inventory |
|
DB |
1 | |||
|
|
S10200000 |
From detail policy inventory |
|
DB |
1 | |||
|
Page 2, Line 8 |
M10160021 |
|
All Company 034 |
|
|
1 | ||
|
|
S10160003 |
|
All Company 034 |
|
|
1 | ||
|
Page 2, Line 14 |
M10220100 |
|
All Company 034 |
|
|
1 | ||
|
|
M10220500 |
|
All Company 034 |
|
|
1 | ||
|
|
M10227500 |
|
All Company 034 |
|
|
1 | ||
|
|
M10229200 |
From detail policy inventory |
|
DB |
1 | |||
|
|
X00000000 |
|
All Company 034 |
|
|
1 | ||
|
|
S10229200 |
|
All Company 034 |
|
|
1 | ||
|
Page 2, Line 15.1a |
M10171020 |
611 |
1E |
|
32 |
|
DB |
1 |
|
|
M10171020 |
000 |
0X |
|
00 |
|
XX, XX |
0 |
|
|
X00000000 |
000 |
0X |
|
63 |
|
DB |
1 |
|
|
S10171020 |
611 |
1E |
|
32 |
|
DB |
1 |
|
|
S10171020 |
611 |
1E |
|
63 |
|
DB |
1 |
|
Page 2, Line 15.1b * |
M10171026 |
|
All Company 034 |
|
|
1 | ||
|
(External Reinsurance) |
M20060007 |
|
All Company 034 |
|
|
1 | ||
|
Page 2, Line 15.2 |
S10171030 |
611 |
1E |
|
32 |
|
DB |
1 |
|
|
S10171030 |
611 |
1E |
|
63 |
|
DB |
1 |
|
Page 2, Line 16.1 * |
M10190020 |
|
All Company 034 |
|
|
1 | ||
|
|
S10190020 |
|
All Company 034 |
|
|
1 | ||
|
Page 2, Line 16.3 Ext * |
M10360407 |
|
All Company 034 |
|
|
1 | ||
|
Page 2, Line 16.3 (XXXX) |
M10191030 |
|
All Company 034 |
|
|
1 | ||
|
|
M10191412 |
|
All Company 034 |
|
|
1 | ||
|
|
S10191030 |
|
All Company 034 |
|
|
1 | ||
|
Page 2, Line 18.2 |
S10250220 |
|
All Company 034 |
|
|
1 | ||
|
Page 2, Line 19 |
M10270004 |
All |
All |
|
All |
|
DB |
3 |
|
|
M10270005 |
All |
All |
|
All |
|
DB |
3 |
|
Page 2, Line 25 |
M10340000 |
611 |
1E |
|
42 |
|
DB |
1 |
|
|
M10340000 |
649 |
1E |
|
00 |
|
DB |
1 |
|
|
M10340000 |
699 |
1E |
|
42 |
|
DB |
1 |
|
|
M10340003 |
649 |
1E |
|
00 |
|
DB |
3 |
|
|
M10340070 |
611 |
1E |
|
33 |
|
DB |
1 |
|
Page 2, Line 27 |
M10330101 |
|
All Company 034 |
|
|
1 | ||
|
|
|
|
|
|
|
|
|
|
|
* Methodology to be refined for novation |
|
|
|
|
|
| ||
|
|
|
--------SAP Profit Center-------- |
SAP |
| ||
|
|
Account |
Channel |
Market |
Product |
Reinsurance |
Classification |
|
Page 3, Line 1 * |
M20010000 |
611 |
1E |
3A |
DB |
1 |
|
|
M20010000 |
699 |
1E |
63 |
DB |
1 |
|
|
S20010000 |
601 |
1A |
50 |
DB |
1 |
|
|
S20010000 |
601 |
1A |
51 |
DB |
1 |
|
|
S20010000 |
601 |
1A |
53 |
DB |
1 |
|
|
S20010000 |
601 |
1A |
69 |
DB |
1 |
|
|
S20010000 |
601 |
1R |
51 |
DB |
1 |
|
|
S20010000 |
611 |
1E |
31 |
DB,CL |
1 |
|
|
S20010000 |
000 |
0X |
00 |
XX,XX,XX |
1 |
|
|
S20010000 |
611 |
1E |
33 |
DB,CL |
1 |
|
|
S20010000 |
611 |
1E |
34 |
DB,CL |
1 |
|
|
S20010000 |
611 |
1E |
3A |
DB,CL |
1 |
|
|
S20010000 |
000 |
0X |
0X |
XX,XX |
1 |
|
|
S20010000 |
000 |
0X |
0X |
DB,CL |
1 |
|
|
S20010000 |
611 |
1E |
50 |
DB |
1 |
|
|
S20010000 |
611 |
1E |
51 |
DB,CL |
1 |
|
|
S20010000 |
611 |
1E |
53 |
DB |
1 |
|
|
S20010000 |
611 |
1E |
63 |
DB,CL |
1 |
|
|
S20010000 |
611 |
1E |
00 |
XX |
0 |
|
|
X00000000 |
000 |
0X |
00 |
XX,XX,XX |
1 |
|
|
S20010000 |
699 |
1E |
32 |
DB |
1 |
|
|
S20010000 |
699 |
1E |
34 |
DB |
1 |
|
|
S20010000 |
699 |
1E |
63 |
DB |
1 |
|
Page 3, Line 2 |
M20010010 |
611 |
1E |
42 |
DB,CL |
1 |
|
|
S20010010 |
611 |
1E |
42 |
DB,CL |
1 |
|
|
M20010310 |
611 |
1E |
42 |
DB,CL |
1 |
|
|
X00000000 |
611 |
1E |
42 |
DB,CL |
1 |
|
Page 3, Line 3 |
M20110107 |
611 |
1E |
63 |
DB |
1 |
|
|
M20160001 |
611 |
1E |
32 |
DB |
1 |
|
|
M20160001 |
699 |
1E |
32 |
DB |
1 |
|
Page 3, Line 4.1 |
M20010030 |
611 |
1E |
31 |
DB,CL |
1 |
|
|
M20010030 |
611 |
1E |
32 |
DB,CL |
1 |
|
|
M20010030 |
611 |
1E |
33 |
DB,CL |
1 |
|
|
M20010030 |
611 |
1E |
3A |
DB,CL |
1 |
|
|
M20010030 |
000 |
0X |
0X |
XX,XX |
1 |
|
|
M20010030 |
000 |
0X |
0X |
DB,CL |
1 |
|
|
M20010030 |
611 |
1E |
63 |
DB,CL |
1 |
|
Page 3, Line 4.2 |
M20010040 |
611 |
1E |
42 |
DB,CL |
1 |
|
Page 3, Line 5 |
M20160100 |
611 |
1E |
32 |
DB |
1 |
|
Page 3, Line 6 |
X00000000 |
611 |
1E |
32 |
DB |
1 |
|
Page 3, Line 8 |
M20110000 |
611 |
1E |
32 |
DB |
1 |
|
|
M20110000 |
000 |
0X |
00 |
XX, XX |
0 |
|
|
X00000000 |
000 |
0X |
63 |
DB |
1 |
|
|
S20110000 |
611 |
1E |
32 |
DB |
1 |
|
* Current coding requires manual exclusion of certain Specified Life Business return of premium | ||||||
|
riders coded to product group 63. |
|
|
|
|
| |
|
|
|
|
|
--------SAP Profit Center-------- |
SAP |
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Account |
|
|
|
|
Market |
|
|
Product |
|
|
Reinsurance |
|
|
Classification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Channel |
|
|
Center |
|
|
Group |
|
|
Category |
|
|
Method |
|
Page 3, Line 9.4 |
|
S20020300 |
|
|
|
|
All Company 034 |
|
|
|
|
|
1 | |||
|
Page 3, Line 10 |
|
M20090600 |
|
|
|
|
All Company 034 |
|
|
|
|
|
1 | |||
|
|
|
M20090601 |
|
|
|
|
All Company 034 |
|
|
|
|
|
1 | |||
|
|
|
X00000000 |
|
|
|
|
All Company 034 |
|
|
|
|
|
1 | |||
|
Page 3, Line 11 * |
|
M20090400 |
|
|
|
|
All Company 034 |
|
|
|
|
|
1 | |||
|
Page 3, Line 12 |
|
M20320000 |
|
Refer to allocation** |
|
|
DB |
|
|
2 | ||||||
|
|
|
M20320064 |
|
Refer to allocation** |
|
|
DB |
|
|
2 | ||||||
|
Page 3, Line 13 |
|
S20420000 |
|
611 |
|
|
1E |
|
|
33 |
|
|
DB |
|
|
1 |
|
Page 3, Line 14 |
|
M20210104 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
|
|
M20210105 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
|
|
M20210107 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
|
|
M20210300 |
|
All |
|
|
All |
|
|
All |
|
|
DB, DR |
|
|
3 |
|
|
|
M20210800 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
|
|
M21020002 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
Page 3, Line 15.1 |
|
M20200200 |
|
|
|
|
All Company 034 |
|
|
|
|
|
1 | |||
|
Page 3, Line 16 |
|
M20320902 |
|
From detail policy inventory |
|
|
DB |
|
|
1 | ||||||
|
Page 3, Line 17 |
|
M20400407 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
|
|
M20400500 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
|
|
M20400501 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
|
|
M20400502 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
|
|
M20400504 |
|
All |
|
|
All |
|
|
All |
|
|
DB |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Methodology to be refined for novation |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
** Allocation with further refinement to identify specific company payables. |
|
| ||||||||||||||
|
|
|
|
|
--------SAP Profit Center-------- |
SAP |
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
Account |
|
|
|
|
Market |
|
|
Product |
|
Reinsurance |
|
|
Classification | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
Number |
|
Channel |
|
|
Center |
|
|
Group |
|
Category |
|
|
Method | ||||
|
Page 3, Line 19 |
|
M19990001 |
|
|
|
|
All Company 034 |
|
|
|
|
1 | |||||||
|
|
|
M29990100 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990152 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990154 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990200 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
X00000000 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990300 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990402 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990403 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990430 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990456 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990502 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990524 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990528 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990606 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990608 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990621 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990622 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990623 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990624 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
X00000000 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990626 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990627 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990628 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990629 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990630 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990635 |
|
Combination *** |
|
DB |
|
|
2 | ||||||||||
|
|
|
M29990888 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29990889 |
|
From detail policy inventory |
|
DB |
|
|
1 | ||||||||||
|
|
|
M29999503 |
|
Combination *** |
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DB |
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*** Combination of specific identification and some level of allocation. Parties to true up | |||||||||||||||||||
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any adjustments related to refined specific identification. |
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--------SAP Profit Center-------- |
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Exhibit 2
Exhibit 2 provides the inventory of principal assumptions utilized in preparing the LBL Balance Sheet after Commutation. As used below, the Company is sometimes referred to as “LBL” and Reinsurer is sometimes referred to as “XXXX.”
Each financial statement line item included in the Commutation Balance Sheet and LBL Balance Sheet after Commutation is measured according to the following classification method, as specified in the table below:
(1) Amount is specifically identifiable to the Commuted Business or the amount is calculated as a function of the Commutation and therefore specifically identifiable to the Commuted Business.
(2) Specifically identifiable balances and an allocation for balances not specifically identifiable.
(3) Amount represents the entire obligation of the Company or right to an asset of the Company to/from an external party to the Company.
For the Commutation items included in Column 8, the Company and Reinsurer will settle those amounts in accordance with Article III of the Agreement.
A schedule, included as Exhibit 1a, is provided of product groups, market centers, channels and reinsurance categories, collectively “Codes”, accessed through queries obtained from the general ledgers of the Company and Reinsurer in support of each financial statement line item. For the avoidance of doubt, the business is identified using Codes. For reference, the account numbers as of March 31, 2013 that relate to those Codes are included in the listing. Certain transactions after March 31, 2013 may utilize additional account numbers associated with the product groups, market centers and channels associated with the Commuted Business or the Company.
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Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to Commutation. | |||
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Financial Statement Line Item |
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Commutation Classification Method, Assumptions Utilized and Additional Notes |
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Page 2 – Assets |
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1 – 4 – Invested assets |
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1 Commutation Balance Sheet Column 1 and Xxxx to Market Impact column sourced from list of actual assets to be transferred as Commutation Consideration. The Invested Assets to separate account in Commutation Balance Sheet Column 1 equals IL basis market value adjusted annuity (“MVAA”) book value reserve held on XXXX books as of Commutation date. Xxxx to market impacts determined utilizing fair value valuation policies consistent with Reinsurer’s existing practices as disclosed in the statutory audited financial statement. |
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5 – Short-term investments and cash equivalents |
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1 Comprised of: Commutation cash in the amount needed to balance assets transferred (equal to Invested Assets line 1-4 plus Contract Loans plus Investment Income Due and Accrued plus Accrued Policy Loan Interest plus Invested Assets From Separate Account) to reserves (equal to liabilities lines 1- |
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Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to Commutation. | |||
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Financial Statement Line Item |
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Commutation Classification Method, Assumptions Utilized and Additional Notes |
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4 plus unearned investment income plus liabilities from separate account) transferred at the Commutation effective date (Column 1), plus cash of the Company prior to Commutation (Column 10).
Includes short term investments and cash equivalents. |
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5 – Cash and outstanding checks |
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1 Includes all cash accounts which includes LBL outstanding checks |
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6 – Contract loans |
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1 Policy loans are calculated at a seriatim level and sourced to the general ledger from the policy administration systems. |
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8 – Other invested assets |
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1 Balance attributable to low income housing tax credit investment on LBL entity. |
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14 – Investment income due and accrued |
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1 Column 1 sourced from contemplated asset lists shared with the Company reflecting current expectations of assets to be transferred. |
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14 – Accrued policy loan interest |
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1 Policy loan interest is calculated at a seriatim level and sourced to the general ledger from the policy administration systems. |
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15.1 – Uncollected premiums |
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1 Premium is sourced from Cyberlife administration system program that compares paid-to-date to the valuation date, in relation to premium mode.
Loading is sourced from a Valuation program interfaced directly to the ledger. Reinsurance premium payable is tracked at a policy/reinsurance treaty level and booked at a product/channel level.
Commutation amounts shown in Transfer of Working Capital Column 8. |
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15.2 – Deferred premiums |
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1 Premium is sourced from the Cyberlife administration system program that reflects premiums from valuation date to next anniversary date that is neither collected or due.
Loading is sourced from a Valuation program interfaced directly to the ledger.
Commutation amounts shown in Transfer of Working Capital Column 8. |
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16.1 – Amounts recoverable from reinsurers |
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1 N/A – No balances expected under commutation. |
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16.3 – Other amounts receivable under reinsurance contracts - others |
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1 N/A – No balances expected under commutation. |
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16.3 - Other amounts receivable under reinsurance contracts – XXXX |
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1 Represents expense allowances receivable from XXXX. Transfer of Working Capital Column 8 amount equals the net of all assets and liabilities in this column such that the net surplus impact from Column 8 equals zero.
For amounts in Column 10, a general ledger program that automatically reinsures account activity between LBL and XXXX.
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18.2 – Net deferred tax asset |
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1 For purposes of the Commutation, determined as a formula prior to giving effect to tax attribute reductions associated with unified loss rule impacts of any |
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Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to Commutation. | |||
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Financial Statement Line Item |
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Commutation Classification Method, Assumptions Utilized and Additional Notes |
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potential LBL sale. The admitted DTA in Column 12 is sourced from the LBL Balance Sheet in Column 10 plus the admitted DTA in the Establish DTA, Column 7. The cap is of admitted DTA in Column 7 is calculated as 15% multiplied by (i) capital and surplus in Column 12 less (ii) the Admitted DTA in Column 12; less the Admitted DTA in Column 10. |
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19 – Guaranty funds receivable or on deposit |
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1 Represents guaranty fund amounts to be taken as credits on Company’s future premium tax returns.
The receivable based on paid assessments is sourced from the Tax Department based on expected tax offsets that can be taken on future premium tax returns.
The receivable based on accrued assessments is calculated from an internally developed database that tracks the Company’s exposure to current insolvencies.
Commutation amounts shown in Transfer of Working Capital Column 8. |
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25 – Aggregate write-ins |
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a. 1 – Third party administrator (‘TPA”) feed - receivable related to Long Term Care business. b. 2- Fund manager payments - Variable Life fund manager fees receivable – balance averages $200,000 to $250,000 at each quarter end. The balance is allocated by channel with 57% being allocated to MBA. When the VL Separate Account is separated post Commutation, the fees will be specifically identifiable. c. 3 - Premium tax refund receivable.
Commutation amounts shown in Transfer of Working Capital Column 8. |
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27 – Separate account assets |
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1 If Nebraska requires MVAAs to be placed into the separate account, assets with a market value equal to the minimum reserve value held in the separate account for MVAAs or as otherwise required by the state of Nebraska will be transferred from the total of investment assets in lines 1-4. |
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Page 3 – Liabilities |
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1 – Aggregate reserve for life contracts |
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1 Reserves commuted are calculated at a seriatim level and recorded by plan code in the general ledger, therefore, the balances related to commutation are determined on a specific identification basis.
The Commutation Balance Sheet reflects the net of the Company’s direct, assumed and ceded reserves. |
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2 – Aggregate reserve for accident and health contracts |
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1 Reserves are calculated by Third Party Administrator at a seriatim level and recorded by plan code in the general ledger, therefore, the balances related to commutation are determined on a specific identification basis.
The Commutation Balance Sheet reflects the net of the Company’s direct and ceded reserves. |
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3 – Liability for deposit-type contracts |
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1 Dividend Deposits & Premium Deposit funds are calculated at a seriatim level recorded in the general ledger by product/channel, therefore, the balances related to commutation are determined on a specific identification basis. |
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Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to Commutation. | |||
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Financial Statement Line Item |
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Commutation Classification Method, Assumptions Utilized and Additional Notes |
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The Commutation Balance Sheet reflects the net of the Company’s direct and ceded reserves. |
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4 – Contract claims |
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1 Pending claim reserves are sourced from the claims system.
IBNR is calculated by valuation actuaries and is based on an actuarial experience study and recorded at a product/channel level as determined utilizing valuation procedures consistent with Reinsurer’s practices for Reinsurer’s retained business as updated from time to time.
The Commutation Balance Sheet reflects the net of the Company’s direct, assumed and ceded claims. Contract claim liabilities will be transferred to the extent Company is responsible for paying claims after the Commutation effective date regardless of claim incurred date. |
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5 – Dividends and coupons due and unpaid |
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1 Policyholder dividend information is booked manually based on section CKVL52TV of the VL52NE Cyberlife Detail Value report sourced from Cyberlife, and is available at a policy level by plan code.
The Commutation Balance Sheet reflects the net of the Company’s direct and ceded dividends.
Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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6.1 – Dividends apportioned for payment |
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1 Policyholder dividend information is booked manually based on section CKVL52TV the VL52NE Cyberlife Detail Value report sourced from Cyberlife and is available at a policy level by plan code.
The Commutation Balance Sheet reflects the net of the Company’s direct and ceded dividends.
Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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8 – Premiums received in advance |
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1 Premium is sourced from the Cyberlife administration system program that compares paid-to-date to the valuation date, in relation to premium mode.
The Commutation Balance Sheet reflects the net of the Company’s direct and ceded premiums received in advance.
Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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9.4 – or Asset Page if Negative - Interest Maintenance Reserve |
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1 Interest Maintenance Reserve (“IMR”) is comprised of:
1. IMR of the Company calculated as per the statutory statement prior to the Commutation, Column 10; plus
2. Column 3, historical unamortized IMR balance related to business Commuted from Reinsurer calculated as of the Commutation date and calculated as the ratio of the average amount of reserves to be |
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Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to Commutation. | |||
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Financial Statement Line Item |
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Commutation Classification Method, Assumptions Utilized and Additional Notes |
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Commuted – the average is calculated using a simple average of December 31, 2012 amounts and Commutation date amounts divided by 2 and then divided by the simple average of the total reserves of Reinsurer on those same dates as per the statutory statement of Reinsurer divided by 2 (reserves exclude MVAAs since those reserves were held in a market value separate account not subject to IMR through most of the life of the business); plus 3. Column 2, IMR generated by Reinsurer attributable to specific assets transferred at the time of Commutation to be held in the Company’s general account—equal to (i) 65% of the fair value less statutory book value of assets transferred subject to IMR less (ii) Column 4, IMR associated with assets transferred to the separate account if MVAAs are held in the separate account.
All portions of the IMR are amortized into income based on their separate amortization schedules. |
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10 – Commissions due and accrued |
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Not included in Commutation Balance Sheet.
Per SSAP 61, this liability remains with the Company. Callidus and Ralie feed general ledger. Also includes manual accruals associated with bonus programs. |
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11- Commissions and expense allowances on reinsurance assumed |
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Not included in Commutation Balance Sheet.
Amounts are tracked at a policy/reinsurance treaty level via TAI and booked at a product/channel level. |
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12 – General expenses due or accrued |
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2 Includes expenses payable by the Company.
Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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13 – Transfers to Separate Accounts |
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1 Ledger balances are recorded at the appropriate product /channel level. Balances result from VUL Commissioner’s Reserve Valuation Method (“CRVM”) as provided in Appendix A-820 Minimum Life and Annuity Reserve Standards, of the NAIC Accounting Practices and Procedures Manual. The balance is calculated based on the excess of fair value of assets over the statutory minimum reserve required CRVM in the Separate account.
The Commutation Balance Sheet reflects the net of the Company’s direct and ceded transfers to separate accounts.
Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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14 – Taxes, licenses and fees due and accrued |
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3 Represents a Company obligation; entire amount transferred to Company as of the Commutation Effective Date.
The accrual is calculated from an internally developed database that tracks the Company’s exposure to industry insolvencies based on the annual insolvency cost report received from the National Organization of Life and Health Insurance Guaranty Associations (“NOLHGA”). |
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Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to Commutation. | |||
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Financial Statement Line Item |
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Commutation Classification Method, Assumptions Utilized and Additional Notes |
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Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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15.1 – Current federal income tax payable |
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1 Specifically identified – arising from Commutation. Equal to (i) 35% multiplied by the statutory gain or loss on reinsurance Commutation and (ii) 35% multiplied by the statutory reserves as represented in Annual Statement Page 3 lines 1-4 and 13 less associated tax reserves.
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16 – Unearned investment income |
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1 General ledger feed from Cyberlife policy administration systems at a product/channel level - sourced from the general ledger. Amounts relate to Policy Loans or other investments in the Commutation Balance Sheet. |
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17 – Amounts withheld |
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3 Represents a Company obligation; entire amount transferred to Company as of the Commutation Effective Date.
Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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19 – Remittances and items not allocated |
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2 Comprised of inbound and outbound suspense accounts. Transactions are initially recorded to a non-descript product/channel and later cleared to the appropriate product/channel level.
To identify the product/channel splits, the information included in the Excel files supporting the account reconciliations is utilized.
The files contain seriatim listings by policy number of outstanding transactions. The policy numbers are compared to the valuation database to extract the corresponding product/channel.
Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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21 – Liability for benefits for employees and agents |
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1 Deferred agent compensation plan associated with the MBA channel. Amounts booked from reports received from TPA.
Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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24.01 – Asset Valuation Reserve |
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1 Asset Valuation Reserve – Column 5 a. AVR worksheet used in the Company’s filed statutory statement utilized to calculate the ending AVR b. Asset values less assets transferred to market value adjusted annuity separate account added to worksheet and the AVR recalculated
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24.02 – Reinsurance in unauthorized companies |
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Not included in Commutation Balance Sheet.
Reserves ceded to Lincoln Benefit Reinsurance Company. Reserves are calculated at a seriatim level and recorded by plan code. |
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24.04 – Payable to parent, |
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1 |
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Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to Commutation. | |||
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Financial Statement Line Item |
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Commutation Classification Method, Assumptions Utilized and Additional Notes |
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subsidiaries and affiliates |
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Not included in Commutation Balance Sheet. |
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25 – Aggregate write-ins for liabilities |
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Abandoned property and Accounts Payable represent Company obligations; therefore the entire amounts were transferred to Company as of the Commutation Effective Date. · 3 - Abandoned property – Tracker system · 1 - Long-term Care payable - TPA · 3 - Accounts Payable - Accounts payable invoices reviewed to ensure that amounts represent Company payable amounts
Amounts transferred under the commutation are shown in Transfer of Working Capital Column 8. |
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27 – Separate account liabilities |
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1 If MVAAs are transferred to the separate account, the reserves are specifically identified. Column 4, minimum reserve set equal to book value of market value adjusted annuity reserve determined under Illinois SAP plus positive or negative IMR transferred to the separate account as a result of the Commutation as defined in IMR paragraph 3 above. |
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Other |
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Include other amounts, whether positive or negative, not contemplated in Exhibit 2 associated with the Commuted Business as identified consistent with the business identification methods outlined for the Commuted Business herein. |
COMMUTATION ANNEX B
Form of Omnibus Assignment
[Attached]
