Exhibit (j)(1)
UNCONDITIONAL CAPITAL MAINTENANCE AGREEMENT
BETWEEN
AMERICAN INTERNATIONAL GROUP, INC.
AND
AMERICAN GENERAL LIFE INSURANCE COMPANY
This Unconditional Capital Maintenance Agreement (this "Agreement"), is made,
entered into and effective as of March 30, 2011, by and between American
International Group, Inc., a corporation organized under the laws of the State
of Delaware ("AIG"), and American General Life Insurance Company, a corporation
organized under the laws of the Texas (the "Company").
WITNESSETH:
WHEREAS, the Company is a life insurer subject to certain capital
requirements of the insurance laws and regulations of Texas (the "Domiciliary
State");
WHEREAS, the Company is an indirect wholly owned subsidiary of AIG; and
WHEREAS, AIG has an interest in unconditionally maintaining and enhancing
the Company's financial condition:
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
1. In the event that the Company's Total Adjusted Capital for each of the
Company's first and third fiscal quarters (as determined based on the
Company's first and third fiscal quarterly filed statutory financial
statements, respectively, subject to any adjustments or modifications
thereto required by the Domiciliary State's insurance department or the
Company's independent auditors) falls below the Specified Minimum
Percentage of the Company's projected Company Action Level RBC (in each
case as estimated by the Company as of the end of each such first and
third fiscal quarters, as the case may be), AIG shall, within the
respective time periods set forth under paragraph 4, in accordance with
paragraph 5 and in compliance with applicable law, provide to the
Company cash, cash equivalents, securities or other instruments that
qualify (as admitted assets) for purposes of calculating the Company's
Total Adjusted Capital, as a contribution and not as a loan, in an
amount such that the Company's Total Adjusted Capital as of the end of
each of the
Company's second and fourth fiscal quarter, as the case may be, will be
projected to be at least equal to the Specified Minimum Percentage of
the Company's Company Action Level RBC. Notwithstanding the foregoing,
AIG may, at any time as it deems necessary in its sole discretion and in
compliance with applicable law, make a contribution to the Company in
such amount as is required for the Company's Total Adjusted Capital to
equal a percentage of its Company Action Level RBC determined to be
appropriate by the Company and AIG.
2. In the event that the Company's Total Adjusted Capital (a) for each of
the Company's first, second and third fiscal quarters (as determined
based on the Company's first, second and third fiscal quarterly filed
statutory financial statements, respectively, subject to any adjustments
or modifications thereto required by the Domiciliary State's insurance
department or the Company's independent auditors) is in excess of the
Specified Minimum Percentage of the Company's projected Company Action
Level RBC (in each case as estimated by the Company as of the end of
each such first, second and third fiscal quarters, as the case may be)
or (b) as of each fiscal year end (as shown in the Company's fiscal
year-end filed statutory financial statements, together with any
adjustments or modifications thereto required by the Domiciliary State's
insurance department or the Company's independent auditors) is in excess
of the Specified Minimum Percentage of the Company's Company Action
Level RBC (as shown in such fiscal year-end statutory financial
statements), the Company shall, within the respective time periods set
forth under paragraph 4, in accordance with paragraph 5 and subject to
approval by the Company's board of directors as required by the laws of
the Domiciliary State, declare and pay dividends ratably to its equity
holders in an aggregate amount equal to the lesser of (i) the amount
necessary to reduce the Company's projected or actual Total Adjusted
Capital as of each of the end of the Company's fiscal quarter or fiscal
year, as the case may be, to a level equal to or not materially greater
than the Specified Minimum Percentage of the Company's Company Action
Level RBC or (ii) the maximum amount permitted by the Domiciliary
State's law to be paid as an ordinary dividend less an amount that the
Company and AIG agree is appropriate to protect the Company from
exceeding such maximum amount allowed by such Domiciliary State's law as
a result of potential audit adjustments or adjustments to the
projections on which such dividend amount is based. For the avoidance of
doubt, this paragraph shall only require the Company to pay ordinary
dividends; under no circumstances shall the Company be required to pay
any dividend which would trigger the
extraordinary dividend provisions of Section 823.107 of the Insurance
Law of the Domiciliary State or that is otherwise prohibited by the
Domiciliary State. Notwithstanding the foregoing, this Agreement does
not prohibit the payment of extraordinary dividends to reduce the
Company's projected or actual Total Adjusted Capital to a level equal to
or not materially greater than the Specified Minimum Percentage of the
Company's Company Action Level RBC.
3. For the avoidance of doubt, the terms "Total Adjusted Capital", "Company
Action Level RBC", and "Surplus to Policyholders" shall have the
meanings ascribed thereto under the insurance laws and regulations of
the Domiciliary State, or, with respect to "Total Adjusted Capital" and
"Company Action Level RBC", if not defined therein, shall have the
meanings ascribed thereto in the risk-based capital ("RBC") instructions
promulgated by the National Association of Insurance Commissioners
("NAIC"). The term "Specified Minimum Percentage" shall be equal to the
percentage set forth on Schedule 1 attached hereto, which shall be
agreed to by AIG and the Company at least once every year beginning upon
the date of the filing of the Company's 2010 Annual Statement with the
Domiciliary State's insurance department and following review against
the capital adequacy standards and criteria ("Agency Criteria") of each
of Standard & Poor's Corp. ("S&P"), Xxxxx'x Investors Service
("Moody's") and A.M. Best Company ("A.M. Best"). Notwithstanding the
obligation of the Company and AIG to review the Specified Minimum
Percentage on an annual basis, the parties hereto agree to review and
revise the Specified Minimum Percentage on a more frequent basis, if the
parties agree it is appropriate, to take into account (a) any material
changes after the date hereof to any Agency Criteria adopted by any of
S&P, Moody's or A.M. Best, on the one hand, or to the law of the
Domiciliary State or NAIC RBC rules or instructions, on the other hand,
which causes the results under the Agency Criteria to diverge from that
under the law of the Domiciliary State or NAIC RBC rules or
instructions, (b) the Company completes a material transaction that is
treated materially differently by the Agency Criteria, on the one hand,
and the NAIC RBC rules or instructions, on the other hand, or (c) any
other material development or circumstance affecting the Company which
AIG and the Company agree merits a reevaluation of the Specified Minimum
Percentage then in effect.
4. The Company and AIG agree that any contribution to be made under
paragraph 1 will take place within the following two time periods per
year, as applicable: (a) during the time beginning on the first business
day after the filing of the Company's first fiscal
quarterly statutory financial statements and ending on the last business
day prior to the end of the Company's second fiscal quarter; and
(b) during the time beginning on the first business day after the filing
of the Company's third fiscal quarterly statutory financial statements
and ending on the last business day prior to the end of the Company's
fourth fiscal quarter. Notwithstanding the foregoing, in compliance with
applicable law, any capital contribution provided for under paragraph 1
may be made by AIG after the close of any fiscal quarter or fiscal year
of the Company but prior to the filing by the Company of its statutory
financial statements for such fiscal quarter or fiscal year,
respectively, and contributions of this nature shall be recognized as
capital contributions receivable as of the balance sheet date of the yet
to be filed quarterly or annual financial statement (as the case may
be), pursuant to paragraph 8 of Statement of Statutory Accounting
Principles No. 72, to the extent approved by the Domiciliary State. The
Company and AIG further agree that any dividends to be made under
paragraph 2 will take place as soon as practicable after the filing by
the Company of the relevant fiscal quarter-end or fiscal year-end
statutory financial statements or such earlier time as may be agreed by
the Company and AIG.
5. At the time that any contribution is due under paragraph 4, AIG agrees
that it will either (a) make such contribution to the Company's direct
parent and cause such direct parent to then contribute such funds,
securities or instruments so contributed by AIG to the Company, or
(b) make such contribution directly to the Company without receiving any
capital stock or other ownership interest in exchange therefor, subject
in either case to any required regulatory approvals. At any time any
dividends are due under paragraph 4, the Company agrees that it will
make such dividend to the Company's direct parent and will use its best
efforts to cause such direct parent to then dividend or otherwise
provide such funds to AIG. All contributions and dividends contemplated
under this Agreement shall be approved, declared and made, as
applicable, in compliance with applicable law, including, without
limitation, approval by the board of directors of each applicable entity
(including the Company) and any prior notice requirements specified
under applicable rules and regulations of the Domiciliary State.
6. Subject to the requirements of applicable law and the approval, to the
extent required, by any or all of the Company's senior management,
relevant management committees, board of directors, and of any insurance
regulator, the Company hereby acknowledges that, in a manner consistent
with past practice and
any other reasonable requirements of AIG, it will comply with all
financial and budgetary planning, risk mitigation, derisking or pricing,
corporate governance, investment, informational and procedural
requirements set forth by AIG.
7. AIG hereby waives any failure or delay on the part of the Company in
asserting or enforcing any of its rights or in making any claims or
demands hereunder.
8. Unless earlier terminated in accordance with this paragraph 8, this
Agreement shall continue indefinitely. AIG shall have the absolute right
to terminate this Agreement upon thirty (30) days' prior written notice
to the Company, which notice shall state the effective date of
termination (the "Termination Date"); provided, however, that AIG agrees
not to terminate this Agreement unless (a) AIG significantly modifies
the corporate structure or ownership of the Company, or (b) AIG sells
the Company to an acquirer (i) having a rating from at least one of S&P,
Xxxxx'x, A.M. Best or a substitute agency, which is a nationally
recognized statistical rating organization, that is at least equal to
the lower of (x) AIG's then-current rating from such agency or (y) the
Company's then-current rating as supported by this Agreement from such
agency; or (ii) such that, immediately on the effective date of the sale
by AIG of the Company, the Company's capitalization is consistent with
the minimum capital adequacy standards and criteria of at least one of
S&P, Xxxxx'x, A.M. Best or a substitute agency, which is a nationally
recognized statistical rating organization, for a rating that is equal
to or better than the Company's then-current rating on the date
immediately preceding such sale. To the extent not terminated previously
by AIG pursuant to the foregoing, this Agreement will terminate
automatically one year after the closing of any sale of the Company by
AIG, and all provisions hereof will be of no further force and effect.
For the avoidance of doubt, the termination of this Agreement pursuant
to this paragraph 8 shall not relieve either party of any obligation it
may owe to the other party hereunder that existed prior to, and remains
outstanding as of, the Termination Date.
9. Any policyholder holding a policy issued by the Company prior to the
termination of this Agreement shall have the right to demand that the
Company enforce the Company's rights under paragraphs 1, 4 and 5 of this
Agreement, and, if the Company fails or refuses to take timely action to
enforce such rights or the Company defaults in any claim or other
payment owed to any such policyholder when due, such policyholder may
proceed directly against AIG to enforce the Company's rights under
paragraphs 1, 4 and 5 of this
Agreement; provided, however, that no policyholder of the Company may
take any action authorized under this paragraph 9 unless and until
(a) such policyholder has given AIG written notice of its intent to
enforce the terms of this Agreement as provided in this paragraph 9,
which notice shall specify in reasonable detail the nature of and basis
for the policyholder's complaint and (b) AIG has failed to comply with
this Agreement within sixty (60) days after such notice is given; and,
provided, further, that upon termination of this Agreement in accordance
with paragraph 8 hereof, the rights of any policyholder as provided for
under this paragraph 9 shall terminate effective as of the Termination
Date, except with respect to the obligation of AIG (if any) to make
capital contributions to the Company pursuant to paragraphs 1, 4 and 5
of this Agreement solely to the extent such obligation arose prior to,
and remained unsatisfied as of, the Termination Date (it being
understood that upon AIG's satisfaction of all such obligations after
the Termination Date, no such policyholder shall have any rights against
the Company or AIG, as the case may be, under this paragraph 9).
10.This Agreement is not, and nothing herein contained and nothing done
pursuant hereto by AIG shall constitute or be construed or deemed to
constitute, an evidence of indebtedness or an obligation or liability of
AIG as guarantor, endorser, surety or otherwise in respect of any
obligation, indebtedness or liability, of any kind whatsoever, of the
Company. This Agreement does not provide, and is not intended to be
construed or deemed to provide, any policyholder of the Company with
recourse to or against any of the assets of AIG.
11.Any notice, instruction, request, consent, demand or other communication
required or contemplated by this Agreement shall be in writing, shall be
given or made or communicated by United States first class mail,
addressed as follows:
If to AIG:
American International Group, Inc.
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Secretary
If to the Company:
American General Life Insurance Company
c/o SunAmerica Financial Group, Inc.
0000-X Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
with a copy (which shall not constitute notice) to:
American General Life Insurance Company
c/o SunAmerica Financial Group, Inc.
0000 Xxxxxx xx xxx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: General Counsel
12.The covenants, representations, warranties and agreements herein set
forth shall be mutually binding upon and inure to the mutual benefit of
AIG and its successors and the Company and its successors.
13.This Agreement shall be governed by and construed in accordance with the
laws of New York, without giving effect to the principles of conflict of
laws.
14.If any provision of this Agreement shall be declared null, void or
unenforceable in whole or in part by any court, arbitrator or
governmental agency, said provision shall survive to the extent it is
not so declared and all the other provisions of this Agreement shall
remain in full force and effect unless, in each case, such declaration
shall serve to deprive any of the parties hereto of the fundamental
benefits of or rights under this Agreement.
15.This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussion, whether oral or written, of the parties. This Agreement may
be amended at any time by written agreement or instrument signed by the
parties hereto.
16.This Agreement may be signed by the parties in one or more counterparts
which together shall constitute one and the same agreement among the
parties.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
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Name: Xxxxx X. Xxxxxxxxx
Title: Executive Vice President
By: /s/ Xxxxxx X. Gender
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Name: Xxxxxx X. Gender
Title: Senior Vice President and
Treasurer
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: /s/ Xxx X. Xxxxxxxx
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Name: Xxx X. Xxxxxxxx
Title: Senior Vice President and
Chief Financial Officer
SCHEDULE 1
The Specified Minimum Percentage shall initially equal 350% of the Company's
Company Action Level RBC.
