ITEM 24. (B) 8 (a)
SERVICE AGREEMENT
AND
INDEMNITY COMBINATION COINSURANCE
AND MODIFIED COINSURANCE AGREEMENT
OF VARIABLE ANNUITY CONTRACTS
BETWEEN
XXXX XXXXXXX LIFE INSURANCE COMPANY (U.S.A.)
AND
XXXX XXXXXXX LIFE INSURANCE COMPANY OF NEW YORK
TREATY 10
TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS................................................... 1
ARTICLE 2 PURPOSE OF AGREEMENT.......................................... 3
Section 2.01 Purpose of Agreement.................................... 3
ARTICLE 3 COVERAGES TO BE REINSURED..................................... 3
Section 3.01 Cession................................................. 3
Section 3.02 Modified Coinsurance.................................... 3
Section 3.03 Coinsurance............................................. 3
ARTICLE 4 INDEMNITY REINSURANCE PROVISIONS.............................. 4
Section 4.01 Basis of Reinsurance.................................... 4
Section 4.02 Annuitizations.......................................... 4
Section 4.03 Spousal Conversions..................................... 4
Section 4.04 Contract Changes........................................ 4
Section 4.05 Non -Spousal "Stretch" Settlements...................... 4
ARTICLE 5 ACCOUNTING, PAYMENTS AND PROCEDURES........................... 5
Section 5.01 Effective Date Accounting............................... 5
Section 5.02 Adjustments............................................. 5
Section 5.03 Further Adjustments..................................... 5
Section 5.04 No Ceding Allowance..................................... 5
Section 5.05 Initial Coinsurance Reinsurance Premium................. 5
Section 5.06 Initial Modco Reinsurance Premium and Reserve Adjustment
Section 5.07 Reserves................................................ 6
Section 5.08 Adjustments Relating to Errors and Incorrect Data ...... 6
Section 5.09 DAC Tax Calculations.................................... 6
Section 5.10 Premium Tax............................................. 7
Section 5.11 Quarterly Accounting and Settlement..................... 7
Section 5.12 Delayed Quarterly Settlement............................ 7
ARTICLE 6 SERVICE....................................................... 8
Section 6.01 Services................................................ 8
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TABLE OF CONTENTS
(continued)
PAGE
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Section 6.02 Delegation.............................................. 9
Section 6.03 Complaint Processing.................................... 9
ARTICLE 7 REGULATORY APPROVALS.......................................... 9
Section 7.01 Regulatory Approval..................................... 9
Section 7.02 Regulatory Approval Following Amendment................. 9
Section 7.03 Best Efforts............................................ 10
Section 7.04 Filing.................................................. 10
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF CEDING COMPANY.............. 10
Section 8.01 Authority............................................... 10
Section 8.02 Other Representations and Warranties................... 10
ARTICLE 8A REPRESENTATIONS AND WARRANTIES OF REINSURER................... 12
Section 8A.01 Authority............................................... 12
Section 8A.02 Conduct of Business..................................... 14
ARTICLE 9 RECORDS, FEES AND OWERSHIP OF PREMIUMS........................ 14
Section 9.01 Records................................................. 14
Section 9.02 Fees.................................................... 14
Section 9.03 Ownership of Premiums................................... 14
Section 9.04 Bank Accounts........................................... 14
Section 9.05 Authorizations.......................................... 15
Section 9.06 Security Agreement...................................... 15
ARTICLE 10 INDEMNIFICATION............................................... 15
Section 10.01 Indemnification of Reinsurer............................ 15
Section 10.02 Indemnification of Ceding Company....................... 16
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TABLE OF CONTENTS
(continued)
PAGE
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ARTICLE 11 CLAIMS INVESTIGATIONS: PUNITIVE DAMAGES....................... 17
Section 11.01 Investigation of Claims: Punitive Damages............... 17
ARTICLE 12 ARBITRATION................................................... 17
Section 12.01 Arbitration Clause...................................... 17
ARTICLE 13 DELIVERIES AS OF THE EFFECTIVE DATE........................... 18
Section 13.01 Deliveries by Ceding Company............................ 18
Section 13.02 Deliveries by Reinsurer................................. 18
ARTICLE 14 GENERAL PROVISIONS............................................ 19
Section 14.01 Successors, Assigns..................................... 19
Section 14.02 Entire Agreement........................................ 19
Section 14.03 Non-Waiver of Rights.................................... 19
Section 14.04 Governing Law........................................... 19
Section 14.05 Rights.................................................. 19
Section 14.06 Counterparts............................................ 19
Section 14.07 Correspondence.......................................... 19
Section 14.08 Duration................................................ 19
Section 14.09 Notices................................................. 20
Section 14.10 Cooperation............................................. 20
Section 14.11 Insolvency.............................................. 20
Section 14.12 Cut-Through Provision................................... 21
Section 14.13 Audit of Records and Procedures......................... 21
Section 14.14 Termination............................................. 21
EXHIBIT A - Description of Reinsured Contracts........................ A-1
EXHIBIT B - Form of Effective Date Accounting......................... B-1
EXHIBIT C -Assets C-1
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TABLE OF CONTENTS
(continued)
PAGE
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EXHIBIT D - Reinsurance Gain.......................................... D-1
EXHIBIT E - Form of Quarterly Accounting and Settlement Report........ E-1
SCHEDULE 8.02(b) - Material Litigation and Regulatory Action.......... F-1
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THIS AGREEMENT is made and entered into as of the first day of January
2010, (herein "Effective Date") between XXXX XXXXXXX LIFE INSURANCE COMPANY
(U.S.A.) of Bloomfield Hills, Michigan (herein "Ceding Company"), AND XXXX
XXXXXXX LIFE INSURANCE COMPANY OF NEW YORK of Valhalla, New York, (herein
"Reinsurer").
RECITALS
A. Ceding Company is incorporated under the laws of Michigan and is
qualified to do business as a capital stock legal reserve life and health
insurer. The administrative offices of Ceding Company are located in Boston,
Massachusetts.
B. Reinsurer is incorporated under the laws of New York, and is qualified
to do business as a capital stock legal reserve life and health insurer and as a
reinsurer. The administrative offices of Reinsurer are located in Valhalla, New
York.
C. Following the merger of Xxxx Xxxxxxx Life Insurance Company with and
into the Ceding Company (the "Merger"), Ceding Company shall have on its books
certain variable annuity contracts, including certain combination fixed and
variable annuity contracts, which it desires to cede 100% hereunder, and,
subject to the terms of this Agreement, Reinsurer desires to reinsure 100% of
such contracts.
D. Although Ceding Company will continue to be legally obligated to the
contract holders, in accordance with its terms, this Agreement is intended to
transfer the economic benefits and liability to the Reinsurer.
AGREEMENT
NOW, THEREFORE, IN CONSIDERATION of the mutual and foregoing recitals and
the mutual covenants and undertakings herein contained, and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties do
freely and voluntarily agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 As used herein, the following terms shall have the following
meanings:
"Accounting Period" shall mean the calendar quarter beginning on the
Effective Date and ending on March 31, 2010, and each calendar quarter
thereafter while this Agreement remains in effect.
"Agreement" shall mean this Service Agreement and Indemnity Combination
Coinsurance and Modified Coinsurance Agreement of Variable Annuity Contracts
Between Xxxx Xxxxxxx Life Insurance Company (U.S.A) and Xxxx Xxxxxxx Life
Insurance Company of New York and all Exhibits and Schedules hereto, and all
amendments entered into in accordance with Section 14.02.
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"Annual Statement" shall mean the 2009 Annual Statement of Xxxx Xxxxxxx
Life Insurance Company for the year ended December 31, 2009.
"Bank Accounts" shall have the meaning ascribed to that term in Section
9.04.
"Coinsurance Reserves" shall mean the statutory reserve for the obligations
reinsured pursuant to Section 3.03.
"Continuing Producer" shall mean a former appointed insurance producer of
the Ceding Company who was authorized to solicit applications for the Reinsured
Contracts and who may act as an appointed insurance producer of the Reinsurer
after the Effective Date.
"Effective Date" shall mean January 1, 2010.
"Effective Date Accounting" shall have the meaning ascribed to that term in
Section 5.01.
"Modified Coinsurance Reserve" shall mean the statutory reserve for the
obligations reinsured pursuant to Section 3.02
"Net Coinsurance Reserve" shall have the meaning ascribed to that term in
Section 5.01.
"Reinsurance Claims" shall mean contract benefits paid or accrued to
contractholders under the Reinsured Contracts including but not limited to Death
Claims, Withdrawals and Surrenders, and Fixed and Variable Annuitization Claims.
"Reinsured Contracts" shall mean the contracts described in Exhibit A which
is attached hereto and made a part hereof. Notwithstanding anything contrary in
this Agreement, Reinsured Contracts: (a) shall, with respect to any group
contracts, be deemed to include only certificates issued in New York; (b) shall
not include any contract for which any applicable Initial Coinsurance
Reinsurance Premium described in Section 5.05, Initial Modco Reinsurance Premium
described in Section 5.06, or any adjustment thereto as described in Sections
5.02, 5.03 or 5.08, are not actually transferred to Reinsurer, and (c) shall not
include any retained asset account established prior to the Effective Date to
pay death benefits under such contract.
"Related Agreements" shall mean the agreements providing for the payment of
commissions relating to the Reinsured Contracts.
"Separate Accounts" means the segregated asset accounts of Ceding Company
that were established as Xxxx Xxxxxxx Variable Annuity Account H, Xxxx Xxxxxxx
Variable Annuity Account U and Xxxx Xxxxxxx Variable Annuity Account V to fund
the variable portion of the Reinsured Contracts and succeeded to by the Ceding
Company in the Merger. For purposes of this Treaty 10, "Separate Accounts" shall
also mean the segregated asset account of Ceding Company designated "3SA00" that
was established for purposes of funding reserve obligations of Reinsured
Contracts with respect to fixed income investment allocations that may be
subject to a market value adjustment. Any such reserve obligations shall be
reinsured on a modified coinsurance basis with the Reinsurer in accordance with
the terms of this Treaty 10.
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"Treaty # 11" shall mean the Service Agreement and Indemnity Coinsurance
Agreement of Annuity Contracts and Certificates Between Xxxx Xxxxxxx Life
Insurance Company (U.S.A) and Xxxx Xxxxxxx Life Insurance Company of New York
dated January 1, 2010 and designated as Xxxxxx # 00, and all Exhibits and
Schedules thereto, and all amendments entered into in accordance with its terms.
ARTICLE 2
PURPOSE OF AGREEMENT
Section 2.01 Purpose of Agreement. The purpose of this Agreement is to
provide for the one hundred percent (100%) indemnity reinsurance by Reinsurer of
all of the interest of Ceding Company in the Reinsured Contracts and to provide
for servicing of such Reinsured Contracts. The reinsurance and service
responsibilities are subject to the terms and conditions set forth herein.
Reinsurer shall not accept any liabilities of Ceding Company other than those
express, written contractual liabilities set forth in the Reinsured Contracts
and the Related Agreements. Reinsurer shall be obligated only under the express,
written terms of the Reinsured Contracts and the Related Agreements and shall
not be bound by any sales materials or other written or verbal representations
stated or implied by either Ceding Company or any of its representatives,
agents, or other parties or liable for any matter other than contractual
liabilities under the express, written terms of the Reinsured Contracts and the
Related Agreements. Reinsurer shall not assume liability for: (a) any
misrepresentations that have been made or allegedly have been made to the
contractholders of Ceding Company, or to its representatives, agents, or other
parties on or prior to the Effective Date or (b) for any alterations in the
terms of the Reinsured Contracts and the Related Agreements not expressly
reflected in the books and records of the Ceding Company transferred to
Reinsurer on the Effective Date pursuant to the terms of this Agreement.
ARTICLE 3
COVERAGES TO BE REINSURED
Section 3.01 Cession. Ceding Company agrees to cede, and does cede, as of
the Effective Date, all of Ceding Company's rights and interest in the Reinsured
Contracts and the Related Agreements so that then and thereafter, as between the
parties to this Agreement, Ceding Company shall have no liability for the
express, written benefits under the Reinsured Contracts or the Related
Agreements.
Section 3.02 Modified Coinsurance. Reinsurer agrees to accept, and it does
accept as of the Effective Date, cession of the Reinsured Contracts, and to
assume, and it does assume, on a modified coinsurance basis, all Separate
Account obligations and liability as may be related to express, written
contractual liability insured under the Reinsured Contracts and provided under
the Related Agreements after such date.
Section 3.03 Coinsurance. Reinsurer agrees to accept, and it does accept as
of the Effective Date, cession of the Reinsured Contracts, and to assume, and it
does assume, on a 100% indemnity coinsurance basis, all general account
liability as relates to all remaining written
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contractual liability not assumed in accordance with Section 3.02, except as
otherwise provided in Section 4.02.
ARTICLE 4
INDEMNITY REINSURANCE PROVISIONS
Section 4.01 Basis of Reinsurance. On and after 12:01 a.m., New York time,
on the Effective Date, Ceding Company's liabilities under the Reinsured
Contracts shall be reinsured on a one hundred percent (100%) indemnity
coinsurance and modified coinsurance basis by Reinsurer.
Section 4.02 Annuitizations. Reinsurer's assumption of 100% of the
liabilities and benefits of the Reinsured Contracts shall be continuous and
uninterrupted in the event a Reinsured Contract is settled, in whole or in part,
as a fixed annuity payout. Proceeds so applied to a fixed annuity payout under
any such Reinsured Contract shall be reflected as a Fixed Annuitization in the
Quarterly Accounting and Settlement in accordance with Section 5.11, and a
reinsurance premium for a single premium immediate annuity ("SPIA") contract
pursuant to the terms and conditions of that certain coinsurance agreement
effective on the Effective Date between the parties and designated Treaty Number
11.
Section 4.03 Spousal Conversions. After the Effective Date, Ceding
Company's Reinsured Contracts that permit a surviving spouse to continue a
Reinsured Contract in that surviving spouse's name shall, upon any such
continuance, immediately become a Reinsured Contract within the meaning of this
Agreement.
Section 4.04 Contract Changes. Ceding Company agrees that it shall not make
any changes after the Effective Date in the provisions and conditions of a
Reinsured Contract; provided, however, that after the Effective Date, Ceding
Company may make changes regarding non-guaranteed Contract provisions of the
Reinsured Policies (e.g. Mortality charges and interest rates). Ceding Company
agrees that it will follow its normal financial management processes that it
follows on its own business with regard to the Reinsured Policies and confer
with the Reinsurer prior to making any such changes. It is the parties'
expectation that the Ceding Company will credit a rate on the fixed account
portion, if any, of the Reinsured Policies under the Ceding Company's current
crediting rate practice. If the Ceding Company elects to credit interest rates
outside its current crediting practice, the Ceding Company shall first provide
the Reinsurer with the description of the Ceding Company's proposed strategy and
the Ceding Company's justification for crediting interest rates outside its
current crediting rate practice, and seek the Reinsurer's consent. Such consent
shall not be unreasonably withheld. At Reinsurer's request, Ceding Company shall
report its current crediting rates to Reinsurer (through electronic means or
otherwise) in such format and at such times as may be mutually agreed for
purposes of Reinsurer's administration and preparation of statutory accounting
reports in accordance with Section 6.01.
Section 4.05 Non-Spousal Beneficiary "Stretch" Settlements. The Reinsured
Contracts include death benefit settlements pursuant to which a non-spousal
beneficiary receives death benefit proceeds for a period not to exceed the
lesser of the life or lifetime expectancy (pursuant to U.S. Treasury
Regulations) of such beneficiary ("Stretch Settlement"). Any amounts
4
distributed during an Accounting Period under a Stretch Settlement shall be
reflected as a Death Benefit in that Accounting Period's Quarterly Accounting
and Settlement in accordance with Section 5.11.
ARTICLE 5
ACCOUNTING. PAYMENTS, AND PROCEDURES
Section 5.01 Effective Date Accounting. On the Effective Date, Ceding
Company shall have prepared as of the Effective Date, an estimate of all
liabilities and related assets customarily arising under statutory accounting
principles on account of the Reinsured Contracts, substantially in the form set
forth in Exhibit B (the "Effective Date Accounting"). Such accounting shall have
been reviewed and certified by a Fellow of the Society of Actuaries familiar
with the business of Ceding Company. It is the intent of the parties that such
accounting and each of the entries thereof shall have been prepared in
accordance with insurance accounting principles prescribed or permitted under
statutory authority applied on a basis consistent with those applied by the
Ceding Company in prior years and shall present fairly the items reflected
therein in accordance with sound actuarial principles as of the date of such
accounting. The results of such accounting shall be called the Net Coinsurance
Reserve and the Modified Coinsurance Reserve. It is anticipated that all
liabilities and assets arising from or relating to the Reinsured Contracts on
the Effective Date shall be reflected in the Effective Date Accounting, and
omission of an item from Exhibit B which properly relates to the Reinsured
Contracts shall not be cause for omission of such item from the Effective Date
Accounting. Ceding Company agrees to supply Reinsurer a copy of all computer
runs, work papers and supporting data used in preparing the Effective Date
Accounting.
Section 5.02 Adjustments. Within ninety (90) days of the Effective Date,
the Ceding Company shall prepare and deliver to Reinsurer a revised accounting,
prepared as of the Effective Date in the manner prescribed in Section 5.01. The
revised accounting shall include a revised Exhibit A, which can be in electronic
format, that includes all the Reinsured Contracts as of the Effective Date.
Ceding Company shall also prepare a revised Schedule C listing of all the assets
transferred on the Effective Date, the actual fair market value of those assets
on the Effective Date and any differences between the actual fair market value
and the estimated fair market value used in calculating the Reinsurance Premium.
Any payments required of either party as a result of the revised accounting and
revised asset listing shall be made within ten (10) business days after delivery
of the revised accounting in accordance with Exhibit B.
Section 5.03 Further Adjustments. In the event that subsequent data or
calculations or banking arrangements require revision of the Effective Date
Accounting, the required revision and appropriate payments thereunder with
interest in accordance with Exhibit B shall be made within ten (10) business
days after reasonable determination of such revision.
Section 5.04 No Ceding Allowance. Reinsurer shall not provide Ceding
Company with a ceding allowance.
Section 5.05 Initial Coinsurance Reinsurance Premium. On the Effective
Date, Ceding Company shall deliver to Reinsurer an estimated accounting as
described in Section 5.01
5
calculated as of the Effective Date, and Ceding Company shall transfer an
initial reinsurance premium ("Initial Coinsurance Reinsurance Premium") to
Reinsurer on the Effective Date in the form of cash and/or assets listed in
Exhibit C with an estimated fair market value as of the Effective Date equal to
the Net Coinsurance Reserve (including associated unamortized interest
maintenance reserves)described in Exhibit B.
Section 5.06 Initial Modco Reinsurance Premium and Reserve Adjustment. On
the Effective Date, the Ceding Company shall also transfer to the Reinsurer an
additional estimated reinsurance premium equal to the Modified Coinsurance
Reserve ("Initial Modco Reinsurance Premium") and the Reinsurer shall
immediately transfer to the Ceding Company an amount equal to the Modified
Coinsurance Reserve. Such payments shall be settled on a net basis.
Section 5.07 Reserves. With respect to the Reinsured Contracts, the Ceding
Company will maintain an aggregate liability equal to the Modified Coinsurance
Reserve on its statutory statements equal to the Separate Accounts' balance, and
the Reinsurer agrees to establish and maintain a liability on its statutory
statements not less than the statutory reserves and claim reserves, as required
by the applicable regulatory authorities, for all liabilities except those for
which the Reserve is held in the Separate Accounts.
Section 5.08 Adjustments Relating to Errors and Incorrect Data. Each party
is entitled to protection against the consequences of material errors with
respect to (i) data on the Reinsured Contracts, and (ii) the Effective Date
Accounting. If material errors are discovered in the above described information
within three (3) years from the Effective Date, the parties will promptly make
any needed adjustments in the amounts so transferred.
Section 5.09 DAC Tax Calculations. In regards to the Reinsured Contracts
described in Exhibit A, Ceding Company and Reinsurer agree to the following
pursuant to United States Treasury Regulation Section 1.848-2(g)(8):
(a) The term "party" will refer to either Ceding Company or Reinsurer
as appropriate.
(b) The terms used in this Section are defined by reference to United
States Treasury Regulation Section 1.848-2 in effect as of the Effective
Date and at all relevant times thereafter.
(c) For each taxable year ending on or after the Effective Date, the
party with net positive consideration for this Agreement for each taxable
year will capitalize specified contract acquisition expenses with respect
to this Agreement without regard to the general deductions limitation of
Section 848(c)(l) of the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
(d) Both parties agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to ensure
consistency or as otherwise required by the United States Internal Revenue
Service.
(e) The exchange of information will follow the following procedure:
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By May 1 of each year, Reinsurer will submit a schedule to Ceding
Company of its calculation of the net consideration for the preceding
taxable year. This schedule of calculations will be accompanied by a
statement signed by an officer of Reinsurer stating the amount of net
consideration Reinsurer will report in its tax return for the preceding
taxable year. To ensure consistency, Ceding Company will utilize this
information in determining its net consideration for its preceding taxable
year. Ceding Company shall advise Reinsurer if it disagrees with the
calculations provided and the parties agree to act in good faith to resolve
such differences amicably.
(f) Both parties agree to attach a schedule to their 2010 Federal
Income Tax Return as required by United States Treasury Regulation
1.848-2(g)(8)(ii) And 1.848-2(g)(8)(iii).
(g) Both parties warrant that they are U.S. taxpayers as defined by
United States Treasury Regulation 1.848-2(h)(2)(ii).
Section 5.10 Premium Tax. Reinsurer shall reimburse Ceding Company annually
(or such shorter period as the parties agree) for an amount equal to the premium
tax and any other tax required to be paid by Ceding Company to any State or
political sub-division thereof with respect to any premiums received for the
Reinsured Contracts after the Effective Date.
Reinsurer shall, on a timely basis and in accordance with Section 6.01,
provide Ceding Company any information necessary for Ceding Company to make such
tax payments.
Section 5.11 Quarterly Accounting and Settlement. Within thirty (30) days
after the end of each Accounting Period, Reinsurer shall submit to Ceding
Company quarterly accounting reports, substantially in the form of Exhibit E -
Form of Quarterly Accounting and Settlement Reports, for each Accounting Period
(such reports shall include, but are not limited to, the amounts determined in
the manner described in Exhibit D for Reinsurance Premiums, Reinsurance Fees,
Reinsurance Claims, Reinsurance Gains and Modco Reserves).
Within forty-five (45) days after the end of each Accounting Period, an amount
equal to the Reinsurance Gain, as defined in Exhibit D and calculated as shown
in Exhibit E, will be settled between the Ceding Company and Reinsurer. Payment
shall first be made by way of cash or cash equivalent, where: (i) if the
Reinsurance Gain is greater than or equal to zero, the Ceding Company shall pay
the Reinsurer, and (ii) if the Reinsurance Gain is less than zero, the Reinsurer
shall pay the Ceding Company the absolute value of the amount.
Section 5.12 Delayed Quarterly Settlement. If there is a delayed quarterly
settlement, a party may impose an interest penalty charge on the other for the
period that an amount is overdue, as follows: (a) in the event Reinsurer timely
submits a Quarterly Accounting and Settlement Report and the Reinsurance Gain is
greater than zero, Reinsurer may impose an interest penalty charge for the
period that the settlement amount is overdue; (b) in the event Reinsurer does
not timely submit a Quarterly Accounting and Settlement Report and the
Reinsurance Gain is greater than zero, Reinsurer may impose an interest penalty
charge for the period that the settlement amount is overdue but any such period
shall not begin until fifteen (15) days after it submits the Quarterly
Accounting and Settlement Report; (c) in the event Reinsurer
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timely submits a Quarterly Accounting and Settlement Report and the Reinsurance
Gain is less than zero, Ceding Company may impose an interest penalty charge for
the period that the settlement amount is overdue; and (d) in the event Reinsurer
does not timely submit a Quarterly Accounting and Settlement Report and the
Reinsurance Gain is less than zero, Ceding Company may impose an interest
penalty charge for the period that the Quarterly Accounting and Settlement
Report is overdue. Any interest penalty charged shall be calculated from the
applicable date described above, to the date of payment based on the three month
LIBOR on a per annum basis (containing 360 days) as published on the last day of
the calendar month plus 50 basis points. The three month LIBOR rate for this
calculation will reset at the last business day of each subsequent calendar
month until outstanding amounts due have been paid. Accrued balances of less
than $200,000 can be paid in the next subsequent Accounting Period settlement
without interest penalty.
ARTICLE 6
SERVICE
Section 6.01 Services. After the Effective Date, Reinsurer agrees to
provide the following services on behalf of and in the name of the Ceding
Company at its own expense:
(a) All normal and necessary service on account of the Reinsured
Contracts, including but not limited to:
(i) answering contractholder questions and correspondence; making
changes requested by contractholders to the Reinsured Contracts and
maintaining contract information and other information storage systems
and files;
(ii) adjudicating claims and preparing checks or drafts to pay
claims, surrender benefits and other contractual benefits in
accordance with applicable state and federal law, provided that at the
option of Ceding Company, Ceding Company may pay all claims and seek
reimbursement from Reinsurer. For greater clarity, it is the intention
of the parties that although Reinsurer will provide all Services
required to administer the Reinsured Contracts after the Effective
Date, Ceding Company will initially, at the direction of Reinsurer,
pay all claims and will be subsequently reimbursed quarterly (or such
shorter period as the parties agree) by Reinsurer in accordance with
the Quarterly Settlement provisions in Section 5.11; and
(iii) satisfying all contract filing tax reporting and any other
regulatory requirements with respect to the Reinsured Contracts.
(b) All information with respect to the Reinsured Contracts required
by Ceding Company to prepare: (i) the quarterly and annual NAIC reports
including all schedules thereto, (ii) any monthly, quarterly and annual tax
reporting, and (iii) any other information with respect to the Reinsured
Contracts which may be requested by any regulatory body in any jurisdiction
in which the Ceding Company is licensed.
8
In order to permit Ceding Company to satisfy its reporting
obligations, Reinsurer agrees to maintain, in accordance with accepted
standards of prudent insurance recordkeeping, records for ERISA reporting
purposes (to the extent applicable to the Reinsured Contracts), complaint
records, records regarding rescissions, claim activities, customer service
and other matters to the same extent that Ceding Company maintains such
records with respect to its individual variable annuity contracts issued
outside of New York.
All data required for quarterly NAIC reports shall be submitted
to Ceding Company no later than the end of the third week of the month
following the quarter end. All data required for annual NAIC reporting
shall be submitted to the Ceding Company no later than January 31st.
Section 6.02 Delegation. Reinsurer may employ an affiliate to perform any
of its servicing responsibilities under this Agreement. The performance of such
servicing responsibilities by any entity other than the Reinsurer, or its
affiliate shall require the written consent of the Ceding Company.
Section 6.03 Complaint Processing. As part of the services hereunder,
Reinsurer shall be responsible for the processing of all complaints involving
the Reinsured Contracts, and maintaining adequate written records thereof
including the name and address of the complainant, the date received, the nature
of the complaint and the resolution. Reinsurer shall provide Ceding Company with
such records on request. Reinsurer will communicate with Ceding Company
concerning any Complaints that, in Reinsurer's good-faith judgment, appear to be
likely to give rise to liability (provided, however, that Reinsurer shall not be
liable for, and the indemnification responsibilities, outlined in Article 10,
shall be unaffected by, Reinsurer's error of judgment). Ceding Company shall
promptly notify Reinsurer of any Complaints it receives regarding the Reinsured
Policies. Complaints for the purposes of this paragraph shall be defined as any
written communication primarily expressing a grievance.
If Reinsurer receives any notice from any source (including, but not
limited to, a contractholder or regulatory agency) of a lawsuit or other legal
or administrative hearing or proceeding being brought against Ceding Company and
involving the Reinsured Contracts or the threat of any such lawsuit, hearing or
proceeding ("Proceeding"), for which Reinsurer is entitled to indemnification by
Ceding Company, Reinsurer will promptly forward to Ceding Company notice of the
Proceeding and a copy of all legal documents, correspondence and other materials
relevant thereto which Reinsurer reasonably has access to as required by Article
9 hereof, provided, however, that failure to give such notice shall not affect
Ceding Company's obligations to indemnify Reinsurer unless such failure
materially prejudices Ceding Company's rights with respect to such Proceeding.
Reinsurer agrees to cooperate fully with Ceding Company in connection with the
Proceeding.
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ARTICLE 7
REGULATORY APPROVALS
Section 7.01 Regulatory Approval. Ceding Company and/or Reinsurer shall
apply, where applicable, to the Commissioner of Michigan's Office of Financial
and Insurance Regulation, and the Superintendent of the New York State Insurance
Department for approval of the transfer contemplated by this Agreement in
accordance with the relevant provisions of the applicable legislation in the
United States on the terms and conditions set out herein either without
modification or with such modification as may have been agreed by the parties
hereto and approved by such regulatory authorities.
Section 7.02 Regulatory Approval Following Amendment. Any change to this
Agreement which occurs after the approvals referred to in Section 7.01 hereof
have been obtained shall be subject to the approval of the Commissioner of
Michigan's Office of Financial and Insurance Regulation, the Superintendent of
the New York State Insurance Department and, to the extent necessary or
appropriate, to any federal authorities with jurisdiction over the subject
matter herein.
Section 7.03 Best Efforts. Ceding Company and Reinsurer agree that they
will each proceed with all due diligence to consummate the transaction set forth
in this Agreement.
Section 7.04 Filing. Ceding Company and Reinsurer shall file all documents
required to be filed by the Commissioner of Michigan's Office of Financial and
Insurance Regulation, the Superintendent of the New York State Insurance
Department and, to the extent necessary or appropriate, any federal authorities
with jurisdiction over the subject matter herein in order to consummate the
transaction set forth in this Agreement.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF CEDING COMPANY
Section 8.01 Authority. Ceding Company represents and warrants that Ceding
Company is a corporation duly organized as a capital stock legal reserve life
and health insurance company, validly existing under the laws of the State of
Michigan and the Ceding Company or its predecessor in interest was licensed or
otherwise authorized in New York to issue the Reinsured Contracts. Ceding
Company has the full corporate power and authority to carry out and perform its
undertakings and obligations under this Agreement. Except as provided in Article
7, the execution and delivery by Ceding Company of this Agreement and the
consummation by Ceding Company of the transactions contemplated in this
Agreement have been duly authorized by all proper and requisite proceedings and
will not conflict with, constitute a default under or breach any provision of
the Articles of Organization or Bylaws of Ceding Company, or any material
provision of any other instrument to which Ceding Company is a party or by which
it is bound, or any law, rule or regulation of any governmental body applicable
to Ceding Company or any order, writ, injunction or decree of any court or
governmental body directed against Ceding Company. This Agreement has been duly
and validly executed and delivered by Ceding Company. Assuming due
authorization, execution and delivery by Reinsurer, this Agreement is the legal,
10
valid and binding obligation of Ceding Company enforceable against it in
accordance with its terms.
Section 8.02 Other Representations and Warranties. The Ceding Company
hereby makes the following representations and warranties:
(a) Compliance with Law. All of the forms of the Reinsured Contracts,
including but not limited to applications, amendments, endorsements,
riders, certificates, contracts, which have been reinsured under this
Agreement have been filed and approved, if required, by the applicable
insurance departments in the jurisdictions in which such filing is
required. All advertising materials and point-of-sale materials used in
connection with the sale or marketing of the Reinsured Contracts were in
compliance with all applicable laws and regulations when utilized.
(b) Validly Issued, No Adverse Affect, and No Litigation. (i) All of
the Reinsured Contracts are validly issued; (ii) as of the Effective Date
there are currently no known facts or conditions which have not been
disclosed to the Reinsurer, that would adversely affect the contractual
liabilities assumed by Reinsurer pursuant to this Agreement; and (iii)
except as provided in Schedule 8.02(b), there is no material litigation or
regulatory action proceeding pending or threatened against Ceding Company
on the Effective Date which would adversely affect the Reinsured Contracts
under this Agreement or the assets to be transferred hereunder or which
would prevent the consummation of this Agreement.
(c) No Reinsurance Agreements. There are no reinsurance agreements
with a third party concerning the Reinsured Contracts.
(d) Title. No person, firm or corporation has any claim, lien,
judgment or right of action, legal or equitable, against or in any assets
transferred to Reinsurer under the terms of this Agreement. Reinsurer shall
obtain good and merchantable title to all such assets free and clear of all
claims, liens, judgments or rights of action upon such assets being
transferred to Reinsurer in accordance with the terms hereof. Ceding
Company agrees to indemnify and save harmless Reinsurer against and from
any and all claims or liens against said assets or any claim or judgment
which may be made or entered against or related to said assets or any claim
or judgment which may be made or entered against Reinsurer for which the
latter is not expressly obligated under this Agreement.
(e) Accountings. Pursuant to the terms of this Agreement, Ceding
Company will furnish to Reinsurer the Effective Date Accounting as well as
a copy of all computer runs, work papers, and supporting data used in
preparing such accounting. The accounting shall be prepared in accordance
with insurance accounting principles prescribed or permitted under
statutory authority applied on a basis consistent with those applied by
Ceding Company in prior years and to present fairly the items reflected
therein in accordance with sound actuarial principles as of the date of
such accounting.
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(f) Correct Information. All of the information concerning the
Reinsured Contracts contained in Exhibit A, or any other exhibits to this
Agreement, is true and correct in all material respects.
(g) Consistent with Books and Records. All of the Reinsured Contracts
and the Related Agreements are consistent with the books and records of
Ceding Company which are transferred to Reinsurer pursuant to the terms of
this Agreement. Any amendments, riders, or other modifications to the
Reinsured Contracts shall be reflected in the books and records transferred
to Reinsurer.
(h) Related Agreements. Each of the Related Agreements is in one of
the forms provided by Ceding Company to Reinsurer on or before the
Effective Date. Ceding Company has duly performed all the terms,
conditions, covenants, and warranties of the Related Agreements required on
the part of the Ceding Company, and, to the best of Ceding Company's
knowledge, all other parties to the Related Agreements have duly performed
all the terms, conditions, covenants and warranties required on their part.
(i) Litigation. Except as disclosed in Schedule 8.02(b), as of the
Effective Date there are no material actions, suits, proceedings or
investigations pending, nor to the knowledge of Ceding Company, threatened
against, involving or affecting any of the Reinsured Contracts, any of the
rights or assets to be transferred hereunder or any of the transactions
contemplated by this Agreement before any federal, state, municipal or
other governmental court department, commission, board, arbitrator, bureau,
agency or instrumentality. Except as disclosed in Schedule 8.02(b), as of
the Effective Date Ceding Company does not have any knowledge of any state
of facts or contemplated events that reasonably may be expected to give
rise to any such material claim, action, suit, proceeding, or
investigation.
ARTICLE 8A
REPRESENTATIONS AND WARRANTIES OF REINSURER
Reinsurer represents and warrants that:
Section 8A.01 Authority. Reinsurer has the full corporate, legal and
regulatory authority to carry out and perform its undertakings and obligations
under this Agreement and will continue to maintain such authority for the
duration of this Agreement. Reinsurer will either maintain its licenses to
conduct the business of life insurance (including the authority to conduct
variable annuity business) in New York, and in any jurisdiction where the ceding
company or its successor is domiciled, or will maintain licenses as an
accredited Reinsurer in those jurisdictions. The execution and delivery by
Reinsurer of this Agreement and the consummation by Reinsurer of the
transactions contemplated in this Agreement have been duly authorized by all
proper and requisite proceedings and will not conflict with, constitute a
default under or breach any provision of the Articles of Incorporation or Bylaws
of Reinsurer, or any material provision of any other instrument to which
Reinsurer is a party or by which it is bound, or any law, rule or regulation of
any governmental body applicable to Reinsurer or any order, writ, injunction or
decree of any court or governmental body directed against Reinsurer. This
Agreement has been
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duly and validly executed and delivered by Reinsurer. Assuming due
authorization, execution and delivery by Ceding Company, this Agreement is the
legal, valid and binding obligation of Reinsurer enforceable against it in
accordance with its terms. In the event that the Reinsurer fails to have or
maintain its license in any jurisdiction in which the Ceding Company or its
successor is licensed and such license is a precondition for the Ceding Company
to receive credit for reinsurance for the Reinsured Contracts, the Reinsurer
shall immediately collateralize the Coinsurance Reserves for the Reinsured
Contracts (and in no event beyond the end of the calendar quarter during which
such failure occurs) by either a letter of credit or assets in trust or any
combination of the two, which in total will comply with statutory and regulatory
requirements for obtaining the Ceding Company's credit for reinsurance. The
Reinsurer shall have the option of determining the method of collateralization
provided it is acceptable to the insurance regulatory authorities having
jurisdiction over the Ceding Company's reserves.
When collateralizing by a letter of credit, the Reinsurer agrees to arrange
for the timely delivery of a clean, unconditional and irrevocable letter of
credit for the exclusive benefit of Ceding Company, issued in a form acceptable
to the insurance regulatory authorities having jurisdiction over Ceding
Company's reserves. The letter of credit (the "Letter of Credit") will be issued
by a bank that is neither the parent, subsidiary or affiliate of either
Reinsurer or Ceding Company and is (1) organized or licensed in the United
States, (2) regulated, supervised and examined by U.S. federal or state
authorities, and (3) and has been found acceptable to Ceding Company.
Not less than ten (10) days prior to the end of each Accounting Period,
Ceding Company shall estimate such Coinsurance Reserves and the amount of any
Letter of Credit required in accordance with this Section and notify Reinsurer
of the amount of the Letter of Credit required in accordance with this Section
and prior to the close of the Accounting Period in which such notice is
received, Reinsurer shall obtain and deliver to Ceding Company a Letter of
Credit, or an amendment to a Letter of Credit, in an amount not less than the
aforementioned estimated amount.
Reinsurer further agrees that upon completion of any Accounting Period
reporting, if the Letter of Credit amount as based upon the aforementioned
estimate is less than the actual amount of the Letter of Credit provided under
this Section, Reinsurer shall obtain and provide to Ceding Company such other
Letter of Credit, or amendment to Letter of Credit, in such amount as needed to
meet the requirements of this Section.
Ceding Company agrees that upon completion of any Accounting Period
reporting, if the actual amount of the Letter of Credit provided by Reinsurer
under this Section is in excess of the Letter of Credit amount as based upon the
aforementioned estimate, Ceding Company shall promptly, upon receipt of
Reinsurer's written request, agree to an amendment reducing the amount of the
Letter of Credit by an amount equal to such excess.
Notwithstanding anything to the contrary in this Agreement, Reinsurer and
Ceding Company agree that the Letter of Credit may be drawn on by Ceding Company
at any time and will be utilized and applied by Ceding Company, including,
without limitation, any liquidator, rehabilitator, receiver or conservator of
Ceding Company, without diminution because of the insolvency on the part of
Ceding Company or Reinsurer, only for the following purposes:
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(a) To reimburse Ceding Company for Reinsurer's share of benefit payments
or losses paid by Ceding Company pursuant to the provisions of
contracts reinsured under this Agreement, the payment of which is due
under the terms of this Agreement and which has not otherwise been
paid;
(b) In the event Ceding Company receives notice that the Letter of Credit
will not be renewed and on the thirtieth (30th) day following the date
of such notice Reinsurer has not established a replacement Letter of
Credit or alternative security device suitable to qualify Ceding
Company for reserve credit for the reinsurance hereunder, then Ceding
Company or its statutory successor may draw upon the Letter of Credit
to fund an amount with Ceding Company for Reinsurer's obligations
which are properly attributable to the Reinsured Contracts reinsured
under this Agreement. Such amount will include, but not be limited to,
amounts for Contract reserves, reserves for claims and losses
incurred, loss adjustment expenses and unearned premiums. The amount
drawn on the Letter of Credit shall be held in trust in an interest
bearing account separate from Ceding Company's other assets and
interest thereon shall accrue to the benefit of Reinsurer, and;
(c) To pay any other obligations of Ceding Company that are in fact due
from Reinsurer under this Agreement, the payment of which is due under
the terms of this Agreement and which has not otherwise been paid.
In the event that the amount drawn by Ceding Company on the Letter of
Credit exceeds the actual amount required for items (a) and/or (c) above, or in
the case of a draw pursuant to (c) above, Ceding Company shall promptly return
to Reinsurer the excess amounts so drawn, together with interest thereon. All
the foregoing shall be applied without diminution because of insolvency on the
part of Ceding Company or Reinsurer.
Section 8A.02 Conduct of Business. Reinsurer shall conduct its business and
perform its obligations hereunder in the same manner in which Reinsurer conducts
its own business and with the same degree of care.
ARTICLE 9
RECORDS. FEES, AND OWNERSHIP OF PREMIUMS
Section 9.01 Records. As requested by Reinsurer or Ceding Company, the
other party shall deliver unto the requesting party any contract records, files,
charts, books, ledgers, and other documents or copies thereof maintained by it
concerning the Reinsured Contracts. Included in the foregoing, without
limitation, shall be all records relating to development, reserving or approval
of the Reinsured Contracts. All records, books, files, accounts and materials of
any kind relating to the Reinsured Contracts maintained by Ceding Company or
Reinsurer relating to the Reinsured Contracts shall be open to examination and
audit by the other at reasonable times during normal business hours.
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Section 9.02 Fees. Except as stated to the contrary in Article 12, each
party shall be responsible for its own fees and expenses in connection with the
transaction contemplated by this Agreement, including without limitation
attorneys', accountants', actuaries', and other similar fees.
Section 9.03 Ownership of Premiums. All monies, checks, drafts, money
orders, postal notes, and other instruments received after the Effective Date by
Ceding Company for premiums on the Reinsured Contracts shall be either allocated
to the Separate Accounts in accordance with instructions from contractholders or
transferred to Reinsurer in accordance with the Quarterly Settlement provisions
under this Agreement.
Section 9.04 Bank Accounts. After the Effective Date, Reinsurer shall be
authorized by Ceding Company to process payments relating to the Reinsured
Contracts. Ceding Company agrees to do whatever is necessary in order to give
Reinsurer the authority to prepare drafts on Ceding Company's bank accounts and
in Ceding Company's name to the extent necessary to process claims under the
Reinsured Contracts and with respect to which Ceding Company shall have no
overdraft liability. All amounts due from Ceding Company to pay such claims
shall be deposited by Ceding Company in such account until the claim is paid,
and Reinsurer shall reimburse Ceding Company for such claims in accordance with
Section 5.11.
Section 9.05 Authorizations. After the Effective Date, if required, Ceding
Company shall provide specific authorizations for Reinsurer's employees to sign
letters and acknowledge contract modifications on behalf of Ceding Company
concerning, inter alia, underwriting, contract administration, agent
compensation, and claim matters. Notwithstanding the failure of Ceding Company
to grant specific authorizations, Reinsurer shall be authorized hereunder to
perform such acts with respect to the Reinsured Contracts and the Related
Agreements.
Section 9.06 Security Agreement. The parties hereto agree that as security
for all the Secured Obligations (as hereinafter defined), Ceding Company does
hereby grant, bargain, sell, convey, assign and otherwise pledge to Reinsurer,
all of Ceding Company's rights, titles and interests, if any, (legal, equitable
or otherwise) to all premiums and fees due the Reinsurer under the Reinsured
Contracts after the Effective Date (the "Collateral"). As used herein, "Secured
Obligations" shall mean (a) the obligations of Ceding Company pursuant to
Article 9 and any other obligations of Ceding Company under this Agreement. Upon
the failure of Ceding Company to fully perform its obligations and undertakings
hereunder, Reinsurer shall have, in addition to all other rights under this
Agreement or under applicable law, the following rights: the right to exercise
all rights and remedies granted a secured party under the Uniform Commercial
Code, as said code has been enacted in the State of Michigan (the "UCC"), as
though all the Collateral constituted property subject to a security interest
under Article 9 thereof; the right to set off; and the right to reasonable
attorneys' fees incurred in connection with the enforcement of this Agreement.
15
ARTICLE 10
INDEMNIFICATION
Section 10.01 Indemnification of Reinsurer. Ceding Company hereby agrees to
indemnify and hold harmless Reinsurer against and in respect of any and all
liabilities, losses, claims, obligations, damages, deficiencies, costs and
expenses, including, but not limited to, reasonable attorneys' fees, resulting
from or arising out of:
(a) any and all unpaid liabilities occurring prior to the Effective
Date other than those express, written contractual liabilities set forth in
the Reinsured Contracts and the express, written contractual liabilities in
the Related Agreements;
(b) any misrepresentation or breach of any covenant or warranty made
by Ceding Company (or matter treated as a covenant or warranty made by
Ceding Company) in this Agreement or the matters that are the subject of
any such misrepresentation or breach (notwithstanding Ceding Company's
knowledge of such matter, misrepresentation or breach);
(c) any acts or omissions by or on behalf of Ceding Company, its
agents or employees, occurring prior to the Effective Date;
(d) any acts or omissions committed by agents (including former
agents) of Ceding Company that occur before the Effective Date.
Ceding Company will assume the defense of any lawsuits that may be brought
against Reinsurer that relate to the matters for which Ceding Company herein
agrees to indemnify Reinsurer.
Reinsurer shall give written notice to Ceding Company of any indemnity
claims within thirty (30) days after Reinsurer has actual notice of such claim,
and in the event a suit or other proceeding is commenced, within ten (10) days
after receipt of notice to Reinsurer; provided, however that failure to give
such notice shall not affect Ceding Company's obligations to indemnify unless
such failure materially prejudices Ceding Company's rights with respect to
defending such claim. Reinsurer and Ceding Company shall cooperate in reasonable
requests for documents, testimony and other forms of assistance in connection
with an indemnity claim.
Section 10.02 Indemnification of Ceding Company. Reinsurer hereby agrees to
indemnify and hold harmless Ceding Company against and in respect of any and all
liabilities, losses, claims, obligations, damages, deficiencies, costs and
expenses, including, but not limited to reasonable attorneys fees, resulting
from:
(a) any misrepresentation or breach of any covenant or warranty made
by the Reinsurer in this Agreement or the matters that are the subject of
such misrepresentation or breach;
16
(b) any liability, other than liabilities arising out of Ceding
Company's actions, resulting from the maintenance or operation of bank
accounts created pursuant to Section 9.04;
(c) any acts or omissions by or on behalf of Reinsurer, its agents or
employees, occurring entirely after the Effective Date (provided that such
actions were not taken based on the books and records transferred
hereunder);
(d) any acts or omissions committed by appointed agents of the
Reinsurer in servicing the Reinsured Contracts occurring after the
Effective Date, but excluding acts of concealment of wrongdoing by Ceding
Company or its agents that occurred prior to the Effective Date;
(e) any fines or penalties imposed on Ceding Company solely as a
result of the activities of Reinsurer, its agents or employees; and/or
(f) any acts or omissions committed by former agents of Ceding Company
with respect to the Reinsured Contracts occurring after the Effective Date
(but excluding acts of concealment of wrongdoing by its former agents that
occurred prior to the Effective Date or acts undertaken under apparent or
actual authority arising independent of the Reinsured Contracts).
Reinsurer will assume the defense of any lawsuits that may be brought
against Ceding Company that relate to the matters for which Reinsurer agrees to
indemnify Ceding Company.
Ceding Company shall give written notice to Reinsurer of any indemnity
claims within thirty (30) days after Ceding Company has actual notice of such
claim, and in the event a suit or other proceeding is commenced, within ten (10)
days after receipt of notice to Ceding Company; provided, however that failure
to give such notice shall not affect Reinsurer's obligations to indemnify unless
such failure materially prejudices Reinsurer's rights with respect to defending
such claim. Reinsurer and Ceding Company shall cooperate in reasonable requests
for documents, testimony and other forms of assistance in connection with an
indemnity claim
ARTICLE 11
CLAIMS INVESTIGATIONS: PUNITIVE DAMAGES
Section 11.01 Investigation of Claims: Punitive Damages. Ceding Company
shall investigate, settle or defend any and all actions which may be filed
against Ceding Company or Reinsurer on account of any acts or omissions by or on
behalf of Ceding Company (including its agents or employees) occurring prior to
the Effective Date whether such action is filed before or after the Effective
Date. Ceding Company shall reimburse and hold Reinsurer harmless from any and
all costs, expenses and liabilities in any such action which exceeds the strict
contract limits. Without limiting the generality of the foregoing, Ceding
Company shall be solely liable for and shall defend any and all claims
17
for punitive or exemplary damages based on any facts or occurrences occurring
prior to the Effective Date and shall reimburse and hold Reinsurer harmless from
any and all costs, expenses or liabilities including attorneys' fees which it
may incur as a result of any such claim. Reinsurer shall be solely liable for
and shall defend any and all claims for punitive or exemplary damages based on
any facts or occurrences (a) arising solely out of the actions or omissions of
Reinsurer, its employees or agents occurring on or after the Effective Date
(provided that such actions were not taken based on the books and records
transferred hereunder) and (b) arising solely out of the acts of Continuing
Producers and shall reimburse and hold Ceding Company harmless from any and all
costs, expenses and liabilities including attorneys' fees which it may incur as
a result of any such claim. Notwithstanding any other provision contained herein
which may be construed to the contrary, Reinsurer assumes no responsibility or
liability whatsoever to any party for any claim made prior to the Effective Date
made for recovery of punitive or exemplary damages, and the indemnification
provisions contained herein are not intended to, and shall not be construed to,
impose liability on any party hereto vis-a-vis third parties.
ARTICLE 12
ARBITRATION
Section 12.01 Arbitration Clause. All disputes or differences between
Ceding Company and Reinsurer arising under or which are related to this
Agreement upon which an amicable understanding cannot be reached within thirty
(30) days shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, except as hereinafter
provided, and judgment upon the award entered by the arbitrators may be entered
in any Court having jurisdiction thereof. The Court of Arbitrators provided for
herein shall construe this Agreement in light of the prevailing custom and
practices for reinsurance in the insurance industry. The Court of Arbitrators
shall consist of three neutral arbitrators who must be active or retired
officers of insurance companies other than Ceding Company or Reinsurer or anyone
of their affiliates, familiar with the reinsurance business. The parties agree
that this Court of Arbitrators, if implemented under this Agreement, shall be
held at a site selected by the Arbitrators in the State of New York. The parties
agree to arbitrate within thirty (30) days following the transmittal of written
demand of either party to arbitrate any dispute arbitrable under this Agreement.
Each of the parties shall appoint an arbitrator within thirty (30) days
following notice of written demand to arbitrate, notifying the other party of
the name and address of such arbitrator. If either party shall fail to appoint
an Arbitrator as herein provided, or should the two arbitrators so named fail to
select the third arbitrator within thirty (30) days of their appointment, then,
in either event, the President of the American Council of Life Insurance or its
successor shall appoint such second and/or third arbitrator. The three
arbitrators so selected shall constitute the Court of Arbitrators. A decision of
a majority of the Court of Arbitrators shall be final and binding and there
shall be no appeal therefrom. The Court of Arbitrators shall not be bound by
legal rules of procedure and may receive evidence in such a way as to do justice
between the parties. The Court of Arbitrators shall promptly enter an award
which shall do justice between the parties and the award shall be supported by a
written opinion. The cost of arbitration, including but not limited to the fees
of the arbitrators and attorneys, shall be borne by the losing party unless a
Court of Arbitrators shall decide that, in light of the circumstances, such
would be inequitable, in which case the arbitrators shall allocate costs among
the parties.
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ARTICLE 13
DELIVERIES AS OF THE EFFECTIVE DATE
Section 13.01 Deliveries by Ceding Company. Ceding Company shall use its
reasonable efforts to deliver or cause to be delivered to Reinsurer within five
(5) days of the Effective Date (i) a listing (electronic or otherwise) of the
Reinsured Contracts, and (ii) all instruments (including without limitation bond
powers) as may be necessary or advisable to cause all of Ceding Company's
rights, title, and interest in and to the properties, rights, or assets to be
transferred hereunder or to effect the purposes hereof to vest in Reinsurer
based on the Effective Date Accounting described in Section 5.01. Ceding Company
will cooperate with Reinsurer in connection with any required reregistration of
such instruments (or of any additional instruments as may be necessary in
connection with adjustments described in Sections 5.02 and 5.03) , and Reinsurer
will bear any risks associated with such reregistration.
Section 13.02 Deliveries by Reinsurer. Reinsurer shall use its reasonable
efforts to deliver or cause to be delivered to Ceding Company within five (5)
days of a revised accounting in accordance with Section 5.02 or 5.03 all
instruments (including without limitation bond powers) as may be necessary or
advisable to vest in Ceding Company all of Reinsurer's rights, title, and
interest in and to the properties, rights, or assets to be transferred back to
Ceding Company to effect any correction of a prior accounting in favor of
Reinsurer.
ARTICLE 14
GENERAL PROVISIONS
Section 14.01 Successors, Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of both Ceding Company
and the Reinsurer; provided, that Reinsurer may not assign, transfer or reinsure
the obligations assumed by it under this Agreement, without the written consent
of Ceding Company.
Section 14.02 Entire Agreement. All prior or contemporaneous agreements and
representations between the parties relating to the subject matter hereof are
superseded by this Agreement which, together with any Exhibits and Schedules
attached, constitutes the entire contract between the parties. There are no
understandings or agreements between the parties with respect to the Reinsured
Contracts other than as expressed in this Agreement. No waiver, amendment, or
modification hereof shall be of any force or effect unless in writing and signed
by the parties. The agreements, covenants, representations, and warranties
contained herein shall survive the closing hereunder.
Section 14.03 Non-Waiver of Rights. No waiver by any party of any default
by any other party in the performance of any promise, term or condition of this
Agreement shall be construed to be a waiver by such party of any other or
subsequent default in performance of the same or any other promise term or
condition of this Agreement. A waiver shall constitute a waiver only with
respect to the particular circumstance for which it is given and not a waiver of
any future circumstance. No prior transactions or dealings between any of the
parties shall be deemed to establish any custom or usage waiving or modifying
any provisions hereof. The failure
19
of any party to enforce any part of this Agreement shall not constitute a waiver
by such party of its right to do so, nor shall it be deemed to be an act of
ratification or consent. A waiver shall constitute a waiver only with respect to
the particular circumstance for which it is given and not a waiver of any future
circumstance.
Section 14.04 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
Section 14.05 Rights. Nothing herein, either expressed or implied, is
intended or shall be construed to confer upon or give any person, firm or
corporation, other than the Reinsurer and Ceding Company any rights or remedies
under or by reason of this Agreement.
Section 14.06 Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 14.07 Correspondence. Any and all correspondence, records or
otherwise coming to Ceding Company after the Effective Date pertaining to the
Reinsured Contracts shall be immediately and forthwith delivered to Reinsurer
without charge to Reinsurer or its delegee pursuant to Section 6.02.
Section 14.08 Duration. This Agreement shall remain in force until the last
Reinsured Contract ceases to be in force unless otherwise terminated pursuant to
Section 14.14.
Section 14.09 Notices. Any notice hereunder shall be deemed to be duly
given when and if delivered or three (3) business days after such notice is
deposited in the U.S. Mail for delivery by pre-paid first-class registered or
certified mail to:
(1) Reinsurer: Xxxx Xxxxxxx Life Insurance Company of New York
000 Xxxxxx Xxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: President
With Copy To: Xxxx Xxxxxxx Life Insurance Company (U.S.A.)
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Manager, Xxxx Xxxxxxx
Annuities
20
(2) Ceding Company: Xxxx Xxxxxxx Life Insurance Company (U.S.A.)
000 Xxxxxxxx
Xxxxxx Xxxxxx, XX 00000
Attention: Corporate Secretary
With Copy To: Xxxx Xxxxxxx Life Insurance Company (U.S.A.)
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Manager, Xxxx Xxxxxxx
Annuities
Or such other address as shall be furnished in writing by the parties to the
other.
Section 14.10 Cooperation. With regard to any matters not expressly stated
herein, the parties to this Agreement agree to furnish such information, to
execute such additional documents, and to cooperate with each other as may be
necessary to carry out the purposes of this Agreement, in accordance with
industry practice for transactions of this kind.
Section 14.11 Insolvency. Except as provided in Section 14.12 in the event
of the insolvency of Ceding Company, all reinsurance made, ceded, renewed or
otherwise becoming effective under this Agreement shall continue to be payable
by Reinsurer under the terms of the contracts reinsured, on behalf of Ceding
Company, its liquidator, receiver or statutory successor, without diminution
because of the insolvency.
Section 14.12 Cut-Through Provision. In the event of the rehabilitation or
liquidation of Ceding Company, any claims of holders and beneficiaries under
Reinsured Contracts issued by Ceding Company the reserves for which are held in
the Separate Accounts of Ceding Company shall first be paid out of the
respective Separate Account to fund those benefits. To the extent there are any
benefits under a Reinsured Contract that are not payable out of assets held in
the respective Separate Account, Reinsurer shall pay all such amounts due under
that Reinsured Contract, which would be otherwise due to the rehabilitator
liquidator, receiver, or statutory successor in the absence of this Section
14.12, directly to the holder or beneficiary, as applicable of the Reinsured
Contract, without diminution on account of Ceding Company being placed in
rehabilitation or liquidation unless the Superintendent of Insurance of the
State of New York (Superintendent) directs the Reinsurer to make payments to the
rehabilitator, liquidator, receiver or statutory successor, and shall at the
direction of the Superintendent provide each such contractholder with a
certificate approved by the Superintendent, which shall state, inter alia, that
Reinsurer will directly pay the contractual obligations of Ceding Company not
satisfied out of the respective Separate Account under such Reinsured Contract.
Section 14.13 Audit of Records and Procedures. Ceding Company shall have
the right to audit during normal business hours and at the office of Reinsurer
or any service provider designated by Reinsurer pursuant to Section 6.02 all
records and procedures relating to the Reinsured Contracts and the Services
provided by or on behalf of Reinsurer under this Agreement.
21
Further, Reinsurer agrees to confirm, at reasonable request of Ceding Company,
the existence of the Reinsured Contracts.
In conjunction with any examination of Ceding Company by the Insurance
Department (or any other regulatory body) of any jurisdiction in which Ceding
Company is licensed, Reinsurer shall permit an examination of its books and
records relating to the Reinsured Contracts.
Section 14.14 Termination: This Agreement shall terminate immediately prior
to the Effective Date if the Merger between Ceding Company and its affiliate,
Xxxx Xxxxxxx Life Insurance Company does not take place on or prior to the
Effective Date.
22
IN WITNESS WHEREOF, Ceding Company and Reinsurer have caused this
instrument to be executed by their duly authorized officers as of the day and
year first hereinabove written.
XXXX XXXXXXX LIFE INSURANCE COMPANY XXXX XXXXXXX LIFE INSURANCE COMPANY OF
(U.S.A.) NEW YORK
BY: /s/ Xxxx Xxxxxxxxxx BY: /s/ Xxxxx X. Xxxxxxxxx
--------------------------------- ------------------------------------
Name Xxxx Xxxxxxxxxx Name Xxxxx X. Xxxxxxxxx
Title: Executive Vice President Title: President
Date: January 1, 2010 Date: January 1, 2010
23
EXHIBIT A
Reinsured Contracts
Reinsured Contracts as used in this Agreement refers to combination funded
fixed and variable annuity contracts indicated below, including supplement
benefits shown, issued in New York by Xxxx Xxxxxxx Life Insurance Company, which
contracts are in-force as of the Effective Date. Reinsured Contracts shall not
include the obligations resulting from the contractual right under the Reinsured
Contracts, if any, to annuitize cash value, surrender or death benefits under
such contracts, as these obligations will be covered under Treaty 11 between
Ceding Company and Reinsurer.
REINSURED VARIABLE ANNUITY CONTRACT SUPPLEMENTAL BENEFIT RIDERS APPLICABLE SEPARATE ACCOUNTS
----------------------------------- ------------------------------------ --------------------------------------
Accommodator (deferred only) None Xxxx Xxxxxxx Variable Annuity
Account U
Accommodator 2000 None Xxxx Xxxxxxx Variable Annuity
Account V
Declaration Enhanced "Stepped- up" death benefit Xxxx Xxxxxxx Variable Annuity
Rider Account H, MVA Separate Account 3SA00
Nursing Home Waiver
Independence None Xxxx Xxxxxxx Variable Annuity
Account U
Independence Preferred None Xxxx Xxxxxxx Variable Annuity
Account V
Independence 2000 None Xxxx Xxxxxxx Variable Annuity
Account V
Patriot Enhanced "Stepped- up" death benefit Xxxx Xxxxxxx Variable Annuity
Rider Account H, Xxxx Xxxxxxx Variable
Nursing Home Waiver Annuity Account V, MVA Separate
Account 3SA00
Revolution Access Enhanced "Stepped- up" death benefit Xxxx Xxxxxxx Variable Annuity
Rider Account H, MVA Separate Account 3SA00
Earnings Enhancement Death Benefit
Rider
Revolution Extra Enhanced "Stepped- up" death benefit Xxxx Xxxxxxx Variable Annuity
Rider Account H, MVA Separate Account 3SA00
Earnings Enhancement Death Benefit
Rider
Waiver of Withdrawal Charge
("CARESolutions") Rider
Revolution Value/Wealthbuiler Enhanced "Stepped- up" death benefit Xxxx Xxxxxxx Variable Annuity
Rider Account H, MVA Separate Account 3SA00
A-1
REINSURED VARIABLE ANNUITY CONTRACT SUPPLEMENTAL BENEFIT RIDERS APPLICABLE SEPARATE ACCOUNTS
----------------------------------- ------------------------------------ --------------------------------------
Nursing Home Waiver
Earnings Enhancement Death Benefit
Rider
Waiver of Withdrawal Charge
("CARESolutions") Rider
Revolution Value II/Wealthbuilder II Nursing Home Waiver Xxxx Xxxxxxx Variable Annuity
Earnings Enhancement Death Benefit Account H
Rider
Highest Anniversary Death Benefit
Rider
Waiver of Withdrawal Charge
("CARESolutions") Rider
A-2
EXHIBIT B
Form of Effective Date Accounting
JANUARY 1, 2010 ESTIMATED
RESERVES
RESERVES
1 Gross Formula Reserves on NY Basis 21,851,267
2 Ceded Reserves (including modco)
3 Additional reserves needed
4 ACTUARIAL RESERVES NET OF REINSURANCE 21,851,267
OTHER LIABILITIES
5 Policyholders' and beneficiaries' funds 0
6 Policy benefits in process of payment
7 Other policy obligations
8 Interest maintenance reserve
9 Obligations related to separate accounts
10 OTHER LIABILITIES 0
11 NET COINSURANCE RESERVES (4+10) 21,851,267
-----------
MODIFIED COINSURANCE RESERVE 310,000,000
-----------
The Net Coinsurance Reserve shown constitutes the Initial Coinsurance
Reinsurance Premium pursuant to Section 5.05, and the Modified Coinsurance
Reserve shown constitutes the Initial Modco Reinsurance Premium and Reserve
Adjustment pursuant to Section 5.06.
In the event adjustments are made under Section 5:02 or Section 5:03, the amount
owed will be increased with interest for the time elapsed between the Effective
Date and the date of payment. The annual interest rate to be used will be the
yield on 3 month US Treasury Bills, as published by the U.S Treasury, on the
last business day of the quarter ending on or immediately prior to the date of
any revised accounting
B-1
EXHIBIT C
Assets Permitted in Lieu of Cash under Article 5
The list of transferred assets shall contain a seriatim listing of all assets
transferred by the Ceding Company and be provided to the Reinsurer upon request.
ASSET SUMMARY
MARKETABLE SECURITIES
1 Bonds - Public 21,303,025
2 Bonds - Private 0
3 Preferred stocks 0
4 Equity - Public 0
5 Equity - Private 0
6 Commercial Mortgages 0
7 Commercial Real Estate 0
8 Agriculture 0
9 Timber 0
10 Derivatives 0
11 Other invested assets 0
12 Investment Income Due & Accrued 328,629
13 Cash and short-term investments 219,613
14 TOTAL MARKETABLE SECURITIES 21,851,267
OTHER ASSETS
15 Policy Loans 0
16 Premiums due and deferred 0
17 Assets held in separate accounts 0
18 Funds Withheld 0
19 TOTAL OTHER ASSETS 0
20 TOTAL ASSETS (14+19) 21,851,267
C-1
EXHIBIT D
Reinsurance Gain
A. REINSURANCE GAIN
For each Accounting Period as defined in Section 1.01, the reinsurance gain (the
"Reinsurance Gain") will be equal to (1) plus (2), minus (3), plus (4), plus
(5), minus (6), minus (7) where:
(1) Equals the Reinsurance Premiums as determined in accordance with
Section B. of this Exhibit D.
(2) Equals the Net Reinsurance Fees as determined in accordance with
Section C. of this Exhibit D.
(3) Equals the Reinsurance Claims as determined in accordance with Section
D. of this Exhibit D.
(4) Equals the Net Transfers as determined in accordance with Section E.
of this Exhibit D.
(5) Equals the Separate Account Modco Investment Credit as determined in
accordance with Section F. of this Exhibit D.
(6) Equals the Modco Reserve Adjustment as determined in accordance with
Section G. of this Exhibit D.
(7) Equals the Commission Allowance as determined in accordance with
Section H. of this Exhibit D.
For the avoidance of doubt, each of the amounts determined above, including the
Reinsurance Gain, may be a positive or a negative number.
B. REINSURANCE PREMIUMS
For each Accounting Period, Reinsurance Premiums is the amount of all premiums
earned under the Reinsured Contracts.
C. NET REINSURANCE FEES
For each Accounting Period, Net Reinsurance Fees is the amount payable by Ceding
Company to reflect all fees charged by the Ceding Company on the Reinsurance
Contracts, including insurance fees, and rider fees, less any trail commission
expense. For the purposes of this Agreement, the amount payable for Net
Reinsurance Fees for each Accounting Period will be 29.0 basis points, or such
other rate as may be agreed between the parties from time to time, times the
average of the beginning fund value of the respective Separate Accounts H, U and
V for the Reinsured Contracts and the ending fund value of the respective
Separate Accounts H, U and V for the Reinsured Contracts. For the avoidance of
doubt, the Reinsurance Fees calculated by this method for any Accounting Period
can never be in excess of the insurance fees, and rider fees actually earned
less trail commissions paid by the Ceding Company on the Reinsured Contracts.
D-1
D. REINSURANCE CLAIMS
For each Accounting Period, Reinsurance Claims includes all benefits paid or
accrued under the Reinsured Contracts. For these purposes, benefits paid or
accrued under the Reinsured Contracts include, but are not limited to:
(i) Death Claims. Death Claims includes the cash surrender value and, if
applicable any guaranteed minimum death benefits (GMDB) paid or
accrued by the Ceding Company under the Reinsured Contracts at death
of an Owner or Annuitant, as the case may be.
(ii) Withdrawals and Surrenders. Withdrawals and Surrenders is the total
amount paid or accrued in the event of a partial withdrawal of
account value or full surrender of a Reinsured Contract net of any
applicable withdrawal charges, including any amounts paid during the
Accounting Period to a non-spousal beneficiary under a "Stretch"
Settlement described in Section 4.05. Withdrawal charges, for these
purposes, is the total amount that the Ceding Company deducts before
paying the cash surrender value upon a full or partial surrender of a
Reinsured Contract.
(iii) Fixed Annuitization Claims. It is the intention of the parties that
Reinsurance Claims, for purposes of the Agreement, will reflect a
reduction during any Accounting Period in which a Reinsured Contract
is settled, in whole or in part, under a fixed annuity settlement
option. A Fixed Annuitization Claim, for any Reinsured Contract,
shall reflect the greater of (a) account value applied to a fixed
annuity payout option; and (b) account value multiplied by the
monthly income determined at terms guaranteed in the Reinsured
Contract at time of issue divided by the monthly income determined
with the Annuity 2000 mortality table (no age setback and age nearest
birthday on annuitization date) with Scale G (1995 TSA) mortality
improvements and the yield on the most recently auctioned 7-year
Treasury Security, as posted in the Wall Street Journal, at the
beginning of the month in which the fixed annuitization occurs, plus
50 basis points. Any such amount shall be considered a reinsurance
premium for a single premium immediate annuity ("SPIA") contract
pursuant to the terms and conditions of that certain coinsurance
treaty effective on the Effective Date between the parties and
designated Treaty 11.
(iv) Variable Annuitization Claims. It is the intention of the parties
that Reinsurance Claims will reflect any loss incurred by Ceding
Company, including mortality losses, relating to Reinsured Contracts
in a variable annuitization status. Conversely, Reinsurance Claims
will also reflect any gains realized by Ceding Company related to
variable annuitization.
E. NET TRANSFERS TO (FROM) SEPARATE ACCOUNTS
For each Accounting Period, Net Transfers to/from Separate Accounts is the net
amount of all fund transfers related to the Reinsured Contracts between the
Separate Accounts and the general account. Net Transfers from the Separate
Accounts to the general account are to be reflected as a positive amount in the
"General Account (Coinsurance)" column on Exhibit E and a negative amount in the
"Separate Accounts (Modco)" column on Exhibit E. Conversely, Net Transfers to
the Separate Accounts from the general account are to be reflected as a negative
amount in the "General Account (Coinsurance)" column on Exhibit E and a positive
amount in the "Separate Accounts (Modco)" column on Exhibit E. The combined Net
Transfers shown for the "General
D-2
Account (Coinsurance)" and "Separate Accounts (Modco)" columns on Exhibit E for
any Accounting Period shall be equal to $0.
F. SEPARATE ACCOUNT MODCO INVESTMENT CREDIT
For each Accounting Period, the Separate Account Modco Investment Credit for
Separate Accounts H, U and V is equal to the sum of all accrued investment
income and capital gains and losses, realized and unrealized, on the Ceding
Company's Separate Accounts shown on Exhibit A, which has been credited to (or
deducted from) the Reinsured Contracts during the Accounting Period. The
Separate Account Modco Investment Credit for Separate Accounts H, U and V is net
of the amount of any fees deducted by underlying funds used with the Reinsured
Contracts.
For each Accounting Period, the Separate Account Modco Investment Credit for MVA
Separate Account 3SA00 is equal to [ (A + B) /2 ] x [ C / (D + .5E) ] where:
(A) equals the Ceding Company's MVA account value for Reinsured Contracts at the
beginning of the Accounting Period;
(B) equals the Ceding Company's MVA account value for Reinsured Contracts at the
end of the Accounting Period;
(C) equals the total investment income including realized and unrealized capital
gains and losses from invested assets held in MVA Separate Account 3SA00 for the
Accounting Period;
(D) equals the total invested assets held in MVA Separate Account 3SA00 at the
beginning of the Accounting Period, and;
(E) equals the net transfers into/(out of) invested assets held in MVA Separate
Account 3SA00 during the Accounting Period.
It is the intent of the parties that the Separate Account Modco Investment
Credit shall be adjusted to reflect gains or losses to the Separate Accounts
during the Accounting Period resulting from Reinsurer's errors in providing
services described in Article 6.
G. MODCO RESERVE ADJUSTMENT
For each Accounting Period, the Modco Reserve Adjustment shall be (1) minus (2),
where,
(1) Equals a modified coinsurance reserve (the "Modco Reserve") held by the
Ceding Company at the end of the Accounting Period. For these purposes, the
Modco Reserve equals the amounts shown on Ceding Company's statutory
statements at the end of the Accounting Period for its Separate Account
liabilities related to the Reinsured Contracts, including pending claim
reserves. Ceding Company may, for purposes of determining Reinsurance Gain,
exclude immaterial reserve amounts determined under the then applicable
Commissioners Annuity Reserve Valuation Method (CARVM); and
(2) Equals the Modco Reserve, determined in accordance with subsection (1),
at the end of the previous Accounting Period, except that for the initial
Accounting Period, the Modco Reserve will equal the Modified Coinsurance
Reserve determined as of the
D-3
Effective Date, in accordance with Sections 5.01, 5.02 and 5.03 and Exhibit
B of the Agreement.
H. COMMISSION ALLOWANCE
For each Accounting Period, the Commission Allowance equals the total amount of
initial commission (i.e., not trail commission) paid to distributors of the
Reinsured Contracts to reflect the receipt of additional premiums on the
Reinsured Contracts.
D-4
EXHIBIT E
Form of Quarterly Accounting and Settlement Report
Accounting Period: ________
Calendar Year: ________________
Date Report Completed: ________________
General Separate Separate
Account Accounts - H, U Account - MVA
(Coinsurance) and V (Modco) 3SA00 (Modco)
------------- --------------- -------------
1. Reinsurance Premiums
2. Net Reinsurance Fees (29.00 bps of beginning + ending separate
account value / 2)
3. Reinsurance Claims [a + b + c + d]
a. Death Claims (i + ii)
i. Account Value*
ii. Death Benefit in Excess of Account Value
b. Withdrawals and Surrenders (i - ii)
i. Account Value**
ii. Withdrawal Charges
c. Fixed Annuitizations
d. Variable Annuitization gain/loss
4. Net Transfers to/from Separate Accounts
5. Separate Account Modco Investment Credit
6. Modco Reserve Adjustment
7. Commission Allowance (1st yr commissions on new premiums)
REINSURANCE GAIN (1 + 2 - 3 + 4 + 5 - 6 - 7)
Amount due to the CEDING COMPANY [if < 0]
Amount due to the REINSURER[if > 0]
* excludes spousal continuations described in Section 4.03
** includes amounts distributed pursuant to non-spousal beneficiary "stretch"
settlements described in Section 4.05
F-1
SCHEDULE 8.02(B)
Material Litigation and Regulatory Action
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