Exhibit 10.5
EXHIBIT B
REINSURANCE AGREEMENT
THIS REINSURANCE AGREEMENT (this "Agreement"), made the 30th day of July,
1992 by and between Xxxx Xxxxxxx Mutual Life Insurance Company, a Massachusetts
mutual life insurance company (the "Company"), and Provident Life and Casualty
Insurance Company, a Tennessee insurance company (the "Reinsurer"),
WITNESSETH THAT
IN CONSIDERATION of the mutual covenants and promises, and upon the terms
and conditions set forth in this Agreement, the parties agree as follows:
ARTICLE I
BUSINESS REINSURED
1. The Company hereby cedes to the Reinsurer, and the Reinsurer hereby
reinsures, 100% of the Policy Liabilities (as defined in Article V below) of the
Disability Line (as defined in the Acquisition Agreement referred to in Article
IV below) and all contracts or other agreements which are part of the Disability
Line that are listed on Attachment B-1 on the Closing Date (as defined in
Article IV below). All such policies and contracts described on Attachment B-1
are hereafter referred to as the "Policy" or "Policies."
2. All Policy Liabilities for which the Reinsurer is liable under this
Agreement are subject in all respects to the same terms, conditions,
interpretations, waivers, modifications, alterations and cancellations as the
Policies. The Reinsurer reinsures the Policy Liabilities subject to all
defenses, setoffs and counterclaims to which the Company would be entitled with
respect to the Policies. It is expressly understood and agreed by the parties
that no
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such defenses, setoffs or counterclaims are waived by the execution of this
Agreement or the consummation of the transactions contemplated under this
Agreement, and that on the Closing Date the Reinsurer shall be fully subrogated
to all such defenses, setoffs and counterclaims.
3. Nothing in this Agreement creates any obligations on, or establishes
any rights against, the Reinsurer in favor of any person not a party to this
Agreement.
4. Prior to the Closing Date, the Company and the Reinsurer shall obtain
all the consents or approvals of insurance regulatory authorities (whether
through positive notification of approval or non-objection), if any, which are
necessary for the consummation on the Closing Date of the transactions
contemplated by this Agreement to be consummated on the Closing Date. After the
Closing Date, the Company and the Reinsurer shall obtain all the consents or
approvals of insurance regulatory authorities (whether through positive
notification of approval or non-objection), if any, which are necessary for the
consummation after the Closing Date of the transactions contemplated by this
Agreement to be consummated after the Closing Date. The respective transactions
shall not be consummated unless and until the applicable consents or approvals
are obtained.
5. The Reinsurer shall, at all times during the term of this Agreement,
take all actions consistent with state laws and regulations necessary to insure
that the Company is permitted to take full reserve credits relating to the
Policies reinsured. The Reinsurer will assume responsibility for computing
reserves (i.e., unearned premium reserves, active life reserves, and claim
reserves) in accordance with minimum statutory reserve standards for the
liability it assumes under this Agreement.
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ARTICLE II
REINSURANCE
1. The Company has taken or will take action to terminate existing
reinsurance agreements as to the Disability Line. Such termination will be
effective on or before the Closing Date. It is agreed that certain existing
claims, which remain in effect as of the Closing Date, shall continue on a
reinsured basis as outlined in the Acquisition Agreement.
2. The Company shall assist the Reinsurer in the administration of these
claims and shall aid the Reinsurer in collecting all amounts due from other
reinsurers and shall forward to the Reinsurer any funds collected from other
reinsurers on the Policies.
ARTICLE III
TERRITORY
This Agreement shall apply only to Policies having their situs in the
state of New York.
ARTICLE IV
TERM
This Agreement shall become effective at 12:01 A.M., Boston,
Massachusetts time, on the date of the Closing (the "Closing Date") of the
transactions provided for in the Acquisition Agreement, dated July 30, 1992,
between the Company and the Reinsurer (the "Acquisition Agreement") and shall
continue in effect until and unless terminated in accordance with Article XIII
of this Agreement.
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ARTICLE V
LIABILITY
The term "Policy Liabilities" means the gross liability of the Company
on the Policies. Policy Liabilities do not include Excluded Liabilities (as
defined in the Acquisition Agreement).
ARTICLE VI
POLICY ADMINISTRATION
1. The Company and the Reinsurer will collect all due premiums, perform
all policy administration and service all of the Policies reinsured under this
Agreement pursuant to terms of the Administrative Services Agreement dated July
30, 1992 between the Company and the Reinsurer (the "Administrative Services
Agreement"). Pursuant to applicable law, the Company grants to the Reinsurer
authority in all matters relating to policy administration as set out in the
Administrative Services Agreement. The Company hereby nominates and appoints
the Reinsurer as the attorney-in-fact of the Company with respect to the rights,
duties, privileges and obligations of the Company under the Policies, with full
power and authority to act in the name, place and stead of the Company. This
power and authority includes without limitation the power to service all
Policies, to defend, settle and pay all claims and to take such other actions as
may be necessary or desirable to effect the transactions contemplated by this
Agreement.
2. Notwithstanding the provisions of this Agreement, the Acquisition
Agreement, the Administrative Services Agreement, or any other agreement related
to this transaction, it is expressly understood and agreed by the Reinsurer and
the Company, that as to Policies covered by this Agreement the Company retains
final authority in matters of claim administration. The Company agrees that it
shall consult with the Reinsurer in making any decision
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it is called upon or required to make in connection with the administration of
claim payments under of this Agreement.
ARTICLE VII
PREMIUMS; CONSIDERATION
1. The Reinsurer is entitled to 100% of all premiums and other
consideration, including premiums collected on and after August 1, 1992, with
respect to any and all Policies which have been billed, but as to which premiums
remain unpaid as of Closing, attributable to the Policies, less ceding
allowances as outlined in Exhibit A to this Agreement. If the Company receives
premiums and other consideration after the Closing Date it shall promptly remit
such premiums and consideration to the Reinsurer, along with pertinent
information such as the nature of the payment, the source of funds, the policy
number, the period to which the remittance relates and any special rates or
instructions. The amount of expense allowance as outlined on Exhibit A will be
adjusted by the Reinsurer from time to time as required to reflect the
allocation of policy administration functions then being performed by the
Company.
2. Except as may be provided in the Acquisition Agreement, the
Reinsurer assumes no liability for dividends that may be granted under the
Policies reinsured, or any other amounts which may be treated as or deemed to be
a dividend to the policyholder. Any such dividends to policyholders shall be
treated as paid solely by the Company.
3. As outlined in the Acquisition Agreement, the Reinsurer shall allow
to the Company, as consideration for reinsurance of the Policies, an amount
equal to 47.98888% of the annualized modal premium in force (the "Purchase
Price") with respect to the Policies as of the Closing Date.
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4. As consideration for the Reinsurer's 100% reinsurance of the Policy
Liabilities, the Company shall allow to the Reinsurer as of the Closing Date an
amount equal to the Final Reserves as outlined in the Acquisition Agreement.
ARTICLE VIII
RECORDS AND ACCOUNTING
1. As soon as practicable after the Closing Date, the Company shall
forward to the Reinsurer duplicate copies of all reports, records, underwriting
files, claim files and other data or information ("Records") relating to the
Policies as required by the Reinsurer pursuant to terms of the Administrative
Services Agreement and shall cooperate with the Reinsurer in the administration
of the Policies. The original records with respect to the Policies will be
maintained by the Company. The Company shall use its best efforts to maintain
the Policies and the Records in the manner in which the Reinsurer requires. The
Company shall also grant to the Reinsurer such access to Records maintained on
the computer systems of the Company as is necessary to administer the payment of
claims under the Policies and for such other purposes as may be mutually agreed
upon by the Company and the Reinsurer.
2. All reserves will be accounted for by the Company as ceded
reinsurance and by the Reinsurer as assumed reinsurance.
3. The Reinsurer will be credited with 100% of the total premiums
received on the policies reinsured and debited with the ceding allowances
outlined in Exhibit A to this Agreement.
ARTICLE IX
RESERVES
1. The Reinsurer shall maintain active life, unearned premium, claim,
and other reserves (including reserves for losses incurred but not reported),
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consistent with the law of any jurisdiction having regulatory authority with
respect to the Policies.
2. At any point in time, the Reinsurer will owe to the Company, an
amount equal to the ceding allowances outlined in Exhibit A to this Agreement,
multiplied by the amount of premiums recorded as paid by the Company, but not
yet transferred to the Reinsurer.
ARTICLE X
ADJUSTMENT FOR FEDERAL INCOME TAXES
There shall be no sharing or proration of the federal income tax benefits
or payments which may accrue to the Reinsurer or Company as a result of this
Agreement.
ARTICLE XI
REINSURANCE ACCOUNTING
The Company and the Reinsurer shall administer the Policies hereunder
and shall perform all accounting for such Policies. Within the time frames as
specified in Exhibit B the Company and the Reinsurer each shall provide to the
other such information as is necessary to complete monthly, quarterly, or annual
financial statements. The particulars of this financial/accounting process are
contained in Exhibit B to this Agreement.
ARTICLE XII
INSOLVENCY
In the event of the Company's insolvency, the Reinsurer is obligated to
make payments of its liability under this Agreement without diminution because
of the insolvency. It is agreed that any liquidator, receiver or statutory
successor of the Company shall give written notice to the Reinsurer of the
pendency of a claim against the Company on any Policy within a reasonable time
after the claim is filed in the insolvency proceeding. During
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the pendency of any such claim the Reinsurer may investigate the claim
and may, at its own expense, interpose any defense which the Reinsurer considers
to be available to the Company or its liquidator, receiver or statutory
successor.
ARTICLE XIII
TERMINATION
This Agreement may not be cancelled by either party acting alone but
shall remain in full force and effect until such time as all liabilities under
this Agreement and under the Policies have been discharged or have otherwise
expired. This Agreement may be terminated at any time by written instrument
signed by both parties.
ARTICLE XIV
GENERAL PROVISIONS
1. All notices and other communications shall be in writing and shall be
delivered personally or mailed postage prepaid, certified or registered mail,
return receipt requested, to the party at the address set forth after its
respective name below:
If to the Company, addressed to:
Xxxx Xxxxxxx Mutual Life Insurance Company
Xxxx Xxxxxxx Place, 000 Xxxxxxxxx Xxxxxx
Post Xxxxxx Xxx 000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx
Vice President
With a copy to:
Xxxxx X. Xxxxx
Assistant Counsel
Xxxx Xxxxxxx Mutual Life Insurance Company
Xxxx Xxxxxxx Place, 000 Xxxxxxxxx Xxxxxx
Post Xxxxxx Xxx 000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
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If to the Reinsurer, addressed to:
Provident Life and Casualty Insurance Company
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxx
Vice President, Acquisitions and Reinsurance
Accident Department
With a copy to:
Xxxxx X. Xxxxxx, III -
Senior Counsel
Provident Life and Casualty Insurance Company
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
or to another place and with other copies as a party may designate for itself by
written notice to the other.
2. If any provision or portion of this Agreement is invalid or
unenforceable for any reason, the Agreement shall be read as though it includes
such minor changes in the provision or portion as are necessary to make it valid
or enforceable. That any provision or portion of the Agreement is invalid or
unenforceable shall not affect the validity or enforceability of the other
provision or portions of the Agreement.
3. This Agreement:
(a) together with the Acquisition Agreement, the Coinsurance
Agreement between the Company and Provident Life and Accident Insurance Company
and the Administrative Services Agreement constitute the entire agreement and
supersedes all prior agreements, understandings, and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement;
(b) may be executed in counterparts, each of which shall be deemed an
original and all of which constitute one and the same instrument;
(c) shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns;
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(d) may not be assigned by either party without the written consent
of the other party hereto.
(e) shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts; and
(f) shall be construed and interpreted in a manner consistent with,
and not contrary to, the terms and conditions of the Acquisition Agreement. In
the event of any conflict between the provisions of the Acquisition Agreement
and this Agreement, the provisions of the Acquisition Agreement shall prevail.
XXXX XXXXXXX MUTUAL LIFE
INSURANCE COMPANY
Witness: /s/ Xxxxxx X. Xxxxxxx BY: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------- ----------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President
PROVIDENT LIFE AND CASUALTY
INSURANCE COMPANY
Witness: /s/ Xxxxx X. Xxxxx, III BY: /s/ Xxxxx X. Xxxxxxxxxx
---------------------------- ----------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President and Chief
Officer, Accident Department
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Attachment B-1
Description of Reinsured Policies
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EXHIBIT A
COINSURANCE CEDING ALLOWANCES
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XXXX XXXXXXX
COINSURANCE CEDING ALLOWANCES
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 & Following
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----------------
Commission Allowance/A/ 10.00% 10.00% 9.00% 8.00% 7.25% 6.50% 5.75% 5.00% 4.50% 4.25% 4.00%
Expense Allowance 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75%
Premium Tax Allowance 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
The above percentage allowance factors will be multiplied by the dollar amount
of premiums recorded as paid less returned premiums and waiver premiums.
/A/ Reflects savings from Xxxx Xxxxxxx'x annualization of commissions during
1991.
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EXHIBIT B
FINANCIAL/ACCOUNTING PROCESS FOR
REINSURANCE AGREEMENT
I. Information to be supplied monthly by the Company
A. Net premiums recorded as paid for the preceding month - a summary of
premiums paid less any returned premiums for the second preceding month
B. Premium billed and due but not yet paid - this information needs to be
separated into the following categories
1. Billed but not yet paid within the 31-day grace period
2. Premiums billed and due but more than 31 days past due but less than
90 days
3. Premiums billed and due but 90 days or more past due
C. Waived premiums during the preceding month
D. Allowances for commissions, administration and premium taxes - each
allowance will be computed by multiplying (a) the net premiums recorded
paid less returned premiums less premiums waived by (b) the appropriate
percentage factor as shown in the attached schedule.
E. The IDH master policy file for all policies
F. The computer datasets are to be shipped, guaranteed next day delivery,
on the 1st working day of each month; accounting information is due by
the 4th day of each month. All information shall reflect transactions as
of the last day of the month next preceding.
II. Data to be supplied by the Reinsurer
A. Monthly
-------
1. Claim payments made during the preceding month
B. Quarterly
---------
1. Claim reserves on in-process claims
2. Claim reserves for IBNR
3. Active life reserves
4. Unearned premium reserves
5. F.I.T. tax basis reserves
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The information in A above is to be telecopied on the 3rd working day of each
month, as of the last day of the month next preceding. The information in B
above is due no later than the 7th working day of the month as of the last day
of the calendar quarter next preceding.
C. Annually
--------
1. A & H Policy Form Exhibit
2. Experience by policy series for state of New York
3. Annual statement information
The information in C(1) and C(2) is due by March 15 of each year; the
information in C(3) is due by January 31 of each year.
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