Exhibit 10.40
REINSURANCE AGREEMENT
BETWEEN
COLUMBIA UNIVERSAL LIFE INSURANCE COMPANY
AND
ALLSTATE LIFE INSURANCE COMPANY
RECITALS
This Reinsurance Agreement (hereinafter "Agreement") is made and entered into by
and between COLUMBIA UNIVERSAL LIFE INSURANCE COMPANY, a life insurance company
domiciled in the State of Texas (hereinafter "Ceding Company") and ALLSTATE LIFE
INSURANCE COMPANY, a life insurance company domiciled in the State of Illinois
(hereinafter the "Reinsurer").
WHEREAS, the Ceding Company desires to cede to the Reinsurer, and the Reinsurer
desires to accept on a coinsurance basis 100% of the Ceding Company's Net Ceded
Liabilities (as defined in Article I below) under annuity contracts and
supplemental agreements, as specified in this Agreement;
NOW THEREFORE, the Ceding Company and the Reinsurer mutually agree to reinsure
on the terms and conditions stated in this Agreement.
ARTICLE I
DEFINITIONS
Unless otherwise defined herein, as used in this Agreement the following terms
shall have the meanings ascribed to them below:
A. "Annual Statement" shall mean the Ceding Company's Life and Accident and
Health Companies Annual Statement for the General Account as filed with the
Texas Insurance Department.
B. "Code" shall mean the Internal Revenue Code of 1986, as amended.
C. "Commission and Expense Allowance" shall have the meaning set forth in
Exhibit B.
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D. "Effective Date" shall mean the effective date of this Agreement, which
shall be June 30, 2000.
E. "Excluded Liabilities" shall mean (i) Extra-Contractual Obligations, and
(ii) liabilities ceded by Ceding Company under Third-Party Reinsurance
Agreements.
F. "Extra-Contractual Obligations" shall mean all liabilities and obligations
for consequential, extra-contractual, exemplary, punitive, special or
similar damages or any other amounts due or alleged to be due (other than
those arising under the express terms and conditions of the Policies) which
arise from any real or alleged act, error or omission, whether or not
intentional, in bad faith or otherwise, including without limitation, any
act, error or omission relating to: (i) the marketing, underwriting,
production, issuance, cancellation or administration of the Policies; (ii)
the handling of claims in connection with the Policies; or (iii) the
failure to pay or the delay in payment of benefits or claims, under or in
connection with the Policies.
G. "Initial Settlement Date" shall have the meaning set forth in Article IV of
this Agreement.
H. "Net Benefits" shall mean the actual amounts paid or incurred by the Ceding
Company with respect to the Policies for all surrenders, withdrawals (full
and partial), death benefits, annuitizations, and payments on supplemental
contracts, net of Excluded Liabilities.
I. "Net Ceded Liabilities" shall mean any and all liabilities of the Ceding
Company arising under the Policies, but shall not include Excluded
Liabilities.
J. "Net Premiums" shall mean the premiums due the Ceding Company with respect
to the Policies.
K. "Net Statutory Reserves" shall have the meaning set forth in Article IV of
this Agreement.
L. "Policy or Policies" shall mean the insurance contracts defined in Exhibit
A which are underwritten or reinsured by the Ceding Company. For the
avoidance of doubt, "Policies" refers to annuity contracts which are
in-force on the Effective Date or issued after the Effective Date,
including (i) any supplemental agreements or benefits arising out of the
Policies, (ii) policies, or portions thereof, recaptured by the Ceding
Company under Third-Party Reinsurance Agreements, and (iii) Policies
reinsured by Ceding Company.
M. "Reinsurance Settlement" shall have the meaning set forth in Article V of
this Agreement.
N. "Terminal Accounting and Settlement" shall have the meaning set forth in
Article XIV of this Agreement.
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O. "Third-Party Reinsurance Agreements" shall mean any written reinsurance
agreements under which Ceding Company has ceded liabilities with respect to
the Policies, other than this Agreement.
ARTICLE II
BASIS OF REINSURANCE
The Ceding Company agrees to cede and the Reinsurer agrees to accept Net Ceded
Liabilities. The reinsurance provided hereunder shall be on a 100% coinsurance
basis.
ARTICLE III
LIABILITY OF REINSURER; COINSURANCE PROVISIONS
A. All of the Net Ceded Liabilities shall be reinsured pursuant to the terms
of this Agreement as of the Effective Date.
B. The liability of the Reinsurer with respect to Policies in force on the
Effective Date will begin on the Effective Date. The liability of the
Reinsurer with respect to any application received or any contract issued
after the Effective Date and reinsured hereunder will begin simultaneously
with that of the Ceding Company. The Reinsurer's liability with respect to
any Policy will terminate on the date the Ceding Company's liability on
such contract terminates or the date this Agreement is terminated,
whichever is earlier. However, termination of this Agreement will not
terminate the Reinsurer's liability for Net Benefits prior to the date of
termination. If any of the Policies are reduced or terminated by payment of
a death benefit, withdrawal or surrender, the reinsurance will be reduced
proportionately or terminated.
C. The reinsurance provided under this Agreement is subject to the same
limitations and conditions as set forth in the Policies.
D. Ceding Company shall not make any changes after the Effective Date in the
provisions and conditions of a Policy except with Reinsurer's prior written
consent and/or to the extent that any change is required in the reasonable
judgment of Ceding Company, under any law, rule or regulation. Reinsurer
and Ceding Company shall fully cooperate with each other to effect any such
changes in the provisions and conditions of a Policy in compliance with any
applicable law, rule or regulation.
E. Some of the Policies ceded under this Agreement provide that the Ceding
Company may in its discretion, from time to time, as provided in the policy
or contract, declare interest rates, cost of insurance rates, premium
payments or other non-guaranteed elements that are or affect required
premium payments or are used to determine policy or contract values. The
Ceding Company agrees, while this Agreement is in effect, to set such
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discretionary interest rates, cost of insurance rates, premium rates or
other non-guaranteed elements to be declared on the Policies and the
effective dates thereof, taking into account the recommendations of the
Reinsurer with respect thereto. After giving due consideration to
Reinsurer's recommendations, Ceding Company may, in its discretion, either
follow or reject such recommendations. The Ceding Company and Reinsurer
agree to fully cooperate in obtaining any required regulatory approvals in
connection with setting or changing such discretionary interest rates, cost
of insurance rates, premium rates or other non-guaranteed elements.
ARTICLE IV
RESERVE TRANSFERS
A. On June 30, 2000, an estimate shall be made of the net statutory reserves
as calculated in B(i) below ("Net Statutory Reserves"). After receiving
approval from all necessary regulatory authorities, assets consisting of
policy loans, cash and investments (at market value) including accrued
investment income and net of unearned investment income shall be
transferred by the Ceding Company to the Reinsurer in an amount equal to
the Net Statutory Reserves.
B. Within ninety (90) days following the Effective Date ("Initial Settlement
Date"), Ceding Company shall pay to Reinsurer, or receive from Reinsurer,
as the case may be, cash in an amount equal to (i) less (ii), where (i) and
(ii) are as defined below. Ceding Company shall also pay to Reinsurer, or
receive from Reinsurer, as the case may be, interest on such amount at the
rate specified in (iii) below.
(i) Net Statutory Reserves determined as the portion of the following
items (a) through (e), minus items (f) and (g) attributable to the
Policies (or portion of such policies) ceded to Reinsurer under this
Agreement. The applicable portion of these items will be calculated as
of the Effective Date and will be based on the corresponding items
from Ceding Company's Annual Statement.
ITEM NAIC STATEMENT REFERENCE* DESCRIPTION
(a) Page 3, Line 1 Aggregate reserve for life policies
and contracts
(b) Page 3, Line 3 Supplementary contracts without life
contingencies
(c) Page 3, Lines 4.1 & 4.2 Policy and contract claims
(d) Page 3, Line 9 Premium and annuity considerations
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received in advance
(e) Page 3, Lines 11.1, 11.2 & 11.3 Policy and contract liabilities not
included elsewhere
(f) Page 2, Line 15 Life insurance premiums and annuity
considerations deferred and
uncollected
(g) Page 40, Column 3, Line 32 Interest Maintenance Reserve
adjustment for current year's liability
gains\losses released from the reserves
resulting from this transaction
*References herein are to the 1999 NAIC Statutory Statement. Appropriate
adjustments will be made for changes, if any, in the NAIC Statutory Statement
on or after the Effective Date.
(ii) The amount transferred under Paragraph A of this Article IV.
(iii) Interest on cash transferred at an effective rate of seven percent
(7%) per annum, simple rate, from the Effective Date to the Initial
Settlement Date.
C. Within ninety (90) days following the recapture by Ceding Company of any
business ceded under Third-Party Reinsurance Agreements, Ceding Company
shall pay to Reinsurer assets with statutory book value equal to (i) X
[1+(ii)(iii)/365], where (i) through (iii) are as defined below:
(i) Net Statutory reserves, as defined in Paragraph A, Item (i) of this
Article IV, attributable to the policies recaptured. The applicable
portion of these items will be calculated as of the end of the month
following the date of recapture.
(ii) The 90-day Treasury Xxxx rate on the effective date of the recapture.
(iii) The number of days between the end of the month following the date of
recapture and the date when payment is made.
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ARTICLE V
SETTLEMENT AND REPORTING
A. While this Agreement is in effect, in addition to the periodic cash
transfers related to policy cash flows, a reinsurance settlement shall be
payable between the Ceding Company and the Reinsurer at least each calendar
quarter with respect to the Net Ceded Liabilities ("Reinsurance
Settlement"). The Reinsurance Settlement shall be equal to Item (i) less
the sum of Items (ii) through (iv) below.
(i) Earned Premiums ceded (defined consistent with the Annual Statement
line items referenced in this subparagraph) to the Reinsurer by the
Ceding Company under this Agreement, and as currently represented on
Annual Statement page 4, Lines 1 through 3A before the adjustments
needed to reflect this Agreement with respect to the Ceding Company.
(ii) Commission and Expense Allowances calculated in accordance with
Exhibit B.
(iii) Incurred Benefits ceded (defined consistent with the Annual Statement
line items referenced in this subparagraph) to the Reinsurer by the
Ceding company under this Agreement, and as currently represented on
Annual Statement page 4, Lines 8 through 16A and Line 28 before the
adjustments needed to reflect this Agreement with respect to the
Ceding Company.
(iv) Periodic cash transfers related to policy cash flows made during the
settlement period.
If the Reinsurance Settlement amount for the quarter is positive, the Ceding
Company shall remit such amount within forty-five (45) days after the end of the
calendar quarter. If the Reinsurance Settlement amount for the quarter is
negative, the Reinsurer shall remit such amount to the Ceding Company within
forty-five (45) days following the end of the calendar quarter.
B. The Ceding Company will provide the Reinsurer with accounting reports no
less frequently than quarterly within fifteen (15) business days after the
end of each calendar quarter. These reports will contain sufficient
information about the Policies to enable the Reinsurer to prepare its
quarterly and annual financial reports.
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ARTICLE VI
TAX MATTERS
A. On a basis no less frequent than quarterly, the Ceding Company and the
Reinsurer shall settle the federal income tax consequences relating to the
reinsurance of the Policies hereunder. Such settlement shall be determined
by comparing (a) the Ceding Company's separate return tax liability (or
refund), determined as set forth below and calculated prior to taking into
account any settlement under this paragraph (the "Actual Tax Liability"),
with (b) the Ceding Company's separate return tax liability (or refund)
that would have been incurred if the Policies were written directly by the
Reinsurer and the invested assets and related reserves were held by the
Reinsurer (the "Pro Forma Tax Liability"). If the Actual Tax Liability
exceeds the Pro Forma Tax Liability, the Reinsurer shall pay to the Ceding
Company such amount (grossed-up to take into account the tax on such
payment, determined at the highest federal corporate income tax rate); if
the Actual Tax Liability is less than the Pro Forma Tax Liability, the
Ceding Company shall pay to the Reinsurer such amount (grossed-up to take
into account the tax on such payment, determined at the highest federal
corporate income tax rate). For this purpose, the Actual Tax Liability
shall be computed as follows: (i) if the Ceding Company is not a member of
the same consolidated tax group as the Reinsurer, the Actual Tax Liability
shall be determined as if the Ceding Company filed a separate federal
income tax return and all the income on such return were taxed at the
highest federal corporate income tax rate; (ii) if the Ceding Company is a
member of the same consolidated tax group as the Reinsurer, the Actual Tax
Liability of the Ceding Company shall be the amount of consolidated group's
tax allocable to the Ceding Company under any tax sharing agreements with
members of the group. The Pro Forma Tax Liability shall be determined under
similar principles.
B. With respect to this Agreement, the Ceding Company and the Reinsurer hereby
make the election as set forth in Exhibit C and as provided for in
section 1.848-2(g)(8) of the Treasury Regulations. Each of the parties
hereto agrees to take such further actions as may be necessary to ensure
the effectiveness of such election.
ARTICLE VII
RESERVE CREDIT
The Reinsurer shall, to the extent necessary, together with all its subsequent
retrocessionaires, establish adequate net reserves, and shall agree in good
faith to take any other steps necessary, pursuant to the requirements of Texas
or any other state or jurisdiction in which the Ceding Company is licensed or
accredited, for the Ceding Company to take statutory credit for reinsurance
ceded to an unadmitted, unauthorized or unaccredited reinsurer, up to the full
amount of the reserve that the Ceding Company would have established for the
Policies if it had retained the Policies.
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ARTICLE VIII
OVERSIGHTS
The Reinsurer shall be bound as the Ceding Company is bound, and it is expressly
understood and agreed that if failure to reinsure or failure to comply with any
terms of this Agreement is shown to be unintentional and the result of
misunderstanding or oversight on the part of either the Ceding Company or the
Reinsurer, both the Ceding Company and the Reinsurer shall be restored to the
positions they would have occupied had such error or oversight not occurred.
ARTICLE IX
INSPECTION OF RECORDS
The Ceding Company and the Reinsurer shall have the right, upon reasonable prior
notice and at any reasonable time, to examine at the office of the other, any
books, documents, reports or records which pertain in any way to the contracts
reinsured under this Agreement.
ARTICLE X
INSOLVENCY
A. The portion of any risk or obligation assumed by the Reinsurer, when such
portion is ascertained, shall be payable on demand of the Ceding Company at
the same time as the Ceding Company shall pay its net retained portion of
such risk or obligation, and the reinsurance shall be payable by the
Reinsurer on the basis of the liability of the Ceding Company under the
Policies without diminution because of the insolvency of the Ceding
Company. In the event of the insolvency of the Ceding Company and the
appointment of a conservator, liquidator or statutory successor of the
Ceding Company, such portion shall be payable to such conservator,
liquidator or statutory successor immediately upon demand, on the basis of
claims allowed against the Ceding Company by any court of competent
jurisdiction or, by any conservator, liquidator or statutory successor of
the Ceding Company having authority to allow such claims, without
diminution because of such insolvency or because such conservator,
liquidator or statutory successor has failed to pay all or a portion of any
claims. Payments by the Reinsurer as above set forth shall be made directly
to the Ceding Company or its conservator, liquidator or statutory
successor.
B. Further, in the event of the insolvency of the Ceding Company, the
liquidator, receiver or statutory successor of the insolvent Ceding Company
shall give written notice to the Reinsurer of the pendency of any
obligation of the insolvent Ceding Company on any Net Ceded Liability,
whereupon the Reinsurer may investigate such claim and interpose at its own
expense, in the proceeding where such claim is to be adjudicated, any
defense or defenses which it may deem available to the Ceding Company or
its liquidator or statutory successor. The expense thus incurred by the
Reinsurer shall be chargeable, subject to court approval, against the
insolvent Ceding Company as part of the expenses of liquidation to the
extent of a proportionate share of the benefit which may accrue to the
Ceding Company solely as a result of the defense undertaken by the
Reinsurer.
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C. In the event of the Reinsurer's insolvency, this treaty will terminate, and
the Terminal Accounting and Settlement described in Article XIV will occur.
Any payments due the Reinsurer from the Ceding Company pursuant to the
terms of this Agreement will be made directly to the Reinsurer or its
conservator, liquidator, receiver or statutory successor.
ARTICLE XI
ARBITRATION
Any dispute arising with respect to this Agreement which is not settled by
mutual agreement of the parties shall be referred to arbitration. Within twenty
(20) days from receipt of written notice from one party that an arbitrator has
been appointed, the other party shall also name an arbitrator. The two
arbitrators shall choose a third arbitrator within twenty (20) days following
the appointment of the second arbitrator, and shall forthwith notify the
contracting parties of such choice. Each arbitrator shall be a present or former
officer of a life insurance company or life reinsurance company and should have
no present or past affiliation with this Agreement or with either party. The
arbitrators shall consider this Agreement as an honorable engagement rather than
merely as a legal obligation, and shall be relieved of all judicial formalities;
provided, however, the arbitration shall be governed pursuant to the rules of
the American Arbitration Association and the laws of Illinois. The decision of
the arbitrators shall be final and binding upon the parties hereto, and may not
be appealed to any court or other forum. The decision of the arbitrators shall
be handed down within forty-five (45) days of the date on which the arbitration
is concluded. Each party shall bear the expenses of its own arbitrator and shall
jointly and equally bear the expenses of the third arbitrator and of the
arbitration. Any such arbitration shall take place at the Home Office of the
Reinsurer, unless some other location is mutually agreed upon.
ARTICLE XII
PARTIES TO AGREEMENT
This Agreement is solely between the Ceding Company and the Reinsurer. The
acceptance of reinsurance hereunder shall not create any right or legal relation
whatever between the Reinsurer and any party in interest under any Policy.
Ceding Company shall be and remain solely liable to any insured, contract owner,
or beneficiary under any contract reinsured hereunder.
ARTICLE XIII
DURATION OF AGREEMENT AND TERMINATION
A. DURATION. This agreement will be effective as of the Effective Date, and
will be unlimited as to its duration except as provided otherwise herein.
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B. TERMINATION OF REINSURER'S LIABILITY. The Reinsurer's liability with
respect to a Net Ceded Liability will terminate on the earliest of: (1) the
date such Net Ceded Liability is recaptured in accordance with paragraph C
below; (2) the date the Ceding Company's liability on the underlying Policy
is terminated; or (3) the date this Agreement is terminated pursuant to
paragraph D of this Article XIII. Termination of the Reinsurer's liability
is subject to payments in respect of such liability in accordance with the
provisions of Article XIV.
C. TERMINATION BY CEDING COMPANY. At any time after the occurrence (or
nonoccurrence, as the case may be) of any of the following, the Ceding
Company shall have the right, at its option, upon delivery of written
notice to the Reinsurer, to terminate this Agreement and recapture any and
all of the Net Ceded Liabilities:
(1) if the Reinsurer materially breaches any provision of this Agreement,
which breach is not cured within sixty (60) days after receipt by the
Reinsurer of notice thereof from the Ceding Company;
(2) if the Ceding Company provides thirty (30) days prior written notice to
the reinsurer.
D. TERMINATION BY THE REINSURER. This Agreement may be terminated by the
Reinsurer: (1) if the Ceding Company materially breaches this Agreement,
which breach is not cured within sixty (60) days after receipt by the
Ceding Company of written notice from the Reinsurer describing such breach;
or (2) if the Ceding Company fails to pay any amounts due the Reinsurer
pursuant to this Agreement within sixty (60) days following the end of any
specified period, upon thirty (30) days prior written notice to the Ceding
Company.
E. TERMINATION FOR NEW BUSINESS. This Agreement may be terminated with respect
to the reinsurance of new business by either party giving the other party
ninety (90) days written notice of termination to the other party.
F. SETTLEMENT. In the event of termination and recapture under paragraphs C or
D of this Article XIII, there shall be a Terminal Accounting and Settlement
pursuant to Article XIV of this Agreement.
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ARTICLE XIV
TERMINAL ACCOUNTING AND SETTLEMENT
A. TERMINAL ACCOUNTING. In the event that this Agreement is terminated in
accordance with paragraphs C or D of Article XIII above, a Terminal
Accounting and Settlement will take place.
B. DATE. The terminal accounting date will be the earliest of: (1) the
effective date of termination pursuant to any notice of termination given
under this Agreement, or (2) any other date mutually agreed to by the
parties in writing.
C. SETTLEMENT. The Terminal Accounting and Settlement will consist of the
Reinsurance Settlement as calculated consistent with Article III and
Article IV after the final settlement under Article IV has been completed,
as of the terminal accounting date as if this Agreement were still in
effect. If the calculation of the Terminal Accounting and Settlement
produces an amount owing to the Ceding Company, such amount will be paid by
the Reinsurer to the Ceding Company within thirty (30) days from the date
of termination. If the calculation of the Terminal Accounting and
Settlement produces an amount owing to the Reinsurer, such amount will be
paid by the Ceding Company to the Reinsurer within thirty (30) days from
the date of termination.
D. SUPPLEMENTARY ACCOUNTING AND SETTLEMENT. Within forty five (45) days after
the end of the quarter following the Terminal Accounting and Settlement as
provided above, a supplementary accounting will take place in accordance
with Paragraph C above. Any amount owed to the Ceding Company or to the
Reinsurer, as the case may be, by reason of such supplementary accounting
will be paid promptly upon the completion thereof.
ARTICLE XV
GENERAL PROVISIONS
A. ENTIRE AGREEMENT. This Agreement constitutes the entire contract between
the Reinsurer and the Ceding Company with respect to the Policies. No
variation, modification or changes to this Agreement shall be binding
unless in writing and signed by an officer of each party.
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B. NOTICES. Any notice or communication given pursuant to this Agreement must
be in writing and (1) delivered personally, (2) sent by facsimile
transmission, (3) delivered by overnight express, or (4) sent by registered
or certified mail, postage prepaid, as follows:
If to the Reinsurer: Allstate Life Insurance Company
0000 Xxxxxxx Xx.
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Vice President, Finance
Facsimile No.: (000) 000-0000
If to the Ceding Company: Columbia Universal Life Insurance Company
00000 Xxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Athens
Facsimile No.: (000) 000-0000
All notices and other communications required or permitted under the terms
of this Agreement that are addressed as provided in this Article XV shall:
(1) if delivered personally or by overnight express, be deemed given upon
delivery; (2) if delivered by facsimile transmission, be deemed given when
electronically confirmed; and (3) if sent by registered or certified mail,
be deemed given when received. Any party from time to time may change its
address for notice purposes by giving a similar notice specifying a new
address, but no such notice shall be deemed to have been given until it is
actually received by the party sought to be charged with the contents
thereof.
C. EXPENSES. Except as may be otherwise expressly provided in this Agreement,
whether or not the transactions contemplated hereby are consummated, each
of the parties hereto shall pay its own costs and expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
D. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall
constitute one and the same instrument and shall become effective when one
or more counterparts have been signed by each of the parties and delivered
to the other parties.
E. NO THIRD PARTY BENEFICIARY. Except as otherwise provided herein, the terms
and provisions of this Agreement are intended solely for the benefit of the
parties hereto, and their respective successors or permitted assigns, and
it is not the intention of the parties to confer third-party beneficiary
rights upon any other person, and no such rights shall be conferred upon
any person or entity not a party to this Agreement.
F. AMENDMENT. This Agreement may only be amended or modified by a written
instrument executed on behalf of both parties hereto.
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G. ASSIGNMENT; BIND EFFECT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole
or in part, by any of the parties hereto without the prior written consent
of the other party, which consent shall not be unreasonably withheld, and
any such assignment that is attempted without such consent shall be null
and void. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the parties
and their respective successors and permitted assigns.
H. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if
the rights or obligations of the parties hereto under this Agreement will
not be materially and adversely affected thereby, (1) such provision shall
be fully severable; (2) this Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never comprised a
part hereof; and (3) the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom.
I. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of Illinois, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
J. WAIVER. Any term or condition of this Agreement may be waived in writing at
any time by the party that is entitled to the benefit thereof. A waiver on
one occasion shall not be deemed to be a waiver of the same or any other
breach or nonfulfillment on a future occasion. All remedies, either under
the terms of this Agreement, or by law or otherwise afforded, shall be
cumulative and not alternative, except as otherwise provided by law.
K. HEADINGS, etc. The headings used in this Agreement have been inserted for
convenience and do not constitute matter to be construed or interpreted in
connection with this Agreement. Unless the context of this Agreement
otherwise requires, (1) words using the singular or plural number also
include the plural or singular number, respectively; (2) the terms
"HEREOF," "HEREIN," "HEREBY," "HERETO," "HEREUNDER," and derivative or
similar words refer to this entire Agreement (including the exhibits
hereto); (3) the term "ARTICLE" refers to the specified Article of this
Agreement; (d) the term "EXHIBIT" refers to the specified Exhibit attached
to this Agreement; and (e) the term "PARTY" means, on the one hand, the
Ceding Company, and on the other hand, the Reinsurer.
L. OFFSET. Any debits or credits incurred after the Effective Date in favor of
or against either the Ceding Company or the Reinsurer with respect to this
Agreement are deemed mutual debits or credits, as the case may be, and
shall be set off against each other dollar for dollar.
M. COMPLIANCE WITH LAWS. The parties hereto shall at all times comply with all
applicable laws in performing their obligations under this Agreement.
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N. ERRORS AND OVERSIGHTS. Each party to this Agreement will act reasonably in
all matters within the terms of this Agreement. Clerical errors and
oversights occasioned in good faith in carrying out this Agreement will not
prejudice either party, and will be rectified promptly on an equitable
basis.
IN WITNESS HEREOF, the parties to this Agreement have caused it to be duly
executed in duplicate by their respective officers on the dates shown below.
ALLSTATE LIFE INSURANCE COMPANY
By:
-------------------------------------
Title: Vice President
---------------------------------
Date:
----------------------------------
COLUMBIA UNIVERSAL LIFE INSURANCE COMPANY
By:
-------------------------------------
Title:
----------------------------------
Date:
-----------------------------------
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EXHIBIT A
ELIGIBLE AND INELIGIBLE POLICIES
Policies eligible for reinsurance under this Agreement are defined as all
annuity contracts and supplementary contracts with and without life
contingencies, assumed or issued by the Ceding Company
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EXHIBIT B
COMMISSION AND EXPENSE ALLOWANCE
While this Agreement is in effect, a Commission and Expense Allowance
attributable to the Policies ceded to the Reinsurer under this agreement shall
be made quarterly and used in the calculation of the Reinsurance Settlement
required under Article IV of this Agreement. The Commission and Expense
Allowance shall be equal to the sum of Items (a) through (d) less Item (e) below
before the adjustments needed to reflect this Agreement on the Ceding Company:
(a) Commissions on premiums, annuity considerations and deposit types (direct
business only), as currently represented on Annual Statement page 4,
Line 20.
(b) Commissions and expense allowances on reinsurance assumed, as currently
represented on Annual Statement page 4, Line 21.
(c) General insurance expenses allocated to Net Ceded Liabilities, calculated
in accordance with the following:
(i) $30.00 per Policy issued and placed in force after the Effective
Date;
(ii) 0.35% of premium collected;
(iii) $3.50 per inforce Policy per month.
(d) Insurance taxes, licenses and fees, excluding federal income taxes, as
currently represented on Annual Statement page 4, Line 23.
(e) Commissions and expense allowances under reinsurance ceded under
Third-Party Reinsurance Agreements, as currently represented on Annual
Statement page 4, Line 5.
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EXHIBIT C
TAX ELECTION
The Ceding Company and the Reinsurer hereby make an election pursuant to
Treasury Regulations Section 1.848-2(g)(8). This election shall be effective for
the tax year during which the Effective Date falls and all subsequent taxable
years for which this Agreement remains in effect. Unless otherwise indicated,
the terms used in this Exhibit are defined by reference to Treasury Regulations
Section 1.848-2 as in effect on the date hereof. As used below, the term "PARTY"
or "PARTIES" shall refer to the Ceding Company or the Reinsurer, or both, as
appropriate.
1. The party with the Net Positive Consideration (as defined in Section 848 of
the Code and related Treasury Regulations)with respect to the transactions
contemplated under this Agreement for any taxable year covered by this
election will capitalize specified policy acquisition expenses with respect
to such transactions without regard to the general deductions limitation of
Section 848(c)(1) of the Code.
2. The parties agree to exchange information pertaining to the amount of Net
Consideration (as defined in Section 848 of the Code and related Treasury
Regulations) under this Agreement each year to ensure consistency or as is
otherwise required by the Internal Revenue Service. The exchange of
information each year will follow the procedures set forth below:
(a) By April 1 of each year, the Ceding Company will submit a schedule to
the Reinsurer of its calculation of the Net Consideration for the
preceding calendar year. This schedule of calculations will be
accompanied by a statement signed by an authorized representative of
the Ceding Company stating the amount of the Net Consideration the
Ceding Company will report in its tax return for the preceding
calendar year.
(b) Within thirty (30) days of the Reinsurer's receipt of the Ceding
Company's calculation, the Reinsurer may contest such calculation by
providing an alternative calculation to the Ceding Company in writing.
If the Reinsurer does not notify the Ceding Company that it contests
such calculation within said 30-day period, the calculation will be
presumed correct and the Reinsurer shall also report the Net
Consideration as determined by the Ceding Company in the Reinsurer's
tax return for the preceding calendar year.
(c) If the Reinsurer provides an alternative calculation of the Net
Consideration pursuant to clause (b), the parties will act in good
faith to reach an agreement as to the correct amount of Net
Consideration within thirty (30) days of the date the Ceding Company
receives the alternative calculation from the Reinsurer. When the
Ceding Company and the Reinsurer reach agreement on an amount of Net
Consideration, each party shall report the applicable amount in their
respective tax returns for the preceding calendar year.
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