EXHIBIT (i)(1)
ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
AND
AMERICAN GENERAL LIFE COMPANIES
THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") made March 25, 2004 to
be effective as of February 1, 2004 (the "Effective Date") is by and between
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK ("USL"), a New
York domiciled life insurance company, and AMERICAN GENERAL LIFE COMPANIES
("AGLC"), a corporation organized pursuant to the laws of Delaware with its
principal place of business in Houston, Texas and formerly known as American
General Independent Producer Division.
RECITALS
WHEREAS, USL is a wholly-owned indirect subsidiary of AMERICAN INTERNATIONAL
GROUP, INC. ("AIG"), a Delaware corporation;
WHEREAS, AGLC is a wholly-owned indirect subsidiary of AIG; and currently has
employees in Houston, Texas; Dallas, Texas; Neptune, New Jersey; Chicago,
Illinois; Milwaukee, Wisconsin; New York, New York; Syracuse, New York; and
Springfield, Illinois;
WHEREAS, USL and AGLC are affiliates under the ultimate common control of AIG
pursuant to New York Insurance Law Section 1501;
WHEREAS, AGLC was formed to provide administrative and other services to
affiliated companies to attain synergies and expense savings;
WHEREAS, USL desires AGLC to perform certain administrative and other services
as set out below (the "Services") on behalf of USL and with respect to its
insurance business and operations;
WHEREAS, USL and AGLC contemplate that such an arrangement will achieve certain
operating economies and improve services to the benefit of USL and USL's
insureds;
WHEREAS, USL and AGLC wish to identify the respective Services to be provided
to USL by AGLC and to provide a method for identifying the charges to be
assessed against USL and compensation to be paid to AGLC with respect to the
Services; and
WHEREAS, USL and AGLC wish to assure that all charges for the services are
reasonable and in accordance with the applicable laws and regulations of the
State of New York, including, without limitation, the New York Insurance
Department Regulation No. 33, and to the extent practicable, reflect reasonable
costs and are determined in a fair and equitable manner.
NOW, THEREFORE, in consideration of the premises and of the mutual promises set
forth herein, and intending to be legally bound hereby, USL and AGLC agree as
follows:
1. SERVICES TO BE PROVIDED BY AGLC TO USL. Subject to the terms, conditions,
and limitations of this Agreement, AGLC shall, at USL's request and direction,
provide to USL the following services:
(a) DISTRIBUTION/PRODUCER MANAGEMENT. AGLC shall provide administrative
services relating to general agents and other producers (collectively,
"Producers") including: (i) recruiting Producers for appointment by
USL; (ii) providing general administrative and managerial services to
Producers in order to assist Producers in the sale of USL products;
(iii) assisting with due diligence investigations of USL Producers and
Producer practices; (iv) developing alternative compensation, benefits
and financing plans for Producers; (v) administering Producer licenses,
contracts and compensation and maintaining a computer database
reporting license and contract statuses; (vi) providing payroll
services, including the calculation of commissions for Producers and
the generation and delivery of a single commission check containing
commissions generated by affiliate sales. As commissions become due,
USL will transfer commission monies into an AGLC bank account and the
amount of commission paid by USL will be delineated to the Producer;
(vii) planning Producer conferences in accordance with New York
Insurance Law (S) 4228; (viii) supporting general agency
communications; and (ix) designing and assisting in implementation of
training programs, including ones related to product features,
insurance industry developments, legal compliance requirements, and the
ramifications of USL membership in the Insurance Marketplace Standards
Association.
(b) MARKETING SUPPORT/PRODUCT DEVELOPMENT AND ADMINISTRATION. With the
exception of all fixed annuity products issued by or assumed by USL
prior to the effective date of this Agreement or issued by USL after
the effective date of this Agreement (hereinafter referred to as "all
USL fixed annuity products"), AGLC shall provide administrative
services relating to marketing support and product development and
administration with respect to insurance and variable annuity products,
individual and group, and registered and non-registered, including:
(i) conducting formal insurance market research; (ii) developing and
designing new products and obtaining regulatory approvals for
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such products; (iii) developing illustration and sales materials;
(iv) providing case design underwriting services; (v) evaluating
product performance based on production, expense, persistency,
investment and mortality levels; and (vi) maintaining sales
illustration, advertising materials and re-projection software which
are compliant with New York Insurance Law (S) 3209 and New York
Insurance Regulation 74 and maintained in accordance with New York
Insurance Regulation 152.
(c) REINSURANCE AND UNDERWRITING. AGLC shall: (i) advise with respect to
reinsurance retention limits; (ii) provide advice and support with
respect to the negotiation of reinsurance treaties; (iii) provide
advice and support with respect to the management of reinsurer
relationships; (iv) provide analyses of underwriting standards;
(v) assist and advise in the development of appropriate underwriting
standards; (vi) distribute to corporate employers and/or agents
underwriting guidelines applicable to corporate executive benefit
products; (vii) review insurance, variable annuity and corporate
executive benefit applications for conformity with underwriting
criteria; (viii) perform all underwriting pertaining to those
applications; (ix) prepare and maintain life insurance binder
agreements related to corporate executive benefit products; and
(x) designate as ready for issue all insurance, variable annuity and
corporate executive benefit applications which clearly fall within
underwriting criteria. AGLC expressly understands that all underwriting
decisions shall ultimately be the responsibility of USL and subject to
the control and direction of USL.
(d) POLICYOWNER AND CONTRACT HOLDER SERVICES. With the exception of all USL
fixed annuity products, AGLC shall provide administrative policyowner
and contract holder ("Customer") services including: (i) receiving and
processing insurance (including variable universal life), annuity and
corporate executive benefit product applications, amendments and
riders, physically generating the related insurance policies, annuity
contracts, amendments and riders on USL paper, and transmitting all
such USL policies, amendments and riders to Customers on USL
stationery; (ii) maintaining computerized and hard copy files relating
to insurance policies, annuity contracts and corporate executive
benefit products consistent with New York Insurance Department
Regulation 152; (iii) billing Customers; (iv) preparing and updating
Customer payment records to reflect premiums and annuity considerations
paid to USL and initially received by Chase National Bank ("Chase") or
another financial institution of USL's choice pursuant to lockbox
agreements among Chase (or other financial institution), USL and AGLC
as contemplated in Section 1.(f) below; (v) handling Customer tax
issues such as processing requests related to XXX rollovers; and
(vi) administering requested policy modifications consistent with
underwriting guidelines subject to the control and direction of USL. At
all times that AGLC is providing the above Customer services, it shall
answer all telephone inquiries as USL and when making communications
with Customers in writing, such communications shall be on USL
stationery.
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(e) SAFEGUARDING CUSTOMER INFORMATION. AGLC shall implement and maintain
appropriate measures designed to meet the objectives of Department
Regulation No. 173, with respect to safeguarding USL's customer
information and customer information systems. AGLC shall adjust its
information security program at the request of USL for any relevant
changes dictated by USL's assessment of risk around its customer
information and customer information systems. Confirming evidence that
AGLC has satisfied its obligations under this agreement shall be made
available, during normal business hours, for inspection by USL, anyone
authorized by USL, and any governmental agency that has regulatory
authority over USL's business activities.
(f) CLAIMS PROCESSING AND PAYMENT. With the exception of all USL fixed
annuity products, AGLC shall process claims, contestable and
non-contestable. AGLC will pay insurance and annuity benefits with a
check drawn on an USL bank account. At all times that AGLC is providing
claims processing and payment services, AGLC will answer all telephone
inquiries as USL and will use USL stationery when communicating in
writing with respect to a claim. AGLC expressly understands that all
claims decisions shall ultimately be the responsibility of USL and
subject to the control and direction of USL. AGLC will comply with all
applicable licensing requirements.
(g) ACTUARIAL/FINANCIAL SERVICES. With the exception of all USL fixed
annuity products (i) AGLC shall provide actuarial and financial
services, including: (a) preparing actuarial reports, opinions and
memoranda and assisting with asset/liability management and cash flow
testing which will be provided in hard copy annually; (b) conducting
product experience studies which will be provided in hard copy as
required; (c) preparing reserve calculations and valuations which will
be provided in hard copy annually; (d) assisting in the development of
budgets and business plans which will be provided in hard copy
annually; (e) preparation of books of account including general
ledgers, transaction registers and trial balances which will be
reviewed for accuracy by USL and provided in hard copy quarterly;
(f) preparing financial statements and reports, including, annual and
quarterly financial statements on both statutory and generally accepted
accounting principles ("GAAP") bases which will be provided in hard
copy; (g) preparing and disseminating filings with regulatory entities
and rating agencies which will be provided in hard copy as required;
(h) developing financial models which will be provided in hard copy as
required; (i) analyzing capitalization level issues; (j) arranging for
one or more lockboxes owned and controlled by USL at a financial
institution of USL's choice to receive premiums or annuity
considerations paid to USL; (k) inputting into Customer records
information related to premiums or annuity considerations sent to the
financial institution lockbox, provided that USL verifies that all such
information is accurate and properly reflected in USL's records; and;
(ii) arranging for bank accounts in the name and control of USL and
processing receipts and disbursements subject to the direction and
control of USL.
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Notwithstanding the foregoing, USL shall maintain its cash
concentration account in New York. AGLC will provide USL at USL's
principal office in New York, New York computer access to the
electronic system that generates the electronic records with respect to
USL's business. Computer access to the electronic data media used to
maintain the accounting records relating to USL business will be
readily available, easily accessible and in a readable format during
all normal business hours. AGLC will maintain format integrity and
compatibility of the electronic records to insure such records which
constitute the accounting records relating to USL's business are
current and accessible. USL shall verify that all accounting
transactions are accurately prepared and reflected in USL's records.
This shall be accomplished through reconciliations of bank and other
accounting records provided by AGLC to USL and by review of general
ledgers.
(h) INFORMATION/TECHNOLOGY. With the exception of all USL fixed annuity
products, AGLC shall provide administrative services relating to
information technology, including: (i) developing data processing
systems strategy; (ii) implementing systems strategy; (iii) programming
computers; (iv) providing data center services including maintenance
and support of mainframe and distribution process hardware and
software; (v) managing voice communication systems; (vi) managing data
communications; and (vii) providing data security. AGLC shall maintain
an effective disaster recovery program to recover USL's data in the
event of the loss of the physical data center, including daily or
periodic backup as needed. If the electronic data system being used to
maintain the records which comprise the book of accounts of USL is to
be replaced by a system incompatible with the existing system, AGLC
will convert all pre-existing data to a format compatible with the new
system.
(i) GENERAL SERVICES. With the exception of all USL fixed annuity products,
AGLC shall provide the following general administrative services as to
USL purchases and other transactions: (i) performing document control
and production of standardized company forms; (ii) arranging for
warehouse storage space; (iii) distributing warehoused standardized
forms and other materials; (iv) arranging for travel services;
(v) providing management systems support; (vi) arranging for commercial
real estate brokerage services for the acquisition or disposition of
office space; (vii) arranging for space programming, design,
architectural, construction, environmental, and property management
services; (viii) providing representation on the American General
Purchasing Committee and participating in national purchasing
agreements; (ix) providing standardized systems for purchasing;
accounts payable; and fixed asset management for office furniture,
fixtures, equipment or supplies; and (x) administering the lease,
purchase, or sale of company automobiles.
(j) REGISTERED AND NON-REGISTERED PRODUCT SERVICES. With respect to:
(i) the development, sale and servicing of products of USL that are
registered with the Securities and Exchange Commission (the "SEC") as
well as to "private placement" products which are not registered with
the SEC; and (ii)
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the administration of the SEC-registered and unregistered separate
accounts of USL, AGLC shall provide in addition to all any and services
described above, all related legal, accounting, including daily pricing
of the underlying divisions of the Separate Account and preparation of
the statutory and GAAP financial statements, computer support and
transfer agent services.
(k) LEGAL SERVICES. With the exception of all USL fixed annuity products,
AGLC shall provide Legal Services, including: (i) providing general
advice and counsel with respect to applicable state and federal legal
requirements; (ii) assisting with dispute resolution, including
litigation: (iii) managing outside counsel retained for the purpose of
the prosecution, defense or resolution of legal matters including
litigation; (iv) representing or serving as an advocate for USL in
conjunction with all legal matters; (v) providing tax advice and
counsel; and (vi) providing such other Legal Services as are reasonably
required or requested by USL.
(l) CONSUMER COMPLAINTS. With the exception of all USL fixed annuity
products, AGLC shall provide customer services including responding to
customer complaints and inquiries by letter or telephone. At all times
that AGLC is providing such customer services, it shall answer all
telephone inquiries as USL and when making communications in writing,
such communications shall be on USL stationary.
(m) HUMAN RESOURCES. AGLC shall provide services including; (i) general
employee communications; (ii) employee training; and (iii) employee
benefit and personnel administration.
(n) ADMINISTRATIVE SERVICES. With the exception of all USL fixed annuity
products, AGLC will provide administrative services necessary to the
conduct of the services provided under this agreement.
2. PERFORMANCE OF SERVICES. The performance of services by AGLC with respect
to the business and operations of USL shall at all times be subject to the
direction and control of the Board of Directors of USL. Subject to the
terms, conditions and limitations of this Agreement, AGLC agrees to perform
diligently and in a professional manner the services set forth in Section 1
of this Agreement, and such other directly related incidental services as
USL determines to be reasonably necessary in the conduct of its insurance
operations. AGLC agrees that it will obtain all licenses necessary for the
performance of services pursuant to the Agreement.
(a) CAPACITY OF PERSONNEL. Whenever AGLC utilizes its personnel to perform
services for USL pursuant to this Agreement, such personnel shall at
all times be subject to the direction and control of AGLC, and USL
shall not have liability to such personnel for their welfare, salaries
or fringe benefits or for legally required employer contributions or
tax obligations with respect to such personnel.
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(b) EXERCISE OF JUDGMENT IN RENDERING SERVICES. In providing any service
hereunder which requires the exercise of judgment by AGLC, AGLC shall
perform its services in accordance with written standards, guidelines
and procedures USL develops, as appropriate, and communicates to AGLC.
In performing any services hereunder, AGLC shall at all times act in a
manner reasonably calculated to be in, or not opposed to, the best
interests of USL.
(c) CONTROL. The performance of services by AGLC for USL pursuant to this
Agreement shall in no way impair the absolute control of the business
and operations of USL or AGLC by their respective Board of Directors.
AGLC and USL shall act hereunder so as to assure the separate operating
identity of USL.
3. CHARGES FOR SERVICES. USL agrees to reimburse AGLC for the Services
provided by AGLC pursuant to this Agreement at cost, consistent with
generally accepted accounting principles consistently applied. No services
rendered by AGLC shall be duplicative of any services preformed by or
provided to USL by any other affiliate.
Determination by AGLC of charges hereunder shall be presented to USL, and
if USL objects to such determination, it shall so advise AGLC within thirty
(30) days of receipt of notice of such determination. Unless the parties
can reconcile any such objection, they shall agree to the selection of a
firm of independent certified public accountants which shall then determine
the charges properly allocable to USL and shall, within a reasonable time,
submit such determination, together with the basis therefore, in writing to
AGLC and USL, whereupon such determination shall be binding. The expenses
of such a determination by a firm of independent certified public
accountants shall be borne equally by AGLC and USL.
4. PAYMENT OF CHARGES. Within thirty (30) days after the end of each calendar
month, AGLC shall submit to USL a written statement of the charges due from
USL to AGLC for the services rendered and facilities used during the
preceding calendar month, including charges not included in previous
statements. All amounts due shall be paid within ten (10) days following
receipt of such statement. The amount transferred by USL to AGLC shall be a
net payment taking into account any amounts owed by AGLC to USL during the
calendar month provided, however, that the amount of, and the transactions
giving rise to, such net payment shall be evidenced by appropriate
documentation and records.
5. USE OF FACILITIES. Subject to the terms, conditions and limitations of this
Agreement, AGLC agrees to make available to USL such of its facilities
(whether leased or owned) as USL may determine to be reasonably necessary
to conduct its insurance operations, including data processing equipment,
business property and communications equipment. Charges for such use shall
be at cost consistent with generally accepted accounting principles
consistently applied. Notwithstanding the foregoing, none of the facilities
used by AGLC employees in performing services for USL shall be deemed to be
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transferred, assigned or otherwise conveyed to USL as a result of any
performance or use pursuant to this Agreement.
6. SERVICES-RELATED ACCOUNTING RECORDS AND DOCUMENTS. AGLC shall be
responsible for maintaining full and accurate accounts and records of the
services rendered by AGLC and other additional information as USL may
reasonably request for purposes of its internal bookkeeping and accounting
operations. To the extent such accounts and records pertain to AGLC's
computation of charges, AGLC shall keep such accounts and records available
at its home offices for audit, inspection and copying during reasonable
business hours by USL, persons authorized by USL or appropriate
governmental agencies. USL and AGLC agree that records and documents will
be maintained consistent with New York Insurance Department Regulation 152
entitled "General Records and Documents."
7. GENERAL RECORDS AND DOCUMENTS. Other books, records and files established
and maintained by AGLC with respect to its performance of services under
this Agreement which, absent this Agreement, would have been held by USL,
shall be deemed the property of USL and shall be subject to examination
during reasonable business hours by USL, person authorized by USL or
appropriate governmental agencies. USL and AGLC agree that such records and
documents will be maintained consistent with New York Insurance Department
Regulation 152 entitled "General Records and Documents."
8. RIGHT TO CONTRACT WITH THIRD PARTIES. Nothing herein shall be deemed to
grant AGLC an exclusive right to provide services to USL, and USL retains
the right to contract with any affiliate or unaffiliated third party for
the performance of services and/or for the use of facilities, as are
available to or have been requested by USL pursuant to this Agreement.
9. DISCLOSURE OF PROPRIETARY INFORMATION. USL and AGLC acknowledge that during
the course of the relationship established by this Agreement each of them
will be exposed to the confidential and proprietary information of the
other party (the "Confidential Information"). Each party agrees to take all
reasonable measures to prevent the Confidential Information from being
acquired by unauthorized persons to the same extent that it protects its
own confidential and proprietary information and will not disclose the
Confidential Information to third parties, except as mandated by law,
without the prior written consent of the other party. This provisions
survives the termination of this Agreement pursuant to paragraph 11 of this
Agreement.
10. INDEMNIFICATION. Both USL and AGLC have a duty to be aware of and comply
with all laws and regulations which may affect the parties' performance of
the terms of this Agreement. Both parties agree to comply with all such
laws and regulations.
(a) AGLC agrees to indemnify and hold USL harmless against all civil
liability or regulatory penalty, including attorneys' fees and costs of
investigation and defense incident thereto, arising as a result of
errors, omissions, negligence,
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misrepresentation, fault or wrongful action of AGLC, its affiliates,
agents, or any officer, director or employee of AGLC or its affiliates
or agents, including, but not limited to, failure to comply with any
applicable federal or state law or regulation, administrative rule or
regulation, in the performance of obligations hereunder.
(b) USL agrees to indemnify and hold AGLC harmless against all civil
liability or regulatory penalty, including attorneys' fees and costs of
investigation and defense incident thereto, arising as a result of
errors, omissions, negligence, misrepresentation, fault or wrongful
action of USL, its affiliates, agents, or any officer or director of
USL or said affiliates or agents, including, but not limited to,
failure to comply with any applicable federal or state law or
regulation, administrative rule or regulation, in the performance of
obligations hereunder.
11. TERMINATION.
(a) This Agreement shall remain in effect until terminated by AGLC or USL
upon giving sixty (60) days or more advance written notice, unless both
parties agree in writing to a shorter advance notice period.
(b) Upon termination of this Agreement, and subject to the terms (including
any limitations and restrictions) of any applicable software or
hardware licensing agreement then in effect between AGLC and any
licensor, AGLC shall grant to USL a license for any software developed
or used by AGLC in connection with the services provided to USL
hereunder; provided, however, that such software is not commercially
available and is necessary, in USL's reasonable judgment, for USL's
performance of the functions which have been provided by AGLC hereunder.
(c) Upon termination, AGLC shall promptly deliver to USL all books and
records that are, or are deemed by this Agreement to be, the property
of USL.
(d) No later than ninety (90) days after the effective date of termination
of this Agreement, AGLC shall deliver to USL a detailed written
statement of the respective charges incurred and not included in any
previous statement. The amount owed hereunder shall be due and payable
within thirty (30) days of receipt of such statement.
12. ASSIGNMENT. Except as provided below, this Agreement and any rights
pursuant hereto shall be assignable only upon the written consent of the
New York State Insurance Department and all of the parties hereto. Except
as and to the extent specifically provided in this Agreement, nothing in
this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto, or their respective legal successors, any
rights, remedies, obligations, or liabilities, or to relieve any person
other than the parties hereto or their respective legal successors, from
any obligations or liabilities that would otherwise be applicable.
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13. ARBITRATION. Any unresolved dispute or difference between the parties
arising out of or relating to this Agreement, or the breach thereof, shall
be settled by arbitration in accordance with the Commercial Arbitration
Association and the Expedited Procedures thereof. The award rendered by the
Arbitrator shall be final and binding upon the parties, and judgment upon
the award rendered by the Arbitrator may be entered in any Court of
competent jurisdiction. The arbitration shall take place in New York and
the substantive law of New York shall apply in such proceedings.
14. NOTICE. All notices, statements or requests provided for hereunder shall be
deemed to have been duly given when delivered by hand to an officer of the
other party, or when deposited with the U.S. Postal Service, vial
first-class certified or registered mail, with postage prepaid, or when
delivered by overnight courier service, telex or telecopier, addressed as
follows:
If to USL:
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: President
If to AGLC:
AMERICAN GENERAL LIFE COMPANIES
0000-X Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: President
or to such other persons or places as each party may from time to time
designate by written notice.
15. ENTIRE AGREEMENT. This Agreement, together with such amendments as may from
time to time be executed in writing by the parties, constitutes the entire
agreement and understanding between the parties in respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings related to the subject matter hereof.
16. SECTION HEADINGS. Section headings contained herein are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
applicable to contracts made and to be performed in that state, without
regard to principles of conflict of laws.
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18. 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in
duplicate by their respective officers, duly authorized to execute this
Agreement, and their respective corporate seal to be affixed hereto, as of the
date and year first above written.
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
By: /s/
--------------------------
[Seal]
Attest: /s/
--------------------------
Secretary
AMERICAN GENERAL LIFE COMPANIES
By: /s/
--------------------------
[Seal]
Attest: /s/
--------------------------
Secretary
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