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Exhibit 10.4
AMENDED AND RESTATED REINSURANCE AGREEMENT
referred to as the "Agreement"
BETWEEN
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
OF
NEW YORK, NEW YORK
referred to in this Agreement as the "Company"
AND
LIFE REASSURANCE CORPORATION OF AMERICA
OF
STAMFORD, CONNECTICUT
referred to in this Agreement as "Life Re"
AGREEMENT #8888-1
[Life Re Logo]
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This Amended and Restated Reinsurance Agreement (this "Agreement") amends
and fully restates the Reinsurance Agreement between the Company and Life Re
entered into on May 25, 1994, with an effective date for the reinsurance of
January 1, 1994.
The Company and Life Re mutually agree to reinsure on the terms and
conditions set forth below. This Agreement is solely between the Company and
Life Re, and performance of the obligations of each party under this Agreement
shall be rendered solely to the other party. In no instance will anyone other
than the Company or Life Re have any rights under this Agreement.
ARTICLE I
REINSURANCE
The Company will cede and Life Re will accept 50% of the Company's rights,
obligations, liabilities and risks associated with the insurance policies, plans
and/or riders set forth in Schedule A that went into paid up status on or before
December 31, 1993. The policies set forth in Schedule A that are reinsured under
this Agreement are hereinafter referred to collectively as "Reinsured Policies"
and individually as a "Reinsured Policy." The 50% of the Company's business
associated with the Reinsured Policies is hereinafter referred to as "Life Re's
Share." Life Re will have no liability for any policies any part of which are
currently reinsured by the Company.
ARTICLE II
REINSURANCE LIABILITY
The liability of Life Re on any Reinsured Policy begins and ends at the
same time as that of the Company; however, Life Re will have no liability for
claims incurred before January 1, 1994.
ARTICLE III
PLAN AND AMOUNT OF INSURANCE
1. Plan
Reinsurance under this Agreement is on a funds withheld basis according to
Life Re's Share, subject to the terms and conditions of policy forms issued by
the Company for the Reinsured Policies in existence as of the effective date of
this Agreement.
2. Reductions and Terminations
Reinsurance amounts are calculated in terms of coverages on a "per policy"
basis. If any of the Reinsured Policies on an insured are reduced or terminated,
reinsurance under this Agreement on such Reinsured Policies will be reduced in
proportion to Life Re's Share.
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3. Reinstatements
A Reinsured Policy originally ceded under this Agreement, that is reduced,
terminated, lapsed or surrendered, and later reinstated to paid up status by the
Company pursuant to the policy provisions, will be accepted for reinsurance by
Life Re up to such amount as would be in force if such Reinsured Policy had not
been reduced, terminated, lapsed or surrendered. The Company will pay to Life
Re, Life Re's Share of any payments or interest that the Company received for
reinstatement.
ARTICLE IV
PROCEDURES FOR REINSURANCE
1. Initial Consideration
Within 15 days of the date of execution of this Agreement, Life Re will pay
to the Company initial consideration equal to $10,450,000.00, plus an amount
equal to the reserves for dividend liabilities on Life Re's Share of the
Reinsured Policies.
2. Establishment of Reserves
Within 15 days of the date of execution of this Agreement, the Company will
establish a dedicated portfolio consisting of cash equal to (i) the statutory
reserves (including reserves for substandard policies and dividend liabilities)
on Life Re's Share of the Reinsured Policies as of January 1, 1994 as set forth
in Schedule A and (ii) interest on such reserves from January 1, 1994 to the
date of payment at an effective annual rate of interest equal to 7%. The assets
held in the dedicated portfolio are hereinafter referred to as the "Withheld
Assets." A list of the assets comprising the Withheld Assets at the inception of
this Agreement are set forth in Schedule B.
3. Treaty Quarter
The three month period ending on the last day of each March, June,
September, and December is referred to herein as a "Treaty Quarter."
4. Withdrawal and Surrender Benefits and Dividends
Life Re's Share of death benefits, withdrawal benefits, surrender benefits,
maturities, Annual Policy Dividends (as defined below), and Policy Termination
Dividends (as defined below) will be paid after the end of each Treaty Quarter
within 30 calendar days after Life Re receives from the Company the Quarterly
Reports described in Article IV, 6, below, showing the amount of actual
payments, increased with interest. Interest will be calculated from the midpoint
of the quarter such amounts are paid by the Company to the date they are paid by
Life Re, at an effective annual rate of interest equal to the three month
Treasury Xxxx rate, as of the midpoint of the quarter such amounts are paid by
the Company. Such payments will be made by (i) the release of assets from the
Withheld Assets by the Company, in consultation with Life Re, (ii) the release
of cash
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from the Withheld Assets, (iii) direct payment by Life Re to the Company, or
(iv) any combination of the above.
5. Expense Allowances
Life Re will pay to the Company an annual expense allowance equal to Life
Re's Share of $15.00 for each Reinsured Policy. Such expense allowance will be
payable in quarterly installments within thirty (30) days after Life Re receives
from the Company the Quarterly Reports described in Article IV,6, below, based
on the number of Reinsured Policies in effect as of the end of such Treaty
Quarter. Payment will be made as described in Article IV, 4.
6. Quarterly Reports
Within thirty (30) calendar days following the end of a Treaty Quarter, the
Company will forward to Life Re a statement of transactions in substantially the
form shown in Schedule C ("Quarterly Report") and as may be amended from time to
time by the mutual written consent of the Company and Life Re. If a balance is
due the Company, Life Re will remit such amount to the Company, with interest as
provided in Article IV,4, above, within 30 calendar days of receiving the
Quarterly Report. With the Quarterly Report, the Company will provide a list of
assets comprising the Withheld Assets and the value of such assets as reported
on the Company's financial statements.
7. Interest Maintenance Reserve
When a Withheld Asset which is subject to the interest maintenance reserve
statutory accounting principles applicable to the Company is sold, an interest
maintenance reserve applicable to the Withheld Assets under this Agreement will
be established for purposes of this Agreement (the "IMR") and the following
occur:
The realized gain on the sold Withheld Asset is not credited at
the time of sale to the investment earnings on the Withheld Assets. The
value of the Withheld Assets required to be held will be increased by
the amount of the related interest maintenance reserve as calculated by
the Company for inclusion in its statutory financial statements. Life
Re will pay to the Company from the Withheld Assets an amount equal to
the statutory gain from the sale of such asset minus the amount of the
IMR established. As this payment is assumed to cover the Company's tax
cost, the amount of the payment divided by the realized gain is deemed
the "Tax Rate" for the specific asset sold. Such payment will be made
within 30 calendar days of receiving the Quarterly Report and such
payment will include interest from the date the Withheld Asset was sold
at an effective annual rate of interest equal to the three-month
Treasury Xxxx rate as of the date the Withheld Asset was sold.
As the Company amortizes the related interest maintenance
reserve, the Company will credit to the investment earnings on the
Withheld Assets the amount amortized for the asset sold divided by I
minus the Tax Rate. Such payment will be made as described in Article
IV, 4.
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8. Withheld Assets
The Withheld Assets will be held by the Company in an amount equal to the
statutory reserves (including the IMR and the Company's estimated dividend
liabilities) on Life Re's Share of the Reinsured Policies. The investment of the
Withheld Assets will be managed by an investment advisor (the "Advisor")
approved by both the Company and Life Re. The Advisor will manage the Withheld
Assets in accordance with the Investment Guidelines attached hereto as Schedule
D. Any investment income or gain received from the Withheld Assets will be
considered Withheld Assets.
Life Re is solely responsible for the payment of any fees charged by the
Advisor for managing the Withheld Assets. Such fees will be paid directly by
Life Re and will not be paid out of the Withheld Assets.
If at any time the value of the Withheld Assets (as reflected on the
Company's financial statements prepared in accordance with statutory accounting
principles) should be less than the statutory reserves (including the IMR and
the Company's estimated dividend liabilities) on Life Re's Share of the
Reinsured Policies, Life Re will transfer to the Company cash or other assets
which meet the requirements of the Investment Guidelines in an amount sufficient
so that the value of the Withheld Assets equals or exceeds the statutory
reserves (including the IMR and the Company's estimated dividend liabilities) on
Life Re's Share of the Reinsured Policies.
If the value of the Withheld Assets (as reflected on the Company's
financial statements prepared in accordance with statutory accounting
principles) exceeds the statutory reserves (including the IMR and the Company's
estimated dividend liabilities) on Life Re's Share of the Reinsured Policies,
Life Re may elect to have all or some portion of the excess paid to Life Re.
Life Re may elect to have either cash or assets transferred from the Withheld
Assets to Life Re; however, Life Re must ensure that after any such transfer the
value of the Withheld Assets equals or exceeds the statutory reserves (including
the IMR and the Company's estimated dividend liabilities) on Life Re's Share of
the Reinsured Policies. If the value of the Withheld Assets (as reflected on the
Company's financial statements prepared in accordance with statutory accounting
principles) exceeds the statutory reserves (including the IMR and the Company's
estimated dividend liabilities) on Life Re's Share of the Reinsured Policies by
more than 5% of the statutory reserves (including the Company's estimated
dividend liabilities), the Company will automatically pay to Life Re from the
Withheld Assets an amount necessary to reduce such excess to less than 5% of the
statutory reserves (including the IMR and the Company's estimated dividend
liabilities).
Within thirty (30) days of the end of each month, the Advisor will provide
the Company with a report that reflects duration and rating of each Withheld
Asset. If at any time the Withheld Assets fail to meet the requirements of the
Investment Guidelines, Life Re will correct such failure within thirty (30) days
of receiving notice of such failure.
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9. DAC Tax
The Company and Life Re hereby agree to make an election pursuant to
Section 1.848-2(g)(8) of the Income Tax Regulations issued December 1992, under
Section 848 of the Internal Revenue Code of 1986, as amended. This election
shall be effective for 1993 and for all subsequent taxable years for which this
Agreement remains in effect. The Company and Life Re also agree to the
following:
(a) The term "party" will refer to either the Company of Life Re as
appropriate.
(b) The terms use in this Article are defined by reference to
Regulation Section 1.848-2 in effect December 1992.
(c) The party with the net positive consideration for this Agreement
for each taxable year will capitalize specified policy acquisition
expenses with respect to this Agreement without regard to the
general deductions limitation of Section 848(c)(1).
(d) Both parties agree to exchange information pertaining to the amount
of net consideration under this Agreement each year to ensure
consistency or is otherwise required by the Internal Revenue
Service.
(e) The Company will submit a schedule to Life Re by May 1 of each year
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 officer of the Company stating that the
Company will report such net consideration in its tax return for
the preceding calendar year.
(f) Life Re may contest such calculation by providing an alternative
calculation to the Company in writing within thirty (30) days of
Life Re's receipt of the Company's calculation. If Life Re does not
so notify the Company, Life Re will report the net consideration as
determined by the Company in Life Re's tax return for the previous
calendar year.
(g) If Life Re contests the Company's calculation of the net
consideration, the parties will act in good faith to reach an
agreement as to the correct amount within thirty (30) days of the
date Life Re submits its alternative calculation. If the Company
and Life Re reach agreement on an amount of net consideration, each
party shall report such amount in their respective tax returns for
the previous calendar year.
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ARTICLE V
LIABILITY FOR PAYMENTS
1. Age Adjustment
If the amount of any Reinsured Policy is changed because of a misstatement
of age, Life Re will share in any adjustments in proportion to Life Re's Share.
2. Commissions
Life Re will not participate with the Company in any agent commissions or
other similar compensation paid by the Company in connection with a Reinsured
Policy.
ARTICLE VI
BENEFITS
1. POLICYHOLDER BENEFITS
A. Annual Policy Dividends
Life Re will reimburse the Company for Life Re's Share of
dividends credited to the policyholder on the anniversary of
any Reinsured Policy ("Annual Policy Dividend"). The Company
shall have sole responsibility for setting the formula for
determining the Annual Policy Dividend and Life Re shall be
bound by the Company's determination.
B. Policy Termination Dividends
Life Re will reimburse the Company for Life Re's Share of
dividends paid to the policyholder on the termination of any
Reinsured Policy ("Policy Termination Dividend"). The Company
shall have sole responsibility for setting the formula for
determining the Policy Termination Dividend and Life Re shall
be bound by the Company's determination.
C. Reduction in Annual Policy Dividends
If the dividend interest rate used to determine the Annual
Policy Dividend for 1994 (payable in 1995) is reduced from the
rate used for the Annual Policy Dividend for 1993, Life Re
will pay additional consideration to the Company for the
reinsurance within thirty (30) days after the Annual Policy
Dividend for 1994 is established by the Board of Trustees of
the Company at its 1994 meeting regarding dividends. The
amount paid is based on the number of basis points by which
the dividend interest rate is reduced. For this purpose, the
reduction in the dividend interest is defined as:
.4438L5 + .1435L6 + .0214L8 + .3913LV,
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where L5, L6, L8 and LV, are the dividend interest rate
reductions for policies with 5%, 6%, 8%, and variable loan
rates, respectively.
The amount Life Re will pay the Company for each basis point
by which the dividend interest rate used to determine the
Annual Policy Dividend is reduced will be determined by the
following formulas:
(1) For reductions up to and including 37.4 basis points, Life
Re will pay the Company the greater of $0.00 or the amount
determined using the following formula:
((Basis point reduction) x $39,775) - $500,000
(2) For reductions in excess of 37.4 basis points, Life Re
will pay the Company the amount determined using the
following formula:
$987,500 + ((basis point reduction - 37.4 basis points)
x $23,400)
D. Policy Loans
Life Re will not participate with the Company on policy loans
on any Reinsured Policy.
E. Settlement Options
Life Re will not participate in settlement options.
2. CLAIM BENEFITS
A. Notification
Unless otherwise requested by Life Re, the Company will notify
Life Re of claims involving any Reinsured Policy at the time
the Quarterly Report is delivered to Life Re. The Company will
furnish Life Re claim information and, upon request by Life
Re, copies of all claim papers and proofs.
B. Authorization for Payment
Life Re will follow the decision of the Company on payment of
a claim arising from a Reinsured Policy, other than as
provided in Article VI,2,D. Life Re will pay Life Re's Share
of such claims to the Company in full. Payment will be made as
described in Article IV, 4.
C. Expenses
Life Re will share in the claim expense of any contest or
compromise of a claim in proportion to Life Re's Share. Life
Re will share in the total
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amount of an reduction in liability in proportion to Life Re's
Share. Claim expense includes, but is not limited to, cost of
investigation, legal fees, court costs, and interest charges.
Compensation of salaried officers and employees will not be
reimbursed by Life Re.
Life Re will pay Life Re's Share of any extracontractual or
punitive damages assessed against the Company for any
Reinsured Policy under this Agreement if each of the following
conditions is met:
(a) The primary basis for the award of extracontractual or
punitive damages was the Company's denial of a claim under
the Reinsured Policy;
(b) Before any action by the Company indicating to the
claimant that the claim is being denied or contested, Life
Re must have had the opportunity to review the claim file;
and
(c) Life Re must have agreed that the claim should be denied
or contested.
Life Re also will reimburse the Company for Life Re's Share of
reasonable legal fees incurred in defense of extracontractual
or punitive damages.
D. Contested Claims
Whenever the Company has formed a preliminary opinion that a
claim might be denied or contested, and before any final
action by the Company indicating to the claimant that the
claim is being denied or contested, the Company will give Life
Re the opportunity to review the complete claim file. Life Re
will review the file promptly and, at its option, (i) pay Life
Re's Share as if the claim was not contested, in full
discharge of its obligation to the Company for that claim or
(ii) after consultation with the Company, join in the contest,
or ratify the denial.
If Life Re joins in the contest, or ratifies the denial, of a
claim, Life Re will communicate to the Company Life Re's
decision to pay Life Re's Share of the ultimate claim expense.
ARTICLE VII
INSOLVENCY
All reinsurance under this Agreement will be paid by Life Re directly to
the Company, its liquidator, receiver, or statutory successor, on the basis of
the liability of the Company under the Reinsured Policies without diminution
because of the insolvency of the Company. In the event of the insolvency of the
Company, the liquidator, receiver, or statutory successor of the Company will
give written notice of a pending claim against the Company on any Reinsured
Policy within a reasonable time after the claim is filed in
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the insolvency proceedings. While the claim is pending, Life Re may investigate
and interpose, at its own expense, in the proceedings where the claim is to be
adjudicated, any defenses which it may deem available to the Company or its
liquidator, receiver, or statutory successor. The expense incurred by Life Re
will be charged, subject to court approval, against the Company as an expense of
liquidation to the extent of a proportionate share of the benefit that accrues
to the Company as a result of the defenses by Life Re. Where two or more
reinsurers are involved and a majority in interest elect to defend a claim, the
expense will be apportioned in accordance with the terms of this Agreement as if
the expense had been incurred by the Company.
ARTICLE VIII
ARBITRATION
Life Re and the Company intend that any dispute between them under or with
respect to this Agreement be resolved without resort to any litigation.
Accordingly, Life Re and the Company agree that they will negotiate diligently
and in good faith to agree on a mutually satisfactory resolution of any such
dispute; provided, however, that if any such dispute cannot be so resolved by
them within sixty (60) calendar days (or such longer period as the parties may
agree) after commencing such negotiations, Life Re and the Company agree that
they will submit such dispute to arbitration in the manner specified herein, and
such arbitration proceeding will be conducted in accordance with the rules of
the American Arbitration Association.
The arbitration hearing will be before a panel of three arbitrators, each
of whom must be a present or former officer of a life insurance or life
reinsurance company, other than the Company or Life Re or any of their
affiliates. Life Re and the Company will each appoint one arbitrator by written
notification to the other party within thirty (30) calendar days after the date
of the mailing of the notification initiating the arbitration. These two
arbitrators will then select the third arbitrator within sixty (60) calendar
days after the date of the mailing of the notification initiating arbitration.
If either Life Re or the Company fail to appoint an arbitrator, or should
the two arbitrators be unable to agree upon the choice of a third arbitrator,
the arbitrator will be selected by the American Arbitration Association or its
successor organization or (if necessary) the president of any similar
organization designated by lot of Life Re and the Company within thirty (30)
calendar days after the request.
The vote or approval of a majority of the arbitrators will decide any
question considered by the arbitrators; provided, however, that if no two
arbitrators reach the same decision, then the average of the two closest
mathematical determinations will constitute the decision of all three
arbitrators. The place of arbitration will be New York, New York. Each decision
(including without limitation each award) of the arbitrators will be final and
binding on all parties and will be nonappealable, and (at the request of either
of Life Re or the Company) any award of the arbitrators may be confirmed by a
judgment entered by any court of competent jurisdiction. Each party will be
responsible for paying (i) all fees and expenses charged by its respective
counsel, accountants, actuaries, and
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other representatives in conjunction with such arbitration and (ii) one-half of
the fees and expenses charged by each arbitrator.
ARTICLE IX
GENERAL PROVISIONS
1. Exchanges and Conversions
Any Reinsured Policy that is exchanged for or converted to a policy issued
by the Company that is not a Reinsured Policy will be treated as a surrender.
Any Reinsured Policy that is no longer on paid up status will be treated as a
surrender.
2. Policy Forms and Rates
Upon request, the Company will furnish Life Re with a copy of its
application forms, policy and rider forms, premium and non-forfeiture value
manuals, reserve tables, actuarial memoranda, and any other forms or tables
needed for proper handling of reinsurance under this Agreement. Life Re must
agree in writing before incurring additional liability resulting from any
voluntary changes to policies, policy riders or amendments reinsured under this
Agreement.
3. Errors and Omissions
If either the Company or Life Re fails to perform an obligation under this
Agreement, and such failure is the result of an Error on the part of the Company
or Life Re, such Error will be corrected by restoring both the Company and Life
Re to the positions they would have occupied had no such Error occurred. For
this purpose, "Error" means any clerical mistake made inadvertently, excluding
errors of judgment and all other forms of error.
4. Offset
Any amount under this Agreement which either the Company or Life Re is
contractually obligated to pay to the other party may be paid out of any amount
which is due and unpaid under this Agreement. The application of this offset
provision will not be deemed to constitute diminution in the event of
insolvency.
5. Inspection
Upon reasonable notice, Life Re may inspect any and all books, records,
documents or similar information relating to or affecting reinsurance under this
Agreement at the home office of the Company during normal business hours. Upon
reasonable notice, the Company may inspect any and all books, records, documents
or similar information relating to or affecting reinsurance under this Agreement
at the home office of Life Re during normal business hours.
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6. Entire Agreement
This Agreement and the Schedules attached hereto supersede all prior
discussions and written and oral agreements between the parties with respect to
the subject matter of this Agreement. This Agreement and the Schedules attached
hereto contain the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.
7. Amendment
This Agreement may be modified or amended only by a writing duly executed
by or on behalf of the Company and Life Re.
8. Counterparts
This Agreement may be executed simultaneously in any number of
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument.
9. No Assignment
Except as otherwise provided herein, neither party hereto may assign this
Agreement or any right hereunder or part hereof without the prior written
consent of the other party hereto. In the event of the insolvency of the
Company, Life Re does hereby grant to the Company's liquidator, receiver or
other statutory successor the unilateral right to assign the Company's interest
under this Agreement to any other insurance company.
Life Re will not retrocede Life Re's Share of the Reinsured Policies under
this Agreement to a life insurance company that is not a licensed or authorized
reinsurer in the State of New York without the prior approval of the New York
Department of Insurance.
10. Binding Effect
This Agreement is binding upon and will inure to the benefit of the parties
and their respective successors and permitted assignees.
11. Notices
Any notice, request, instruction, or other document to be given hereunder
by any party hereto to the other party hereto shall be in writing and (i)
delivered personally, (ii) sent by facsimile, (iii) delivered by overnight
express, or (iv) sent by registered or certified mail, postage prepaid, as
follows:
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If to the Company, to:
The Mutual Life Insurance Company of Xxx Xxxx
Xxxxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Senior Vice President and
Chief Actuary Facsimile: 201/907-5998
If to Life Re, to:
Life Reassurance Corporation of America
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Vice President
Facsimile: 203/321-3200
or at such other address for a party as shall be specified by like notice. Each
notice or other communication required or permitted under this Agreement that is
addressed as provided in this Article IX, 11 will, if delivered personally or by
overnight express, be deemed given upon delivery; will, if delivered by
facsimile or similar facsimile transmission, be deemed delivered when
electronically confirmed; and shall, if delivered by mail in the manner
described above, be deemed given on the third business day after the day it is
deposited in a regular depository of the United States Mail.
12. 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 Company or Life Re under this Agreement will not be materially and
adversely affected thereby, (1) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid, or unenforceable provision or by its
severance herefrom, and (iv) in lieu of such illegal, invalid, or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid, and enforceable provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible.
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 Company or Life Re under this Agreement would be materially and adversely
affected thereby, the Company and Life Re agree to negotiate in good faith to
amend this Agreement so that each of the parties is in as similar a position as
possible to that held immediately prior to any provision of this Agreement being
held illegal, invalid, or unenforceable.
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ARTICLE X
DURATION OF AGREEMENT
This Agreement will be effective on and after January 1, 1994. This
Agreement is unlimited in duration but may be amended by mutual consent of the
Company and Life Re. The reinsurance provided hereunder will remain in force
until termination of the Reinsured Policies in accordance with the terms of this
Agreement.
A. This Agreement may be terminated by the Company (in its sole
discretion) if Life Re does not transfer additional assets to
the Company to become Withheld Assets as required by Article
IV,8, and does not correct such failure within the time period
specified. If the Company terminates this Agreement, the
Company will recapture the Reinsured Policies effective as of
the end of the calendar quarter in which Life Re receives
notice of such termination. Upon recapture, all outstanding
amounts owed under this Agreement will be settled.
In addition, before termination and recapture, Life Re and the
Company will appoint a mutually acceptable actuary who is not
affiliated with either Life Re or the Company to value the
future profits of Life Re's Share of the Reinsured Policies by
measuring the future cash flows on the Withheld Assets minus
the future cash flows on Life Re's Share of the liabilities on
the Reinsured Policies. The actuary will follow the guidelines
attached in Schedule E in conducting the valuation. Upon
receipt of the independent actuary's valuation of the future
profits, the Company will pay Life Re, concurrently with the
recapture, an amount equal to (i) the present value of such
future profits (including the Company's current estimated
dividend liabilities) minus (ii) the lesser of (a)
$1,000,000.00 or (b) 25 % of the present value of such future
profits plus (iii) if any, Withheld Assets in excess of the
statutory reserves (including the IMR) and the Company's
current estimated dividend liabilities. The expenses of the
independent actuary will be paid by the Company and Life Re
equally.
B. If this Agreement is declared invalid or is otherwise
terminated (other than under the provisions of paragraph A.,
above), the Company will recapture the Reinsured Policies.
Upon recapture, all outstanding amounts owed under this
Agreement will be settled.
In addition, before recapture, Life Re and the Company will
appoint a mutually acceptable actuary who is not affiliated
with either Life Re or the Company to value the future profits
of Life Re's Share of the Reinsured Policies by measuring the
future cash flows on the Withheld Assets minus the future cash
flows on Life Re's Share of the liabilities on the Reinsured
Policies. The actuary will follow the guidelines attached in
Schedule E in conducting the valuation. Upon receipt of the
independent actuary's valuation of the future profits, the
Company will pay Life Re,
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concurrently with the recapture, an amount equal to (i) the
present value of such future profits (including, the Company's
current estimated dividend liabilities) plus (ii) if any,
Withheld Assets in excess of the statutory reserves (including
the IMR) and the Company's current estimated dividend
liabilities. The expenses of the independent actuary will be
paid by the Company and Life Re equally.
ARTICLE XI
EXECUTION
IN WITNESS WHEREOF, Life Re and the Company have executed this Amended and
Restated Reinsurance Agreement on the date set forth below to amend and restate
the Reinsurance Agreement between the Company and Life Re entered into on May
25, 1994, with an effective date for the reinsurance January 1, 1994.
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
Date: February 10, 1995 By: /s/ Xxxxxx X. Bank
Name: Xxxxxx X. Bank
Title: Vice President & Deputy
General Counsel
LIFE REASSURANCE CORPORATION OF AMERICA
Date: February 9, 1995 By: /s/ W. Xxxxxx Xxxxxx
Name: W. Xxxxxx Xxxxxx
Title: Senior Vice President
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SCHEDULE A
SCHEDULE OF REINSURED POLICIES
AGREEMENT #8888-1
The Reinsured Policies consist of the Company's paid-up
policies in force as of December 31, 1993, excluding growth option riders. These
policies are identified by the following paid-up group codes on the Company's
valuation system:
0001-0 0005-0 0006-0 0008-0 0180-0 0190-0 0210-0
0101-0 0101-1 0102-0 0102-1 0108-0 0110-0 0111-0
0201-0 0202-0 0207-0 0211-0 0213-0 0214-0 0401-0
0402-0 0407-0 0410-0 0412-0 0413-0 0451-0 0452-0
0460-0 0462-0 0463-0 0499-0 0501-0 0502-0 0504-0
0510-0 0512-0 0513-0 0551-0 0552-0 0562-0 0563-0
0701-0 0701-1 0701-2 0701-4 0701-5 0702-0 0710-0
0712-0 0713-0 0751-0 0751-1 0751-2 0751-3 0751-4
0751-5 0752-0 0762-0 0763-0 0799-0 0801-0 0802-0
0810-0 0851-0 0852-0 1012-0 1051-0 1201-0 1251-0
1551-0
The following are excluded from the reinsured block: (i)
policies issued in Canada; (ii) any policy any part of which is already ceded to
another company; (iii) policies issued with a 1980 CSO valuation basis; and (iv)
for policies with spouse and/or children's riders, the secondary insured when
such status was in effect as of December 31, 1993 (as designated by the
Company's indices 974, 978, or 990).
On May 20, 1994, the Company provided Life Re with a seriatim
tape listing of the policies to be reinsured. This listing will be viewed as a
closed block and only the policies therein are reinsured. Any policies which are
later found to belong to the block, but are not on the tape listing, are not
reinsured.
As of December 31, 1993, the liabilities reinsured (50% quota
share) are as follows:
Reserves (standard) $120,075,635.00
Reserves (substandard) $ 226,640.00
Dividend liability $ 2,285,884.00
17
SCHEDULE B
AGREEMENT #8888-1
WITHHELD ASSETS AS OF MAY 25, 1994
18
SCHEDULE B
SAVR MONTH END LOT BOOK
05/31/94
BOOK ORIGINAL TRADE INVEST-
SHARES/PAR VALUE COST DATE MENT YEAR YIELD
----------------- ------------ ---------- ---------- ------------- --------
001TLRE 02 010100206BF10 AT&T CAPITAL CORP. NOTES 4.20000 1994/06/01
1 940531I0104 4,000,000.0000 3,999,533.33 3,999,533.33 05/31/94 9405 99.9883332500 4.200000
TOTAL FOR 010100206BF10 4,000,000.0000 3,999,533.33 3,999,533.33
001TLRE 02 010102635SF36 AMERICAN GENERAL CORP 4.35000 1994/06/03
1 94052700101 4,000,000.0000 3,996,772.22 3,996,772.22 05/27/94 9405 99.9193055000 4.150000
TOTAL FOR 010102635SF36 4,000,000.0000 3,996,772.22 3,996,772.22
00111RE 02 030103739KF36 AON CORP NOTES 4.20000 1994/06/03
1 940527I0108 4,000,000.0000 3,996,733.33 3,996,733.33 05/27/94 9405 99.9183332500 4.200000
TOTAL FOR 010303739KF36 4,000,000.0000 3,996,733.33 3,996,733.33
001TLRE 02 0101046003AAA ASSOCIATES CORP OF NA NOTES 4.12000 1994/06/02
1 940526H0106 4,000,000.0000 3,996,795.56 3,996,795.56 05/26/94 9405 99.89198890000 4.120000
TOTAL FOR 0101046803AAA 4,800,000.0000 3,996,795.56 3,596,795.56
001TLRE 02 010105527BF94 BASF NOTES 4.20000 1994/06/09
1 940526I0102 4,000,000.0000 3,993,466.67 3,993,466.67 05/26/94 9405 99.8366667500 4.200000
TOTAL FOR 010105527BF94 4,000,000.0000 3,993,466.67 3,993,466.67
001TLRE 02 010105589SF36 BT SECURITIES INC. NOTES 4.15000 1994/06/03
1 940531K0301 4,000,000.0000 3,996,772.22 3,996,772.22 05/27/94 9405 99.9193055000 4.150000
TOTAL FOR 010105589SF35 4,000,000.0000 3,996,772.22 3,996,772.22
0013TLRE 02 010107815KFA8 XXXX SOUTH TELECOMM. NOTES 4.20000 1994/06/10
1 940526K0304 3,000,000.0000 2,994,750.00 2,994,750.00 05/26/94 9405 99.8250000000 4.200000
TOTAL FOR 010107815KFAB 3,000,000.0000 2,994,750.00 2,994,750.00
001TLRE 02 010108143SF12 XXXXX COMPANIES 4.25000 1994/06/01
1 94053100303 4,008,000.0000 3,999,527.78 5,999,527.78 5/31/94 9405 99.9881945000 4.250000
19
BOOK ORIGINAL TRADE INVEST-
SHARES/PAR VALUE COST DATE MENT YEAR YIELD
--------------- ------------ --------- ---------- ----------- --------
TOTAL FOR 010108343SF12 4,000,000.0000 3,999,527.78 3,999,527.78
001TLRE 02 010121667FF92 XXXXXX INDUSTRIES NOTES 4.13090 1994/06/09
0 94052630105 4,000,000.0000 3,993,497.78 3,993,497.78 05/26/94 9405 99.8374445000 4.180000
TOTAL FOR 010123667FF9Z 4,000,000.0000 3,993,497.78 3,993,497.78
001TLRE 02 310323787FF35 DONNELLEY (R.R.) & SONS NOTES 4.30000 1994/06/01
0 04053110393 4,000,000.0000 3,999,522.22 3,999,522.22 05/31/94 9405 99.98005555000 4.300000
TOTAL FOR 010125787FF35 4,000,000.0000 3,999,522.22 3,999,522.22
0017LRE 02 0303263540F80 DUPONE INC. NOTES 4.15000 1994/06/05
3 940526H9304 4,000,000.0000 3,994,005.56 3,994,005.56 05/26/94 9504 99.8501390000 4.150000
TOTAL FOR 0101263548F80 4,000,000.0000 3,994,005.56 3,994,005.56
001TLRE 02 010130230WF11 EXXON IMPERIAL CORP. 4.10000 1994/06/01
3 94052600101 4,000,000.000 3,997,266.67 3,997,266.67 05/26/94 9405 99.9316667500 4.100000
TOTAL FOR 010130230WF11 4,000,000.0000 3,997,266.67 3,997,266.67
001TLRE 02 0101369605GFI G.E. COMPANIES NOTES 4.15000 1994/06/02
3 94052610103 4,000,000.0000 3,996,772.22 3,996,772.22 05/26/94 9405 99.9193055000 4.150400
TOTAL FOR 030136960SGF1 4,000,000.0000 3,996,772.22 3,996,772.22
0037TLRE 02 0000000000F31 XXXXXXX XXXXX & CO. NOTES 4.15000 1994/06/03
3 940527H0105 4,000,000.0000 3,996,772.22 3,996,772.22 05/27/94 9405 99.9193055000 4.150000
TOTAL FOR 010181420F31 4,000,000.0000 3,996,772.22 3,996,772.22
[TEXT [TEXT ILLEGIBLE] [TEXT ILLEGIBLE] [data
ILLEGIBLE] illegible]
3 94053100301 4,000,000.0000 3,999,527.78 3,999,527.78 05/31/94 9405 99.9881945000 4.250000
TOTAL FOR 01034280X3F18 4,000,000.0000 3,999,527.78 3,999,527.78
B-2
20
001TLRE 02 010144181DF39 HOUSEHOLD FINANCE CO. 4.12500 1994/06/03
1 94052600105 4,000,000.0000 3,996,333.33 3,996,333.33 05/26/94 9405 99.9083332500 4.12500
TOTAL FOR 0103441310F39 4,000,000.0000 3,996,333.33 3,996,333.33
0015TLRE 02 010150000BF13 XXXX INDUSTRIES NOTES 4.278000 1994/06/01
1 94053310102 4,000,000.0000 3,999,525.56 3,999,525.56 05/31/94 9405 99.9881390000 4.270000
TOTAL FOR 010150000BF13 4,000,000.0000 3,999,525.56 3,999,525.56
001TLRE 02 010159012XF22 XXXXXXX XXXXX & CO. NOTES 4.15000 1994/06/02
0 000000X0000 4,000,000.0000 3,996,772.22 3,996,772.22 05/26/94 9405 59.9193055000 4.150000
TOTAL FOR 010159018KF22 4,000,000.0000 3,996,772.22 3,996,772.22
0013TLRE 02 010161166BF10 MONSANTO INC. 4.28000 1994/06/01
3 94053100302 4,000,000.0000 3,999,524.44 3,999,524.44 05/31/94 9405 99.9881110000 4.280000
TOTAL FOR 010163366BF10 4,000,000.0000 3,999,524.44 3,999,524.44
001TLRE 02 010163743DF22 NATIONAL RURAL NOTES 4.15000 1994/06/02
UTILITIES
3 940526I0106 4,000,000.0000 3,996,772.22 3,996,772.22 05/26/94 9405 99.9193055000 4.150000
TOTAL FOR 010163743DF22 4,000,000.0000 3,996,772.22 3,996,772.22
000XXXX 00 000000000XX00 XXX XXXXXXX POWER CO. NOTES 4.25000 1994/06/01
3 940531H0201 4,000,000.0000 3,999,527.78 3,999,527.78 05/31/94 9405 99.9881945000 4.250000
TOTAL FOR 010164419BF19 4,000,000.0000 3,999,527.78 3,999,527.78
001TLRE 02 010170905FF75 PENNSYLVANIA POWER NOTES 4.20000 1994/06/07
& LIGHT
3 940526H0101 4,000,000.0000 3,994,400.00 3,994,400.00 05/26/94 9405 99.8600000000 4.200000
TOTAL FOR 010170905FF75 4,000,000.0000 3,994,400.00 3,994,400.00
001TLRE 02 010171815FFLS XXXXXX XXXXXX CO. NOTES 4.20000 1994/06/01
1 940531H0203 4,000,000.0000 3,999,533.33 3,999,533.33 05/31/94 9405 99.9883332500 4.200000
TOTAL FOR 010171815FF15 4,000,000.0000 3,999,533.33 3,999,533.33
0001TLRE 02 010174740FSH2 QUAKER OATS CO. NOTES 4.15000 1994/06/02
0 000000X0000 4,000,000.0000 3,996,772.22 3,996,772.22 05/26/94 9405 99.9193055000 4.350000
TOTAL FOR 010174740FSH3 4,000,000.0000 3,996,772.22 3,996,772.22
B-3
21
0013TLRE 02 140183237BF76 XXXXX XXXXX XXXXXXX CO NOTES 4.17000 1994/06/07
3 040520H0103 4,000,000.0000 3,994,440.00 3,994,440.00 05/26/94 9405 99.8610000000 4.170000
TOTAL FOR 140133237BF76 4,000,000.0000 3,994,440.00 3,994,440.00
00131TLRE 02 010190262DF30 UBS FINANCE CO. NOTES 4.30000 1994/06/01
1 040530IF0202 4,000,000.0000 3,999,522.22 3,999,522.22 05/31/94 9405 99.980555000 4.300000
TOTAL FOR 010390262DF18 4,000,000.0000 3,999,522.22 3,999,522.22
TOTAL FOR SUB-ACCT 02 103,000,000.0000 102,924,838.88 102,924,838.88 4,314,666.17 4.192*
* WEIGHTED AVERAGE YIELD RATE
Cash in the portfolio of $10,005,537.12
B-4
22
SCHEDULE C
AGREEMENT #8888-1
QUARTERLY REPORT
23
SCHEDULE C
LIFE REASSURANCE CORPORATION OF AMERICA
SELF ADMINISTERED/BULK REINSURANCE SUMMARY REPORTING FORM
Ceding Company ____________ Reinsurer ________________ Treaty/Account # _______________
Period Experience as for __ Life Re's Share _________% Three Month Treasury Xxxx Rate ____%
# Days in Interest Calculation _______
Contact ___________________ Date ______________________ Phone #_____________________
SECTION I - ACCOUNTING FOR INSURANCE OPERATIONS
1) Adjustment to Original Consideration 1)
2) Reinstatements 2)
Benefits Paid
3) Surrenders 3)
4) Maturities 4)
5) Annual Policy Dividends 5)
6) Policy Termination Dividends 6)
7) Claims 7)
8) Claims Allowance 8)
9) Expense Allowance 9)
--------------------
Total TOTAL
--------------------
10) Interest 10)
11) Net Due to (Life Re) Company 11)
SECTION II - ACCOUNTING - FOR INVESTMENTS
1) Policy Reserves 1)
2) Dividend Liability 2)
3) Investment Maintenance Reserve 3)
4) Amounts Due & Unpaid 4)
5) Total Required Assets (1) + (2) + (3) + (4) 5)
6) Maximum Withheld Assets (5) @ 1.05 6)
--------------------
TOTAL WITHHELD ASSETS Total
--------------------
SECTION III - POLICY EXHIBIT INFORMATION
Current Period Year-to-Date
No. of Amt. of No. of Amt. of
Policies Rein (000) Policies Rein (000)
--------------------- ----------------------------
A. Inforce Beg. of Period A.
1. Reinstatements 1.
2. Other Increases 2.
a) Total Inc (1+2) a)
3. Death 3.
4. Lapses 4.
5. Surrenders 5.
6. Expiry/Maturity 6.
7. Other Decreases 7.
b) Total Dec (3+4+5+6+7) b)
B. Inforce End of Period (A + a - b) B.
24
SCHEDULE D
AGREEMENT #8888-1
INVESTMENT GUIDELINES
The dedicated portfolio (the "Dedicated Portfolio") for the
Withheld Assets shall be subject to (i) the laws of the State of New York
governing the investments that may be made by a New York domiciled insurance
company, and (ii) the restrictions, limitations and requirements of these
Investment Guidelines. If the laws of the State of New York are more restrictive
as to any type of investment permitted under these Investment Guidelines, the
laws of the State of New York will control the investments that may be made in
the Dedicated Portfolio.
SECTION I GENERAL REQUIREMENTS
(1) The weighted (by book value) average adjusted modified duration of the
portfolio of Cash Equivalents and Long Term Investments will be less than 7.5 at
the end of each calendar quarter.
(2) The weighted (by book value) average quality of the Long Term Investments
portfolio will be at least A2/A at the end of each calendar quarter, determined
in a manner consistent with the methods used by Life Re Corporation in its
filings with the Securities and Exchange Commission.
(3) The sum of the book values of Cash Equivalents, Long Term Investments and
Other Assets will equal or exceed the amount of Withheld Assets required at the
end of each month. The book value of investments in a single issuer shall not be
larger than 4% of the Dedicated Portfolio at the end of any calendar quarter,
except that U.S. Government, agency or U.S. Government guaranteed issues shall
not be included in this restriction.
(4) All debt investments are U.S. dollar pay.
(5) In addition to the general limitations set forth in Paragraphs (1) through
(4) of this Section I, the Dedicated Portfolio shall be subject to the
diversification and other limitations set forth in Section II below.
SECTION II PERMISSIBLE INVESTMENTS
The Dedicated Portfolio shall only invest in the following
categories of investments:
25
(1) Cash Equivalents
The Dedicated Portfolio may invest in any of the following
investments subject to the terms, conditions, and limitations set forth below,
providing that all mature within 365 days of the date of acquisition:
(a) U.S. Government Securities. U.S. Government securities and
securities of an agency of the U.S. Government;
(b) Certificates of Deposit. Negotiable certificates of deposit and
bankers' acceptances issued by (i) any U.S. commercial bank rated C or better by
Xxxxx Bruvette; or (ii) any European, Canadian or Japanese commercial bank rated
2 or better by Xxxxx Xxxxxxxx and which have assets in excess of US $50 billion;
(c) Commercial Paper. (i) Commercial paper rated A-1 or better by S&P
or P-1 or better by Xxxxx'x;
(d) Repurchase Agreements. Repurchase agreements relating only
Government securities from the Dedicated Portfolio at the cost of such
securities to the Dedicated Portfolio plus accrued interest within a specified
time; provided, however, (i) that the value of the collateral underlying such
repurchase agreements shall at all times be at least equal to the repurchase
price of the securities subject to the agreement less any accrued interest
earned under such agreement; (ii) that such repurchase agreements shall have a
term of not more than thirty days; (iii) that the other party to such repurchase
agreements shall be a corporation incorporated under the laws of the United
States of America or any state of the United States of America and shall be an
eligible Commercial Paper issuer as defined in (c) above or shall be an eligible
issuer of certificates of deposit described in (b) above; and (iv) that such
repurchase agreements shall entitle the Dedicated Portfolio to take delivery of
the collateral underlying such agreements at the time the Dedicated Portfolio
enters into such agreements; and
(e) Tax-Exempt Notes. Tax-exempt notes; provided, however, that at the
time of each investment such Tax-exempt Notes shall be rated by either Xxxxx'x
or S&P as follows: (i) Xxxxx'x: MIG I for notes; P-1 for commercial paper; or
(ii) S&P: SP-1 for short-term municipal notes; A-1+ or A-1 for commercial paper.
For purposes of this provision, Tax-exempt Notes shall include such securities
as Tax Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes,
Construction Loan Notes, and Tax-exempt commercial paper.
(2) Long Term Investments
The Dedicated Portfolio may invest in the following investments
subject to the terms, conditions, and limitations set forth below providing that
all mature more than 365 days from the date of acquisition:
X-0
00
(x) Xxxxxx Xxxxxx Obligations.
The Dedicated Portfolio may invest in (a) direct obligations of
the United States of America for the payment of money, or obligations for the
payment of money to the extent guaranteed or insured as to the payment of
principal and interest by the United States of America; and (b) direct
obligations for the payment of money, issued by an agency or instrumentality of
the United States of America, or obligations for the payment of the money to the
extent guaranteed or insured as to the payment of principal and interest by an
agency or instrumentality of the United States of America.
(b) Corporate Obligations.
The Dedicated Portfolio may invest in bonds and notes of a
solvent business corporation, on the following conditions:
i) The corporation shall be incorporated under the
laws of the United States of America or any
state of the United States of America;
ii) The corporation shall have net worth of not
less than $10 million;
iii) No such obligation, guarantee, or insurance of
the corporation shall have been in default as
to principal or interest during the 5 years
preceding the date of investment; and
iv) The issue shall be rated by either Xxxxx'x or
S&P.
(c) Municipal Obligations.
The Dedicated Portfolio may invest in the debt obligations
issued by states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, or multistate agencies or authorities, the interest from
which is exempt from federal income tax on the following conditions:
i) The obligations may be either so called
"general obligation" bonds or "revenue" issues
as those terms are commonly understood;
ii) The issue shall be rated by either Xxxxx'x or
S&P.
X-0
00
(x) Collateralized Mortgage Obligations.
The Dedicated Portfolio may invest in collateralized mortgage
obligations provided they are rated by either Xxxxx'x or S&P.
(e) Financial Futures Contracts and Options.
The Dedicated Portfolio may enter into exchange traded
financial futures contracts and acquire exchange traded put and call options
under terms and conditions regulated by, or substantially similar to those terms
and conditions required by, a federal regulatory agency, but only to the extent
that such financial futures contracts or options are entered into or acquired as
part of a hedging transaction. For purposes of this provision, a "hedging
transaction" shall mean the opening or closing (as such transaction may be
adjusted from time to time) of one or more financial futures contracts or
options which can reasonably be expected to minimize or reduce the price or
interest rate risk relating to those assets or liabilities of the Dedicated
Portfolio which are subject to the hedging transaction. No more than 20% of the
value of the Withheld Assets may be hedged in this manner at any one time.
(3) Other Investments
Irrespective of the above limitations, the Dedicated Portfolio
may invest up to a maximum of 10% of its assets in investments not provided for
in (1) or (2) above.
D-4
28
SCHEDULE E
AGREEMENT #8888-1
In determining the present value of future profits, the
independent actuary will adhere to the following guidelines:
(1) Assumptions for lapse, surrender and mortality will be
based upon actual experience of the Company on the Reinsured Policies. Future
improvement or deterioration in these assumptions will not be used unless events
causing future improvement or deterioration are known at the time of such
present value calculation and can be demonstrated to apply to the Reinsured
Policies.
(2) Assumptions for termination dividends and all components of
annual dividends will be based upon the scale then currently applicable. Future
changes in the scale which are assumed or proposed, but not yet approved by the
Company's Board of Trustees, may not be utilized.
(3) Maintenance expenses are assumed to be $15 per policy.
(4) The earnings rate used for the investment income on the
assets will be set using the current rate which can be earned on the Withheld
Assets then existing.
(5) The profit stream will be discounted using a rate of 14.75%
before the effect of taxes.
(6) No target surplus or assumption for target surplus will be
included in the calculation.
If, due to current regulatory or environmental conditions, any
of the above guidelines do not meet then current standards of actuarial
practice, the independent actuary may deviate from the guidelines.
