EXHIBIT (g)(1)
MODIFIED COINSURANCE
AGREEMENT
BETWEEN
AMERICAN FRANKLIN LIFE INSURANCE COMPANY OF
SPRINGFIELD, ILLINOIS
AND
INTEGRITY LIFE INSURANCE COMPANY
OF
PHOENIX, ARIZONA
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REINSURANCE AGREEMENT
between
AMERICAN FRANKLIN LIFE INSURANCE COMPANY
of
Springfield, Illinois,
hereinafter referred to as "REINSURED," and
INTEGRITY LIFE INSURANCE COMPANY
Of
Phoenix, Arizona
hereinafter referred to as the "REINSURER."
A. REINSURANCE COVERAGE
--------------------
1. The insurance policies issued by the REINSURED as listed in Schedule I
shall be reinsured with the REINSURER on a modified coinsurance basis.
2. The reinsurance shall cover the portion of the risk under the policies as
specified in Schedule II.
3. The liability of the REINSURER shall begin simultaneously with that of the
REINSURED, but in no event prior to the effective date of this Agreement.
Reinsurance with respect to any policy shall not be in force unless
issuance and delivery of the policy constituted the doing of business in a
state of the United States of America, the District of Columbia, or a
country in which the REINSURED was properly licensed.
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TABLE OF CONTENTS
SECTION ITEM PAGE
-------- -------------------------------------------------------------- ----
A Reinsurance Coverage 4
B Placing Reinsurance in Effect 5
C Payments by Reinsured 5
D Payments by Reinsurer 7
E Terms of Reinsurance 9
F Unusual Expenses and Adjustments 10
G Policy Changes 11
H Oversights 12
I Reductions 12
J Inspection of Records 12
K Arbitration 12
L Insolvency 13
M Parties to Agreement 14
N Effective Date 14
O Payments upon Termination of Agreement 14
P Duration of Agreement 15
Q Execution 16
SCHEDULE
--------
I Policies Subject to Reinsurance 17
II Amount of Reinsurance 18
III Periodic Report 19
IV Annual Reports 20
V Administration Charges 21
VI Underwriting Expenses 22
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REINSURANCE AGREEMENT
between
AMERICAN FRANKLIN LIFE INSURANCE COMPANY
of
Springfield, Illinois,
hereinafter referred to as "REINSURED," and
INTEGRITY LIFE INSURANCE COMPANY
of
Phoenix, Arizona
hereinafter referred to as the "REINSURER."
A. REINSURANCE COVERAGE
--------------------
1. The insurance policies issued by the REINSURED as listed in Schedule I
shall be reinsured with the REINSURER on a modified coinsurance basis.
2. The reinsurance shall cover the portion of the risk under the policies as
specified in Schedule II.
3. The liability of the REINSURER shall begin simultaneously with that of the
REINSURED, but in no event prior to the effective date of this Agreement.
Reinsurance with respect to any policy shall not be in force unless
issuance and delivery of the policy constituted the doing of business in a
state of the United States of America, the District of Columbia, or a
country in which the REINSURED was properly licensed.
4. Reinsurance hereunder shall be on a calendar year basis, as follows:
(a) with respect to a policy on any of the forms listed in Schedule I
(including policy forms hereafter added by mutual agreement) which is
issued by the REINSURED on or after the effective date of this
Agreement, the reinsurance with respect to such policy shall cover the
period commencing with the effective date of the
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policy and ending at midnight at the end of the last day of the
calendar year in which such policy was issued;
(b) all reinsurance hereunder shall automatically renew for each
succeeding calendar year annually as of midnight at the beginning of
January 1.
5. The reinsurance under this Agreement with respect to any policy shall be
maintained in force without reduction so long as the liability of the
REINSURED under such policy reinsured hereunder remains in force without
reduction, unless reinsurance is terminated or reduced as provided herein.
B. PLACING REINSURANCE IN EFFECT
-----------------------------
1. Reinsurance with respect to policies issued after the effective date of
this Agreement shall become effective simultaneously with the liability of
the REINSURED, provided, however, that the REINSURED shall give
notification of such reinsurance to the REINSURER simultaneously with the
quarterly reconciliation prescribed in Section E, paragraph 5.
C. PAYMENTS BY REINSURED
---------------------
1. Reinsurance Premiums
--------------------
The REINSURED shall pay the REINSURER each day, as reinsurance premiums,
the gross contributions or premiums the REINSURED receives after the
effective date of this Agreement with respect to the portions of policies
reinsured hereunder.
2. Disbursements and Deductions from Policyholder Account Values
-------------------------------------------------------------
The REINSURED shall pay the REINSURER each day with respect to the portions
of policies reinsured hereunder the following amounts:
(a) Monthly deductions for the costs of insurance and rider and benefit
charges.
(b) Any monthly administrative charges, including such charges made only
for the first policy year.
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(c) Charges instituted at policyholders request, e.g., for partial
withdrawals, increases and decreases in face amount and transfers
among investment options.
(d) Surrender charges made upon surrender or decreases in face amount.
(e) Any deductions waived under a waiver of monthly deduction benefit.
(f) Any other amounts deducted from policyholder account values.
3. Reduction in Policyholder Account Values for Benefits Paid
----------------------------------------------------------
The REINSURED shall pay the REINSURER each day with respect to the portions
of policies reinsured hereunder the amounts of policyholder cash values
paid as surrender benefits and partial withdrawal benefits and the amounts
of account values included in death benefits.
4. Charges for Mortality and Expense Risks
---------------------------------------
The REINSURED shall pay the REINSURER each day with respect to the portions
of policies reinsured hereunder, the charge made against the Separate
Accounts of the REINSURED for mortality and expense risks under the
policies.
5. Miscellaneous Gains and Losses
------------------------------
The REINSURED shall pay the REINSURER each day with respect to the portions
of the policies reinsured hereunder, the net gains (or "breakage") caused
by delays in moving funds to and from the Separate Account of the
REINSURED. If such amounts are net losses, then they shall be paid by the
REINSURER to the REINSURED.
6. Miscellaneous Income
--------------------
The REINSURED shall pay the REINSURER each day with respect to the portions
of the policies reinsured hereunder, the amounts of any miscellaneous
income not included elsewhere in this Agreement.
7. Gross Investment Income and Net Realized and Unrealized Capital Gains And
-------------------------------------------------------------------------
Losses
------
Gross investment income and net capital gains and losses, determined in
accordance with the REINSURED's investment year method (or such other
method as agreed upon by the REINSURED and REINSURER) used to allocate such
income and capital gains and losses derived from the assets of the
REINSURED held in relation to the reserves established in and other funds
held in the general account of the REINSURED on the portions of the
policies reinsured hereunder, shall be paid at the end of each year by the
REINSURED to the REINSURER, as a part of the consideration for the
reinsurance hereunder. This payment shall be reduced by the amounts of
interest credited to the
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policyholder account values or any items in the nature of interest paid
under the policies on the portions of the policies reinsured hereunder.
8. Reserve Adjustment Allowance
----------------------------
The REINSURED shall provide an allowance to the REINSURER at the end of
each accounting period to reflect the change in surrender charges, if any,
used to calculate reserves on the portions of the policies reinsured
hereunder. Such allowance shall be ceded to the REINSURER, but will
continue to be settled on a cash basis.
9. Modification of Reserve Basis
-----------------------------
If the REINSURED shall modify the basis used in computing its reserve
liability with respect to the portion of any policy reinsured hereunder
after the effective date of this Agreement, reinsurance amounts paid to the
REINSURER under this section in the year of the modification shall be
adjusted by adding any increase or deducting any decrease in reserves due
to such modification.
D. PAYMENTS BY REINSURER
---------------------
1. Distribution Allowance
----------------------
The REINSURER shall pay the REINSURED each day a distribution allowance
equal to 5% of the reinsurance premiums plus 85% of such premiums which are
for the first policy year and which are not greater than the amounts
defined as commissionable "target" premiums by the REINSURED with regard to
the portions of the policies reinsured hereunder.
The REINSURER shall pay the REINSURED each day an additional distribution
allowance equal to any commissions paid by the REINSURED on increases in
face amount, with respect to the portions of policies reinsured hereunder.
2. Contributions to Policyholder Account Values
--------------------------------------------
The REINSURER shall pay the REINSURED each day the portion of contributions
or premiums which after deductions are deposited to the Policy Accounts
with respect to the portions of policies reinsured hereunder.
3. Benefits
--------
The REINSURER shall pay the REINSURED each day with respect to the portions
of the policies reinsured hereunder:
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(a) the gross amounts of all death benefits paid by the REINSURED (i.e.,
without deduction for reserves);
(b) the cash surrender values and withdrawal benefits paid by the
REINSURED
(c) interest paid on claims;
(d) monthly deductions waived by the REINSURED under a waiver of monthly
deduction benefit.
Benefits that may be paid in more than one sum or under another form of
payment (i.e. a settlement option), shall, for the purposes of the
reinsurance agreement, be deemed to be paid in one sum.
4. Administrative Charges
----------------------
The REINSURER shall pay the REINSURED issue, underwriting and
administrative charges with respect to the portion of policies reinsured
hereunder in the amounts defined in Schedule V for each reinsured policy.
5. Expense Allowance
-----------------
The REINSURER shall pay the REINSURED, as an expense allowance a
reimbursement for certain fees for service paid by the REINSURED under the
Servicing Agreement with respect to the portions of policies reinsured
hereunder in the amounts defined in to Schedule VI for each reinsured
policy.
6. Investment Expenses and Federal Income Taxes
--------------------------------------------
The REINSURER shall be obligated for and shall pay to the REINSURED the
investment expenses incurred in each accounting period in respect of the
gross investment income payable to the REINSURER in accordance with Section
C, paragraph 7. The REINSURER shall be obligated for and shall pay federal
income taxes imposed on the REINSURER.
7. State Premium Taxes
-------------------
When the REINSURER is not required to pay state premium taxes upon the
reinsurance premiums received from the REINSURED, the REINSURER shall pay
the REINSURED on a quarterly basis any such taxes the REINSURED may be
required to pay with respect to that part of the contributions or premiums
received under the REINSURED'S original policies which are paid to the
REINSURER as reinsurance premiums.
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8. Miscellaneous Disbursements
---------------------------
The REINSURER shall pay the REINSURED each day with respect to the portions
of the policies reinsured hereunder the amounts of any miscellaneous
disbursements not included elsewhere in this agreement.
9. Annual Reserve Adjustments - Waiver
-----------------------------------
(a) Annual reserve adjustments for disabled life reserves under waiver of
monthly deduction riders shall be computed by deducting (i) the total
amount of such reserves on the last day of the preceding accounting
period on the portions of the policies reinsured hereunder from (ii)
the total amount of such reserves on the last day of the current
accounting period on the portions of the policies reinsured hereunder
and then in force under this Agreement. Such reserves shall be
calculated on the same basis used by the REINSURED in computing its
reserve liability. With respect, however, to the accounting period
during which the effective date of this Agreement occurs, the
reference in "(i)" above, to "the last day of the preceding accounting
period" shall refer to the effective date of this Agreement. With
respect, however, to the accounting period during which the
termination of this Agreement occurs, the reference in (ii) above, to
"the last day of the current accounting period" shall refer to the day
immediately prior to the terminal accounting date.
(b) For any accounting period in which "(ii)" exceeds "(i)" in (a), above,
the REINSURER shall pay the REINSURED such excess. For any accounting
period in which "(i)" exceeds "(ii)", the REINSURED shall pay the
REINSURER such excess.
10. Miscellaneous Liabilities and Accrual Items
-------------------------------------------
The REINSURER shall be responsible for miscellaneous reserves and accrual
items on the portions of the policies reinsured hereunder; e.g. unearned
premium reserves, incurred but unreported claims, etc., incurred by the
REINSURED at the end of each accounting period. Such liabilities shall be
ceded to the REINSURER, but such ceded amounts will continue to be settled
on a cash basis.
E. TERMS OF REINSURANCE
--------------------
1. Ownership of Assets
-------------------
The REINSURED shall retain ownership of all of the assets held in relation
to the reserves on the portions of the policies reinsured hereunder, and
the REINSURER shall have no legal, equitable, or security interest in such
assets.
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2. Capital Gains and Losses
------------------------
The REINSURER shall not participate in capital gains and losses of the
REINSURED except as specified in Section C, paragraph 7. No part of the
gains and losses of the REINSURED from, or considered as from, sales and
exchanges of capital assets shall be treated as gains and losses from sales
and exchanges of capital assets of the REINSURER.
3. Amounts Due REINSURER or REINSURED
----------------------------------
Except as otherwise specifically provided herein, all amounts, other than
those paid daily, due to be paid to either the REINSURER or the REINSURED
shall be determined or estimated on a net basis as of the last day of the
month preceding the end of each accounting period and shall be due and
payable as of such date. If such amounts cannot be determined at such later
date on an exact basis, such payments may be paid on an estimated basis and
any final adjustments are to be made within 3 months after the end of such
accounting period.
4. Accounting Period
-----------------
The accounting period for this Agreement shall be a calendar year, except
that the first accounting period hereunder shall run from the effective
date of this Agreement through December 31 of the calendar year in which
the effective date of this Agreement falls. The REINSURED and the
REINSURER, however, shall each reconcile the reinsurance transactions
hereunder as prescribed in Schedule III at the end of each calendar
quarter.
5. Reports
-------
(a) Annual Statement information as prescribed in Schedule IV, paragraph A
shall be provided by the REINSURED to the REINSURER not later than 30
working days after the end of each accounting period.
(b) Periodic Reports as prescribed in Schedule III shall be provided by
the REINSURED to the REINSURER not later than 30 working days after
the end of each calendar quarter.
F. UNUSUAL EXPENSES AND ADJUSTMENTS
--------------------------------
1. Any unusual expenses incurred by the REINSURED in defending or
investigating a claim for policy liability or rescinding a policy reinsured
hereunder shall be participated in by the REINSURER in the same proportion
as its reinsurance bears to the total insurance under such policy.
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2. For purposes of this Agreement (but not as a limitation on the REINSURER'S
liability under paragraph 1), it is agreed that penalties, attorney's fees,
and interest imposed automatically by statute against the REINSURED and
arising solely out of a judgment rendered against the REINSURED in a suit
for policy benefits reinsured hereunder shall be considered unusual
expenses.
3. In no event, however, shall the following categories of expenses or
liabilities be considered for purposes of this Agreement as "unusual
expenses":
(a) routine investigative or administrative expenses;
(b) expenses incurred in connection with a dispute or contest arising out
of conflicting claims of entitlement to policy proceeds or benefits
which the REINSURED admits are payable;
(c) expenses, fees, settlements, or judgments arising out of or in
connection with claims against the REINSURED for punitive or exemplary
damages; and
(d) expenses, fees, settlements, or judgments arising out of or in
connection with claims made against the REINSURED and based on alleged
or actual bad faith, failure to exercise good faith, or tortuous
conduct. -
4. In the event that the amount of liability provided by a policy or policies
reinsured hereunder is increased or reduced because of a misstatement of
age or sex, the reinsurance liability of the REINSURER shall increase or
reduce in the proportion that the reinsurance liability of the REINSURER
bore to the sum of the retained liability of the REINSURED and the
liability of other reinsurers immediately prior to the discovery of such
misstatement of age or sex.
G. POLICY CHANGES
--------------
1. If a change is made in the terms and conditions of a policy issued by the
REINSURED which affects the risk reinsured hereunder in respect of such
policy, and which is evidenced by the issuance of a new policy form, the
REINSURED shall notify the REINSURER promptly of such change.
2. For purposes of this Agreement, any such change shall be deemed to be the
issuance of a new policy form by the REINSURED. The REINSURER shall inform
the REINSURED whether the REINSURER will include such new policy form under
this Agreement, or will terminate or modify the reinsurance hereunder in
respect of such policy.
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H. OVERSIGHTS
----------
It is understood and agreed that, if 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 REINSURED or the REINSURER, both the
REINSURED and the REINSURER shall be restored to the positions they would have
occupied had no such misunderstanding or oversight occurred.
I. REDUCTIONS
----------
If a portion of the insurance issued by the REINSURED on a life reinsured
hereunder is terminated, reinsurance on that life hereunder shall be reduced.
J. INSPECTION OF RECORDS
---------------------
The REINSURER and the REINSURED each shall have the right at any reasonable time
to inspect, at the office of the other, all books and documents relating to the
reinsurance under this Agreement.
K. ARBITRATION
-----------
1. It is the intention of the parties that customs and usages of the business
of reinsurance shall be given full effect in the interpretation of this
Agreement. The parties shall act in all things with the highest good faith.
A dispute or difference between the parties with respect to the operation
or interpretation of this Agreement on which an amicable understanding
cannot be reached shall be decided by arbitration. The arbitrators are
empowered to decide all questions or issues and shall be free to reach
their decision from the standpoint of equity and customary practices of the
insurance and reinsurance industry rather than from that of the strict law.
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2. The court of arbitration shall be held in the city where the Home Office of
the REINSURER is located and shall consist of three arbitrators who must be
officers of life insurance companies other than the parties to this
Agreement or their affiliates or subsidiaries. The REINSURED shall appoint
one arbitrator and the REINSURER the second. These two arbitrators shall
then select the third before arbitration begins. Should one of the parties
decline to appoint an arbitrator or should the two arbitrators be unable to
agree upon the choice of a third, such appointment shall be left to the
president of the American Council of Life Insurance or its successor
organization.
3. The arbitrators shall decide by a majority of votes, and from their written
decision there can be no appeal. The cost of arbitration, including the
fees of the arbitrators, shall be borne by the losing party unless the
arbitrators decide otherwise.
L. INSOLVENCY
----------
1. In the event of the insolvency of the REINSURED, all reinsurance shall be
payable directly to the liquidator, receiver, or statutory successor of the
REINSURED, without diminution because of the insolvency of the REINSURED.
2. In the event of insolvency of the REINSURED, the liquidator, receiver, or
statutory successor shall give the REINSURER written notice of the pendency
of a claim on a policy reinsured within a reasonable time after such claim
is filed in the insolvency proceeding. During the pendency of any such
claim, the REINSURER may investigate such claim and interpose in the name
of the REINSURED (its liquidator, receiver, or statutory successor), but at
its own expense, in the proceeding where such claim is to be adjudicated
any defense or defenses which the REINSURER may deem available to the
REINSURED or its liquidator, receiver, or statutory successor.
3. The expense thus incurred by the REINSURER shall be chargeable, subject to
court approval, against the REINSURED as part of the expense of liquidation
to the extent of a proportionate share of the benefit which may accrue to
the REINSURED solely as a result of the defense undertaken by the
REINSURER. Where two or more reinsurers are participating in the same claim
and a majority in interest elect to interpose a defense or defenses to any
such claim, the expense shall be apportioned in accordance with the terms
of the reinsurance agreement as though such expenses had been incurred by
the REINSURED.
4. In the event that (a) the REINSURER shall execute and file articles of
dissolution as provided in Arizona Revised Statutes Section 10-092, or (b)
the Arizona Insurance Department shall be directed to rehabilitate or
liquidate the REINSURER pursuant to an order of rehabilitation or
liquidation issued as provided in Arizona Revised Section 20-620 and 621,
reinsurance hereunder shall, at the option of the REINSURED,
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be terminated as of a date concurrent with or subsequent to the filing of
the articles of dissolution or issuance of the order of liquidation, as
selected by the Reinsured. Written notification of such termination and
date shall be given by the REINSURED to the REINSURER. Termination under
this paragraph shall be subject to the provisions of the Arizona Insurance
Code. The scope of this paragraph and the option of the REINSURED to
terminate pursuant hereto shall not be limited or otherwise affected by any
other provision of this Agreement.
M. PARTIES TO AGREEMENT
--------------------
This is an Agreement for indemnity reinsurance solely between the REINSURED and
the REINSURER. The acceptance of reinsurance hereunder shall not create any
right or legal relation whatever between the REINSURER and the insured or the
beneficiary under any policy reinsured hereunder, and the REINSURED shall be and
remain solely liable to such insured or beneficiary under any such policy.
N. EFFECTIVE DATE
--------------
The effective date of this Agreement is April 1, 1989.
O. PAYMENTS UPON TERMINATION OF AGREEMENT
--------------------------------------
1. In the event that this Agreement is terminated pursuant to any provision
hereof, a terminal accounting and settlement shall take place.
2. The terminal accounting date for the termination shall be the effective
date of termination pursuant to any notice of termination given under this
Agreement or such other date as shall be mutually agreed to in writing.
3. The terminal accounting period shall be the period commencing on January 1
of the calendar year in which the termination is effective and ending on
the terminal accounting date.
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4. The terminal accounting and settlement shall consist of a terminal reserve
adjustment by the REINSURED, as described in paragraph 5 below; and an
amount paid by the REINSURER, as described in paragraph 6 below.
5. The REINSURED shall pay to the REINSURER a terminal reserve adjustment in
an amount equal to the reserves established in the general account of the
REINSURED on the day immediately prior to the terminal accounting date on
the portions of the policies reinsured hereunder.
6. The REINSURER shall pay to the REINSURED an amount equal to the reserves
established in the general account of the REINSURED on the day immediately
prior to the terminal accounting date on the portions of the policies
reinsured hereunder.
P. DURATION OF AGREEMENT
---------------------
1. Except as otherwise provided herein, this Agreement shall be unlimited in
duration.
2. This Agreement may be terminated at any time by either party giving
two-years written notice of termination or by the REINSURED giving one-year
written notice accompanied by a payment of $500,000. In addition, if the
REINSURER terminates during the initial three years of this Agreement, the
Reinsured shall pay the Reinsurer $500,000 less $10 for each policy
reinsured on the effective date of the termination, but not less than $0.
The date of delivery of the notice to the other party's Home Office, which
delivery shall be made by a mail or express service that uses a return
receipt, shall be the day of notice.
3. During the one-year or two-year period, as the case may be, this Agreement
shall continue to operate in accordance with its terms.
3. The Reinsurer and the Reinsured shall remain liable after termination, in
accordance with the terms and conditions of this Agreement, with respect to
all, reinsurance ceded to the Reinsurer prior to termination of this
Agreement.
5. In the event that any amounts become payable upon termination in accordance
with paragraph 1 of this section and similar payments are provided for in
other agreements between the parties, the REINSURED and the REINSURER agree
that it is their intention that such termination fees shall be payable only
once. It is not the intention of the parties to create multiple or
offsetting penalties in the event that other related agreements between the
parties are terminated.
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Q. EXECUTION
---------
IN WITNESS WHEREOF the said
AMERICAN FRANKLIN LIFE INSURANCE COMPANY OF Springfield, Illinois,
and the said
INTEGRITY LIFE INSURANCE COMPANY of Phoenix, Arizona,
have by their respective officers executed this Agreement in duplicate on the
dates shown below.
AMERICAN FRANKLIN LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
INTEGRITY LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
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SCHEDULE I
----------
POLICIES SUBJECT TO REINSURANCE
-------------------------------
Policies on Policy Form T1755 sold by registered representatives of Franklin
Financial Services Corporation, are subject to reinsurance hereunder, except as
provided in Schedule II. Riders, by whomever sold, attached to such policies are
also subject to reinsurance hereunder.
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SCHEDULE II
-----------
AMOUNT OF REINSURANCE
---------------------
The portion of the risk reinsured under this Agreement shall be 30% on any
policy to the extent reinsured hereunder, as provided in Schedule I, except that
there shall be no reinsurance on any benefit under this Agreement where the
REINSURED does not retain its normal retention of risk on a policy hereunder.
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SCHEDULE III
------------
PERIODIC REPORT
---------------
Period Beginning:
Period Ending:
Individual Insurance
--------------------
Reserves in the General Account
Beg. of Period
End of Period
Receipts
Premiums
1st Yr.
Renewal
SIA Transfers
Others
Disbursements of Insurance Death Benefits
Death Benefit Payments
SIA Transfers
Premium Taxes
Policy Expense Allowances
Commissions
1st Yr.
Renewal
Allowance
Investment Expense Allowances
Other
Life Insurance Issued (Number and face amount)
Life Insurance in Force (Number and face amount)
Term Insurance Riders Inforce (face amount)
ADB Inforce (face amount)
Waiver Benefit in Force
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SCHEDULE IV
-----------
ANNUAL REPORTS
--------------
A. Annual Statement
All the appropriate entries for the following parts of the REINSURER'S NAIC
blank shall be furnished to the REINSURER by the REINSURED:
Page 5 Analysis of operations by lines of business
Page 6 Analysis of increase in reserves during the year
Exhibit 1 Premiums and annuity considerations
Exhibit 6 Taxes, licenses and fees
Exhibit 11 Policy and contract claims
Page 15 Exhibit of Life Insurance
Schedule T Premiums and annuity considerations
B. Tax Return Information
All information used in preparing the REINSURED'S Federal Income Tax Return
(Form 112OL) and which is necessary for the REINSURER to complete each item
in its Federal Income Tax Return with respect to the reinsurance hereunder
shall be furnished to the REINSURER by the REINSURED on a timely basis.
Page 20 of 39
SCHEDULE V
----------
ADMINISTRATION CHARGES
----------------------
1. For each policy issued and reinsured during a calendar year, the REINSURER
shall pay the REINSURED $30.00 (30% of $100.00) to cover issue and
underwriting expenses incurred by the REINSURED.
2. The REINSURER shall pay the REINSURED each year an amount to cover
administrative expenses incurred by the REINSURED. This amount shall be
calculated by multiplying $3.00 (30% of $10.00) by .5 times the following:
(a) the number of reinsured policies in force at the end of the prior
calendar year, plus
(b) the number of policies in force at the end of the current calendar
year, plus
(c) the number of policies issued and reinsured during the current
calendar year.
The above unit charges will apply during the first year of this agreement and
will subsequently be redetermined to follow future experience.
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SCHEDULE VI
-----------
EXPENSE ALLOWANCE
-----------------
1. For each policy issued and reinsured during a calendar year, the REINSURER
shall pay the REINSURED $54.00 (30% of $180.00) as an expense allowance to
cover service fees for issue and acquisition incurred by the REINSURED.
2. The REINSURER shall pay the REINSURED each year an expense allowance to
cover administrative service fees incurred by the REINSURED. This allowance
shall be calculated by multiplying $18.00 (30% of $60.00) by .5 times the
following:
(a) the number of reinsured policies in force at the end of the prior
calendar year, plus
(b) the number of policies in force at the end of the current calendar
year, plus
(c) the number of policies issued and reinsured during the current
calendar year.
The above unit charges will apply during the first year of this agreement and
will subsequently be redetermined to follow future experience.
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5. In the event that any amounts become payable upon termination in accordance
with paragraph 1 of this section and similar payments are provided for in
other agreements between the parties, the REINSURED and the REINSURER agree
that it is their intention that such termination fees shall be payable only
once. It is not the intention of the parties to create multiple or
offsetting penalties in the event that other related agreements between the
parties are terminated.
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AMENDMENT NO. 1
The Modified Coinsurance Agreement between American Franklin Life Insurance
Company of Springfield, Illinois and Integrity Life Insurance Company of
Phoenix, Arizona, effective April 1, 1989, is amended by replacing the first
paragraph of section D.1. with the following paragraph:
The REINSURER shall pay the REINSURED each day a distribution allowance
equal to 5% of the reinsurance premiums plus 80% of such premiums which are
for the first policy year and which are not greater than the amounts
defined as commissionable "target" premiums by the REINSURED with regard to
the portions of the policies reinsured hereunder.
AMERICAN FRANKLIN LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
INTEGRITY LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
Page 24 of 39
AMENDMENT NO. 2
The Modified Coinsurance Agreement between American Franklin Life Insurance
Company of Springfield, Illinois and Integrity Life Insurance Company of
Phoenix, Arizona, effective April 1, 1989, is amended as follows:
I. The following is added to Section E. "Terms of Reinsurance":
6. Claims
------
The settlement made by the REINSURED for a death claim under a
policy reinsured under this agreement shall be binding on the
REINSURER. However, the REINSURER shall be consulted before any
admission of liability on the claim is made by the REINSURED if
the claim amount reinsured is equal to or greater than $200,000
or when death occurs during the contestable period. The REINSURED
shall furnish the REINSURER with copies of the proofs of loss and
any information the REINSURER may request.
II. Schedule II is replaced by the attached Schedule II, revised 5/2/90.
III. Schedule V is replaced by the attached Schedule V, revised 5/2/90.
AMERICAN FRANKLIN LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
INTEGRITY LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
Page 25 of 39
SCHEDULE II
-----------
AMOUNT OF REINSURANCE
---------------------
The portion of the risk reinsured under this Agreement shall be 30% on any
policy to the extent reinsured hereunder, as provided in Schedule I, in
accordance with the following rules:
1. There shall be no reinsurance on any benefit under this Agreement
where the REINSURED does not retain its normal retention of risk on a
policy hereunder.
2. There shall be no reinsurance on policies issued as term conversions
or replacements where full evidence of insurability has not been
secured which were: (a) originally written by The Franklin Life
Insurance Company; (b) not reinsured; and (c) where the original
underwriting occurred over five years prior to submission of the case
to American Franklin.
3. There shall be no reinsurance on policies issued as term conversions
from or replacements of policies originally issued by The Franklin
Life Insurance Company, which were originally reinsured under other
reinsurance agreements.
4. There shall be no reinsurance on an automatic basis for any risk
offered on a facultative basis by the reinsured to any company.
Page 26 of 39
SCHEDULE V
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ADMINISTRATION CHARGE
---------------------
1. For each policy issued and reinsured during a calendar year, the REINSURER
shall pay the REINSURED $30.00 (30% of $100.00) to cover issue and
underwriting expenses incurred by the REINSURED,
However, if such policy is a term conversion from or a replacement of a
policy originally written by The Franklin Life Insurance Company, where
full evidence of insurability has not been secured, the REINSURER shall pay
the REINSURED a reduced amount of $15 (30% of $50.00).
2. The REINSURER shall pay the REINSURED each year an amount to cover
administrative expenses incurred by the REINSURED. This amount shall be
calculated by multiplying $3.00 (30% of $10.00) by .5 times the following:
(a) the number of reinsured policies in force at the end of the prior
calendar year, plus
(b) the number of policies in force at the end of the current calendar
year, plus
(c) the number of policies issued and reinsured during the current
calendar year.
The above unit charges will apply during the first year of this agreement and
will subsequently be redetermined to follow future experience.
Revised 5/2/90
Page 27 of 39
AMENDMENT NO. 3
The Modified Coinsurance Agreement between American Franklin Life Insurance
Company of Springfield, Illinois and Integrity Life Insurance company of
Phoenix, Arizona, effective April 1, 1989, is amended by replacing Schedule II
(revised 4-12-90) with the attached Schedule II (revised 7-1-93).
AMERICAN FRANKLIN LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
INTEGRITY LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
Page 28 of 39
SCHEDULE II (revised 7-1-93)
----------------------------
AMOUNT OF REINSURANCE
---------------------
The portion of the risk reinsured under this Agreement shall be 30% on any
policy to the extent reinsured hereunder, as provided in Schedule I, in
accordance with the following rules;
1. There shall be no reinsurance on any benefit under this Agreement where the
REINSURED does not retain its normal retention of risk on a policy
hereunder,
2. There shall be no reinsurance on policies: (a) originally written under
Franklin Life; (b) not reinsured by Franklin Life; and (c) where the
original underwriting occurred over five years prior to submission of the
case to American Franklin.
3. There shall be no reinsurance on policies originally issued by Franklin
Life Insurance Company and originally reinsured by Franklin Life under
other reinsurance agreements.
4, There shall be no reinsurance on an automatic basis for any risk offered on
a facultative basis by the reinsured to any company.
5. There shall be no reinsurance on policies issued in the State of
California.
Page 29 of 39
AMENDMENT NO. 4
The Modified Coinsurance Agreement originally written between American Franklin
Life Insurance Company of Springfield, Illinois and Integrity Life Insurance
Company of Phoenix, Arizona, effective April 1, 1989, is hereby amended as
follows:
In accordance with the provisions of Article P. Duration of Agreement, this
Agreement is hereby terminated for the placement of new reinsurancc on and after
January 1, 1997. Reinsurance remaining in force at January 1, 1997 shall
continue to be covered under the provisions of this Agreement until the
termination of each underlying policy.
The REINSURER agrees to waive the provision in Article P that mandates a
one-year prior written notice of termination.
All terms, provisions and conditions of this Agreement will continue unchanged
except as specially revised in this Amendment
This Amendment is signed in triplicate at the dates and places indicated with an
effective date of January 1, 1997.
Integrity Life Insurance Company American Franklin Life Insurance
Company
Approved By Approved By
-------------------------- --------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
Page 30 of 39
Phoenix Home Life Mutual Insurance Company
000 Xxxxxx Xxxxxx Xxxxxxxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Phone 000 000-0000
FAX 000 000-0000
Phoenix Home Life
December 29, 1994
Xx. Xxxx X. XxXxxxxx
Co-Counsel and Secretary
ARM Financial Group, Inc.
000 X. Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000 BY FAX 000-000-0000
Dear Xxxx;
Re: Letter of Intent to Enter into Reinsurance Agreements Between
Phoenix Home Life and Integrity Life
This is to confirm our agreement and intent to enter into four reinsurance
agreements under the following conditions and terms:
I. AMERICAN FRANKLIN LIFE'S EQUIBUILDER
-- ------------------------------------
You (Integrity Life) will retro-cede to us (Phoenix Home Life) the 30% share of
the Equibuilder business (the "shared" block) which you assume from American
Franklin Life. You will retro-cede to us this Flexible Premium Variable Life and
Term Riders under terms similar to those you have with American Franklin Life.
The effective date is October 31, 1994. We will pay you a purchase price of
$624,000, to be adjusted at the rate of $1.25 per thousand of face amount for
new business and lapses between the valuation date (June 30, 1994) and October
31, 1994. This is a Modified Coinsurance agreement under which you are carrying
a receivable of $1,598,671, for which we will reimburse you in return for that
right under the agreement. We will accept the fill 30% share of all policies
assumed by you and handle retrocessions in excess of our own retention.
II. TRANSAMERICA OCCIDENTAL LIFE'S TRANSEQUITY I & II
--- -------------------------------------------------
You (Integrity Life) will retro-cede to us (Phoenix Home Life) the 30% share of
the Transequity I and Transequity II business (the "shared" block) which you
assume from
Page 31 of 39
Transamerica Occidental Life. You will retro-cede to us this Flexible Premium
Variable Life and Term Riders under terms similar to those you have with
Transamerica Occidental Life. The effective date is September 30, 1994. We will
pay you a purchase price of $61,700, to be adjusted at the rate of $1.25 per
thousand of face amount for changes in inforce between reports as of September
30, 1994 and the valuation run dated October 31, 1994. The inforce anticipated
in the purchase price is 30% of $164,558,961 or $49,367,694. This is a Modified
Coinsurance agreement under which you are carrying a receivable of $154,917, for
which we will reimburse you in return for that right under the agreement. We
will accept the full 30% share of all policies assumed by you and handle
retrocessions in excess of our own retention.
III. INTEGRITY LIFE'S PORTFOLIO LIFE
---- -------------------------------
You (Integrity Life) will cede to us (Phoenix Home Life) a 50% share of the
Portfolio Life business (both the "shared" and the "non-shared" block) which you
have written. You will cede to us this Flexible Premium Variable Life and Term
Riders under terms similar to those you have with American Franklin Life. The
effective date is December 31, 1994. We will pay you a purchase price of
$876,000, to be adjusted at the rate of $3 .40 per thousand of face amount for
changes in inforce between the valuation date (June 30, 1994) and December 31,
1994. This is a Modified Coinsurance agreement under which you are carrying a
receivable of (it was $533,573 as of October 31, 1994, but the December 31, 1994
amount is to be determined), for which we will reimburse you in return for that
right under the agreement. We will accept the full 50% share of all policies
assumed by you and handle retrocessions in excess of our own retention.
IV. XXXXX LIFE'S PORTFOLIO LIFE
--- ---------------------------
You (Integrity Life) will cede to us (Phoenix Home Life) a 50% share of the
Portfolio Life business (the "non-shared" block) marketed by Xxxxx which you
have written in Integrity Life. You will cede to us this Flexible Premium
Variable Life and Term Riders under terms similar to those you have with
American Franklin Life for other Portfolio Life. The effective date is December
31, 1994. We will pay you a purchase price of $26,600, to be adjusted at the
rate of $3.40 per thousand of face amount for changes in inforce between the
valuation run dated October 31, 1994 and December 31, 1994. The inforce
anticipated in the purchase price is 50% of $15,606,907 or $7,803,453. This is a
Modified Coinsurance agreement under which you are carrying a receivable (in an
amount to be determined), for which we will reimburse you in return for that
right under the agreement. We will accept the full 50% share of all policies
assumed by you and handle retrocessions in excess of our own retention.
We intend to complete the development and sign a Reinsurance Agreement to effect
these commitments before February 15, 1994. We intend to record these
transactions in our 1994 Statutory Annual Statement filings, and to settle all
accounts by February 15, 1994
Page 32 of 39
Please indicate your agreement to these provisions by signing below, keeping one
copy for your records and returning one to me.
Agreed,
AMERICAN FRANKLIN LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
Agreed,
INTEGRITY LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Date Date
-------------------------------- --------------------------------
Page 33 of 39
REINSURANCE ASSIGNMENT AGREEMENT
--------------------------------
This Reinsurance Assignment Agreement is made and entered by and among Integrity
Life Insurance Company ("Assignor") and Phoenix Home Life Insurance Company
("Assignee") effective as of October 31, 1994.
Whereas, Assignor wishes to assign to Assignee all of its reinsurance interest
in that certain Modified Coinsurance Agreement between Assignor and American
Franklin Life Insurance Company ("Reinsured") effective April 1, 1989, as
amended, with respect to policies on Policy Form T1755 and riders attached
thereto (the "Agreement"), subject to a final accounting and settlement of any
preexisting oversights, errors or omissions thereunder; and
Whereas, Assignee has agreed to pay Assignor for such reinsurance in an amount
acceptable to Assignor as set forth herein, and
Now, therefore, the parties hereby agree as follows, intending to be legally
bound.
1. Assignor assigns and Assignee accepts the assignment effective as of October
31, 1994 (the "Settlement Date"), of all of Assignor's rights, interests in, and
obligations under the Agreement to Assignee, subject only to the continuing good
faith obligations of Assignor and Reinsured with respect to preexisting
oversights, errors or omissions which shall neither be subject to such
assignment nor affect Assignee's interest in the Agreement in any way, and shall
be fully resolved solely between Assignor and Reinsured consistent with the
terms of the Agreement for the resolution of such issues.
2. Assignee agrees to pay Assignor a lump sum equal to $624,000, receipt of
which is hereby acknowledged, plus an additional amount equal to $1,598,671
representing the amount of a receivable due to Assignee from Reinsured, which
receivable is hereby transferred from Assignor to Assignee.
ASSIGNOR: ASSIGNEE:
INTEGRITY LIFE INSURANCE COMPANY PHOENIX HOME LIFE INSURANCE COMPANY
By By
-------------------------------- --------------------------------
Title Title
-------------------------------- --------------------------------
Page 34 of 39
AGREEMENT
This Agreement is entered into by and between The American Franklin Life
Insurance Company ("American Franklin"), Integrity Life Insurance Company
("Integrity"), and Phoenix Home Life Mutual Insurance Company ("Phoenix").
WHEREAS, American Franklin and Integrity entered into a Modified
Coinsurance Agreement (the "MCA") with an effective date of April 1, 1989, under
which Integrity reinsured on a modified coinsurance basis certain insurance
policies issued by American Franklin; and
WHEREAS, by a Reinsurance Assignment Agreement entered into on October 31,
1994, Integrity assigned to Phoenix Integrity's reinsurance interest and
obligations under the MCA; and
WHEREAS, the parties hereto desire that Phoenix become the reinsurer under
the MCA in lieu of Integrity, effective on January 1, 1999;
NOW, THEREFORE, the parties hereto agree as follows:
Effective January 1, 1999, (1) Phoenix assumes all rights and obligations
of Integrity under the MCA, (2) Integrity has no rights or obligations
pertaining to the reinsurance in force under the MCA as of January 1, 1999, and
(3) the Reinsurance Assignment Agreement dated October 31, 1994 between
Integrity and Phoenix is cancelled.
IN WITNESS WHEREOF, this Agreement has been executed on the dates indicated
by the parties hereto.
THE AMERICAN FRANKLIN LIFE INSURANCE COMPANY
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Date:
-----------------------------
INTEGRITY LIFE INSURANCE COMPANY
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Date:
-----------------------------
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Date:
-----------------------------
Page 35 of 39
NOVATION AMENDMENT TO
REINSURANCE AGREEMENT(S)
SHOWN IN THE ATTACHED LISTS
between
THE AMERICAN FRANKLIN LIFE INSURANCE COMPANY
of
Springfield, Illinois
and
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
of
East Greenbush, New York
(Administrative Offices in Eafield, Connecticut)
The reinsurance agreements shown in the attached lists are amended as follows:
This amendment causes the liability of Phoenix Home Life Mutual Insurance
Company to be assumed by Employers Reassurance Corporation, of Overland Park,
Kansas.
As respects interests and liabilities outstanding as of January 1, 2000 and
incurred thereafter, Phoenix Home Life Mutual Insurance Company is deleted and
Employers Reassurance Corporation is substituted therefor.
This Agreement is now between The American Franklin Life Insurance Company and
Employers Reassurance Corporation without otherwise affecting its provisions.
Page 36 of 39
In witness whereof, this Amendment is signed in duplicate on the dates indicated
by an officer of the companies.
The American Franklin Life Insurance Phoenix Home Life Mutual
Company Insurance Company
Approved by: Approved by:
------------------------- ------------------------
Title: Title:
------------------------- ------------------------
Date: Date:
------------------------- ------------------------
Employers Reassurance Corporation
Approved by:
-------------------------
Title:
-------------------------
Date:
-------------------------
Page 37 of 39
December 5, 2002
Xxxxx Xxxx
Employers Reassurance Corp
000 Xxxx Xxx Xxxxx. Xxxxx 000
Xxxxxxx, XX 00000
Dear Xx. Xxxxx:
The purpose of this letter is to notify you that effective December 31, 2002,
All American Life Insurance Company ("AAL"), The American Franklin Life
Insurance Company ("AMFLIC"), and The Franklin Life Insurance Company ("FLIC")
will merge with and into American General Life Insurance Company ("AGL").
As a result of this merger, AGL assumes all rights and obligations of the
companies identified above under all reinsurance agreements (the "Reinsurance
Agreements") between AAL, AMFLIC, and/or FLIC and Employers Reassurance Corp,
the same as if AGL had been an original party to such agreements.
Please acknowledge your receipt of this notice and indicate your acceptance of
AGL's assumption of the rights and obligations under the Reinsurance Agreements,
by executing the enclosed copy of this letter and returning the same to: Attn:
Xxxx Xxxxxxx at AIG American General Life Insurance Co., Xxx Xxxxxxxx Xxxxxx,
Xxx 000, Xxxxxxxxxxx, XX 00000-0000 by December 16, 2002. If we do not receive
your acknowledgment and acceptance by this date, we will deem your acceptance
received and recorded.
Very truly yours,
Xxxxxx X. Xxxxxxxxx, FSA, MAAA
Senior Vice President & Chief Actuary
We acknowledge receipt of notice concerning the merger transaction described
above and consent to American General Life Insurance Company's assumption of all
of the rights and obligations of the companies identified above under all
Reinsurance Agreements with us.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
Date:
-----------------------------
Page 38 of 39
All American Life Insurance Company/Employers Reassurance Corporation Treaty
List
--------------------------------------------------------------------------------
Type of Treaty Eff. Date Treaty No. Mainfame No.
--------------------------------------------------------------------------------
Auto YRT 1/1/90 GF-4082-81 3561A01
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Auto YRT 1/1/97 GF-4082-82 (3560B) 3560B02
--------------------------------------------------------------------------------
Auto YRT 5/1/99 GF-4082-83 3560D01
--------------------------------------------------------------------------------
Page 39 of 39
