1
REVISED
LIFE COINSURANCE TREATY WITH FUNDS WITHHELD
(HEREINAFTER CALLED THE "AGREEMENT")
BETWEEN
UNIFIED LIFE INSURANCE COMPANY
(HEREINAFTER CALLED THE "REINSURER")
AND
XXXX XXXXX LIFE INSURANCE COMPANY OF AMERICA
(HEREINAFTER CALLED THE "COMPANY")
Page 1 of 12
2
TABLE OF CONTENTS
ARTICLE I BUSINESS COVERED
ARTICLE II TERM AND TERMINATION
ARTICLE III LOSS
ARTICLE IV EXTRA CONTRACTUAL OBLIGATIONS
ARTICLE V RETENTION AND LIMIT
ARTICLE VI CONSIDERATION, FUNDS
WITHHELD, ACCOUNTING
ARTICLE VII COMPENSATION
ARTICLE VIII INSOLVENCY
ARTICLE IX OFFSET
ARTICLE X ARBITRATION
ARTICLE XI EXCESS INTEREST, DIVIDENDS
ARTICLE XII REINSURER'S OPTIONS
ARTICLE XIII GENERAL PROVISIONS
EXHIBIT A PLANS COVERED
EXHIBIT B LIST OF POLICIES
EXHIBIT C INITIAL FUNDS WITHHELD
EXHIBIT D ASSETS SUPPORTING NET
POLICY LIABILITIES
Page 2 of 12
ARTICLE I
Rev. 90696
3
BUSINESS COVERED
The Company agrees to cede and the Reinsurer hereby agrees to automatically
accept as reinsurance, 100% of the Company's Loss for Policy(ies) for the plans
listed in Exhibit A together with any attached riders to such plans, on or
after July 1, 1996 and which are administered by the Company and issued by the
Company and in force as of July 1, 1996. The liability of the Reinsurer with
respect to each policy hereunder shall commence on the effective date, and will
be net of existing reinsurance on the policies as of July 1, 1996. A complete
listing of the policies covered under this agreement together with any riders
providing additional or supplementary benefits is attached hereto as Exhibit B.
ARTICLE II
TERM AND TERMINATION
Business ceded under this agreement will remain subject to the conditions of
this agreement until the policies are no longer in force.
ARTICLE III
LOSS
"Loss" shall mean such payments as are incurred on or after the effective date
and are actually made by or on behalf of the Company under the Policies
reinsured hereunder including amounts paid by or on behalf of the Company in
any settlement of any claims for benefits, cash surrenders or actions under
such Policies and any amounts paid by or on behalf of the Company in
satisfaction of judgments. All Loss settlements by the Company shall be
unconditionally binding upon the Reinsurer (in proportion to its
participation), and the Reinsurer shall benefit proportionately in all
recoveries.
The Reinsurer shall bear its share of all expenses incurred by the Company in
the investigation and settlement, contesting the validity of all Losses or
alleged Losses under Policies reinsured hereunder (excluding office expenses
and salaries of employees of the Company), and shall receive its proportionate
share of any recoveries of such expenses. It is understood and agreed that all
Loss expenses incurred are in addition to the reinsurance limit hereunder.
All expenses other than as previously provided, including court costs,
prejudgment and post-judgment interest, and loss expenses incurred in
investigation, defense and settlement of claims made against the Company under
its Policies reinsured hereunder, shall be apportioned in proportion to the
respective interests of the parties hereto.
ARTICLE IV
EXTRA CONTRACTUAL OBLIGATIONS
It is understood that the Reinsurer will not be responsible for any Extra
Contractual Obligations resulting from any actions by the Company.
Extra Contractual Obligations as used hereunder shall mean punitive, exemplary,
compensatory or consequential damage.
Reinsurer will be responsible for all Extra Contractual Obligations resulting
from any actions by the Reinsurer or by the Company, if at the direction in
writing of the Reinsurer, which occur after July 1, 1996.
Page 3 of 12
ARTICLE V
Rev. 90696
4
RETENTION AND LIMIT
As respects business subject to this Agreement, the Company shall retain and be
liable for 0% of its gross liability.
ARTICLE VI
CONSIDERATION, FUNDS WITHHELD, ACCOUNTING
Funds held under this agreement will remain with the Company. The initial
amount owed to the Reinsurer will equal the policy reserves on the business
reinsured less the ceding commission of $800,000, less policy loans, less net
due and deferred premiums, plus advance premiums, as shown in Exhibit C.
The Company will take credit under this agreement for the reinsured share of
policy reserves, policy loans, net due and deferred premiums and advance
premiums.
Quarterly the Company will report to the Reinsurer (A) a balance sheet on the
reinsured business showing policy assets and liabilities (net policy
liabilities). In addition the Company will show (B) Gross Premiums collected,
less existing reinsurance premiums paid, less commissions, less premium taxes
incurred, less administrative expenses retained, less death claims paid net of
reinsurance collections, less surrender benefits paid, plus gross investment
income earned on policy loans, plus investment income earned on the assets
supporting the business reinsured as shown in Exhibit D times the ratio of the
net policy liabilities to the total book value of such supporting assets. The
supporting assets shall be at the end of each quarter at least equal to the
amount of the net policy liabilities.
Company will remit to reinsurer item (B) if positive. If (B) is negative
Reinsurer will pay this amount to Company.
If the increase in net liabilities (A) is positive, Reinsurer will remit that
amount to Company. If a decrease results, then Company will remit the change
in (A) to Reinsurer.
The amount of Funds Withheld shall equal the preceding quarter's Funds
Withheld, adjusted by the change in the net policy liabilities for the quarter.
Provided that in no event shall the Company be required to make any such
payment which would result in the Funds Withheld to be less than zero (0).
ARTICLE VII
COMPENSATION
All compensation amounts are calculated as a percentage of the Gross Premium.
The Reinsurer shall allow the Company to deduct the following compensation:
1. Commission - Actual
2. Premium Tax - Actual
In addition to the compensation as stated above, the Company shall retain an
Administrative Expense:
$5.00 per month, per policy in force at
the beginning of each month
Page 4 of 12
Rev. 90696
5
ARTICLE VIII
INSOLVENCY
Company's Insolvency
The portion of any risk or obligation assumed by the reinsurer, when such
portion is ascertained, shall be payable on demand of the ceding insurer at the
same time as the ceding insurer shall pay its net retained portion of such risk
or obligation, with reasonable provision for verification before payment, and
the reinsurance shall be payable by the reinsurer, on the basis of the
liability of the ceding insurer under the contract or contracts reinsured
without diminution because of the insolvency of the ceding insurer. In the
event of the insolvency and the appointment of conservator, liquidator or
statutory successor of the ceding company, such portion shall be payable to
such conservator, liquidator or statutory successor immediately upon demand,
with reasonable provision for verification, on the basis of claims allowed
against the insolvent company by any court of competent jurisdiction or by any
conservator, liquidator or statutory successor of the company having authority
to allow such claims, without diminution because of such insolvency or because
such conservator, liquidator or statutory successor has failed to pay all or a
portion of any claims. It is agreed, however, that the liquidator, receiver,
or statutory successor of the Company shall have to give written notice to the
Reinsurer of the pendency of a claim against the Company subject to this
Agreement within a reasonable time after such a claim is filed in the
insolvency proceeding and that during the pendency of such claim, the Reinsurer
may investigate such claim and raise, at its own expense, any defenses which it
may deem available to the Company or its liquidator, receiver or statutory
successor.
The expense incurred by the Reinsurer shall be chargeable, subject to court
approval, to the Company as part of the expense of liquidation to the extent of
the proportionate share of the benefits which may accrue to the Company as a
result of the defense undertaken by the Reinsurer. When two or more reinsurers
are involved 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 agreements the same as though such
expense had been incurred by the Company.
Reinsurer's Insolvency
In the event of the insolvency, bankruptcy, receivership, rehabilitation or
dissolution of the Reinsurer, the Company may retain all or any portion of any
amount then due or which may become due to the Reinsurer under this Agreement
and use such amounts for the purposes of paying any and all liabilities of the
Reinsurer incurred under this Agreement. When all such liability hereunder has
been discharged, the Company shall pay the Reinsurer, its successor, or
statutory receiver, the balance of such amounts withheld as may remain.
ARTICLE IX
OFFSET
Relative solely to the business reinsured hereunder each party hereto shall
have, and may exercise at any time, the right to offset any balance or
balances, due from such party to the other. The party asserting the right of
offset shall have and may exercise such right whether the balance to such party
from the other are on account of premiums or on account of losses or otherwise
and regardless of the capacity, whether as assuming insurer or as ceding
insurer, in which each party acted under the Agreement.
Page 5 of 12
ARTICLE X
Rev. 90696
6
ARBITRATION
Resolution of disputes as a condition precedent to any right of action arising
hereunder, in the event of any dispute between the Reinsurer (or its successor
in interest) and the Company (or its successors in interest), arising out of or
relating to provision of this Agreement, shall be submitted to arbitration in
the following manner.
One arbitrator shall be chosen by the Company, the other by the Reinsurer, and
an Umpire shall be chosen by the two arbitrators before they enter upon
arbitration, all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies. In the event that either party
should fail to choose an arbitrator within 30 days following a written request
by the other party to do so, the requesting party may choose two arbitrators
who shall in turn choose an Umpire before entering upon arbitration. If the
two arbitrators fail to agree upon the selection of an Umpire within 30 days
following their appointment, each arbitrator shall nominate three candidates
within 10 days thereafter, two of whom the other shall decline, and the
decision shall be made by drawing lots.
Each party shall present its case to the arbitrator within 30 days following
the date of appointment of the Umpire and the arbitrators shall hand down a
decision within 45 days of the closing of the arbitration hearing. The
arbitrators shall consider this agreement as an honorable engagement rather
than merely as a legal obligation and they are relieved of all judicial
formalities. The decision of the arbitrators shall be final and binding on
both parties; but failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both parties.
Judgment upon the final decision of the arbitrators may be entered in any court
of competent jurisdiction.
If more than one reinsurer is involved in the same dispute, all such reinsurers
shall constitute and act as one party for purposes of this Article and
communications shall be made by the Company to each of the reinsurers
constituting one party, provided, however, that nothing herein shall impair the
rights of such reinsurer to assert several, rather than joint, defenses or
claim, nor be construed as changing the liability of the reinsurer
participating under the terms of this Agreement from several to joint.
Any arbitration proceedings shall take place in Kansas, at a location mutually
agreed upon by the parties to this Agreement, but notwithstanding the location
of the arbitration, all proceedings pursuant hereto shall be governed by the
law of the state in which the Reinsurer has its principal office.
ARTICLE XI
EXCESS INTEREST, DIVIDENDS
The Company will pay no excess interest nor dividend on the reinsured policies
without prior approval of the Reinsurer. Such approval shall not unreasonably
be withheld.
ARTICLE XII
REINSURER'S OPTIONS
The Reinsurer at its sole discretion, subject to all regulation approvals as
may be required, shall have the option to undertake all administrative
functions with respect to the policies coinsured hereunder upon 60 days notice
and the Administrative Expense as provided in Article VII shall thereafter not
be payable.
Page 6 of 12
The Reinsurer at its sole discretion, subject to all regulatory approvals as
may be required, shall have the option to convert this Agreement into an
Assumption Agreement at any time upon 90 days notice. The
Rev. 90696
7
Company shall cooperate fully and make available any and all records as may be
required by the Reinsurer to accomplish the implementation of the above
options.
ARTICLE XIII
GENERAL PROVISIONS
Inspection
Both parties shall place at the disposal of the other for inspection, through
its authorized representatives, at all reasonable times during the term of this
Agreement and thereafter any records, books or documents kept by either party
pertaining to the reinsurance provided hereunder and all claims made in
connection therewith.
Errors and Omissions
Errors or omission on the part of the Company shall not invalidate the
reinsurance under this Agreement, provided such errors or omissions are
corrected promptly after discovery.
Mutual Indemnity
Both parties agree to indemnify and hold harmless the other against any and all
claims, demands causes of action, losses, costs and expenses, including
attorneys fees, arising out of any willful or negligent act or omission on the
part of itself or its assigns, officers, directors or employees.
Severable Terms
The invalidity of unenforceability of any terms or provisions in this Agreement
shall not affect the validity or enforceability of any other term or provision
of the Agreement.
Amendment
This Agreement may be amended only by the mutual written consent of the
parties.
Notices
All notices, requests, demands and other communications hereunder must be in
writing and shall be deemed to have been duly given if delivered by and or
mailed by first class, registered mail, return receipt requested, as follows:
1. If to the Reinsurer:
Unified Life Insurance Company
Xxxxx 000, 0000 X. 000 Xxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: Xxxxx Xxxxxx
2. If to the Company:
Xxxx Xxxxx Life Insurance Company of America
11845 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Page 7 of 12
Waiver
Waiver of a breach of any provision of this Agreement shall not be deemed a
waiver of any other breach of the same or different provision.
Rev. 90696
8
Currency
All transactions under this Agreement shall be in United States dollars.
State Mandate
In the event any Provision is deemed to be in conflict with any applicable
state regulations, the provision in question will automatically be modified
accordingly to be in compliance and any such modification will become part of
this agreement.
Entire Agreement
This Agreement contains the entire understanding of the parties with respect to
the subject matter hereof. It cannot be modified unless the parties agree in
writing to do so. There are no restrictions, promises, warranties, covenants
or undertakings with respect to such subject matter, other than those expressly
set forth herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
the date set forth above, at the offices of the Reinsurer in Overland Park,
Kansas, which shall be the site of this contract.
UNIFIED LIFE INSURANCE COMPANY
Xxxxx 000, 0000X. 000xx Xx.
Xxxxxxxx Xxxx, Xxxxxx 00000
By: Xxxxxxx X. Xxxxxxxx
Title: Chairman of the Board
Witness: Xxxxxxx X. Xxxxxxxx, III
Date: 9/6/96
XXXX XXXXX LIFE INSURANCE COMPANY OF AMERICA
11845 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
By: Xxxxx X. Xxxxxx
Title: President
Witness: Xxxxxxxxxxx X. XxXxxxx
Date: 9/9/96
Page 8 of 12
EXHIBIT A
Plans covered in force as of July 1, 1996
Rev. 90696
9
Reinsured under this agreement
Plan Code Description
0091 Old Whole Life
0090 Single Premium Life
0094 Life Paid Up At 95
0095 Reduced Paid-up
0001 VIP
0018 Paid-Up Term Ins to Age 70
0007 A.C.T.
0008 Xxx-00
0000 X-000
0015 Yrt-95
0016 WL with Excess Interest
0004 Mod-10
0003 Mod-5
0019 Best I
0031 VIP `80
0032 VIP II `80
0033 Reduced Paid-up Life
0934 Paid Up Addition Life Rider
0920 Family Protection Rider
0921 Exchange Provision Rider
0925 Children's Rider
0014 Paid-UP 80 CSO S/NS
0040 ART-100
0935 Single Premium Life Ins Rider
0936 Annual Premium Life Ins Rider
0013 Reduced Paid Up
0045 TOPLINE
0020 Best II - Policies Issued Prior to 1/1/85
0030 Super Life - Policies Issued Prior to 1/1/85
All Supplemental Benefits included in such policies by rider
Page 9 of 12
Rev. 90696
10
EXHIBIT B
List of Policies with attached riders and supplemental benefits
as of July 1, 1996
Machine listing to be supplied
Page 10 of 12
Rev. 90696
11
EXHIBIT C
Initial Funds Withheld
Total Reserve Liability $ 8,835,578
Plus Unearned Interest on Policy Loans $ 108,191
Less Policy Loans $ 5,830,001
Less Net Due and Deferred Premiums $ 134,572
Plus Advance Premiums $ 0
Subtotal - Net Policy Liabilities $ 2,979,196
Less Ceding Fee $ 800,000
Net Amount of Funds Withheld under Article VI at $ 2,179,196
Effective Date
Page 11 of 12
EXHIBIT D
Rev. 90696
12
Assets Supporting Net Policy Liabilities
BOOK
CUSIP # SECURITY RATE PAR VALUE
------- -------- ---- --- -----
010392-CR-7 Alabama Power 7.75 $ 250,000 $ 246,370.37
000000-XX-0 Xxxxxxx Power 7.95 500,000 501,373.65
341081-DA-2 Florida Power 7.875 250,000 246,166.71
000000-XX-0 Xxxxxxxx Xxxxxxxxxx Edison 8.375 400,000 410,950.02
000000-XX-0 Xxxxxxx, XX,Xx. Agency Rev. 9.250 250,000 258,697.86
452010-6P-1 Illinois Housing Dev. 8.52 200,000 201,249.81
00000X-XX-0 Xxxxx Xxxxxxxx Housing 7.85 350,000 346,587.12
---------- ------------
$2,200,000 $2,211,395.54
Page 12 of 12
Rev. 90696
13
AMENDMENT 1
TO
REVISED
LIFE COINSURANCE TREATY WITH FUNDS WITHHELD
(HEREINAFTER CALLED THE "AGREEMENT")
BETWEEN
UNIFIED LIFE INSURANCE COMPANY
(HEREINAFTER CALLED THE "REINSURER")
AND
XXXX XXXXX LIFE INSURANCE COMPANY OF AMERICA
(HEREINAFTER CALLED THE "COMPANY")
REFERENCE: ULI_JAL.TRT
14
The Coinsurance Agreement between Unified Life Insurance Company and Xxxx Xxxxx
Life Insurance Company of America, Reference:ULI_JAL.TRT, entered into on
September 9, 1996, and effective from July 1, 1996, is hereby amended by adding
to Article VI, following the third paragraph of that Article, on page 4 of the
Agreement, the following paragraph:
"In the event that a supporting asset as designated in Exhibit D is sold,
redeemed or otherwise disposed of, the Reinsurer shall have the right to
designate other assets to replace the asset no longer held. Further, in
the event the supporting assets should be less than the net policy
liabilities at the end of any quarter, the Reinsurer shall within 15 days
of the reporting of such shortfall designate additional assets or
supporting assets as may be needed so that the supporting assets shall
not be less than the net policy liabilities. To the extent there is a
realized or unrealized gain or loss with respect to a designated asset,
that gain or loss times the ratio of the net policy liabilities to the
total book value of the supporting assets on or coinciding with quarter
end shall pass to the Reinsurer."
All other terms and conditions of the Agreement remain unchanged.
IN WITNESS WHEREOF, the parties have executed this Amendment 1 effective as of
July 1, 1996, at the offices of the Reinsurer in Overland Park, Kansas, which
shall be the site of this contract.
UNIFIED LIFE INSURANCE COMPANY
Xxxxx 000, 0000X. 000xx Xx.
Xxxxxxxx Xxxx, Xxxxxx 00000
By: Xxxxxxx X. Xxxxxxxx
Title: Chairman of the Board
Witness: Xxxxx Xxxxxx
Date: 9/18/96
XXXX XXXXX LIFE INSURANCE COMPANY OF AMERICA
11845 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
By: Xxxxx X. Xxxxxx
Title: President
Witness: Xxxxxxxxxxx X. XxXxxxx
Date: 9/19/96
Rev. 90696
