EXHIBIT 10.3.2
EXHIBIT C
REINSURANCE AGREEMENT
This REINSURANCE AGREEMENT, made and entered into by and between FIRST FINANCIAL
LIFE INSURANCE COMPANY ("Life Company"), an Arizona stock life insurance
corporation with principal offices at 0000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxx
Xxxxxx, xxxxx 000, Xxxxx, Xxxxxxx 00000 and SOUTHWESTERN LIFE INSURANCE COMPANY
("SWLIC"), a Texas corporation, with principal offices located at 000 Xxxxx
Xxxxx, Xxxxxx, Xxxxx 00000.
WITNESSETH:
The Life Company and SWLIC mutually agree to reinsure on the terms and
conditions set out below. This agreement is solely between the Life Company and
SWLIC, and performance of the obligations of each party under this agreement
shall be rendered solely to the other party. In no instance shall anyone other
than the Life Company or SWLIC have any rights under this agreement.
ARTICLE I. AUTOMATIC REINSURANCE
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1. Insurance. The Life Company will cede (retrocede) and SWLIC will accept
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reinsurance under policies which are written by SWLIC and quota share
reinsured to the Life Company under a Modified Coinsurance Agreement whose
effective date is January 1, 1987. When the Life Company retains its
maximum limit of retention, as shown in Schedule A, attached, the Life
Company will retrocede (cede) and SWLIC will accept, automatically, amounts
in excess of the Life Company's retention.
If SWLIC reinsures a portion of the mortality risk on any given individual
such that its total retained risk on that individual is less than its
maximum retention limit, then the remaining risk will be shared with the
Life Company in proportion to SWLIC respective maximum retention limits.
For example, if SWLIC has a maximum retention of $500,000 on any given life
and it issues a $521,000 policy, of which $500,000 is reinsured with a
third party reinsurer, the remaining mortality risk will be shared with the
Life Company in direct proportion to the companies' maximum retention
limits. The Life Company will keep 50,000/500,000 of the $21,000 retained
risk, or $2,100 and SWLIC will keep 450,000/500,000 of the $21,000 retained
risk, or $18,900.
2. Coverages. Life insurance, waiver of premium disability benefit for an
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amount not greater than the corresponding life insurance, and benefits
under associated riders are exclusively the coverages or risks reinsured
automatically under Paragraph 1 (to the extent that limits are specified in
Schedule A, attached). The life insurance includes both basic policies and
term riders providing life insurance protection.
3. Regular Limits of Retention. The regular limits of retention detailed in
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Schedule A and referred to in this agreement may be modified by the Life
Company by thirty (30) days' written notice to SWLIC. The amount of
reinsurance to be ceded and accepted automatically after the new limits
take effect will be determined by mutual agreement.
4. Procedures to Effect Reinsurance. SWLIC will notify the Life Company
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quarterly of all new policies assumed by the Life Company where the Life
Company's quota share of the face amount exceeds the Life Company's
retention
2
limit as detailed in Schedule A. These policies will be automatically ceded
(retroceded) to SWLIC.
ARTICLE II. LIABILITY
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1. Automatic Reinsurance Liability. The liability of SWLIC on any automatic
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reinsurance under this agreement begins and ends at the same time as that
of the Life Company.
ARTICLE III. AMOUNT OF INSURANCE
--------------------------------
1. Amounts. Life insurance under this agreement shall be on a Yearly
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Renewable Term plan for the amount at risk under the policy reinsured. For
the purpose of this agreement, the amount at risk shall be defined at the
difference between the face amount of reinsurance and the corresponding
cash value (taken to the nearest dollar) as of the end of such policy year.
When the original policy is issued on a level term plan for twenty years or
less or on a reducing term plan for any period of years, the reinsurance
shall be for the face amount, and cash values, if any, shall be
disregarded. If desired, amount at risk may be determined by other methods
agreeable to the Life Company and SWLIC. Reinsurance amounts for waiver of
premium disability benefit, for additional indemnity for accidental death
or death by accidental means, and for benefits under associated riders are
on the same basis as the coverages assumed by the Life Company.
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2. Reductions and Terminations. Reinsurance amounts are calculated in terms of
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coverages on the life of a person. If any of the Life Company's policies or
riders on the person are reduced or terminated, the reinsurance will be
reduced or terminated by the corresponding amount. The reduction will not
be applied, however, to force the Life Company to reassume more than its
regular retention limit at the time of the reduction for age at issue,
mortality rating and form of the policy or policies for which reinsurance
is being terminated.
3. Reinstatements. A policy which has been ceded to SWLIC on an automatic
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basis, that was reduced, terminated or lapsed, if reinstated will be
reinstated automatically to the amount that would be in force had the
policy not been reduced, terminated or lapsed.
In connection with all such reinstatements, the Life Company shall pay
SWLIC all reinsurance premiums in arrears with interest at the same rate
and in like manner as the Life Company has been credited under its Modified
Coinsurance Agreement with SWLIC.
4. Nonforfeiture Benefits. Reduced paid-up will be treated as a reduction in
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accordance with Paragraph 2 above. Extended term will be continued on a
basis proportionate to the reinsurance risk before the extended term option
was effected. Approximations and methods to simplify handling may be agreed
upon by the Life Company and SWLIC.
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ARTICLE IV. PREMIUMS
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1. Life Insurance. Premiums per $1,000 for life insurance rated standard by
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age and duration are given in Schedule B. The premiums per $1,000 are
applied to the amount of life reinsurance as outlined in Article III.1.
When a flat extra premium is charged on a policy, whether alone or in
addition to a premium based on a multiple table, the Life Company will pay
this premium on the reinsurance amount in addition to the standard or
multiple table premium for the rating and plan of reinsurance.
2. Disability and Payor Benefits. Premiums for waiver of premium disability
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benefit and for payor benefit will be paid at the same rate as the Life
Company has been credited for the benefit on which reinsurance in SWLIC is
based.
3. Preliminary Term Insurance. If the Life Company issues a policy with
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preliminary term insurance, the reinsurance premium for the preliminary
term period will be paid to SWLIC at the same rate the Life Company has
been credited for the policies on which reinsurance in SWLIC is based. This
rule applies to all benefits under the preliminary term insurance. For the
first policy year after the preliminary term period, the premiums for all
benefits will be computed at first year rates.
4. Payments. Premiums are payable quarterly in advance The Policy fee will be
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payable prorata each quarter. If reinsurance is reduced, terminated or
increased by reinstatement during the quarter, prorata adjustment will be
made by SWLIC and the Life Company on all premium items except policy fees.
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5. Procedure. Each calendar quarter SWLIC will send to the Life Company two
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copies of a statement of reinsurance due. The statement will show the
premium due on new reinsurance effected in the preceding quarter and on
existing reinsurance, the prorata adjustments for changes in reinsurance
and death claim benefits payable to the Life Company. The Life Company will
examine the statement and will return one copy with a check for the balance
indicated to SWLIC within a reasonable time. If a balance is due the Life
Company, it will be remitted promptly by SWLIC. The Life Company will note
to SWLIC any discrepancies and proper adjustment will be made. Except as
provided in Article V.3., the payment of reinsurance premiums shall be a
condition precedent to the liability of SWLIC under reinsurance covered by
this agreement. In the event of nonpayment of reinsurance premiums as
provided in this paragraph, SWLIC shall have the right to terminate the
reinsurance under all policies having reinsurance premiums in arrears.
6. Age or Sex Adjustment. If the insured's age or sex was misstated and the
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amount of insurance on the reinsured's policy is adjusted after his death,
the Life company and SWLIC will share the adjustment in proportion to the
amount of liability of each at the time of issue of the policies. Premiums
will be recalculated for the correct ages and amounts but according to the
proportion as above and adjusted without interest. If the insured is still
alive, the method above will be used for past years and the amount of
reinsurance and premium adjusted for the future to the amount that would
have been correct at issue.
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ARTICLE V. GENERAL PROVISIONS
-----------------------------
1. Reinsurance Conditions. The reinsurance is subject to the same limitations
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and conditions as the insurance under the policy or policies reinsured is
based.
2. Errors and Omissions. It is expressly understood and agreed that if
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nonpayment of premiums within the time specified or failure to comply with
any terms of this contract is shown to be unintentional and the result of
misunderstanding or oversight on the part of either the Life Company or
SWLIC, both the Life Company and SWLIC shall be restored to the positions
they would have occupied had no such error or oversight occurred.
3. Insolvency. All reinsurance under this agreement will be paid by SWLIC
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directly to the Life Company, its liquidator, receiver, or statutory
successor, on the basis of the liability of the Life Company under the
policy or policies reinsured without diminution because of the insolvency
of the Life Company. In the event of the insolvency of the Life Company,
the liquidator, receiver, or statutory successor of the Life Company will
give written notice of pending claim against the Life Company on any policy
reinsured within a reasonable time after the claim is filed in the
insolvency proceedings. While the claim is pending, SWLIC 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 Life
Company or its liquidation, receiver, or statutory successor. The expense
incurred by SWLIC will be charged subject to court approval, against the
Life Company as an expense of liquidation to the extent of a proportionate
share of the
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benefit that accrues to the Life Company as a result of the defenses by
SWLIC. Where two or more reinsurers are involved and a majority in interest
elect to defend a claim, the expenses will be apportioned in accordance
with the terms of the reinsurance agreement as if the expense had been
incurred by the Life Company.
ARTICLE VI. RECAPTURE
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1. Recapture. If the Life Company increases its limits of retention, it may
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make a corresponding reduction in the reinsurance in force under this
agreement on all persons where the Life Company has maintained its in limit
of retention as detailed in Schedule A. If the direct face amount of a
policy being reinsured is greater than $500,000, then no reinsurance shall
be reduced under this provision before the end of the tenth policy year of
the reinsured's policy, and no reinsurance may be recaptured where the Life
Company retained less than its maximum retention in effect at the time the
policy was issued.
2. Method of Recapture. If the Life Company elects to recapture, it will
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notify SWLIC in writing within 90 days from the effective date of its
increase in retention. At the next anniversary (or the tenth anniversary,
if later) of the reinsured's policy, the reinsurance will be reduced to
increase the total retained by the Life Company to its new maximum.
Recapture is allowed on only one retention during any twelve month period
and the amount of retention detailed in Schedule A. If reinsurance on any
policy for any person is reduced under this provision, all must be reduced.
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ARTICLE VII. ARBITRATION
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1. Agreement. All differences between the Life Company and SWLIC on which an
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agreement cannot be reached will be decided by arbitration. The arbitrators
will determine the interpretation of the Agreement in accordance with the
usual business and reinsurance practices rather than strict technicalities.
2. Method. Three arbitrators will decide the differences. They must be
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officers of life insurance companies other than the two parties to this
agreement. One of the arbitrators is to be appointed by the Life Company
and one by SWLIC, and these who will select a third. If the two are unable
to agree on a third, the choice will be left to the President of the
American Council of Life Insurance, or its successor.
3. Effect. The arbitrators are not bound by rules of law. Their decision will
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be by majority vote and no appeal will be taken from it. The costs of the
arbitration will be borne by the losing party unless the arbitrators decide
otherwise.
ARTICLE VIII. DURATION OF AGREEMENT
-----------------------------------
1. Duration of Agreement. This agreement will be effective on and after the
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effective date stated in Article IX. It is unlimited induration but may be
amended by mutual consent of the Life Company and SWLIC. It may be
terminated as to new reinsurance by either party giving 90 days' written
notice to the
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other. Termination as to new reinsurance does not affect existing
reinsurance. That reinsurance will remain in force until termination of the
Life Company's policy or policies on which the reinsurance is based in
accordance with the terms of this agreement.
ARTICLE IX. EXECUTION
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In witness of the above, this agreement is signed in duplicate at the dates and
places indicated with an effective date of January 1, 1987.
Date: 27 September, 1991 FIRST FINANCIAL LIFE INSURANCE
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COMPANIES. INC.
Places: Tampa, Florida By: [SIGNATURE ILLEGIBLE]
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Title
Witness: [SIGNATURE ILLEGIBLE]
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Date: 6/1991 SOUTHWESTERN LIFE INSURANCE
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COMPANY
Place: Dallas, Texas By: [SIGNATURE ILLEGIBLE]
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Title PRESIDENT
Witness: /s/ C. XXXXXXX XXXX
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SR. VICE PRESIDENT--FINANCE
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SCHEDULE A
The maximum retention on any one life for FIRST FINANCIAL LIFE INSURANCE COMPANY
is $25,000.
SOUTHWESTERN-TEXAS UNIVERSAL LIFE MALE--ALB
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SELECT (NONSMOKER)
ZERO FIRST YEAR PREMIUM
NO POLICY FEE
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE PREMIUM AGE PREMIUM AGE PREMIUM AGE PREMIUM
0 0.04417 25 0.06140 50 0.21076 75 2.38152
1 0.04417 26 0.05698 51 0.23330 76 2.55181
2 0.04417 27 0.05477 52 0.25894 77 2.74051
3 0.04417 28 0.05477 53 0.28856 78 2.95836
4 0.04417 29 0.05654 54 0.32085 79 3.21573
5 0.04417 30 0.06008 55 0.35489 80 3.52393
6 0.04417 31 0.06273 56 0.39028 81 3.89835
7 0.04417 32 0.06405 57 0.42699 82 4.35499
8 0.04417 33 0.06361 58 0.46681 83 4.91318
9 0.04417 34 0.06273 59 0.51106 84 5.58887
10 0.04417 35 0.06228 60 0.56107 85 6.33727
11 0.04417 36 0.06449 61 0.61507 86 6.99163
12 0.04417 37 0.06847 62 0.67528 87 7.48220
13 0.04815 38 0.07377 63 0.74171 88 7.70714
14 0.05433 39 0.07951 64 0.81347 89 8.06424
15 0.06140 40 0.08526 65 0.89278 90 8.47150
16 0.06140 41 0.09277 66 0.98586 91 9.11418
17 0.06140 42 0.09984 67 1.09760 92 10.14069
18 0.06140 43 0.10867 68 1.23335 93 11.67121
19 0.06140 44 0.11839 69 1.39092 94 13.65805
20 0.06140 45 0.12988 70 1.56146 95 15.91431
21 0.06140 46 0.14402 71 1.73568 96 19.86317
22 0.06140 47 0.15905 72 1.90377 97 25.42208
23 0.06140 48 0.17496 73 2.06396 98 35.37334
24 0.06140 49 0.19219 74 2.22069 99 44.16666
SOUTHWESTERN-TEXAS UNIVERSAL LIFE MALE-ALB
STANDARD
ZERO FIRST YEAR PREMIUM
NO POLICY FEE
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE PREMIUM AGE PREMIUM AGE PREMIUM AGE PREMIUM
0 0.05000 25 0.08151 50 0.43582 75 3.27427
1 0.05000 26 0.07751 51 0.47537 76 3.44669
2 0.05000 27 0.07551 52 0.51895 77 3.63489
3 0.05000 28 0.07801 53 0.56854 78 3.85258
4 0.05000 29 0.08401 54 0.62114 79 4.10945
5 0.05000 30 0.09202 55 0.67526 80 4.41779
6 0.05000 31 0.09902 56 0.72938 81 4.79248
7 0.05000 32 0.10452 57 0.78352 82 5.24851
8 0.05000 33 0.10702 58 0.84118 83 5.80156
9 0.05000 34 0.10852 59 0.90336 84 6.46339
10 0.05000 35 0.11152 60 0.97207 85 7.17427
11 0.05000 36 0.11953 61 0.05184 86 7.91506
12 0.05000 37 0.13103 62 1.13866 87 8.47042
13 0.05450 38 0.14654 63 1.23303 88 8.72506
14 0.06151 39 0.16354 64 1.33195 89 9.12932
15 0.06951 40 0.18155 65 1.44145 90 9.59038
16 0.06951 41 0.19757 66 1.56859 91 10.31794
17 0.06951 42 0.21407 67 1.71992 92 11.48003
18 0.06951 43 0.23259 68 1.90301 93 13.21269
19 0.06951 44 0.25411 69 2.11342 94 15.46194
20 0.07151 45 0.27763 70 2.33555 95 18.01620
21 0.07351 46 0.30466 71 2.55433 96 22.48661
22 0.07551 47 0.33268 72 2.75610 97 28.77971
23 0.07751 48 0.36372 73 2.93782 98 40.04530
24 0.07951 49 0.39776 74 3.10700 99 50.00000
SOUTHWESTERN-TEXAS UNIVERSAL LIFE FEMALE-ALB
SELECT (NONSMOKER)
ZERO FIRST YEAR PREMIUM
NO POLICY FEE
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE PREMIUM AGE PREMIUM AGE PREMIUM AGE PREMIUM
0 0.03534 25 0.03534 50 0.14535 75 1.32433
1 0.03534 26 0.03534 51 0.15551 76 1.45930
2 0.03534 27 0.03534 52 0.16744 77 1.60589
3 0.03534 28 0.03534 53 0.18070 78 1.77480
4 0.03534 29 0.03534 54 0.19529 79 1.97229
5 0.03534 30 0.03799 55 0.20899 80 2.20510
6 0.03534 31 0.04108 56 0.22358 81 2.48805
7 0.03534 32 0.04241 57 0.23949 82 2.82933
8 0.03534 33 0.04373 58 0.25585 83 3.23719
9 0.03534 34 0.04461 59 0.27486 84 3.74690
10 0.03534 35 0.04506 60 0.29652 85 4.32492
11 0.03534 36 0.04859 61 0.31996 86 4.85200
12 0.03534 37 0.05257 62 0.34738 87 5.28325
13 0.03534 38 0.05787 63 0.37656 88 5.54512
14 0.03534 39 0.06361 64 0.40930 89 5.92736
15 0.03534 40 0.06979 65 0.44425 90 6.37165
16 0.03534 41 0.07554 66 0.48628 91 7.00614
17 0.03534 42 0.08084 67 0.53894 92 7.93772
18 0.03534 43 0.08747 68 0.60445 93 9.27645
19 0.03534 44 0.09409 69 0.68591 94 11.00356
20 0.03534 45 0.10160 70 0.77582 95 12.94239
21 0.03534 46 0.11044 71 0.87683 96 16.19092
22 0.03534 47 0.11972 72 0.98054 97 22.24345
23 0.03534 48 0.12767 73 1.08785 98 33.11840
24 0.03534 49 0.13695 74 1.20184 99 44.16666
SOUTHWESTERN--TEXAS UNIVERSAL LIFE FEMALE--ALB
STANDARD
ZERO FIRST YEAR PREMIUM
NO POLICY FEE
ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY ATTAINED MONTHLY
AGE PREMIUM AGE PREMIUM AGE PREMIUM AGE PREMIUM
0 0.04000 25 0.04000 50 0.22658 75 1.87484
1 0.04000 26 0.04000 51 0.24310 76 2.01726
2 0.04000 27 0.04050 52 0.26161 77 2.18241
3 0.04000 28 0.04050 53 0.28264 78 2.37235
4 0.04000 29 0.04100 54 0.30466 79 2.59165
5 0.04000 30 0.04450 55 0.32868 80 2.84745
6 0.04000 31 0.04850 56 0.35171 81 3.12823
7 0.04000 32 0.05101 57 0.37673 82 3.46085
8 0.04000 33 0.05300 58 0.40277 83 3.88601
9 0.04000 34 0.05401 59 0.43281 84 4.37010
10 0.04000 35 0.05551 60 0.46636 85 4.89613
11 0.04000 36 0.06050 61 0.50392 86 5.49283
12 0.04000 37 0.06601 62 0.54299 87 5.98103
13 0.04000 38 0.07351 63 0.58858 88 6.27750
14 0.04000 39 0.08201 64 0.63517 89 6.71021
15 0.04000 40 0.09052 65 0.68929 90 7.21319
16 0.04000 41 0.10001 66 0.75445 91 7.93148
17 0.04000 42 0.10952 67 0.83015 92 8.98610
18 0.04000 43 0.12103 68 0.93145 93 10.50164
19 0.04000 44 0.13303 69 1.04?83 94 12.45686
20 0.04000 45 0.14654 70 1.18634 95 14.65176
21 0.04000 46 0.16154 71 1.32090 96 18.32934
22 0.04000 47 0.17755 72 1.45502 97 25.18126
23 0.04000 48 0.19406 73 1.58970 98 37.49253
24 0.04000 49 0.21058 74 1.72897 99 50.00000
