EXHIBIT 10.2
Amendment Number 4 to the
Automatic Flexible Premium Variable Life Reinsurance Agreement Number 3
(Referred to as the Agreement)
Between
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
St. Petersburg, Florida
(referred to as the Reinsured)
and
GLOBAL PREFERRED RE LIMITED
Xxxxxxxx, Bermuda
(referred to as the Reinsurer)
Effective July 1, 2003
I. Article IX, REINSURANCE RESERVES, Sections 1 is hereby replaced as
follows:
1. The Reinsurer will:
(a) Set up Statutory Reserves and Liabilities not less
than the reduction taken by the Reinsured for the
reinsured contracts; and if greater,
(b) Establish a liability ("Benefit Reserve"), for the
benefit of the Reinsured, not less than the excess of
the present value of expected future reinsured
benefits, less the present value of future expected
gross reinsurance premiums.
II. Schedule B4, Benefit Reserve Formula and Assumptions, is hereby
replaced as follows:
SCHEDULE B4, BENEFIT RESERVE FORMULA AND ASSUMPTIONS
BENEFIT RESERVE METHODOLOGY
The reserve calculation method is the net premium method with the reserve
calculated over a 20-year period, after which the business may be recaptured.
The terminal reserves are calculated using monthly curtate assumptions; premiums
are paid at the beginning of the month and death benefits are paid at the end of
the month. The formula for the terminal reserve is:
tV(12) = PVt (expected future benefits) - k * PVt (expected future
gross reinsurance premiums),
where
k = PVt (expected future benefits)/PVt (expected future gross
reinsurance premiums) for t=0, and
tV(12) is the terminal reserve at duration t.
The final reserve calculation represents an exact linear interpolation between
two terminal reserves, giving the formula:
t-1+sV(12) = t-1V(12) * (1-s) + tV(12) * s,
where
s is the portion of one year expired between the last policy
anniversary and the valuation date.
BENEFIT RESERVE ASSUMPTIONS
>> Interest rate: The maximum statutory interest rate allowed by law as
prescribed in the NAIC Standard Valuation Law and approved by the State
of Ohio Department of Insurance.
>> Gross Reinsurance Premiums: Financial Freedom Builder (FFB) guaranteed
cost of insurance charge paid on a monthly basis.
>> Mortality: Mortality is the 80 CSO mortality table based on Gender
(Male/Female) and Smoking status(Nonsmoker, Smoker).
>> Expected Benefits:
- Policies with a level death benefit option (Option A): The
expected benefits (net amount at risk) per unit of initial
$1,000 of specified amount are:
DURATION NAR DURATION NAR DURATION NAR DURATION NAR
-------- ----- -------- ----- -------- ----- -------- -----
1 1,000 6 962 11 923 16 885
2 992 7 954 12 916 17 878
3 985 8 946 13 908 18 870
4 977 9 939 14 900 19 862
5 969 10 931 15 893 20 855
- All other policies and riders: Expected benefits are level.
>> Lapse Rates: None.
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* * * * *
Except as expressed herein, all terms, covenants and provisions of the Automatic
Flexible Premium Variable Life Reinsurance Agreement Number 3, as amended, not
in conflict with the provisions of this amendment shall remain unaltered and in
full force and effect.
In witness of the above, the Reinsured and the Reinsurer, by their respective
officers have executed this amendment in duplicate at the dates and places
indicated and shall be effective as of July 1, 2003.
WESTERN RESERVE LIFE GLOBAL PREFERRED RE LIMITED
ASSURANCE CO. OF OHIO
at St. Petersburg, FL at Duluth, GA
------------------------------- -----------------------------------
on: October 21, 2003 on: October 15, 2003 .
------------------------------- -----------------------------------
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxx
------------------------------- -----------------------------------
Title: VP & Managing Actuary Title: CFO
By: /s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxx X. XxXxxxx
------------------------------- -----------------------------------
Title: Staff Actuary Title: VP - Financial Projects
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