THE REGISTRANT HAS APPLIED FOR CONFIDENTIAL TREATMENT OF CERTAIN TERMS IN THIS
EXHIBIT WITH THE SECURITIES AND EXCHANGE COMMISSION. THE CONFIDENTIAL PORTIONS
OF THIS EXHIBIT ARE MARKED WITH AN ASTERISK [*] AND HAVE BEEN OMITTED. THE
OMITTED PORTIONS OF THIS EXHIBIT WILL BE FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST.
AMENDED AND RESTATED REINSURANCE AGREEMENT
HENCEFORTH TO BE CALLED
INDEMNITY VARIABLE ANNUITY REINSURANCE AGREEMENT
(THE "AGREEMENT")
between
XXXX XXXXXXX LIFE INSURANCE COMPANY (U.S.A.)
A MICHIGAN CORPORATION
(HEREINAFTER REFERRED TO AS THE "CEDING COMPANY")
and
MANULIFE REINSURANCE (BERMUDA) LIMITED
A BERMUDA CORPORATION
(HEREINAFTER REFERRED TO AS THE "REINSURER")
DATED AS OF OCTOBER 1, 2008
(HEREINAFTER REFERRED TO AS THE "EFFECTIVE DATE")
Treaty #8003
TABLE OF CONTENTS
INDEMNITY VARIABLE ANNUITY REINSURANCE AGREEMENT ....................... 3
ARTICLE I - SCOPE OF REINSURANCE ....................................... 4
ARTICLE II - GENERAL PROVISIONS ........................................ 5
ARTICLE III -INITIAL CONSIDERATION AND REINSURANCE PREMIUMS ............ 12
ARTICLE IV - CLAIMS AND OTHER BENEFITS ................................. 12
ARTICLE V - CEDING COMMISSION AND EXPENSE ALLOWANCE .................... 14
ARTICLE VI - RESERVES AND FUNDS WITHHELD ............................... 15
ARTICLE VII - ACCOUNTING AND QUARTERLY SETTLEMENT ...................... 18
ARTICLE VIII - DURATION AND RECAPTURE .................................. 19
ARTICLE IX - TERMINAL ACCOUNTING AND SETTLEMENT ........................ 20
ARTICLE X - ARBITRATION ................................................ 21
ARTICLE XI - INSOLVENCY ................................................ 23
ARTICLE XII - EXECUTION ................................................ 24
SCHEDULE A - POLICIES REINSURED ......................................... 25
SCHEDULE B - MODCO RESERVE INVESTMENT CREDIT ........................... 28
SCHEDULE C - FUNDS WITHHELD INVESTMENT INCOME .......................... 30
SCHEDULE D - FIXED ACCOUNT INVESTMENT CREDIT ........................... 32
SCHEDULE E - GUARANTEED BENEFITS INVESTMENT CREDIT ..................... 34
SCHEDULE F - QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS .............. 36
SCHEDULE G - ASSET LISTING ............................................. 40
SCHEDULE H - OPENING AMOUNTS AND SETTLEMENTS ........................... 41
SCHEDULE I - INFORMATION REQUIRED FOR FINANCIAL REPORTING .............. 42
SCHEDULE J - FUND LISTING .............................................. 44
SCHEDULE K - BASE DEATH BENEFIT FEES ................................... 54
SCHEDULE L - EXPENSE ALLOWANCE ......................................... 55
2
INDEMNITY VARIABLE ANNUITY REINSURANCE AGREEMENT
This amended and restated Reinsurance Agreement dated as of October 1, 2008
(this "Agreement") is made by and between Xxxx Xxxxxxx Life Insurance Company
(U.S.A.), a Michigan corporation (hereinafter referred to as the "Ceding
Company"), and Manulife Reinsurance (Bermuda) Limited, a Bermuda corporation
(hereinafter referred to as the "Reinsurer").
Whereas the Ceding Company and Manulife Reinsurance Limited entered into a
reinsurance agreement, number 5092, effective January 1, 2002 (the "Reinsurance
Agreement"), which Reinsurance Agreement has been amended from time to time and
was transferred and assigned to the Reinsurer as of October 1, 2004 and
renumbered 8003. Under the terms of the Reinsurance Agreement, the Reinsurer
reinsures the Ceding Company's variable annuity policies, excluding riders,
primarily to provide acquisition cost strain relief to the Ceding Company in
respect of those variable annuity policies;
Whereas the Ceding Company and the Reinsurer acknowledge and affirm that,
pursuant to the Reinsurance Agreement, the base policies relating to the
Separate Account and Fixed Account have been reinsured, and will continue to be
reinsured, on a modified coinsurance basis; and
Whereas the Ceding Company and the Reinsurer now desire to amend and restate the
Reinsurance Agreement as set forth in this Agreement, so that the Reinsurer will
now reinsure all substantial risks relating to the Ceding Company's variable
annuity policies, including all applicable riders;
Now therefore, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Ceding Company and the Reinsurer hereby amend and restate the Reinsurance
Agreement in its entirety as follows:
3
ARTICLE I - SCOPE OF REINSURANCE
The Ceding Company and the Reinsurer mutually agree to reinsure on the terms and
conditions stated herein. This Agreement is an indemnity reinsurance agreement
solely between the Ceding Company and the Reinsurer, and performance of the
obligations of each party under this Agreement will be rendered solely to the
other party. In no instance will anyone other than the Ceding Company or the
Reinsurer have any rights under this Agreement, and the Ceding Company will be
and remain the only party hereunder that is liable to any insured, policyowner
or beneficiary under any policy reinsured hereunder.
For purposes of this Agreement, the following definitions shall apply:
"Agreement" means this amended and restated Reinsurance Agreement, henceforth to
be called "Indemnity Variable Annuity Reinsurance Agreement";
"Deferred Gains" means the outstanding net deferred gains measured on a tax
basis on hedging instruments used to hedge the Guaranteed Benefits and
associated fees held in the asset portfolio backing the Guaranteed Benefits;
"Guaranteed Benefits" means any riders and guaranteed benefits, including the
Guaranteed Earnings Multiplier (GEM), Guaranteed Minimum Death Benefits (GMDB),
Guaranteed Minimum Income Benefits (GMIB) and Guaranteed Minimum Withdrawal
Benefits (GMWB);
"NAIC Statutory Reserves" means the total statutory Policy reserves including
any rider reserves, as calculated in accordance with the assumptions and methods
used by the Ceding Company, which are acceptable in its state of domicile in
preparing its NAIC statutory financial statements; and
"Settlement Date" means 11:59PM Eastern Standard Time on November 18, 2008, the
date on which equity market experience was reflected in the determination of the
Initial Consideration.
4
ARTICLE II - GENERAL PROVISIONS
1. POLICIES AND RISKS REINSURED
The Ceding Company agrees to cede and the Reinsurer agrees to accept the
Quota Share Percentage of the risks under the Policies, as such terms are
defined in Schedule A - Policies Reinsured, according to the terms and
conditions set out herein.
2. COVERAGE AND EXCLUSIONS
This Agreement reinsures Policies as defined in Schedule A - Policies
Reinsured. New business issued after December 31, 2008 shall not be
reinsured under this Agreement.
Only the policies and riders described in Schedule A - Policies Reinsured,
which are underwritten and issued in accordance with the Ceding Company's
policies and guidelines outlined in the prospectus, at time of issue and
subsequent updates, are automatically reinsured under this Agreement
(hereinafter referred to as the "Policies").
3. PLAN OF REINSURANCE
This indemnity reinsurance arrangement is on an automatic quota share basis
using a combination of modified coinsurance and coinsurance funds withheld
reinsurance basis whereby the Ceding Company agrees to cede and the
Reinsurer agrees to accept risks originating from the Policies. For the
avoidance of doubt, the Ceding Company will retain, own, and control all
assets held in relation to the Modco Reserve and Funds Withheld Account.
4. THIRD PARTY REINSURANCE AGREEMENTS
The Ceding Company has entered into certain reinsurance treaties with third
parties with respect to the Policies (the "Third Party Reinsurance
Agreements"). All amounts determined under this Agreement shall be computed
net of those Third Party Reinsurance Agreements, including but not limited
to premiums, claims, expense allowances and reserves, based upon the
reinsurance coverage in effect as of the Effective Date of this Agreement.
Notwithstanding the statement above, the Ceding Company shall not reinsure
the amount it has retained on the business covered under this Agreement, on
any basis, without the prior written consent of the Reinsurer.
5. EXPENSES
As compensation for Policy expenses incurred by the Ceding Company, the
Reinsurer shall pay an expense allowance, calculated in accordance with
Article V - Ceding Commission and Expense Allowance. Such amounts shall be
an allowance for expenses and commissions and as such the Reinsurer will in
no other way bear part of the expenses incurred in connection with the
Policies, except as is otherwise provided herein.
6. POLICY CHANGES AND INVESTMENT FUNDS
The Ceding Company shall provide thirty (30) days written notification to
the Reinsurer of any organized program which will materially change the
original terms or conditions of the Policies, or the benefits provided
thereunder. The Reinsurer will provide written notification to the Ceding
Company as to the Reinsurer's acceptance or rejection of the change within
fifteen (15) days after receipt of such notice. If the Reinsurer accepts
any such change, the Reinsurer will (a) assume that portion of any increase
in the Ceding Company's liability, resulting from the change, which
corresponds to the Quota Share Percentage of the Policies, and (b) receive
credit for that portion of any decrease in the Ceding Company's liability,
resulting from the change, which corresponds to the Quota Share Percentage
of the Policies. If the Reinsurer rejects any such change, the Reinsurer's
liability under this Agreement will be determined as if no such change had
occurred.
Investment funds available to policyholders on the Effective Date are
listed in Schedule J - Fund Listing. The Ceding Company shall provide the
Reinsurer thirty (30) days written notice before it amends, substitutes or
deletes investment fund options and makes such changes effective, and
agrees to maintain a satisfactory
5
selection of core investment options with overall risk profile
characteristics similar to those listed in Schedule J - Fund Listing after
such change.
7. NO EXTRA-CONTRACTUAL DAMAGES
In no event shall the Reinsurer participate in or be required to pay any
Bad Faith Damages, Compensatory Damages, Exemplary Damages or Punitive
Damages which are awarded against the Ceding Company, or which the Ceding
Company may pay voluntarily as a result of a direct or indirect act,
omission or course of conduct committed by the Ceding Company, its agents
or representatives, in connection with any aspect of the Policies. The
Reinsurer shall, however, pay its Quota Share Percentage of Statutory
Penalties assessed against the Ceding Company strictly in connection with
the denial of a claim on any Policy if the Reinsurer elected to join in the
contest of such claim.
Notwithstanding the foregoing, where the Reinsurer directed, or consented
to the act or course of conduct of the Ceding Company which directly
results in the assessment of Bad Faith Damages, Punitive Damages and/or
Compensatory Damages, the damages so assessed shall be shared by the Ceding
Company and the Reinsurer in the same proportions as the Quota Share
Percentage of the Policies or, if applicable, the respective net liability
accepted by each. The Ceding Company shall seek the Reinsurer's opinion and
consent in writing before including the Reinsurer in the participation of
these damages. For the purposes of this provision, the following
definitions shall apply:
- "Bad Faith Damages" are those damages, which are compensated by
punitive damages and are awarded as a result of bad faith
dealings on the part of the Ceding Company;
- "Compensatory Damages" are those amounts awarded to compensate
for actual damages sustained, and are not awarded as a penalty,
nor fixed in amount by statute;
- "Exemplary Damages" or "Punitive Damages" are those damages which
are awarded as a penalty, the amount of which is not governed,
nor fixed, by statute; and
- "Statutory Penalties" are amounts awarded as a penalty and
determined by applicable law.
8. POLICY ADMINISTRATION
The Ceding Company will administer the Policies and will perform all
accounting for such Policies, provided, however, that the Reinsurer
reserves the right to participate in claims administration as set forth
herein.
9. INSPECTION
At any reasonable time, the Reinsurer may inspect, during normal business
hours, at the principal office of the Ceding Company, the original papers
and any and all other records, books, accounting working papers, or
documents relating to or affecting reinsurance under this Agreement. The
Reinsurer will not use any information obtained through any inspection
pursuant to this Section for any purpose not relating to reinsurance
hereunder. The Ceding Company also agrees to provide copies of
documentation relating to any Policies at the request of the Reinsurer.
10. ELECTION TO DETERMINE SPECIFIED POLICY ACQUISITION EXPENSES
The Ceding Company and the Reinsurer agree to the DAC Tax Election pursuant
to Regulation Section 1.848-2(g)(8) of the Treasury Regulation (the
"Regulation") Section 848 of the Internal Revenue Code of 1986, as amended
(the "Code"), whereby:
(a) the party with the net positive consideration for this Agreement for
each taxable year will capitalize specified policy acquisition
expenses with respect to this Agreement without regard to the general
deductions limitation of Code Section 848(c)(1); and
6
(b) both parties agree to exchange information pertaining to the amount of
net consideration under this Agreement each year to ensure
consistency; and
(c) each party agrees to attach to its tax return filed for the first
taxable year ending after this election becomes effective a schedule
that identifies this Agreement as the subject of this election.
The term "net consideration" will refer to either net consideration as
defined in Regulation Section 1.848-2(f) (or gross amount of premiums and
other consideration as defined in Regulation Section 1.848-3(b), as
appropriate).
The Ceding Company will submit a schedule to the Reinsurer by April 1 of
each year and present its calculation of the net consideration for the
preceding taxable year. The Reinsurer may contest the calculation by
providing an alternative schedule in writing within thirty (30) days of
receipt of the Ceding Company's schedule. Any differences will be resolved
between the parties in good faith within 30 days of the date the Reinsurer
submits its alternative schedule and the agreed amount of net consideration
will be reported on the parties' respective tax returns for the preceding
taxable year.
This DAC Tax Election shall be effective for all taxable years for which
this Agreement remains in effect.
11. PROXY TAX REIMBURSEMENT
Under Code Section 848, insurance companies are required to capitalize and
amortize specified policy acquisition expenses. The amount capitalized is
determined by proxy based on a percentage of "net premiums," as defined in
the Regulation Section 1.848-2(a). At the Reinsurer's request, the Ceding
Company will reimburse the Reinsurer for any positive timing cost to the
Reinsurer results from the application of Code Section 848 to the Policies
and the Reinsurer considers material. At the Ceding Company's request, the
Reinsurer will reimburse the Ceding Company for any positive timing cost to
the Ceding Company results from the application of Code Section 848 to the
Policies and that the Ceding Company considers material.
12. ERRORS AND OMISSIONS
Any inadvertent delay, omission or error shall not relieve either party
hereto from any liability which would attach to it if such delay, omission
or error had not been made, provided such delay, omission or error is
rectified promptly upon discovery. The Ceding Company and the Reinsurer
will, promptly upon discovery, adjust the situation to what it would have
been had the error not occurred.
13. ADJUSTMENTS
If the Ceding Company's liability under any of the Policies is changed
because of a misstatement of age, sex or any other material fact, the
Reinsurer will:
(a) Assume that portion of any increase in the Ceding Company's liability,
resulting from the change, which corresponds to the Quota Share
Percentage; and
(b) Receive credit for that portion of any decrease in the Ceding
Company's liability, resulting from the change, which corresponds to
the Quota Share Percentage.
14. REINSTATEMENTS
If a Policy is surrendered or annuitized, and is subsequently reinstated
while this Agreement is in force, the reinsurance for such Policy will be
reinstated automatically. The Ceding Company will pay the Reinsurer the
Quota Share Percentage of all amounts received by the Ceding Company in
connection with the reinstatement of the Policy, plus any amounts
previously refunded to the Ceding Company by the Reinsurer in connection
with the lapse of the Policy.
15. ASSIGNMENT
All the terms of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns, whether so expressed or not; however, neither the
7
Ceding Company nor the Reinsurer may assign any of its rights, duties or
obligations under this Agreement without the prior written consent of the
other party.
16. AMENDMENTS
This Agreement may be amended only by written agreement of the parties. Any
change or modification to this Agreement shall be null and void unless made
in writing and signed by both parties.
17. CURRENT PRACTICES
The Reinsurer's liability under this Agreement shall follow that of the
Ceding Company and be subject in all respects to the general stipulations,
terms, clauses, conditions, waivers and modifications of the Policies. The
Ceding Company will not carry out a material change, alteration or other
compromise of its claims paying or administrative practices with respect to
the Policies without the prior written consent of the Reinsurer, which
consent shall not be unreasonably withheld.
18. ENTIRE AGREEMENT
The terms expressed herein and all Exhibits, Schedules and Amendments
attached to and forming a part hereof constitute the entire agreement
between the parties with respect to the Policies. There are no
understandings or agreements between the parties with respect to the
Policies other than as expressed in this Agreement.
19. COLLATERALIZATION OF COINSURANCE RESERVES
The Reinsurer agrees to collateralize the portion of the Coinsurance
Reserves applicable to the Reinsurer by funds withheld, a letter of credit,
and assets in trust or any combination of the three, which in total will
comply with statutory and regulatory requirements for obtaining the Ceding
Company's credit for reinsurance in the state of domicile. The Reinsurer
shall have the option of establishing the method of collateralization
provided it is acceptable to the insurance regulatory authorities having
jurisdiction over the Ceding Company's reserves. The Ceding Company and the
Reinsurer shall reasonably cooperate in any amendment of this Agreement to
the extent required to permit the Ceding Company to obtain such credit in
the state of domicile.
When collateralizing by a letter of credit, the Reinsurer agrees to arrange
for the timely delivery of a clean, unconditional and irrevocable letter of
credit for the exclusive benefit of the Ceding Company, issued in a form
acceptable to the insurance regulatory authorities having jurisdiction over
the Ceding Company's reserves (the "Letter of Credit"). The Letter of
Credit will be issued by a bank that is neither the parent, subsidiary or
affiliate of either the Reinsurer or the Ceding Company and is (1)
organized or licensed in the United States and NAIC accredited, (2)
regulated, supervised and examined by U.S. federal or state authorities,
and (3) and is acceptable to Ceding Company.
As of the date of this Agreement, a Letter of Credit provided under this
Section shall be in an amount equal to the Coinsurance Reserves less the
Funds Withheld Account Balance as reported in Schedule H - Opening Amounts
and Settlements and the fair market value of any assets held in trust for
the benefit of the Ceding Company. A Letter of Credit in such amount will
be provided to the Ceding Company within seven (7) days following the date
the Agreement is executed by the parties. Thereafter, for every Accounting
Period, the amount of the Letter of Credit will equal or exceed, at all
times, the net of (i) minus (ii) minus (iii), where:
(i) Equals the Coinsurance Reserves; and
(ii) Equals the Closing Funds Withheld Account Balance, as defined in
Article VI - Funds Withheld; and
(iii) Equals the fair market value of any assets held in trust for the
benefit of the Ceding Company.
Not less than ten (10) days prior to the end of each Accounting Period, the
Ceding Company shall estimate such Coinsurance Reserves, Closing Funds
Withheld Account Balance and the amount of any Letter of Credit required in
accordance with this Section and notify the Reinsurer in writing of the
amount of the
8
Letter of Credit required in accordance with this Section and prior to the
close of the Accounting Period in which such notice is received, the
Reinsurer shall obtain and deliver to the Ceding Company a Letter of
Credit, or an amendment to a Letter of Credit, in an amount not less than
the aforementioned estimated amount.
The Reinsurer further agrees that upon completion of any Accounting Period
reporting, if the Letter of Credit amount as based upon the aforementioned
estimate is less than the actual amount of the Letter of Credit provided
under this Section, the Reinsurer shall obtain and provide to the Ceding
Company such other Letter of Credit, or amendment to Letter of Credit, in
such amount as needed to meet the requirements of this Section.
The Ceding Company agrees that upon completion of any Accounting Period
reporting, if the actual amount of the Letter of Credit provided by the
Reinsurer under this Section is in excess of the Letter of Credit amount as
based upon the aforementioned estimate, the Ceding Company shall promptly,
upon receipt of the Reinsurer's written request, agree to an amendment
reducing the amount of the Letter of Credit by an amount equal to such
excess.
Notwithstanding anything to the contrary in this Agreement, the Reinsurer
and the Ceding Company agree that the Letter of Credit may be drawn on by
the Ceding Company at any time and will be utilized and applied by the
Ceding Company, including, without limitation, any liquidator,
rehabilitator, receiver or conservator of the Ceding Company, without
diminution because of the insolvency on the part of the Ceding Company or
the Reinsurer, only for the following purposes:
(a) To reimburse the Ceding Company for the Reinsurer's share of
premiums returned to the owners of the policies reinsured under
this Agreement on account of cancellations of such policies, the
payment of which is due under the terms of this Agreement and
which has not otherwise been paid;
(b) To reimburse the Ceding Company for the Reinsurer's share of
benefit payments or losses paid by the Ceding Company pursuant to
the provisions of policies reinsured under this Agreement, the
payment of which is due under the terms of this Agreement and
which has not otherwise been paid;
(c) In the event the Ceding Company receives notice that the Letter
of Credit will not be renewed and on the thirtieth (30th) day
following the date of such notice the Reinsurer has not
established a replacement Letter of Credit or alternative
security device suitable to qualify the Ceding Company for
reserve credit for the reinsurance hereunder, then the Ceding
Company or its statutory successor may draw upon the Letter of
Credit to fund an amount with the Ceding Company for the
Reinsurer's obligations which are properly attributable to the
Policies reinsured under this Agreement. Such amount will
include, but not be limited to, amounts for policy reserves,
reserves for claims and losses incurred, loss adjustment expenses
and unearned premiums. The amount drawn on the Letter of Credit
shall be held in trust in an interest bearing account separate
from the Ceding Company's other assets and interest thereon shall
accrue to the benefit of the Reinsurer, and;
(d) To pay any other obligations of the Ceding Company that are in
fact due from the Reinsurer under this Agreement, the payment of
which is due under the terms of this Agreement and which has not
otherwise been paid.
In the event that the amount drawn by the Ceding Company on the Letter of
Credit exceeds the actual amount required for items (a), (b) and/or (d)
above, or in the case of a draw pursuant to (c) above, the Ceding Company
shall promptly return to the Reinsurer the excess amounts so drawn,
together with interest thereon (determined using the Funds Withheld Rate
from Schedule C - Funds Withheld Investment Income). All the foregoing
shall be applied without diminution because of insolvency on the part of
the Ceding Company or the Reinsurer.
9
20. AGENT FOR SERVICE OF PROCESS
The Reinsurer agrees to designate an attorney who is located in the United
States as its true and lawful attorney upon whom may be served any lawful
process in any action, suit or proceeding instituted by or on behalf of the
Ceding Company. In the event that the Reinsurer decides to change its
designation of attorney, the Reinsurer will provide written notice to the
Ceding Company.
21. GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by, construed and enforced in accordance
with the laws of the state of Michigan.
22. SEVERABILITY
In the event that any provision or term of this Agreement shall be held by
any court to be invalid, illegal or unenforceable, such holding will not
affect the validity or application of any other provision of this Agreement
which can be given effect without the invalid provision or application, and
to this end, all of the other terms and provisions of this Agreement are
declared severable and shall remain in full force and effect. To the extent
that their continuance is practicable and consistent with original intent
of the parties, the parties will attempt in good faith to renegotiate this
Agreement to carry out its original intent. All of the provisions of this
Agreement shall, to the extent necessary to carry out the purposes of this
Agreement or to ascertain and enforce the parties' rights thereunder
survive its termination.
23. NON-WAIVER OF RIGHTS
No waiver by any party of any default by any other party in the performance
of any promise, term or condition of this Agreement shall be construed to
be a waiver by such party of any other or subsequent default in performance
of the same or any other promise term or condition of this Agreement. No
prior transactions or dealings between any of the parties shall be deemed
to establish any custom or usage waving or modifying any provisions hereof.
The failure of any party to enforce any part of this Agreement, or exercise
any right under this Agreement, shall not constitute a waiver by such party
of its right to do so, nor shall it be deemed to be an act of ratification
or consent.
24. NOTICE PROVISION
All notices, letters or other communications to the respective parties
shall be in writing and faxed, couriered or mailed, addressed as follows:
If to the Ceding Company:
Xxxx Xxxxxxx Life Insurance Company (U.S.A.)
000 Xxxxxxxx Xxxxxx Xxxxxx XX, 00000
Attn: Vice President and Chief Financial Officer - Variable Annuities
If to the Reinsurer:
Manulife Reinsurance (Bermuda) Limited
00 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, XX 00, Xxxxxxx
Attn: Resident Representative
Any change in address shall be communicated in writing to the other party.
25. CURRENCY CLAUSE
All amounts stated in this Agreement are in United States dollars.
26. REPRESENTATIONS AND WARRANTIES
The parties represent and warrant to each other that this Agreement is
entered into in reliance on the utmost good faith of the parties. The
parties pledge continued utmost good faith, on their own parts and on the
part of their representatives, successors and assigns, in their performance
of duties and obligations under this Agreement.
10
The Ceding Company represents and warrants to the Reinsurer as follows, and
acknowledges that the Reinsurer is relying thereon without any independent
inquiry in entering into this Agreement:
(i) All factual information provided to the Reinsurer by the Ceding
Company is complete and accurate as of the date the document
containing such information was prepared and any assumptions made in
preparing the information were based upon informed judgment and are
consistent with sound actuarial principles. The Ceding Company is not
aware of any omissions, errors, changes or discrepancies which would
materially affect the above information; and
(ii) Should the Ceding Company subsequently wish to obtain additional
reinsurance for the Policies it shall obtain permission from the
Reinsurer before entering into any additional reinsurance treaties.
All obligations, representations and warranties made in this Agreement
shall survive the termination of this Agreement and shall continue in full
force and effect until all obligations of the parties hereunder have been
discharged in full.
27. HEADINGS
Section headings in this Agreement are included in this Agreement for
convenience of reference only and shall not affect the construction or
interpretation hereof.
28. ANTI-MONEY LAUNDERING
It is the intention of the Ceding Company and the Reinsurer to comply with
all applicable laws, statutes, regulations and rules. The parties are
responsible for compliance with all such laws, statutes, regulations and
rules applicable to the business reinsured under this Agreement including
but not limited to, the requirements for the USA Patriot Act and the United
States Department of the Treasury's Office of Foreign Asset Control
("OFAC"). Should either party receive information that an underlying policy
which is part of the business reinsured under this Agreement may be insured
or owned, or in any way or right be controlled by a Specialty Designed
National and Blocked Person, as such term is defined by OFAC (a "Prohibited
Person") or a department, agency, branch, instrumentality, government-owned
entity or representative of the government of a sanctioned or an embargoed
country as names by OFAC (collectively, a "Sanctioned Country") that party
shall promptly provide such information to the other party. In no event
shall the Reinsurer be liable for any reinsurance or any reinsurance claim
with respect to any such underlying policy or coverage involving a
Prohibited Person or Sanctioned Country unless the issuance of such
underlying policy or coverage by the underlying issuing company satisfies
all applicable OFAC regulatory requirements.
29. NAIC STATEMENT BLANK
If the NAIC Statement Blank is changed or modified after the date of this
Agreement, such that the items do not appear on the pages, exhibits,
columns and lines referred to in this Agreement, the parties shall use the
corresponding line in the then current blank in performing any operation or
providing any information required by this Agreement. If any line on the
NAIC Statement Blank referred to in this Agreement should be eliminated or
combined with other amounts or if the basis set out in the NAIC Statement
Blank should be modified so that any calculation required by this Agreement
cannot be performed, then such calculation will be determined in accordance
with a method satisfactory to both parties to this Agreement.
30. CONFIDENTIALITY
Both the Ceding Company and the Reinsurer will hold confidential and not
disclose or make competitive use of any shared proprietary information
unless otherwise agreed to in writing, or unless the information otherwise
becomes publicly available or the disclosure of which is required for
retrocession purposes or is required by applicable law, regulatory
authorities having jurisdiction over the parties to this Agreement or by
the parties' external auditors.
11
ARTICLE III - INITIAL CONSIDERATION AND REINSURANCE PREMIUMS
1. INITIAL CONSIDERATION
The Ceding Company will pay the Reinsurer an Initial Consideration of
$2,431,000,000 within five (5) business days of the date this Agreement is
fully executed by the parties (the "Execution Date"). This amount is a best
efforts estimate of the amount to be paid as of the Settlement Date, and
will be adjusted accordingly to the actual amount in the initial Accounting
Period.
2. REINSURANCE PREMIUMS
For each Accounting Period the Ceding Company will pay the Reinsurer the
Quota Share Percentage of all premiums earned under the Policies, including
base policy premiums, any rider premiums, payment enhancements or charges
plus base policy guaranteed death benefit fees, as defined in Schedule K -
Base Death Benefit Fees (the "Reinsurance Premiums"), net of premiums
payable under Third Party Reinsurance Agreements.
3. REINSURANCE FEES
For each Accounting Period the Ceding Company will pay the Reinsurer the
Quota Share Percentage of all fees charged by the Ceding Company on the
Policies, including the net investment management fees, 12(b)(1) fees and
insurance fees (the "Reinsurance Fees"). For the purposes of this
Agreement, the amount payable for Reinsurance Fees for each Accounting
Period will be [*], or such other rate as may be agreed between the parties
from time to time, times the average of the beginning fund value of the
separate account of the base policies reinsured and the ending fund value
of the separate account of the base policies reinsured. For the avoidance
of doubt, the Reinsurance Fees calculated by this method can never be in
excess of the net investment management fees, 12(b)(1) fees and insurance
fees actually earned by the Ceding Company on the Policies.
ARTICLE IV - CLAIMS AND OTHER BENEFITS
1. REINSURANCE CLAIMS
The Reinsurer will reimburse the Ceding Company for the Quota Share
Percentage of Policy benefits paid or accrued by the Ceding Company to
policyholders during the Accounting Period in accordance with this Article
IV (the "Reinsurance Claims"), including but not limited to Death Claims,
Surrenders, Annuitization Claims, Income Benefit Claims and Withdrawal
Benefit Claims. Reinsurance Claims paid and payable under this Agreement
shall be computed net of amounts recovered and recoverable under the Third
Party Reinsurance Agreements in effect as of the date of this Agreement.
Such reimbursement shall be paid in accordance with Article VI - Reserves
and Funds Withheld.
2. DEATH CLAIMS
The Reinsurer will reimburse the Ceding Company for the cash surrender
value and, if applicable, any Guaranteed Minimum Death Benefits (GMDB) and
any Guaranteed Earnings Multiplier (GEM) paid or accrued by the Ceding
Company under the Policies at death, including death benefits (collectively
the "Death Claims").
3. SURRENDERS
The Reinsurer will reimburse the Ceding Company for amounts paid or accrued
to a policyholder in the event of a full or partial surrender of a Policy
net of any applicable Surrender Charges (the "Surrenders"). Surrender
charges shall be defined as the amount that the Ceding Company deducts
before paying the cash surrender value upon a full or partial surrender of
a Policy (the "Surrender Charges").
4. ANNUITIZATION CLAIMS
The Reinsurer will reimburse the Ceding Company annuitization claims paid
or accrued by the Ceding Company under the fixed and/or variable settlement
options of a Policy, provided such payments are made by the Ceding Company
at terms guaranteed in the Policy at its time of issue (the "Annuitization
Claims"). In
12
the event that annuities are issued as part of the fixed settlement options
of the Policy, the Reinsurer will reimburse the Ceding Company for the
Quota Share Percentage of the greater of (i) and (ii), where:
(i) Equals the annuity account value (the "Account Value"); and
(ii) Equals the Account Value multiplied by the monthly income
determined at terms guaranteed in the Policies at time of their
issue divided by the monthly income determined with the Annuity
2000 mortality table (no age setback and age nearest birthday on
annuitization date) with Scale G (1995 TSA) mortality
improvements and the yield on the most recently auctioned 7-year
Treasury Security, as posted in the Wall Street Journal, at the
beginning of the month in which the fixed annuitization occurs,
plus 50 basis points.
The Reinsurer will not be liable for the reinsurance of any Policy
annuitizing at terms more favorable than those guaranteed in the Policy at
its time of issue. In the event that the Ceding Company allows
annuitization at terms more favorable than those guaranteed in the Policy
at the time of issue, such Policy will be considered surrendered and the
Reinsurer will pay the Ceding Company the Quota Share Percentage of the
Account Value applied to the annuitization. No further obligation or
liability will exist for the Reinsurer for such annuitized Policy.
5. INCOME BENEFITS CLAIMS
The Reinsurer will reimburse the Ceding Company for claims on the
guaranteed minimum income benefit (GMIB) riders included in Schedule A -
Policies Reinsured (the "Income Benefit Claims"). The Income Benefit Claims
will be equal to the greater of zero or the result of the GMIB income base
times the GAPR / CAPR less the Account Value, where:
a. the Guaranteed Annuity Purchase Rates (GAPR) is specified in the
applicable GMIB benefit rider form; and
b. the Current Annuity Purchase Rates (CAPR) is calculated using the
Annuity 2000 mortality table (no age setback and age nearest
birthday on exercise date) with scale G (1995 TSA) mortality
improvements and the yield on the most recently auctioned 7-year
Treasury Security, as posted in the Wall Street Journal, at the
beginning of the month in which the exercise of the income
benefit rider occurs, plus 50 basis points.
6. WITHDRAWAL BENEFITS CLAIMS
The Reinsurer will reimburse the Ceding Company for claims on the
guaranteed minimum withdrawal benefit (GMWB) riders included in Schedule A
- Policies Reinsured (the "Withdrawal Benefits Claims"). The Withdrawal
Benefit Claims are the payments made on the Policy once the Account Value
reduces to zero and/or as part of the settlement phase of the Policy.
7. NOTICE
Upon request of the Reinsurer the Ceding Company will notify the Reinsurer
promptly after receipt of any information regarding Reinsurance Claims. The
Reinsurance Claims documentation, including but not limited to copies of
notification, claim papers, and proofs, will be furnished by the Ceding
Company to the Reinsurer upon request.
8. LIABILITY AND PAYMENT
Reinsurer will accept the decision of the Ceding Company with respect to
payment of Policy benefit claims reinsured under this Agreement and such
decision will be binding on the Reinsurer. In no event will the Reinsurer
reimburse the Ceding Company for ex gratia payments with respect to the
Policies reinsured under this Agreement or any other payments not made in
accordance with the terms of the Policies reinsured hereunder unless made
in accordance with Section 9 below.
13
9. CONTESTED CLAIMS
The Ceding Company will advise the Reinsurer of its intention to contest,
compromise or litigate any Policy benefit claims. The Reinsurer will pay
the Quota Share Percentage of such contests, in addition to Reinsurance
Claims, or it may choose not to participate. If the Reinsurer chooses not
to participate, it will discharge its liability by payment to the Ceding
Company of its full Quota Share Percentage of its liability on the Policy
reinsured.
ARTICLE V - CEDING COMMISSION AND EXPENSE ALLOWANCE
1. INITIAL CEDING COMMISSION
An Initial Ceding Commission will be paid by the Reinsurer to the Ceding
Company, simultaneously with the payment of the Initial Consideration, in
an amount equal to $170,000,000. This amount is a best efforts estimate of
the amount to be paid as of the Settlement Date, and will be adjusted
accordingly to the actual amount in the initial Accounting Period.
2. EXPENSE ALLOWANCE
The Reinsurer will pay the Ceding Company an Allowance for Commissions and
Expenses for each Accounting Period equal to the Quota Share Percentage
times the sum of (i) through (v), where:
(i) Equals acquisition expense allowances equal to base policy premiums
and premium enhancements, for each of the following products, times
the percentages as described in Schedule L - Expense Allowance; and
(ii) Equals the CARVM expense allowance attributable to the base policy
premiums, determined in accordance with Article III, Section 2, paid
during the Accounting Period; and
(iii) Equals [*] multiplied by the number of base Policies inforce at the
end of the Accounting Period, as referred to in Schedule A - Policies
Reinsured; and
(iv) Equals [*] percent of the total fund value of the separate account and
fixed account with respect to the base policies reinsured (the "Fund
Value of the Policies") as of the end of the Accounting Period; and
(v) Equals the total for all policy years of (a) times (b), where:
(a) Equals the total Account Value of the Policies for each policy
year as of the end of the Accounting Period; and
(b) Equals the Trailer Commission Rate, as defined below:
Trailer
For Policy Years Commission Rate
---------------- ---------------
1 [*]
2 [*]
3 [*]
4 [*]
5 [*]
6 [*]
7 [*]
8 [*]
9 [*]
10 and later [*]
The Ceding Company will provide the Reinsurer with the detailed calculation
of the Expense Allowance for each Accounting Period as set out in Schedule
F - Quarterly Report of Activity and Settlements.
14
ARTICLE VI - RESERVES AND FUNDS WITHHELD
1. MODCO RESERVE
The modified coinsurance reserve (the "Modco Reserve") will equal the Quota
Share Percentage multiplied by the result of (i) plus (ii) plus (iii),
where:
(i) Equals the NAIC Statutory Reserve held by the Ceding Company with
respect to the base policy of the Policies, including reserves
for both the Separate Account and Fixed Account, excluding any
reserves associated with any Guaranteed Benefits, at the end of
the Accounting Period; and
(ii) Equals the Tax Reserves held at the end of the Accounting Period
for Guaranteed Benefits; and
(iii) Equals the excess, if any, of the Deferred Gains at the end of
the Accounting Period over the amount of Deferred Gains existing
on the Settlement Date.
For greater clarity, the parties intend that the Ceding Company hold the
tax reserves for Guaranteed Benefits, where tax reserves means reserves
computed according to the methods described in Code Section 807 and
Regulations related thereto (the "Tax Reserves").
2. MODCO RESERVE ADJUSTMENT
The Modco Reserve Adjustment shall be (i) minus (ii) minus (iii), where,
(i) Equals the Modco Reserve, determined in accordance with Section 1
above, at the end of the Accounting Period; and
(ii) Equals the Modco Reserve, determined in accordance with Section 1
above, at the end of the previous Accounting Period, except that
for the initial Accounting Period, for which the Modco Reserve
will equal the Modco Reserve determined as of the Effective Date,
in accordance with Schedule H - Opening Amounts and Settlements;
and
(iii) Equals the Modco Reserve Investment Credit determined in
accordance with Schedule B - Modco Reserve Investment Credit.
3. COINSURANCE RESERVE
The coinsurance reserve (the "Coinsurance Reserve") shall be the Quota
Share Percentage multiplied by the result of (i) minus (ii) minus (iii),
where:
(i) Equals the NAIC Statutory Reserve held by the Ceding Company with
respect to any Guaranteed Benefits; and
(ii) Equals the Tax Reserves held at the end of the Accounting Period
for Guaranteed Benefits; and
(iii) Equals the excess, if any, of the Deferred Gains at the end of
the Accounting Period less the Deferred Gains existing on the
Settlement Date.
4. FUNDS WITHHELD ACCOUNT
The Ceding Company will withhold funds from the Reinsurer and establish a
funds withheld account pursuant to this Article (the "Funds Withheld
Account").
The Ceding Company will retain, control and own all assets held in relation
to the Funds Withheld Account while maintaining a liability to the
Reinsurer equal to this amount. The Ceding Company will invest and manage
the assets backing the Funds Withheld Account in accordance with an
investment policy which will be created, and approved by the Reinsurer,
before December 31, 2008 (the "Investment Policy"). The Ceding
15
Company will not materially change the Investment Policy without the prior
written consent of the Reinsurer, which consent will not be unreasonably
withheld.
For the period of October 1, 2008 to December 31, 2008 it is recognized by
both the Ceding Company and the Reinsurer that an Investment Policy does
not yet exist for the asset segment backing the Guaranteed Benefits. As a
result, for the specified period, the Funds Withheld Account will attract
an earned interest rate of LIBOR plus 50 basis points, plus the Quota Share
Percentage of any gains or losses on hedging instruments used to hedge and
back the Guaranteed Benefits and the associated fees in the Policies times
the ratio of the Opening Funds Withheld Account Balance over the sum of the
Opening Funds Withheld Account Balance plus the Guaranteed Benefits
component of the Modco Reserve, as defined in Section 1 (ii) and (iii) of
this Article.
5. OPENING FUNDS WITHHELD ACCOUNT BALANCE
The Funds Withheld Account as of the Effective Date of this Agreement shall
have a balance equal to the amount stated as the Funds Withheld Account
Balance in Schedule H - Opening Amounts and Balances. Thereafter and for
the duration of the Agreement, the Ceding Company shall adjust the Funds
Withheld Account Balance at the end of each Accounting Period as set out in
this Article.
The Funds Withheld Account Balance as of the first day of each Accounting
Period (the "Opening Funds Withheld Account Balance") subsequent to the
Accounting Period in which the date of this Agreement falls shall be an
amount equal to the Funds Withheld Account Balance on the last day of the
immediately preceding Accounting Period (the "Closing Funds Withheld
Account Balance").
The Closing Funds Withheld Account Balance shall never be less than zero.
6. REINSURANCE GAIN
For each Accounting Period, the reinsurance gain (the "Reinsurance Gain")
will be equal to (a) minus (b), where:
(a) Equals the sum of items (i) through (iv), where;
(i) Equals the Reinsurance Premiums as defined in Article III -
Reinsurance Premiums, Section 2; and
(ii) Equals the Reinsurance Fees as defined in Article III -
Reinsurance Premiums, Section 3; and
(iii) Equals the Investment Income gains and losses, whether realized
or unrealized, from assets backing the Funds Withheld Account, in
accordance with Section 9 below; and
(iv) The absolute value of the lesser of zero and the Modco Reserve
Adjustment, determined in accordance with Section 2 above; and
(b) Equals the sum of items (i) through (iii), where;
(i) Equals the Reinsurance Claims as defined in Article IV - Claims
and Other Benefits, Sections 1 through 6; and
(ii) Equals the greater of zero and the Modco Reserve Adjustment,
determined in accordance with Section 2 above; and
(iii) Equals the Expense Allowance as defined in Article V - Expense
Allowance, Section 2.
For the avoidance of doubt, the Reinsurance Gain may be a positive or a
negative number.
16
7. FUNDS WITHHELD ADJUSTMENT
For each Accounting Period the adjustment to the Funds Withheld Account
Balance (the "Funds Withheld Adjustment") will equal the greater of (a)
plus (b) minus (c) and zero, where:
(a) Equals the Opening Funds Withheld Account Balance as defined in
Section 5 above;
(b) Equals the Reinsurance Gain at the end of the Accounting Period as
calculated in accordance with Section 6 above;
(c) Equals the Coinsurance Reserve.
8. CALCULATION OF THE CLOSING FUNDS WITHHELD ACCOUNT BALANCE
The Closing Funds Withheld Account Balance for each Accounting Period will
be equal to the greater of (a) plus (b) minus (c) and zero, where:
(a) Equals the Opening Funds Withheld Account Balance as defined in
Section 5 above;
(b) Equals the Reinsurance Gain at the end of that Accounting Period as
calculated in accordance with Section 6 above;
(c) Equals the Funds Withheld Adjustment as calculated in accordance with
Section 7.
9. CALCULATION OF INVESTMENT INCOME
The Ceding Company shall calculate, for each Accounting Period, the
investment income earned on the portion of the Ceding Company's assets
backing the Opening Funds Withheld Balance, in accordance with Schedule C -
Funds Withheld Investment Income (the "Investment Income"). For the
avoidance of doubt, Investment Income may be a negative number.
10. CREDITING RATE
During the duration of this Agreement, it is the parties' expectation that
the Ceding Company will credit a rate on the fixed account portion of the
Policies which maintains the Company's current crediting rate practice. The
Ceding Company's current practice is to credit a rate that is either
supportable from the return on the duration matched new money rates,
subject to contractual minimum interest rates, or is enhanced by a limited
"promotional budget" not to exceed 0.5% of base policy premiums received
during the Accounting Period, which allows the Ceding Company to remain
competitive in the Variable Annuity market.
The Ceding Company will inform the Reinsurer in the event the Ceding
Company determines the need to deviate from its current crediting practice.
The Ceding Company will provide the Reinsurer with the description of the
Ceding Company's proposed strategy and the Ceding Company's justification
for crediting interest rates outside the guidelines described above. The
description, justification and supporting documentation shall be subscribed
to by a Member of the American Academy of Actuaries stating that the new
crediting rate strategy is sound, adequate in light of cash flow testing,
adequate considering all reserve requirements established in the Standard
Valuation Law and is determined to be sound under the Actuarial Standards
of Practice.
11. INITIAL RESERVE ADJUSTMENT
The Initial Reserve Adjustment on the Effective Date is equal to
$480,000,000.
17
ARTICLE VII - ACCOUNTING AND QUARTERLY SETTLEMENT
1. QUARTERLY ACCOUNTING PERIOD
Each Accounting Period under this Agreement will be a calendar quarter
ending March 31, June 30, September 30 or December 31, except that: (a) the
initial Accounting Period runs from the Effective Date of this Agreement
through the last day of the calendar quarter during which the Execution
Date of this Agreement falls, and (b) the final Accounting Period runs from
the first day after the end of the preceding Accounting Period until the
Terminal Accounting Date of this Agreement as defined in Article IX
- Terminal Accounting and Settlement, Section 2.
2. QUARTERLY ACCOUNTING REPORTS
The Ceding Company shall submit to the Reinsurer quarterly accounting
reports, substantially in the form of Schedule F - Quarterly Report of
Activity and Settlements, for each Accounting Period not later than
forty-five (45) days after the end of each Accounting Period. Such reports
will include, but is not limited to, information on the amount of
Reinsurance Premiums, Expense Allowance, Reinsurance Claims, Funds Withheld
Balances, Funds Withheld Adjustment, Coinsurance Reserves, Modco Reserves
and Modco Investment Credit. Upon request, the Ceding Company shall submit
a quarterly asset listing in the form of Schedule G -Asset Listing, not
later than forty-five (45) days after the end of each Accounting Period. In
addition, upon request, the Ceding Company shall submit a quarterly listing
of policies inforce as described in the form of Schedule I - Information
Required for Financial Reporting.
3. QUARTERLY SETTLEMENTS
Within forty-five (45) days after the end of each Accounting Period, an
amount equal to the Reinsurance Gain, as defined in Article VI - Reserves
and Funds Withheld, Section 7, will be settled between the Ceding Company
and Reinsurer.
Payment shall first be made by way of an increase or decrease to the Funds
Withheld Account as applicable, where: (i) if the Reinsurance Gain is
greater than or equal to zero, the Ceding Company shall increase the Funds
Withheld Account Balance by such amount, and (ii) if the Reinsurance Gain
is less than zero, the Ceding Company shall decrease the Funds Withheld
Account Balance by the absolute value of such amount.
For the avoidance of doubt, no cash payment will be made to the reinsurer
unless, after such payment, the Coinsurance Reserve is equal to the Closing
Funds Withheld Account Balance.
In the event a positive amount is calculated for the Funds Withheld
Adjustment, such amount will be paid in cash to the Reinsurer.
In the event the Funds Withheld Adjustment is calculated to be zero, and
the Coinsurance Reserve exceeds the sum of the Closing Funds Withheld
Account Balance plus any existing Letter of Credit amount, the Reinsurer
has the option to:
(a) Pay an amount to the Ceding Company in cash or cash equivalents
equal to the Coinsurance Reserve less the Closing Funds Withheld
Account Balance less the existing Letter of Credit amount less
the market value of any assets held in trust for the benefit of
the Ceding Company, such amount to be deposited in the Funds
Withheld Account; or
(b) Provide a Letter of Credit to the Ceding Company equal to the
Coinsurance Reserve less the Closing Funds Withheld Account
Balance less any existing Letter of Credit amount, less the
market value of any assets held in trust for the benefit of the
Ceding Company; or
(c) Transfer an amount or assets to a trust for the benefit of the
Ceding Company with a fair value equal to the Coinsurance Reserve
less the Closing Funds Withheld Account Balance less the existing
Letter of Credit amount less the market value of any existing
assets held in trust for the benefit of the Ceding Company.
18
4. AMOUNTS DUE QUARTERLY
Within forty-five (45) days after the end of each Accounting Period, the
Ceding Company will pay to the Reinsurer any positive Funds Withheld
Adjustment for the Accounting Period as per Article VI - Funds Withheld,
Section 7. The payment of a Funds Withheld Adjustment to the Reinsurer
shall only be made by the Ceding Company in cash or cash equivalent as may
be agreed by the Reinsurer. In the event the Funds Withheld Account falls
to zero, any payments to be made by the Reinsurer to the Ceding Company
will be made in cash or funded through a Letter of Credit.
5. ANNUAL ACCOUNTING REPORTS
The Ceding Company will provide the Reinsurer with annual accounting
reports within sixty (60) days after the end of the calendar year for which
such reports are prepared. These reports will contain sufficient
information about the Policies to enable the Reinsurer to prepare its
annual financial reports and to verify information reported in Schedule E -
Quarterly Report of Activity and Settlements, and will include Exhibit 5 by
reserve basis, Page 7 and Schedule S of the NAIC Convention Blank.
Furthermore, upon request, the Ceding Company will provide to the Reinsurer
a copy of its annual NAIC Statement and the Reinsurer will provide to the
Ceding Company a copy of its audited financial statements.
6. ESTIMATIONS
If the amounts, as described in Sections 3 and 4 above, cannot be
determined by the dates described in those sections, on an exact basis,
such payments will be paid in accordance with a mutually agreed upon
formula which will approximate the actual payments. Adjustments will then
be made to reflect actual amounts when they become available.
7. DELAYED PAYMENTS
For purposes of Section 4 above, if there is a delayed settlement of a
payment due, the party owed shall have the right to charge an interest
penalty on the net amount owed for the period that the amount is overdue.
Any interest penalty charged shall be calculated from the date due as set
forth in Section 4 above, to the date of payment based on the three month
LIBOR on a per annum basis (containing 360 days) as published on the last
day of the Accounting Period plus 50 basis points. The three month LIBOR
rate for this calculation will reset at the last business day of each
subsequent Accounting Period until outstanding amounts due have been paid.
Accrued balances of less than $200,000 can be paid in the next subsequent
Accounting Period settlement without interest penalty.
8. OFFSET OF PAYMENTS
The Company and the Reinsurer will have the right to offset any balance or
balances due and payable between the parties, including but not limited to
premiums, allowances, and claims due from one party to the other under this
Agreement. This right of offset shall not be affected or diminished because
of the insolvency of either party to this Agreement.
ARTICLE VIII - DURATION AND RECAPTURE
1. DURATION
Except as otherwise provided herein, this Agreement will be unlimited in
duration.
2. REINSURER'S LIABILITY
The liability of the Reinsurer with respect to any Policy will begin
simultaneously with that of the Ceding Company, but in no event prior to
the Effective Date of the Agreement. The Reinsurer's liability with respect
to any Policy reinsured hereunder will terminate on the earliest of:
(i) the date such Policy is recaptured;
(ii) the date the Ceding Company's liability with respect to such
Policy is terminated; or
(iii) the date this Agreement is terminated in its entirety.
19
Termination of the Reinsurer's liability is subject to payments in respect
of such liability in accordance with the provisions of Article IX -
Terminal Accounting and Settlement of this Agreement. In no event should
the interpretation of this Section imply a unilateral right of the
Reinsurer to terminate this Agreement.
3. TERMINATION FOR NONPAYMENT OF REINSURANCE PREMIUMS OR OTHER AMOUNTS DUE
If the Ceding Company fails to pay the Reinsurance Premiums or any other
amounts due to the Reinsurer pursuant to this Agreement, within
seventy-five (75) days after the end of any Accounting Period, the
Reinsurer may terminate this Agreement, subject to thirty-five (35) days
prior written notice to the Ceding Company. If during the thirty-five (35)
day period, the Ceding Company makes full payment of the Reinsurance
Premiums due, this Agreement shall continue in force.
4. RECAPTURE
The Ceding Company does not have the right to recapture the business
reinsured hereunder on or before December 31, 2018. If the Ceding Company
opts to recapture after December 31, 2018, then the Ceding Company must
recapture all Policies reinsured hereunder. In no event may the Ceding
Company recapture anything other than 100 percent of all Policies reinsured
hereunder without the prior written consent of the Reinsurer. Policies
reinsured hereunder may be recaptured only after specific mutual agreement
on all recapture terms and provisions, including any recapture charges or
credits, between the Reinsurer and the Ceding Company. Recapture shall be
subject to a terminal accounting and settlement pursuant to Article IX -
Terminal Accounting and Settlement.
5. INTERNAL REPLACEMENTS
Should the Ceding Company, its affiliates, successors or assigns, initiate
a program of internal replacement that would include any of the Policies,
the Ceding Company will promptly notify the Reinsurer. At the option of the
Reinsurer, such Policies may be treated as recaptured rather than
surrendered, and the Ceding Company may be required to recapture all such
Policies as of the end of the Accounting Period wherein notice is provided.
For purposes of this Agreement, the term "Internal Replacement" means any
instance in which a Policy or any portion of the Policy is exchanged for
another policy or annuity, not covered under this Agreement, which is
written by the Ceding Company, its affiliates, successors or assigns. This
Section applies to programs of internal replacement and not singular
internal replacements not completed as part of a program. The Ceding
Company will not initiate a program of internal replacement for the purpose
of forcing recapture hereunder without the written approval of the
Reinsurer, which approval shall not be unreasonably withheld, delayed or
conditioned. Any recapture in accordance with this Section is subject to a
terminal accounting and settlement pursuant to Article IX - Terminal
Accounting and Settlement.
Notwithstanding the above, the Reinsurer is aware and is comfortable with,
the upgrade program used by the Ceding Company regarding guaranteed
benefits.
ARTICLE IX - TERMINAL ACCOUNTING AND SETTLEMENT
1. TERMINAL ACCOUNTING AND SETTLEMENT
In the event that the reinsurance under this Agreement is recaptured or
terminated, as provided for herein under Article VIII - Duration and
Recapture, or if by other mutual agreement of the parties, or if by other
means than due to the natural expiration of this Agreement due to
settlement of the last remaining policyholder's benefit, a special
accounting and settlement shall take place.
Upon the natural expiration of this Agreement due to the last policyholder
whose Policy is reinsured hereunder terminating his Policy in accordance
with its terms, no special accounting shall take place and no inference or
construction should be given to this Agreement that would somehow allow the
Reinsurer to recover previous losses due to such natural expiration of this
Agreement.
20
2. TERMINAL ACCOUNTING DATE
The terminal accounting date (the "Terminal Accounting Date") shall be the
effective date of recapture or termination pursuant to any notice of
recapture or termination given under this Agreement or such other date as
shall be mutually agreed to in writing.
3. TERMINAL ACCOUNTING REPORT
The Ceding Company shall provide the Reinsurer a Terminal Accounting Report
providing all of the information contained in the Quarterly Accounting
Report as defined in Article VII - Accounting and Quarterly Settlement,
Section 2 and the Annual Accounting Report as defined in Article VII -
Accounting and Quarterly Settlement, Section 5, except that for all reports
the close of such Accounting Period shall be the Terminal Accounting Date
as defined in Section 2 above.
4. TERMINAL CASH FLOW SETTLEMENT
The Terminal Cash Flow Settlement shall consist of the final cash flow
settlement, and the following payments, determined as of an instant in time
immediately after the final cash flow settlement and immediately before
this Agreement expires.
(a) payment by the Ceding Company to the Reinsurer of an amount equal to
the Closing Funds Withheld Account Balance as of the instant in time
immediately before the expiration of this Agreement; and
(b) payment by the Reinsurer to the Ceding Company of the Reinsurer's net
liability on the Policies immediately before expiration of this
Agreement only if the Reinsurer has received full payment for the
amount called for in (a) above.
The final cash flow settlement is the cash flow settlement as provided for
in Article VII - Accounting and Quarterly Settlement, Section 4 and
Schedule E - Quarterly Report of Activity and Settlements, except that all
amounts will be calculated as of the instant in time immediately before
this Agreement expires.
The net liability referred to in (b) refers to the economic value of the
Reinsurer's obligations under this Agreement, and shall be calculated using
a method agreed upon by both parties at the time of recapture.
For clarity, upon completion of the steps described in (a) and (b) above it
is the parties' intent that the Reinsurer retain an appropriate portion of
the present value of the future economic profits of the business reinsured,
which shall be the difference between the Funds Withheld Account Balance
and the economic reserve for the Policies on the Termination Date, as
determined using a method mutually agreeable to the parties, but in no
event less than zero.
Should the above calculation result in a positive cash flow, such net
amount is due and payable to the Reinsurer. Should the above calculation
result in a negative cash flow, such net amount is due and payable to the
Ceding Company. All payments shall be considered timely if such payment is
received within 30 days after the date as defined in Section 2 above.
Any assets held in a trust for the benefit of the Ceding Company will be
released to the Reinsurer upon termination of the Agreement, which assets
may be used by the Reinsure to settle any termination payment payable to
the Ceding Company.
5. SUPPLEMENTARY ACCOUNTING AND SETTLEMENT
In the event that, subsequent to the Terminal Accounting and Settlement as
provided above, a change is made with respect to any amounts due, a
supplementary accounting will take place pursuant to Section 4 above. Any
amount owed to the Ceding Company or to the Reinsurer by reason of such
supplementary accounting will be paid promptly upon the completion thereof.
ARTICLE X - ARBITRATION
21
1. BASIS FOR ARBITRATION
The Ceding Company and Reinsurer mutually understand and agree that the
wording and interpretation of this Agreement is based on the usual customs
and practices of the insurance and reinsurance industry. While both Parties
agree to act in good faith in its dealings with each other, it is
understood and recognized that situations may arise in which they cannot
reach an agreement.
In the event that any dispute cannot be resolved to the Ceding Company and
the Reinsurer's mutual satisfaction, the dispute will first be subject to
good-faith negotiation as described below in an attempt to resolve the
dispute without the need to institute formal arbitration proceedings.
2. NEGOTIATION
Within ten days after one of the Parties has given the other the first
written notification of the specific dispute, each of the Parties will
appoint a designated officer to attempt to resolve the dispute. The
officers will meet at a mutually agreeable location as early as possible
and as often as necessary, in order to gather and furnish the other with
all appropriate and relevant information concerning the dispute. The
officers will discuss the problem and will negotiate in good faith without
the necessity of any formal arbitration proceedings. During the negotiation
process, all reasonable requests made by one officer to the other for
information will be honored. The designated officers will decide the
specific format for such discussions.
If the officers cannot resolve the dispute within thirty days of their
first meeting, both Parties agree that they will submit the dispute to
formal arbitration. However, the Ceding Company and the Reinsurer may agree
in writing to extend the negotiation period for an additional thirty days.
3. ARBITRATION PROCEEDINGS
No later than fifteen (15) calendar days after the final negotiation
meeting, the officers taking part in the negotiation will give both the
Ceding Company and the Reinsurer written confirmation that they are unable
to resolve the dispute and that they recommend establishment of formal
arbitration.
An arbitration panel consisting of three active or retired officers of life
insurance or reinsurance companies not affiliated with either the Ceding
Company or the Reinsurer in any way will settle the dispute. Each Party
will appoint one arbitrator and those two will select a third. In the event
that the arbitrators are unable to agree on a third arbitrator within sixty
(60) calendar days from the date one of the arbitrators sends written
notice to the arbitrator requesting that the arbitrators select a third
arbitrator, then either party may petition the American Arbitration
Association to select the third arbitrator.
Once the arbitration panel has been constituted, the third arbitrator shall
contact the parties or their counsel in writing and request a telephone
conference. The purpose of the telephone conference is to set a date when
the parties, their counsel and the arbitration panel will meet to address
organizational matters relating to the arbitration.
The arbitration proceedings will be conducted according to the Commercial
Arbitration Rules of the American Arbitration Association in effect at the
time the arbitration begins.
The arbitration will take place in the state of Michigan or such other
jurisdiction as agreed to by the parties.
Within sixty (60) calendar days after the beginning of the arbitration
proceedings the arbitrators will issue a written decision on the dispute
and a statement of any award to be paid as a result. In resolving the
merits of the parties' difference of opinion the arbitration panel is
relieved from all judicial formalities and may abstain from following the
strict rule of law, but shall interpret this Agreement as an honorable
engagement and not merely a legal obligation. The arbitration panel shall
make any interim and final award to effectuate the general purpose of this
Agreement in a reasonable manner rather than in accordance with a literal
or strictly legal interpretation of its language.
The decision will be final and binding on both the Ceding Company and the
Reinsurer and there will be no further appeal.
22
The Ceding Company and the Reinsurer may mutually agree to extend any of
the negotiation or arbitration periods shown in this Article.
The Ceding Company and the Reinsurer will bear the cost of their appointed
arbitrator. Unless otherwise decided by the arbitrators, the Ceding Company
and the Reinsurer will share equally all other expenses resulting from the
arbitration, including the fees and expenses for the third arbitrator,
except that each Party will be responsible for its own attorneys' fees.
ARTICLE XI - INSOLVENCY
1. INSOLVENCY OF THE CEDING COMPANY
If the Ceding Company is judged insolvent, the Reinsurer will pay all
reinsurance under this Agreement directly to the Ceding Company, its
liquidator, receiver or statutory successor on the basis of the Reinsurer's
liability under the Policy or Policies reinsured without decrease because
of the Ceding Company's insolvency. It is understood, however, that in the
event of the Ceding Company's insolvency the liquidator, receiver or
statutory successor will give the Reinsurer written notice of a pending
claim on a Policy within a reasonable time after the claim is filed in the
insolvency proceedings. While the claim is pending, the Reinsurer may
investigate and interpose at its own expense in the proceedings where the
claim is to be adjudicated, any defense which the Reinsurer may deem
available to the Ceding Company, its liquidator, receiver or statutory
successor. It is further understood that the expense the Reinsurer incurs
will be chargeable, subject to court approval, against the Ceding Company
as part of the expense of liquidation to the extent of a proportionate
share of the benefit which may accrue to the Ceding Company solely as a
result of the defense the Reinsurer has undertaken. Where two or more
reinsurers are involved in the same claim and a majority in interest elects
to interpose defense to the claim, the expenses will be apportioned in
accordance with the terms of the retrocession agreement as though the
Ceding Company had incurred the expense. Should the Ceding Company go into
liquidation or should a receiver be appointed, all amounts due to the
Ceding Company or the Reinsurer under this Agreement shall be subject to
the right of offset at any time and from time to time, and upon the
exercise of same, only the net balance will be due. The application of the
offset in the event of insolvency shall not be deemed to constitute
diminution.
2. INSOLVENCY OF THE REINSURER
Notwithstanding the prohibition on recapture until on or after December 31,
2018 set forth in Article VIII, Section 4 of this Agreement, in the event
of the insolvency of the Reinsurer, the Ceding Company may, at its option
recapture all business ceded under this Agreement subject to all other
terms and conditions of this Agreement. Termination of the Ceding Company's
liability is subject to payments in respect of such liability in accordance
with the provisions of Article IX - Terminal Accounting and Settlement of
this Agreement.
23
ARTICLE XII - EXECUTION
This Agreement may be executed in any number of separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier, telex
or electronic mail shall be effective as delivery of a manually executed
counterpart of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the dates indicated below in duplicate by their authorized officers,
with an Effective Date of October 1, 2008.
XXXX XXXXXXX LIFE INSURANCE COMPANY (U.S.A.)
By: /s/ Xxxx Xxxxxxxxxx
---------------------------------
Name: XXXX XXXXXXXXXX
Title: EXECUTIVE VICE PRESIDENT
Date: 12/29/08
By: /s/ Xxxxxxx Xxxxx
---------------------------------
Name: XXXXXXX XXXXX
Title: VICE PRESIDENT, COUNSEL &
CORPORATE SECRETARY
Date: December 29, 2008
MANULIFE REINSURANCE (BERMUDA) LIMITED
(SIGNED IN XXXXXXXX, BERMUDA)
By: /s/ X. Xxxxxxxx
---------------------------------
Name: X. Xxxxxxxx
Title: President
Date: 29/Dec/08
By: /s/ Xxxxxxx Xxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxx
Title: Vice President & Pricing Officer
Date: Dec 29/2008
Signed In: illegible
24
SCHEDULE A - POLICIES REINSURED
1. POLICIES REINSURED
This Agreement covers the variable annuity policies and applicable riders
issued on the policy forms as described in Section 2 below (the
"Policies").
2. POLICY FORMS
SCHEDULE A - POLICIES
REINSURED
BASE CONTRACTS
Under this agreement, the Reinsurer reinsures the Quota Share Percentage of
both the fixed account and the separate account, on those variable
annuities issued on the following policy forms by the Company after January
1, 2002.
VARIABLE ANNUITY POLICY FORM VARIABLE ANNUITY POLICY NAME
---------------------------- ----------------------------
Venture.001 Venture
Venture.003 Venture
Venture.004 Venture
Venture.005 Venture
Venture.100 w/spec page Venture
SP.VEN001.06
Venture.100 Venture III
Venture.100 w/spec page Venture III
SP.VEN100.06
Vision.001 Venture Vision
Vision.002 Venture Vision
Venture.100 w/spec page Venture Vision
SP.VEN100.C.07
Venture.025 Venture Strategy
Venture.026 Venture Strategy
Venture-VA.AW.07 w/spec page Venture Opportunity - A Share
SP.VENVA.AW.07
Venture-VA.B.07 w/spec page Venture Opportunity - B Share
SP.VENVA.B.07
Under this agreement, the Reinsurer reinsures the Quota Share Percentage of
the fixed account on those variable annuities issued on the following
policy forms by the Company after January 1, 2002.
VARIABLE ANNUITY POLICY FORM VARIABLE ANNUITY POLICY NAME
---------------------------- ----------------------------
Venture.015 Vantage
Venture.016 Vantage
Venture.017 Vantage
Venture.100 with SP.VEN015.06 Vantage
Under this agreement, the Reinsurer reinsures the Quota Share Percentage of
the following percentage of the separate separate account on those variable
annuities issued on the following policy forms by the Company on the dates
below
AFTER
1/1/2002 AFTER
AND 12/31/2002
BEFORE AND BEFORE AFTER
VARIABLE ANNUITY POLICY FORM VARIABLE ANNUITY POLICY NAME 1/1/2003 7/1/2007 6/30/2007
---------------------------- ---------------------------- -------- ---------- ---------
Venture.015 Vantage [*] [*] [*]
Venture.016 Vantage [*] [*] [*]
Venture.017 Vantage [*] [*] [*]
Venture.100 with SP.VEN015.06 Vantage [*] [*] [*]
RIDERS
Under this agreement, the Reinsurer reinsures the Quota Share Percentage of
the benefit riders listed below if elected on the policy forms listed
below:
25
BENEFIT RIDER FORMS BENEFIT RIDER NAME
------------------- ------------------
GMDB
BR009.00 GEM Rider
BR009.00G GEM Rider
BR002.99 Annual Step
BR010.00 Annual Step
BR010.00G Annual Step
GMIB
BR.003.00 GRIP II
BR003.00G GRIP II
BR003.02 GRIP II with 10yr J&S
BR010.03 GRIP III
GMWB
BR017.03 GMWB Principal Plus
BR001.05 GMWB Principal Plus for Life (PPFL)
BR002.05 GMWB Principal Plus for Life (PPFL)
BR001.06 GMWB PPFL Classic and GMWB PPFL Annual Step
BR002.06 GMWB PPFL Classic and GMWB PPFL Annual Step
BR001.06-AS GMWB PPFL Annual Step
BR002.06-AS GMWB PPFL Annual Step
BR003NQ.06 GMWB PPFL Spousal
BR003Q.06 GMWB PPFL Spousal
BR004NQ.06 GMWB PPFL Spousal
BR004Q.06 GMWB PPFL Spousal
BR001NQ.07 GMWB - Income Plus for Life (IPFL)
BR001Q.07 GMWB - Income Plus for Life (IPFL)
BR002NQ.07 GMWB - Joint IPFL
BR002Q.07 GMWB - Joint IPFL
BR001NQ.08 GMWB - IPFL Quarterly Step-up
BR001Q.08 GMWB - IPFL Quarterly Step-up
BR002NQ.08 GMWB - Joint IPFL Quarterly Step-up
BR002Q.08 GMWB - Joint IPFL Quarterly Step-up
BR004NQ.07 GMWB - IPFL
BR004Q.07 GMWB - IPFL
BR005NQ.07 GMWB - Joint IPFL
BR005Q.07 GMWB - Joint IPFL
BR003NQ.07 GMWB Principal Returns
BR003Q.07 GMWB Principal Returns
VARIABLE ANNUITY POLICY FORM VARIABLE ANNUITY POLICY NAME
---------------------------- ----------------------------
Venture.001 Venture
Venture.003 Venture
Venture.004 Venture
Venture.005 Venture
Venture.100 w/spec page Venture
SP.VEN001.06
Venture.100 Venture III
Venture.100 w/spec page Venture III
SP.VEN100.06
Vision.001 Venture Vision
Vision.002 Venture Vision
Venture.100 w/spec page Venture Vision
SP.VEN100.C.07
Venture.025 Venture Strategy
Venture.026 Venture Strategy
Venture.027 Venture Strategy
Venture-VA.AW.07 w/spec page Venture Opportunity - A Share
SP.VENVA.AW.07
Venture-VA.B.07 w/spec page Venture Opportunity - B Share
26
SP.VENVA.B.07
Venture.015 Venture Vantage
Venture.016 Venture Vantage
Venture.017 Venture Vantage
Venture. 100 w/spec page Venture Vantage
SP.VEN015.06
BASE CONTRACTS - DEATH BENEFIT
Under this agreement, the Reinsurer reinsures the Quota Share Percentage of
the base contract return of premium death benefit for the Policy Forms and
Issue Dates listed below.
VARIABLE ANNUITY POLICY FORM VARIABLE ANNUITY POLICY NAME ISSUE DATE ON OR AFTER
---------------------------- ----------------------------- ----------------------
Venture.001 Venture 7/1/2001
Venture.003 Venture 7/1/2001
Venture.004 Venture 7/1/2001
Venture.005 Venture 7/1/2001
Venture.100 w/spec page Venture 5/1/2006
SP.VEN001.06
Venture.100 Venture III 7/1/2001
Venture.100 w/spec page Venture III 5/1/2006
SP.VEN100.06
Vision.001 Venture Vision 7/1/2001
Vision.002 Venture Vision 7/1/2001
Venture.100 w/spec page Venture Vision 2/12/2007
SP.VEN100.C.07
Venture.025 Venture Strategy 5/1/2000
Venture.026 Venture Strategy 5/1/2000
Venture.027 Venture Strategy 5/2/2000
Venture-VA.AW.07 w/spec page Venture Opportunity - A Share 2/11/2008
SP.VENVA.AW.07
Venture-VA.B.07 w/spec page Venture Opportunity - B Share 2/11/2008
SP.VENVA.B.07
Venture.015 Vantage 5/1/2000
Venture.016 Vantage 5/1/2000
Venture.017 Vantage 5/1/2000
Venture.100 with SP.VEN015.06 Vantage 5/1/2006
3. QUOTA SHARE PERCENTAGE
Under this Agreement, the Reinsurer reinsures [*] (the "Quota Share
Percentage") of both the fixed account and the separate account liabilities
and Guaranteed Benefits of the Ceding Company arising under the Policies,
net of [*] in effect as of the Effective Date of this Agreement.
27
SCHEDULE B - MODCO RESERVE INVESTMENT CREDIT
1. MODCO RESERVE INVESTMENT CREDIT
The Modco Reserve Investment Credit is equal to the portion of the sum of
(i) plus (ii) plus (iii), where:
(i) Equals the Separate Account Investment Credit, as described in Section
2 below; and
(ii) Equals the Fixed Account Investment Credit, as described in Section 3
below; and
(iii) Equals the Guaranteed Benefits Investment Credit, as described in
Section 4 below. For the initial Accounting Period after the Effective
Date, investment income on this component will only accrue from the
Settlement Date to the end of the Accounting Period.
For the period of October 1, 2008 to December 31, 2008 it is recognized by
both the Ceding Company and the Reinsurer that an Investment Policy does
not yet exist for the asset segment backing the Guaranteed Benefits. As a
result, for the specified period, the Modco Reserve associated with the
Guaranteed Benefits will attract an earned interest rate of three month
LIBOR, as of the Settlement Date, plus 50 basis points times the Quota
Share Percentage, plus the Quota Share Percentage of any gains or losses
from the Settlement Date to the end of the Accounting Period on hedging
instruments used to back the Guaranteed Benefits component of the Modco
Reserve.
For the avoidance of doubt, the Modco Reserve Investment Credit may be a
positive or negative number.
2. SEPARATE ACCOUNT INVESTMENT CREDIT
The Separate Account Investment Credit is equal to the sum of all accrued
investment income and capital gains and losses, realized and unrealized, on
the Ceding Company's separate account with respect to the base policies
reinsured for the Accounting Period, which has been credited to the
Policies, net of all fees deducted from the Fund Value of the Policies,
multiplied by the Quota Share Percentage.
3. FIXED ACCOUNT INVESTMENT CREDIT
The fixed account investment credit shall be calculated as the investment
income determined in accordance with Schedule D - Fixed Account Investment
Credit (the "Fixed Account Investment Credit").
4. GUARANTEED BENEFITS INVESTMENT CREDIT
The guaranteed benefits investment credit shall be calculated as the
investment income determined in accordance with Schedule E - Investment
Income (the "Guaranteed Benefits Investment Credit").
5. FIXED ACCOUNT ASSETS
The fixed account assets, as used in this Agreement, means the appropriate
proportion of the pooled segment containing assets supporting the
liabilities in the fixed account, with respect to the Quote Share
Percentage of the base policies reinsured (the "Fixed Account Assets").
6. FIXED ACCOUNT RATE OF RETURN
The term "Fixed Account Rate of Return" is equal to the rate calculated in
Schedule D, used in the calculation of the Fixed Account Investment Credit
7. FIXED ACCOUNT CREDITING RATE
The term "Fixed Account Crediting Rate", as used in this Agreement, means
the result of [2 * (i) / ((ii) + (iii) -(i))], where:
(i) Equals the total interest credited on all liabilities backed by the Fixed
Account Assets; and
(ii) Equals the account value with respect to all liabilities backed by the
Fixed Account Assets, as defined in Section 5 above, at the end of the
current Accounting Period; and
28
(iii) Equals the account value with respect to all liabilities backed by the
Fixed Account Assets, as defined in Section 5 above, at the end of the
preceding Accounting Period.
29
SCHEDULE C - FUNDS WITHHELD INVESTMENT INCOME
For each Accounting Period the Ceding Company will credit the Reinsurer with
Investment Income as detailed in Article VI - Reserves and Funds Withheld,
Section 9, including amounts for realized and unrealized capital gains and
losses.
Such Investment Income for any Accounting Period shall:
1. Be computed in accordance with statutory accounting principles applicable
to the Ceding Company.
2. Be based upon the performance of assets in the Ceding Company's applicable
sub funds and include amounts as required for, and calculated in accordance
with, the Exhibits of Net Investment Income, Exhibit of Capital Gains
(Losses) of the Ceding Company's NAIC Annual Statement, adjusted to reflect
NAIC Interest Maintenance Reserve instructions, for the Accounting Period,
as detailed in Paragraph 3 below. For the purposes of calculating the
investment income associated with the Funds Withheld Account, the assets in
subfund SF241 should be used.
3. Be equal to (A) times [(B) plus (C)] + (D), where:
(A) For purposes of this Agreement, the Funds Withheld Rate for any
Accounting Period will be equal to:
2 x [(i) + (ii)]
---------------------------, where:
(iii) + (iv) - [(i) + (ii)]
(i) Equals the Net Investment Income for the Accounting Period,
determined in accordance with Page 8, Exhibit of Net Investment
Income, Column 2, Line 17, of the NAIC Annual Statement, plus the
pre-tax amortization of the Interest Maintenance Reserve in
accordance with Page 4, Line 4 of the NAIC Annual Statement;
(ii) Equals the Total Capital Gains (Losses) for the Accounting
Period, determined in accordance with Page 8, Exhibit of Capital
Gains (Losses), Columns 3 and 4, Line 10, of the NAIC Annual
Statement; adjusted to reflect NAIC Interest Maintenance Reserve
instructions;
(iii) Assets, including the unamortized Interest Maintenance Reserve,
as defined below, at the end the preceding Accounting Period;
(iv) Assets, including the unamortized Interest Maintenance Reserve,
as defined below, at the end the Accounting Period.
The term "Assets", as used in this Schedule C, means (a) plus (b)
minus (c) minus (d), where amounts (a), (b), (c) and (d) are
determined solely with respect to the assets identified as forming the
assets backing the Guaranteed Benefits of the Ceding Company:
(a) Equals Subtotals, Cash and Invested Assets, determined in
accordance with Page 2, Column 3, Line 10, of the NAIC Annual
Statement;
(b) Equals Investment Income Due and Accrued, determined in
accordance with Page 2, Column 3, Line 12, of the NAIC Annual
Statement; and
(c) Equals the pre-tax Interest Maintenance Reserve, determined in
accordance with Page 3, Column 1, Line 9.4, of the NAIC Annual
Statement; and
(d) Equals Borrowed Money, determined in accordance with Page 3,
Column 1, Line 22, of the NAIC Annual Statement.
30
(B) Equals the Opening Funds Withheld Account Balance for the Accounting
Period; and
(C) Equals 0.5 times (a) multiplied by the sum of (b) minus (c), where:
(a) Equals the Opening Funds Withheld Account Balance over the sum of
the Modco Reserve, as defined in Article VI - Reserves and Funds
Withheld, Section 1 (ii) and (iii), at the end of the preceding
Accounting Period plus the Opening Funds Withheld Account
Balance; and
(b) Equals reinsurance premiums paid and accrued by the Ceding
Company to the Reinsurer for the Accounting Period, as defined
Article III - Reinsurance Premiums, Section 2, relating to the
Guaranteed Benefits; and
(c) Equals the sum of (i) and (ii), where;
(i) Equals the reinsurance claims indemnified by the Reinsurer
to the Ceding Company for the Accounting Period, as defined
in Article IV - Claims and Other Benefits, relating to the
Guaranteed Benefits; and;
(ii) Equals the Expense Allowance payable by the Reinsurer to the
Ceding Company for the Accounting Period, as defined in
Article V - Expense Allowance.
(D) Equals the investment income earned on the assets in subfund SF080
containing the derivative instruments backing the Guaranteed Benefits
and their associated fees times the ratio of the Opening Funds
Withheld Account Balance over the sum of the Modco Reserve, as defined
in Article VI - Reserves and Funds Withheld, Section 1 (ii) and (iii),
at the end of the preceding Accounting Period plus the Opening Funds
Withheld Account Balance.
Notwithstanding the above, in the event the Terminal Accounting Period is not a
full calendar quarter, the Funds Withheld Rate will be multiplied by a factor
equal to the number of days in the Terminal Accounting Period divided by the
number of days in the calendar quarter in which the Terminal Accounting Period
lies.
For Accounting Periods in any calendar year in which the Exhibits as identified
above are not prepared, the Funds Withheld Rate shall be based upon the
calculations that would be used to prepare the Exhibits as though they had been
prepared for those Accounting Periods.
If the NAIC Annual Statement blank is changed or modified, such that the items
described above do not appear on the pages, exhibits, columns and lines referred
to above, or if they should be eliminated or combined with other amounts or if
the basis set out in the Annual Statement blank for calculation of the Ceding
Company's Adjusted Exhibit 2 Rate should be modified so that the calculation is
not consistent with the calculation of the Investment Income Rate described
above, then they will be determined in accordance with a method mutually
satisfactory to the Reinsurer and the Ceding Company.
31
SCHEDULE D - FIXED ACCOUNT INVESTMENT CREDIT
For each Accounting Period the Ceding Company will credit the Reinsurer with the
Fixed Account Investment Credit as detailed in Schedule B - Modco Reserve
Investment Credit, Section 3, including amounts for realized and unrealized
capital gains and losses.
Such Investment Income for any Accounting Period shall:
1. Be computed in accordance with statutory accounting principles applicable
to the Ceding Company.
2. Be based upon the performance of assets in the Ceding Company's applicable
sub funds and include amounts as required for, and calculated in accordance
with, the Exhibits of Net Investment Income, Exhibit of Capital Gains
(Losses) of the Ceding Company's NAIC Annual Statement, adjusted to reflect
NAIC Interest Maintenance Reserve instructions, for the Accounting Period,
as detailed in Paragraph 3 below. For the purposes of calculating the Fixed
Account Investment Credit associated with the Fixed Account, the assets in
subfunds SF033, SF034 and SF078 and policy loans should be used.
3. Be equal to (A) times (B), where:
(A) For purposes of this Agreement, the Fixed Account Investment Income
Rate for any Accounting Period will be equal to:
2 x [(i) + (ii)]
---------------------------, where:
(iii) + (iv) - [(i) + (ii)]
(i) Equals the Net Investment Income for the Accounting Period,
determined in accordance with Page 8, Exhibit of Net Investment
Income, Column 2, Line 17, of the NAIC Annual Statement, plus the
pre-tax amortization of the Interest Maintenance Reserve in
accordance with Page 4, Line 4 of the NAIC Annual Statement;
(ii) Equals the Total Capital Gains (Losses) for the Accounting
Period, determined in accordance with Page 8, Exhibit of Capital
Gains (Losses), Columns 3 and 4, Line 10, of the NAIC Annual
Statement; adjusted to reflect NAIC Interest Maintenance Reserve
instructions;
(iii) Assets, including the unamortized Interest Maintenance Reserve,
as defined below, at the end the preceding Accounting Period;
(iv) Assets, including the unamortized Interest Maintenance Reserve,
as defined below, at the end the Accounting Period.
The term "Assets", as used in this Schedule D, means (a) plus (b)
minus (c) minus (d), where amounts (a), (b), (c) and (d) are
determined solely with respect to the assets identified as forming the
assets backing the fixed account liabilities of the Ceding Company:
(a) Equals Subtotals, Cash and Invested Assets, determined in
accordance with Page 2, Column 3, Line 10, of the NAIC Annual
Statement;
(b) Equals Investment Income Due and Accrued, determined in
accordance with Page 2, Column 3, Line 12, of the NAIC Annual
Statement; and
(c) Equals the pre-tax Interest Maintenance Reserve, determined in
accordance with Page 3, Column 1, Line 9.4, of the NAIC Annual
Statement; and
32
(d) Equals Borrowed Money, determined in accordance with Page 3,
Column 1, Line 22, of the NAIC Annual Statement; and
(B) Equals the average of the fixed account modco reserve on the Policies
at the end of the preceding Accounting Period and the fixed account
modco reserve on the Policies at the end of the Accounting Period.
Notwithstanding the above, in the event the Terminal Accounting Period is not a
full calendar quarter, the Fixed Account Investment Income Rate will be
multiplied by a factor equal to the number of days in the Terminal Accounting
Period divided by the number of days in the calendar quarter in which the
Terminal Accounting Period lies.
For Accounting Periods in any calendar year in which the Exhibits as identified
above are not prepared, the Fixed Account Investment Incomed Rate shall be based
upon the calculations that would be used to prepare the Exhibits as though they
had been prepared for those Accounting Periods.
If the NAIC Annual Statement blank is changed or modified, such that the items
described above do not appear on the pages, exhibits, columns and lines referred
to above, or if they should be eliminated or combined with other amounts or if
the basis set out in the Annual Statement blank for calculation of the Ceding
Company's Adjusted Exhibit 2 Rate should be modified so that the calculation is
not consistent with the calculation of the Investment Income Rate described
above, then they will be determined in accordance with a method mutually
satisfactory to the Reinsurer and the Ceding Company.
33
SCHEDULE E - GUARANTEED BENEFITS INVESTMENT CREDIT
For each Accounting Period the Ceding Company will credit the Reinsurer with the
Guaranteed Benefits Investment Credit as detailed in Schedule B - Guaranteed
Benefits Investment Credit, Section 4, including amounts for realized and
unrealized capital gains and losses.
Such Investment Income for any Accounting Period shall:
1. Be computed in accordance with statutory accounting principles applicable
to the Ceding Company.
2. Be based upon the performance of assets in the Ceding Company's applicable
sub funds and include amounts as required for, and calculated in accordance
with, the Exhibits of Net Investment Income, Exhibit of Capital Gains
(Losses) of the Ceding Company's NAIC Annual Statement, adjusted to reflect
NAIC Interest Maintenance Reserve instructions, for the Accounting Period,
as detailed in Paragraph 3 below. For the purposes of calculating the
investment income associated with the Modco Reserve as defined in Article
VI - Reserves and Funds Withheld, Section 1 (ii) and (iii), the assets in
subfund SF241 should be used.
3. Be equal to (A) times [(B) plus (C)] + (D), where:
(A) The Guaranteed Benefits Investment Crediting Rate will equal the Funds
Withheld Rate for any Accounting Period; and
(B) Equals the Modco Reserve at the beginning of the Accounting Period, as
defined in Article VI - Reserves and Funds Withheld, Section 1 (ii)
and (iii); and
(C) Equals 0.5 times (a) multiplied by the sum of (b) minus (c), where:
(a) Equals the Modco Reserve, as defined in Article VI - Reserves and
Funds Withheld, Section 1 (ii) and (iii) over the sum of the
Modco Reserve, as defined in Article VI - Reserves and Funds
Withheld, Section 1 (ii) and (iii), at the end of the preceding
Accounting Period plus the Opening Funds Withheld Account
Balance; and
(b) Equals reinsurance premiums paid and accrued by the Ceding
Company to the Reinsurer for the Accounting Period, as defined
Article III - Reinsurance Premiums, Section 2, relating to the
Guaranteed Benefits; and
(c) Equals the sum of (i) and (ii), where;
(i) Equals the reinsurance claims indemnified by the Reinsurer
to the Ceding Company for the Accounting Period, as defined
in Article IV - Claims and Other Benefits, relating to the
Guaranteed Benefits; and;
(ii) Equals the Expense Allowance payable by the Reinsurer to the
Ceding Company for the Accounting Period, as defined in
Article V - Expense Allowance.
(D) Equals the investment income earned on the assets in subfund SF080
containing the derivative instruments hedging the Guaranteed Benefits
and their associated fees times the ratio of the Modco Reserve, as
defined in Article VI - Reserves and Funds Withheld, Section 1 (ii)
and (iii) over the sum of the Modco Reserve, as defined in Article VI
- Reserves and Funds Withheld, Section 1 (ii) and (iii), at the end of
the preceding Accounting Period plus the Opening Funds Withheld
Account Balance.
Notwithstanding the above, in the event the Terminal Accounting Period is not a
full calendar quarter, the Guaranteed Benefit Investment Crediting Rate will be
multiplied by a factor equal to the number of days in the
34
Terminal Accounting Period divided by the number of days in the calendar quarter
in which the Terminal Accounting Period lies.
For Accounting Periods in any calendar year in which the Exhibits as identified
above are not prepared, the Guaranteed Benefit Investment Income Rate shall be
based upon the calculations that would be used to prepare the Exhibits as though
they had been prepared for those Accounting Periods.
If the NAIC Annual Statement blank is changed or modified, such that the items
described above do not appear on the pages, exhibits, columns and lines referred
to above, or if they should be eliminated or combined with other amounts or if
the basis set out in the Annual Statement blank for calculation of the Ceding
Company's Adjusted Exhibit 2 Rate should be modified so that the calculation is
not consistent with the calculation of the Investment Income Rate described
above, then they will be determined in accordance with a method mutually
satisfactory to the Reinsurer and the Ceding Company.
35
SCHEDULE F - QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
(From the Ceding Company to the Reinsurer)
Reporting Quarter: ___________________
Calendar Year: ___________________
Date Report Completed: ___________________
1. CONSIDERATION (only relevant in the initial Accounting Period) [1a - 1b]
a. Initial Consideration (Article III, Section 1)
b. Amounts settled on the Settlement Date
2. REINSURANCE PREMIUMS (Article III, Section 2) [2a + 2b - 2c]
x. Xxxxx Policy Premiums and Payment Enhancements
x. Xxxxx Premiums
c. Premiums Payable under Third Party Reinsurance Agreements
3. REINSURANCE FEES (Article III, Section 3)
4. MODCO RESERVE INVESTMENT CREDIT (Schedule B) [4a + 4b + 4c]
a. Separate Account Investment Credit
b. Fixed Account Investment Credit
c. Guaranteed Benefits Investment Credit
5. FUNDS WITHHELD INVESTMENT INCOME (Article VI, Section 9)
6. MODCO RESERVE ADJUSTMENT (Article VI, Section 2) [6a - 6b]
a. Modco Reserve at the end of the Accounting Period
b. Modco Reserve at the end of the preceding Accounting Period
7. REINSURANCE CLAIMS (Article IV) [7a + 7b + 7c + 7d + 7e - 7f]
a. Death Claims
b. Surrenders
c. Annuitization Benefits
d. Income Benefit Claims
e. Withdrawal Benefit Claims
f. Ceded claims (under Third Party Reinsurance Agreements)
8. INITIAL RESERVE ADJUSTMENT (only relevant in the initial Accounting Period)
(Article VI, Section 11)
9. INITIAL CEDING COMMISSION (only relevant in the initial Accounting Period)
(Article V, Section 1)
10. EXPENSE ALLOWANCE (Article V, Section 2)
11. REINSURANCE GAIN (Article VI, Section 6)
[1 + 2 + 3 + 4 + 5- 6 - 7 - 8 - 9 - 10]
12. FUNDS WITHHELD ADJUSTMENT (ARTICLE VI, SECTION 7)
Max[0,14a+11-15b]
13. QUARTERLY SETTLEMENT [= 11 - 14c]
a. Amount due the Reinsurer [if >0]
b. Amount due the Ceding Company [if <0]
c. Amount due the Ceding Company in cash or Letter of Credit [max
(0 , 15b - 14b - 17a - 18a]
d. Amounts settled on the Settlement Date [= 1b]
36
14. FUNDS WITHHELD ACCOUNT
a. Opening Balance (Article VI, Section 5)
b. Closing Balance (Article VI, Section 8) [14a + 11 -12]
c. Change in Funds Withheld [14b - 14a]
15. COINSURANCE RESERVES (Article VI, Section 3)
a. At the end of the preceding Accounting Period
b. At the end of the Accounting Period
16. TAX RESERVES
a. At the end of the preceding Accounting Period
b. At the end of the Accounting Period
17. LETTERS OF CREDIT
a. Letters of Credit at the end of the preceding Accounting Period
b. Letters of Credit at the end of the Accounting Period
18. ASSETS IN TRUST
a. Market value of any assets held in trust at the end of the
preceding Accounting Period
b. Market value of any assets held in trust at the end of the
Accounting Period
19. DEFERRED GAINS
a. Deferred Gains at the end of the preceding Accounting Period
b. Deferred Gains at the end of the Accounting Period
c. Deferred Gains on the Settlement Date
MOVEMENT OF POLICIES REINSURED (POLICY COUNTS) Policies Riders
---------------------------------------------- -------- ------
ACTIVE LIVES
In Force, Beginning of Period
Additions
Terminations
In Force, End of Period
SEPARATE FIXED
ADDITIONAL TOTAL ACCOUNT ACCOUNT LOSS SEPARATE FIXED
INFORMATION NUMBER OF FUND FUND TOTAL FUND CARRYFOR ACCOUNT ACCOUNT
BASE POLICIES POLICIES VALUE VALUE VALUE XXXX RESERVE RESERVE
------------- --------- -------- ------- ---------- -------- -------- -------
Beginning of Period
+ Additions
- Terminations
End of Period
ADDITIONAL
INFORMATION SEPARATE FIXED
FOR EACH TOTAL ACCOUNT ACCOUNT
GUARANTEED NUMBER OF FUND FUND TOTAL FUND GAURANTEED GUARANTEED
BENEFIT TYPE POLICIES VALUE VALUE VALUE VALUES RESERVE
------------ --------- -------- ------- ---------- ---------- ----------
Beginning of Period
+ Additions
- Terminations
End of Period
37
Ceding
Commission
Acquisition Expense Allowance Rate Volume Total
----------------------------- ---------- ------ -----
Subpays on Policies issued Prior to 2005, premiums and payment
enhancements [*]
Subpays on Policies Issued 2005 thru 2007:
Premium General Account [*]
Premium Separate Account Vantage prior 7/1/07 [*]
Premium Separate Account Non-Vantage [*]
Premium Separate Account Vantage 7/1/07+ [*]
Payment Enhancements General Account [*]
Payment Enhancements Separate Account Vantage prior 7/1/07 [*]
Payment Enhancements Separate Account Non-Vantage [*]
Payment Enhancements Separate Account Vantage 7/1/07+ [*]
Vision Issued in 2007 only [*]
New Policies and Subpays on Policies Issued on and After 1/1/2008
Venture [*]
Venture III [*]
Vision [*]
Vantage [*]
Opportunity [*]
(A) (B) (A) * (B)
FACTOR VOLUME TOTAL
------------------ --------------------- --------------------
Acquisition Expense Premiums
CARVM Allowance N/A N/A
Per Policy [*] # of Inforce Policies
Fund Value [*] Total Fund Value
Trail Commission Expense Table In Article V Total Fund Value
Administrative Expense Allowances (c) = total of above
Quota Share Percentage 90%
Expense Allowance (c) x 90%
FIXED ACCOUNT ASSET RATE OF RETURN (SCHEDULE B, SECTION 2)
i) Fixed Account Investment Income Rate
FIXED ACCOUNT ASSET CREDITING RATE (SCHEDULE B, SECTION 3)
i) Interest credited on all liabilities backed by Fixed Account Assets for the
current Accounting Period
ii) Account Value with respect to all liabilities backed by Fixed Account Assets
at the end of the current Accounting Period
iii) Account Value with respect to all liabilities backed by Fixed Account
Assets at the end of the preceding Accounting Period
iii) Fixed Account Asset Crediting Rate [(2 * i)) / (ii) + iii) - i))]
38
FOR EACH FUND FOR EACH PRODUCT/LINE OF BUSINESS
Total #
of # of Units Fund Unit Price Fund A Total Account
Policies A (etc) Value
-------- --------------- ----------------- -------------
Beginning of Period
+ Addition
- Termination
End of Period
PREMIUMS IN PERIOD FOR EACH PRODUCT
Deposits by Fund
Total Number of ---------------------- Total Account
Policies Fund A Fund B (etc.) Value
--------------- ------ ------------- -------------
Deposits
PREMIUMS IN PERIOD FOR EACH PRODUCT
Total Number of Policies Total Account Value
------------------------ -------------------
(a) Beginning of period
(b) Added During Period
(c) Lapsed During Period
End of Period
39
SCHEDULE G - ASSET LISTING
The Asset Listing shall contain a seriatim listing of all assets held by the
Ceding Company in subfunds SF034, SF078, SF241 and SF080 and be provided to the
Reinsurer upon request.
This listing shall include the following information:
- Asset Class (e.g. mortgage, bond, equity)
- Identifier (e.g. CUSIP)
- Issuer Name
- Par
- Coupon
- Book Value
- Market Value
- Accrued Interest
- Maturity Date
- S&P Rating
- NAIC Rating
- Book Yield
- Market Yield
In the event the information above is not applicable to specific assets held by
the Ceding Company, relevant information should be provided to allow the
Reinsurer to identify the value of the asset.
40
SCHEDULE H - OPENING AMOUNTS AND SETTLEMENTS
(AS OF THE DATE SPECIFIED)
1. MODCO RESERVE - OCTOBER 1, 2008
SEPARATE ACCOUNT RESERVE [*]
FIXED ACCOUNT RESERVE [*]
GUARANTEED BENEFITS RESERVE [*]
2. FUNDS WITHHELD ACCOUNT BALANCE - OCTOBER 1, 2008 [*]
3. COINSURANCE RESERVES - OCTOBER 1, 2008 [*]
4. TAX RESERVES - OCTOBER 1, 2008
SEPARATE ACCOUNT RESERVE [*]
FIXED ACCOUNT RESERVE [*]
GUARANTEED BENEFITS RESERVE [*]
5. MODCO RESERVE - NOVEMBER 18, 2008
GUARANTEED BENEFITS RESERVE [*]
6. FUNDS WITHHELD ACCOUNT BALANCE - NOVEMBER 18, 2008 [*]
7. INITIAL RESERVE FOR GUARANTEED BENEFITS - NOVEMBER 18, 2008 [*]
8. COINSURANCE RESERVES - NOVEMBER 18, 2008 [*]
9. TAX RESERVES FOR GUARANTEED BENEFITS - NOVEMBER 18, 2008 [*]
10. INITIAL CONSIDERATION - NOVEMBER 18, 2008 [*]
11. INITIAL CEDING COMMISSION - NOVEMBER 18, 2008 [*]
12. INITIAL RESERVE ADJUSTMENT - OCTOBER 1, 2008 [*]
13. SETTLEMENT - NOVEMBER 18, 2008 [ = 10 - 11 - 5 - 6] [*]
14. DEFERRED GAINS EXISTING ON THE SETTLEMENT DATE - NOVEMBER 18, 2008 [*]
41
SCHEDULE I - INFORMATION REQUIRED FOR FINANCIAL REPORTING
For each Accounting Period the Ceding Company shall submit the information
listed below:
IN FORCE DATA
GMDB INFORCE FIELDS
Company
Policy number
Plan code
Effective date
Policy issue state
Driver
DB type
Annuitant name
Annuitant sex
Annuitant date of birth
Annuitant issue age
Annuitant attained age
Owner name
Owner sex
Owner date of birth
Owner issue age
Owner attained age
Tax status indicator
Current variable account value
Current fixed account value
Current loan account value
Prior account value
Current account value
Current cash surrender value
Current GMDB
Current GEM amount
Current death benefit
Policy continued date
New policy continued choice
Old policy number
Treaty number
Valuation date
GMIB INFORCE FIELDS
Company
Policy number
Plan code
Effective date
Driver
Annuitant name
Annuitant sex
Annuitant date of birth
Annuitant issue age
Annuitant attained age
Owner name
Owner sex
Owner date of birth
Owner issue age
Owner attained age
Tax status indicator
Current account value
Current income base
Grip indicator
Waiting period end date
Cumulative premium
Cumulative withdrawals
GIR anniversary date
Stepup date
Total monthly payments
Policy continued date
New policy continued choice
Old policy number
Treaty number
Valuation date
WB INFORCE FIELDS
Company
Policy number
Plan code
Effective date
Driver
Annuitant name
Annuitant sex
Annuitant date of birth
Annuitant issue age
Annuitant attained age
Owner name
Owner sex
Owner date of birth
Owner issue age
Owner attained age
Tax stat indicator
Current account value
Current withdrawal base
GMWB indicator
Cumulative premium
Cumulative withdrawals
Guaranteed Withdrawal Amount (GWA)
Lifetime Income Amount (LIA)
Policy continued date
New policy continued choice
Old policy number
Treaty number
Valuation date
42
CLAIMS
GMDB CLAIM FIELDS
Policy Number
Product code
Enhanced indicator
Plan type (Tax stat indicator)
Attained age
Variable amount
Fixed amount
Loan amount
Account value
GMDB amount
Surrender charge amount
Net Amount paid to contractholder
Owner date of birth
Annuitant date of birth
Who died (A or O code)
Effective date
Date of death
Issue age
Date processed
Date paid
Product Type
GEM amount
GMIB CLAIM FIELDS
Policy Number
Vantage-One Plan Code
Plan Type
Annuitant Name
Annuitant Date of Birth
Annuitant Sex
Co-Annuitant Name
Co-Annuitant Date of Birth
Co-Annuitant Sex
Original Contract Issue Date
Annuitization Effective Date
Account Value Annuitized
Income Base
Premium Tax ($ Amt)
Unisex Indicator
Reinsurance Claim Interest Rate
GRIP Purchase Rate
Treaty Purchase Rate
GRIP Reinsurance Claim Amount
GRIP Claim Amount (for reserving)
GMWB CLAIM FIELDS
Policy Number
Vantage-One Plan Code
Plan Type
Annuitant Name
Annuitant Date of Birth
Annuitant Sex
Co-Annuitant Name
Co-Annuitant Date of Birth
Co-Annuitant Sex
Original Contract Issue Date
Guaranteed Withdrawal Balance (GWB)
Guaranteed Withdrawal Amount (GWA)
Lifetime Income Amount (LIA)
Premium Tax ($ Amt)
43
SCHEDULE J - FUND LISTING
DB & IB PRE-2006
VENTURE, VENTURE III, VANTAGE AND VISION CONTRACTS
ISSUED PRIOR TO MAY 1, 2006
PORTFOLIO
AIM CAPITAL MANAGEMENT, INC.
All Cap Growth Trust
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
Small Company Trust
BLACKROCK INVESTMENT MANAGEMENT, LLC
Large Cap Value Trust
CAPITAL GUARDIAN TRUST COMPANY
Income & Value Trust
Overseas Equity Trust
U.S. Large Cap Trust
CAPITAL RESEARCH MANAGEMENT COMPANY
American Asset Allocation
American Blue Chip Income and Growth Trust
American Bond Trust
American Global Growth
American Global Small Capitalization
American Growth-Income Trust
American Growth Trust
American High-Income
American International Trust
American New World
XXXXX ADVISORS
Financial Services Trust
Fundamental Value Trust
DECLARATION MANAGEMENT & RESEARCH
Total Bond Market Trust A
Total Bond Market Trust B
Short-Term Bond Trust
Active Bond Trust
DEIM
DWS Equity 500 Index
DEUTSCHE ASSET MANAGEMENT INC.
All Cap Core Trust
Real Estate Securities Trust
DIMENSIONAL FINANCIAL ADVISORS
Disciplined Diversification Trust
GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC
44
International Core Trust
XXXXXXXX ASSOCIATES LLC
Capital Appreciation Trust
XXXX XXXXX FUNDS MANAGEMENT, INC.
Core Equity Trust
LORD, XXXXXX & CO
All Cap Value
Mid Cap Value
MARISCO CAPITAL MANAGEMENT, LLC
International Opportunities Trust
MASSACHUSETTS FINANCIAL SERVICES COMPANY
Utilities Trust
MFC GLOBAL INVESTMENT MANAGEMENT
American Fundamental Holdings
American Global Diversification
Franklin Xxxxxxxxx Founding Allocation
MFC GLOBAL INVESTMENT MANAGEMENT (U.S.) LLC
Strategic Income Trust
MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED
500 Index Trust
500 Index Trust B
Index Allocation Trust
Mid Cap Index Trust
Money Market Trust
Money Market Trust B
Optimized All Cap Trust
Optimized Value Trust
Pacific Rim Trust
Small Cap Index Trust
Total Stock Market Index Trust
Lifestyle Aggressive Trust
Lifestyle Balanced Trust
Lifestyle Conservative Trust
Lifestyle Growth Trust
Lifestyle Moderate Trust
MFC GLOBAL U.S., LLC
High Income
MUNDER CAPITAL MANAGEMENT
Small Cap Opportunities Trust
PACIFIC INVESTMENT MANAGEMENT COMPANY
Global Bond Trust
PIMCO VIT All Asset Portfolio
Real Return Bond Trust
Total Return Trust
PZENA INVESTMENT MANAGEMENT, LLC
Classic Value Trust
RCM CAPITAL MANAGEMENT LLC
45
Emerging Small Company Trust
SSGA FUNDS MANAGEMENT, INC.
International Equity Index Trust A
International Equity Index Trust B
X. XXXX PRICE ASSOCIATES, INC.
Blue Chip Growth Trust
Capital Appreciation Value Trust
Equity-Income Trust
Health Sciences Trust
Mid Value Trust
Small Company Value
Science & Technology Trust
XXXXXXXXX GLOBAL ADVISORS LIMITED
Global Trust
XXXXXXXXX INVESTMENT COUNSEL, INC.
International Small Cap Trust
International Value Trust
UBS GLOBAL ASSET MANAGEMENT
Global Allocation Trust
Large Cap Trust
XXX XXXXXX
Value
WELLINGTON MANAGEMENT COMPANY, LLP
Core Allocation Plus Trust
Investment Quality Bond Trust
Mid Cap Intersection
Mid Cap Stock Trust
Natural Resources Trust
Small Cap Growth Trust
Small Cap Value Trust
XXXXX FARGO FUND MANAGEMENT, LLC
Core Bond Trust
U.S. High Yield Bond Trust
WESTERN ASSET MANAGEMENT CO. (WAMCO)
U.S. Government Securities Trust
High Yield Trust
Strategic Bond Trust
DB ONLY 2006+
VENTURE, VENTURE III, VANTAGE AND VISION CONTRACTS
ISSUED MAY 1, 2006 AND LATER
CAPITAL GUARDIAN TRUST COMPANY
Income & Value Trust
U.S. Large Cap Trust
46
CAPITAL RESEARCH AND MANAGEMENT COMPANY (Adviser to the American Fund Insurance
Series)
American Asset Allocation Trust
American Bond Trust
American Global Growth Trust
American Global Small Cap Trust
American Growth Trust
American Growth-Income Trust
American High-Income Bond Trust
American International Trust
American New World Trust
XXXXX SELECTED ADVISERS, L.P.
Financial Services Trust
Fundamental Value Trust
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
Real Estate Securities Trust
FRANKLIN XXXXXXXXX INVESTMENT CORP
International Small Cap Trust
GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC
International Core Trust
XXXXXXXX ASSOCIATES LLC
Capital Appreciation Trust
XXXX XXXXX CAPITAL MANAGEMENT, INC.
Core Equity Trust
XXXXXXX CAPITAL MANAGEMENT, LLC
International Opportunities Trust
MFC GLOBAL INVESTMENT MANAGEMENT (U.S.), LLC
High Income Trust
MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED (Adviser to the Franklin
Xxxxxxxxx Founding Allocation Trust)
American Fundamental Holdings Trust
American Global Diversification Trust
Franklin Xxxxxxxxx Founding Allocation Trust
Index Allocation Trust
Lifestyle Aggressive Trust
Lifestyle Balanced Trust
Lifestyle Conservative Trust
MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED
Lifestyle Growth Trust
Lifestyle Moderate Trust
Mid Cap Index Trust
Money Market Trust
Pacific Rim Trust
MUNDER CAPITAL MANAGEMENT
Small Cap Opportunities Trust
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC
Global Bond Trust
Total Return Trust
PZENA INVESTMENT MANAGEMENT, LLC
47
Classic Value Trust
RCM CAPITAL MANAGEMENT LLC
X. XXXX PRICE ASSOCIATES, INC.
Science & Technology Trust
X. XXXX PRICE ASSOCIATES, INC.
Blue Chip Growth Trust
Equity-Income Trust
Health Sciences Trust
Small Company Value Trust
XXXXXXXXX GLOBAL ADVISORS LIMITED
International Value Trust
UBS GLOBAL ASSET MANAGEMENT (AMERICAS) INC.
Global Allocation Trust
XXX XXXXXX
Value Trust
WELLINGTON MANAGEMENT COMPANY, LLP
Investment Quality Bond Trust
Mid Cap Intersection Trust
Mid Cap Stock Trust
Natural Resources Trust
Small Cap Growth Trust
Small Cap Value Trust
WESTERN ASSET MANAGEMENT COMPANY
High Yield Trust
Strategic Bond Trust
U.S. Government Securities Trust
VENTURE OPPORTUNITY CONTRACTS
CAPITAL RESEARCH AND MANAGEMENT COMPANY
(Adviser to the American Fund Insurance Series)
American Asset Allocation Trust
American Blue Chip Income and Growth Trust
American Bond Trust
American Global Growth Trust
American Global Small Capitalization Trust
American Growth Trust
American Growth-Income Trust
American High-Income Bond Trust
American International Trust
American New World Trust
XXXXX SELECTED ADVISERS, L.P.
Fundamental Value Trust
FRANKLIN MUTUAL ADVISORS LLC
Mutual Shares Trust
GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC
International Core Trust
XXXX XXXXX CAPITAL MANAGEMENT, INC.
Core Equity Trust
48
LORD, XXXXXX & CO., LLC
All Cap Value Trust
Mid Cap Value Trust
MFC GLOBAL INVESTMENT MANAGEMENT (U.S.), LLC
Small Cap Intrinsic Value Trust
MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED
American Fundamental Holdings Trust
Franklin Xxxxxxxxx Founding Allocation Trust
Lifestyle Balanced Trust
Lifestyle Conservative Trust
Lifestyle Growth Trust
Lifestyle Moderate Trust
Money Market Trust
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC
Global Bond Trust
Total Return Trust
XXXXXXXXX GLOBAL ADVISORS LIMITED
Global Trust
International Value Trust
XXXXXXXXX INVESTMENT COUNSEL, LLC
International Small Cap Trust
XXX XXXXXX
Value Trust
WELLINGTON MANAGEMENT COMPANY, LLP
Core Allocation Plus Trust
Investment Quality Bond Trust
Mid Cap Intersection Trust
Mid Cap Stock Trust
Small Cap Growth Trust
Small Cap Value Trust
FUNDS AVAILABLE WITH WITHDRAWAL BENEFITS
VENTURE, VENTURE III, VANTAGE AND VISION
MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED
Money Market
American Fundamental Holdings
American Global Diversification
Franklin Xxxxxxxxx Founding Allocation
Index Allocation
Lifestyle Balanced
Lifestyle Conservative
Lifestyle Growth
Lifestyle Moderate
49
CAPITAL RESEARCH MANAGEMENT COMPANY
American Asset Allocation
X. XXXX PRICE ASSOCIATES, INC.
Capital Appreciation Value
DIMENSIONAL FINANCIAL ADVISORS
Disciplined Diversification
AVAILABLE MODEL ALLOCATIONS (PAPER PORTFOLIOS):
PERCENTAGE ALLOCATION OF
INVESTMENT OPTION
MODEL NAME WITHIN MODEL
---------- ------------------------
AMERICAN GLOBAL DIVERSIFICATION
American Global Growth Trust 50%
American Bond Trust 20%
American Global Small Capitalization Trust 15%
American High-Income Bond Trust 10%
American New World Trust 5%
FUNDAMENTAL HOLDINGS OF AMERICA
American Bond Trust 35%
American Growth-Income Trust 25%
American Growth Trust 25%
American International Trust 15%
GLOBAL BALANCED (NOT AVAILABLE AFTER APRIL 30, 2007)
American International Trust 25%
Global Allocation Trust 25%
Fundamental Value Trust 30%
Global Bond Trust 20%
BLUE CHIP BALANCED (NOT AVAILABLE AFTER APRIL 30, 2007)
American Growth Trust 30%
American Growth-Income Trust 30%
Investment Quality Bond Trust 40%
VALUE STRATEGY (NOT AVAILABLE AFTER FEBRUARY 10, 2006)
Core Equity Trust 30%
Equity-Income Trust 30%
Active Bond Trust 20%
Strategic Bond Trust 20%
GROWTH BLEND (NOT AVAILABLE AFTER FEBRUARY 10, 2006)
Blue Chip Growth Trust 40%
American Growth-Income Trust 20%
Active Bond Trust 20%
Strategic Bond Trust 20%
CORE HOLDINGS OF AMERICA (NOT AVAILABLE AFTER AUGUST 1, 2005)
American International Trust 15%
American Growth Trust 25%
American Growth-Income Trust 25%
Active Bond Trust 35%
50
CORESOLUTION (NOT AVAILABLE AFTER APRIL 30, 2005)
U.S. Global Leaders Growth Trust 33%
Classic Value Trust 33%
Strategic Income Trust 34%
VALUE BLEND (NOT AVAILABLE AFTER APRIL 30, 2005)
American Growth Trust 20%
Equity-Income Trust 40%
Active Bond Trust 20%
Strategic Bond Trust 20%
GLOBAL (NOT AVAILABLE AFTER APRIL 30, 2005)
International Value Trust 30%
U.S. Large Cap Trust 20%
Blue Chip Growth Trust 20%
Global Bond Trust 30%
VENTURE OPPORTUNITY WITH GMWB
PORTFOLIO
WELLINGTON MANAGEMENT COMPANY, LLP
Core Allocation Plus
MFC GLOBAL INVESTMENT MANAGEMENT
American Fundamental Holdings
Franklin Xxxxxxxxx Founding Allocation
Lifestyle Balanced
Lifestyle Conservative
Lifestyle Growth
Lifestyle Moderate
CAPITAL RESEARCH MANAGEMENT COMPANY
American Asset Allocation
AVAILABLE MODEL ALLOCATIONS: 8/25/08 AND LATER
PERCENTAGE ALLOCATION OF
INVESTMENT OPTION
MODEL NAME WITHIN MODEL
---------- ------------------------
BALANCED: GROWTH & INCOME
American Global Small Cap 5%
American Growth 5%
Global 5%
Value 5%
Mutual Shares 15%
American Blue Chip Income & Growth 15%
American Growth-Income 10%
American Bond 25%
Investment Quality Bond 15%
BALANCED TOWARD GROWTH
American Global Small Cap 5%
American Growth 10%
51
Global 10%
Value 5%
Mutual Shares 20%
American Blue Chip Income & Growth 15%
American Growth-Income 10%
American Bond 15%
Investment Quality Bond 10%
GROWTH
American Global Small Cap 5%
Mid Cap Stock 5%
American Growth 15%
Global 10%
Value 5%
Mutual Shares 20%
American Blue Chip Income & Growth 15%
American Growth-Income 15%
American Bond 10%
AVAILABLE MODEL ALLOCATIONS: NOT AVAILABLE FOR CONTRACTS ISSUED ON OR AFTER
8/25/08
PERCENTAGE ALLOCATION OF
INVESTMENT OPTION
MODEL NAME WITHIN MODEL
---------- ------------------------
BALANCED: GROWTH & INCOME
American Global Small Cap 5%
American Growth 5%
Global 5%
Mid Cap Value 5%
Mutual Shares 15%
American Blue Chip Income & Growth 15%
American Growth-Income 10%
American Bond 25%
Investment Quality Bond 15%
BALANCED TOWARD GROWTH
American Global Small Cap 5%
American Growth 10%
Global 10%
Mid Cap Value 5%
Mutual Shares 20%
American Blue Chip Income & Growth 15%
American Growth-Income 10%
American Bond 15%
Investment Quality Bond 10%
GROWTH
American Global Small Cap 5%
Mid Cap Stock 5%
52
American Growth 15%
Global 10%
Mid Cap Value 5%
Mutual Shares 20%
American Blue Chip Income & Growth 15%
American Growth-Income 15%
American Bond 10%
53
SCHEDULE K - BASE DEATH BENEFIT FEES
MFO - JH USA BUSINESS
ISSUE DATE
----------------------------------------------------------
1/1/2001- 1/1/2004
BASE PRODUCT DEATH BENEFIT BEFORE 1/1/2001 12/31/2003 12/31/2004 AFTER 1/1/2005
------------ ----------------- --------------- ---------- ---------- --------------
VENTURE 2006 Return of Premium [*] [*]
Annual Step [*] [*]
VENTURE Annual Step [*] [*] [*] [*]
VANTAGE 9 YR Ratchet [*] [*] [*] [*]
Annual Step [*] [*] [*] [*]
VENTURE III Return of Premium [*] [*] [*] [*]
Annual Step [*] [*] [*] [*]
STRATEGY Return of Premium [*] [*] [*] [*]
VISION 5% Indexing [*] [*] [*] [*]
VISION 2007 Return of Premium [*] [*]
Annual Step [*] [*]
GEM MFO [*] all years
Notes:
1. MFO is Margin for Offset
2. All rates are defined as annualized basis points (bps)
54
SCHEDULE L - EXPENSE ALLOWANCE
Ceding Commission Rate
----------------------
Subpays on Policies issued Prior to 2005, premiums and payment enhancements [*]
Subpays on Policies Issued 2005 thru 2007:
Premium General Account [*]
Premium Separate Account Vantage prior 7/1/07 [*]
Premium Separate Account Non-Vantage [*]
Premium Separate Account Vantage 7/1/07+ [*]
Payment Enhancements General Account [*]
Payment Enhancements Separate Account Vantage prior 7/1/07 [*]
Payment Enhancements Separate Account Non-Vantage [*]
Payment Enhancements Separate Account Vantage 7/1/07+ [*]
Vision Issued in 2007 only [*]
New Policies and Subpays on Policies Issued on and After 1/1/2008
Venture [*]
Venture III [*]
Vision [*]
Vantage [*]
Opportunity [*]
55
