Exhibit 10.26
PARTIAL COMMUTATION AGREEMENT
This PARTIAL COMMUTATION AGREEMENT, dated as of April 1, 2014 (the
"Execution Date"), (this "Agreement") is made and entered into by and between
Allstate Life Insurance Company, an insurance company organized under the laws
of the State of Illinois (the "Reinsurer"), and Lincoln Benefit Life Company,
an insurance company organized under the laws of the State of Nebraska (the
"Company").
WHEREAS, the Reinsurer owns 100% of the issued and outstanding capital stock
of the Company;
WHEREAS, the Reinsurer, Resolution Life Holdings, Inc. ("Buyer"), a
corporation organized under the laws of the State of Delaware, and, solely for
purposes of Section 5.25 and Article X thereof, Resolution Life L.P., a Bermuda
limited partnership and the sole owner of Buyer, have entered into a Stock
Purchase Agreement dated as of July 17, 2013, as amended (the "Stock Purchase
Agreement"), pursuant to which the Reinsurer proposes to sell, and Buyer
proposes to purchase, 100% of the issued and outstanding capital stock of the
Company;
WHEREAS, the Stock Purchase Agreement provides, among other things, for the
Company and the Reinsurer to enter into this Agreement;
WHEREAS, the Reinsurer provides reinsurance coverage to the Company in
accordance with the terms of the following reinsurance agreements: (i) a
coinsurance agreement between the parties effective as of December 31, 2001
covering the Company's general account liabilities for all policies and market
value adjustment annuities (the "General Account Reinsurance Agreement"),
(ii) a modified coinsurance agreement between the parties effective as of
December 31, 2001 covering the Company's separate account liabilities for
variable life insurance policies (the "Variable Life Reinsurance Agreement, and
together with the General Account Reinsurance Agreement, the "Subject
Reinsurance Agreements") and (iii) a modified coinsurance agreement between the
parties effective as of December 31, 2001 covering the Company's separate
account liabilities for variable annuity insurance policies (the "Variable
Annuity Reinsurance Agreement");
WHEREAS, the Company and the Reinsurer desire to commute the Commuted
Business (as defined below) currently ceded or retroceded under the Subject
Reinsurance Agreements;
WHEREAS, the Company and the Reinsurer desire a full and final settlement,
discharge and release of any and all of each of their respective liabilities,
duties and obligations with respect to the Commuted Business except as
expressly set forth below;
WHEREAS, the business reinsured pursuant to the Subject Reinsurance
Agreements that is not commuted pursuant to this Agreement shall continue to be
reinsured following the Effective Time pursuant to the terms of the Subject
Reinsurance Agreements, as amended from time to time, until such time as such
Subject Reinsurance Agreements are terminated, restated or replaced; and
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WHEREAS, the Variable Annuity Reinsurance Agreement shall remain in full
force and effect in accordance with its terms without amendment.
NOW, THEREFORE, the Company and the Reinsurer (each a "Party", and together,
the "Parties") agree as follows:
Article I.
DEFINITIONS
Section 1.2. Definitions. For purposes of this Agreement, the following
terms have the respective meanings set forth below:
"Adjusted Commutation Statement" has the meaning set forth in Section 3.3.
"Adjustment Report" has the meaning set forth in Section 3.3.
"Affiliate" of any Person means another Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under
common control with, such first Person, and the term "Affiliated" shall have a
correlative meaning. For the purposes of this definition, "control," when used
with respect to any Person, means the power to direct the management and
policies of such Person, directly or indirectly through the ownership of voting
securities, by contract, or otherwise, and the terms "controlling" and
"controlled" have the meanings correlative to the foregoing.
"Applicable Law" means any law, statute, ordinance, regulation, order,
injunction, judgment, decree, constitution or treaty enacted, promulgated,
issued, enforced or entered by any Governmental Entity applicable to any Person
or such Person's businesses, properties, assets or rights, as may be amended
from time to time.
"Books and Records" has the meaning given to such term in the Stock Purchase
Agreement.
"Business Day" has the meaning given to such term in the Stock Purchase
Agreement.
"Buyer" has the meaning set forth in the Recitals.
"Closing" has the meaning given to such term in the Stock Purchase Agreement.
"Closing Date" has the meaning given to such term in the Stock Purchase
Agreement.
"Commutation Accounting Principles" means the principles, practices and
methodologies set forth in Commutation Annex A.
"Commutation Amount" has the meaning set forth in Section 3.1.
"Commutation Balance Sheet" has the meaning set forth in Section 3.3.
"Commutation Balances" has the meaning set forth in Section 3.2.
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"Commutation Closing Date" means the date of the closing of the transactions
contemplated by this Agreement, which date shall be on or before the Closing
Date.
"Commutation Consideration" has the meaning set forth in Section 3.1.
"Commuted Business" has the meaning set forth in Article II.
"Company" has the meaning set forth in the Preamble.
"Dispute Notice" has the meaning set forth in Section 3.3.
"Effective Time" has the meaning set forth in the Article II.
"Estimated Commutation Amount" has the meaning given to such term in the Stock
Purchase Agreement.
"Estimated Commutation Statement" has the meaning given to such term in the
Stock Purchase Agreement.
"Estimated Settlement Amount" has the meaning set forth in Section 3.3.
"Execution Date" has the meaning set forth in the Preamble.
"Exclusive Producer" means any Producer that markets, sells or administers
business of the type written by the Reinsurer or any of its Affiliates
exclusively for or on behalf of the Reinsurer and its Affiliates,
notwithstanding whether such Producer also sells products of the type not
written by the Reinsurer or any of its Affiliates on behalf of third parties.
"Final Adjustment Statement" has the meaning given to such term in the Stock
Purchase Agreement.
"Final Balance Sheet" has the meaning given to such term in the Stock Purchase
Agreement.
"Final Commutation Balance Sheet" has the meaning set forth in Section 3.3.
"Final Settlement Amount" has the meaning set forth in Section 3.3.
"Governmental Entity" means any domestic or foreign court, arbitral tribunal,
federal, provincial, state or local government or administration, or regulatory
or other governmental authority, commission or agency (including any industry
or other self-regulating body).
"Illinois SAP" shall mean statutory accounting procedures and practices
prescribed or permitted by the Director of Insurance of the State of Illinois.
"Independent Producer" means any Producer that is not an Exclusive Producer.
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"Independent Accounting Firm" has the meaning set forth in Section 3.3.
"Net Commutation Balances Amount" has the meaning set forth in Section 3.2.
"Net Statutory General Account Reserves" shall mean the general account
reserves of the Reinsurer in respect of the Commuted Business as would be
reflected in lines 1 through 4 inclusive in the "Liabilities, Surplus and Other
Funds" section of the NAIC statement blank used to prepare the Reinsurer's
statutory balance sheet as of December 31, 2012 (or if the line numbers are
changed pursuant to relevant guidance from the NAIC, the successor to such line
numbers) prepared in accordance with Illinois SAP. For the avoidance of doubt,
Net Statutory General Account Reserves are net of reserve credit taken under
Third Party Reinsurance. Such reserves shall expressly exclude any additional
or voluntary actuarial reserves, if any, established by the Reinsurer under
Illinois Administrative Code Section 1410.
"Parties" has the meaning set forth in the Preamble.
"Person" means an individual, corporation, partnership, joint venture, limited
liability company, association, trust, unincorporated organization,
Governmental Entity or other entity.
"Producer" means any producer, broker, agent, general agent, managing general
agent, master broker agency, broker general agency, financial specialist or
other Person responsible for marketing or producing insurance policies, annuity
contracts, protection and retirement products on behalf of the Company.
"Reinsurer" has the meaning set forth in the Preamble.
"Representative" has the meaning given to such term in the Stock Purchase
Agreement.
"Resolution Period" has the meaning set forth in Section 3.3.
"Review Period" has the meaning set forth in Section 3.3.
"Seller" means the Reinsurer in its capacity as Seller under the Stock Purchase
Agreement.
"Specified Life Business" means, collectively, (i) the term life insurance
policies written by the Company prior to the Execution Date that have been
reinsured to the Reinsurer and retroceded by the Reinsurer to ▇▇▇▇ Reinsurance
Company, (ii) the term life insurance policies of the type identified on
Schedule 1 that were written by the Company and are reinsured by third party
reinsurers and (iii) the life insurance policies (x) written by the Company
through Producers that, at the time of sale of such policies, marketed, sold or
administered on a non-exclusive basis business of the type written by Reinsurer
or its Affiliates and (y) coded by the Company in its books and records with a
distribution channel code of 601.
"Subject Reinsurance Agreements" has the meaning set forth in the Recitals.
"Statutory Book Value" means the amount carried in respect of such asset by the
Reinsurer as an admitted asset determined in accordance with Illinois SAP, but
disregarding any permitted
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practices applicable to the Reinsurer, other than those of general
applicability to life insurer in the State of Illinois. The Statutory Book
Value of the assets to be transferred as part of the Commutation Consideration
shall be determined as provided in the Commutation Accounting Principles.
"Stock Purchase Agreement" has the meaning set forth in the Recitals.
"Third Party Reinsurance" means all third-party reinsurance of the Company with
respect to the Commuted Business in effect as of the Effective Time.
"Variable Annuity Reinsurance Agreement" has the meaning set forth in the
Recitals.
Article II.
COMMUTATION
Effective as of 12:01 a.m. Central time on April 1, 2014 (the "Effective
Time"), the Parties hereby commute one hundred percent (100%) of all
liabilities ceded or retroceded to the Reinsurer under the Subject Reinsurance
Agreements arising under (i) all of the fixed deferred annuity, value adjusted
deferred annuity and indexed deferred annuity business written by the Company,
(ii) all of the life insurance business written by the Company through
Independent Producers, other than the Specified Life Business, and (iii) all of
the net liability of the Company with respect to the accident and health and
long-term care insurance business written by the Company, in each case as more
particularly identified in Schedule 2 ((i), (ii), and (iii) collectively, the
"Commuted Business"). For the avoidance of doubt, this Agreement does not apply
to the Variable Annuity Reinsurance Agreement.
Article III.
COMMUTATION CONSIDERATION
Section 3.1. Commutation Consideration. Notwithstanding anything contained
in the Subject Reinsurance Agreements to the contrary, as consideration for the
Parties' commutation of the Commuted Business, the Reinsurer shall transfer to
the Company the policy loans included in the Commuted Business and outstanding
as of the Effective Time and assets determined in accordance with Schedule 3
(the "Commutation Consideration") with an aggregate Statutory Book Value,
including investment income due, accrued and unearned, as of the Effective Time
equal to the sum of (i) the Net Statutory General Account Reserves as of the
Effective Time attributable to the Commuted Business minus (if positive) or
plus (if negative) the absolute value of (ii) the amount of the final
settlement in respect of the Commuted Business determined in accordance with
Article V of the General Account Reinsurance Agreement and Article IV of the
Variable Life Reinsurance Agreement for the period ending on March 31, 2014
(the "Commutation Amount"). The Commutation Amount shall be determined, and the
Commutation Consideration shall be paid and adjusted, in accordance with
Section 3.3.
Section 3.2. Interest Maintenance Reserve; Other Commutation Balances.
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(a) As of the Effective Time, the Reinsurer shall transfer to the Company
all liability for the interest maintenance reserve that is attributable to the
Commuted Business at the point in time immediately prior to the consummation of
the transactions contemplated by this Agreement, as well as any liability for
the interest maintenance reserve that is attributable to the Commuted Business
that is created following the Effective Time, in each case determined in
accordance with the Commutation Accounting Principles. The interest maintenance
reserve liability that is so attributable to the Commuted Business as of the
Effective Time shall be determined pursuant to Section 3.3 and shall be
reflected in the Final Commutation Balance Sheet.
(b) In addition to the Commutation Amount, all account balances (both assets
and liabilities) related to the Commuted Business and ceded by the Company to
the Reinsurer under the Subject Reinsurance Agreements (other than (i) those
that are reflected in Net Statutory General Account Reserves and (ii) the
liability for interest maintenance reserve related to the Commuted Business)
will be transferred from the Reinsurer to the Company (the "Commutation
Balances") as of the Effective Time. The Commutation Balances shall be
determined in accordance with the Commutation Accounting Principles and shall
be paid in accordance with Section 3.3. Such Commutation Balances shall
include, but are not limited to, uncollected premiums and agents' balances,
deferred premiums, policyholder dividends, premiums received in advance,
commissions due and accrued, commissions and expense allowances on reinsurance
assumed, general expenses due or accrued, transfers to separate accounts,
taxes, licenses and fees due and accrued, amounts withheld or retained,
remittances and items not allocated, liability for benefits for employees and
agents, abandoned property, guaranty funds receivable or on deposit, guaranty
funds payable, premium tax receivable, and accounts receivable and payable
related to long-term care third party administration agreements, in each case
to the extent attributable to the Commuted Business. The Commutation Balances
shall also include amounts in respect of the Commuted Business that are paid to
or received by the Reinsurer on behalf of the Company after the Effective Time
but prior to the Commutation Closing Date. Upon transfer of these Commutation
Balances, a net reinsurance recoverable or a reinsurance payable will be
recorded by the Company in respect of the Commutation Balances (the "Net
Commutation Balances Amount"). The Net Commutation Balances Amount shall be
determined, settled and adjusted by the Reinsurer or the Company, as
applicable, pursuant to Section 3.3.
Section 3.3. Pre-Closing and Post-Closing Payments.
(a) On the Commutation Closing Date but in any case prior to the Closing,
the Reinsurer shall transfer to the Company all policy loans, investment
assets, cash and other assets selected in accordance with Schedule 3 and
included in the Commutation Consideration having an aggregate Statutory Book
Value, including investment income due, accrued and unearned, as of the
Effective Time equal to the sum of the Estimated Commutation Amount and the
estimated Net Commutation Balances Amount (the "Estimated Settlement Amount")
set forth in the Estimated Commutation Statement prepared by the Reinsurer and
previously delivered to the Company and Buyer pursuant to the terms of
Section 2.4 of the Stock Purchase Agreement. In order to effectuate the
transfer of such investment assets, cash or other assets, the Reinsurer and the
Company shall execute an omnibus assignment agreement substantially in the form
attached as Commutation Annex B.
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(b) The sum of the final Commutation Amount and the final Net Commutation
Balances Amount (the "Final Settlement Amount") shall be determined as set
forth in subsections (c) and (d) of this Section 3.3. If the Final Settlement
Amount is greater than the Estimated Settlement Amount, then the Reinsurer
shall transfer to the Company within five Business Days after the final
determination thereof additional investment assets, cash and other assets
selected in accordance with Schedule 3 and included in the Commutation
Consideration having an aggregate Statutory Book Value as of the Effective Time
equal to the amount by which the Final Settlement Amount exceeds the Estimated
Settlement Amount. If the Estimated Settlement Amount is greater than the Final
Settlement Amount, then the Company shall transfer to the Reinsurer within five
Business Days after the final determination thereof cash and/or investment
assets transferred by the Reinsurer to the Company on the Commutation Closing
Date mutually agreed by the Parties that have an aggregate Statutory Book Value
as of the Effective Time equal to the amount by which the Estimated Settlement
Amount exceeds the Final Settlement Amount.
(c) No later than 90 days after the Closing Date, the Company shall deliver
to the Reinsurer: (i) a statement (the "Adjusted Commutation Statement")
setting forth a proposed commutation balance sheet as of the Effective Time
prepared in good faith from the Books and Records in accordance with the
Commutation Accounting Principles, consistently applied (a "Commutation Balance
Sheet") and showing the Company's calculations of (A) the Commutation Amount,
including the amount of the Net Statutory General Account Reserves as of the
Effective Time and (B) the Commutation Balances, and (ii) reasonable supporting
documentation with respect to the calculations of the amounts set forth in the
Adjusted Commutation Statement. In addition, the Adjusted Commutation Statement
shall be prepared in a manner consistent with the preparation of the Final
Adjustment Statement delivered to the Reinsurer by Buyer pursuant to
Section 2.5 of the Stock Purchase Agreement. The Reinsurer shall, during such
period of no longer than 90 days after the Closing Date, provide the Company
and its Representatives with reasonable access to the employees of the
Reinsurer to the extent such employees have knowledge about the Commuted
Business and to all documentation, records and other information of the Company
(to the extent in the possession of the Reinsurer) or the Reinsurer, as the
Company or any of its Representatives may reasonably request and that are
necessary to facilitate the preparation of the Adjusted Commutation Statement;
provided, that such access does not unreasonably interfere with the conduct of
the business of the Reinsurer and that such access and cooperation shall not,
in the event of any dispute arising out of this Agreement, serve to prejudice
the Reinsurer or any of its Affiliates.
(d) (i) The Reinsurer shall have 45 days from the date on which the Adjusted
Commutation Statement is delivered to it to review the Adjusted Commutation
Statement and the calculations of (A) the Commutation Amount, including the
amount of the Net Statutory General Account Reserves as of the Effective Time
and (B) the Commutation Balances (the "Review Period"). In furtherance of such
review, the Company shall (and shall cause Buyer to) provide the Reinsurer and
its Representatives with reasonable access during such 45 day period to the
employees of Buyer and the Company (including to the Chief Financial Officer of
Buyer) and to all documentation, records and other information of Buyer and the
Company as the Reinsurer or any of its Representatives may reasonably request;
provided, that such access does not unreasonably interfere with the conduct of
the business of Buyer or the Company and that such access and cooperation shall
not, in the event of any dispute arising out of this Agreement, serve to
prejudice the Buyer, the Company or any of its Affiliates.
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(ii)If the Reinsurer disagrees with the Adjusted Commutation Statement
(including any amount or computation set forth therein) in any
respect and on any basis, the Reinsurer may, on or prior to the
last day of the Review Period, deliver a notice to the Company
setting forth, in reasonable detail, each disputed item or amount
and the basis for the Reinsurer's disagreement therewith (the
"Dispute Notice"). The Dispute Notice shall set forth, with
respect to each disputed item, the Reinsurer's position as to the
correct amount or computation that should have been included in
the Adjusted Commutation Statement and as to any calculations
contained therein. Such Dispute Notice shall be included together
with any Dispute Notice (as such term is defined in the Stock
Purchase Agreement) delivered by Reinsurer, as Seller, to the
Buyer under Section 2.5(c)(ii) of the Stock Purchase Agreement.
(iii)If no Dispute Notice is received by the Company with respect to
any item in the Adjusted Commutation Statement on or prior to the
last day of the Review Period, the amount or computation with
respect to such item as set forth in the Adjusted Commutation
Statement shall be deemed accepted by the Reinsurer, whereupon the
amount or computation of such item or items shall be final and
binding on the Parties subject to paragraph (ix) below.
(iv)For a period of 10 Business Days beginning on the date that the
Company receives a Dispute Notice (the "Resolution Period"), if
any, the Company and the Reinsurer shall endeavor in good faith to
resolve by mutual agreement all matters identified in the Dispute
Notice. In the event that the Parties are unable to resolve by
mutual agreement any matter in the Dispute Notice within such 10
Business Day period, the Company and the Reinsurer shall jointly
engage PricewaterhouseCoopers LLP (the "Independent Accounting
Firm") to make a determination with respect to all matters in
dispute. If PricewaterhouseCoopers LLP is unwilling or unable to
serve, the Reinsurer and the Company shall cooperate in good faith
to appoint, within 30 days after the Reinsurer and the Company
receive notice from PricewaterhouseCoopers LLP of its refusal or
inability to act as the Independent Accounting Firm, an
independent certified public accounting firm of national
recognition mutually acceptable to the Company and the Reinsurer,
in which event such firm shall be the "Independent Accounting
Firm." If the Reinsurer, as the Seller, and the Buyer have an
unresolved dispute in respect of any Dispute Notice (as such term
is defined in the Stock Purchase Agreement) delivered by
Reinsurer, as Seller, to the Buyer under Section 2.5(c)(ii) of the
Stock Purchase Agreement, then the accounting firm appointed by
the Reinsurer, as Seller, and the Buyer under the Stock Purchase
Agreement, shall be appointed by the Reinsurer and the Company
hereunder as the "Independent Accounting Firm." Such Independent
Accounting Firm shall review any unresolved disputes submitted
hereunder and under the Stock Purchase Agreement together and each
of the Parties shall direct the
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Independent Accounting Firm to render a determination hereunder at
the same time as it delivers any determination under the Stock
Purchase Agreement.
(v) The Reinsurer and the Company shall direct the Independent
Accounting Firm to render a determination within 30 days after its
retention (along with its determination of any dispute submitted
to the Independent Accounting Firm under the Stock Purchase
Agreement), and the Company, the Reinsurer and their respective
employees and agents will cooperate with the Independent
Accounting Firm during its engagement. The Company, on the one
hand, and the Reinsurer, on the other hand, shall promptly (and in
any event within 10 Business Days) after the Independent
Accounting Firm's engagement, each submit to the Independent
Accounting Firm their respective computations of the disputed
items identified in the Dispute Notice and information, arguments
and support for their respective positions, and shall concurrently
deliver a copy of such materials to the other Party. Each Party
shall then be given an opportunity to supplement the information,
arguments and support included in its initial submission with one
additional submission to respond to any arguments or positions
taken by the other Party in such other Party's initial submission,
which supplemental information shall be submitted to the
Independent Accounting Firm (with a copy thereof to the other
Party) within five Business Days after the first date on which
both Parties have submitted their respective initial submissions
to the Independent Accounting Firm. The Independent Accounting
Firm shall thereafter be permitted to request additional or
clarifying information from the Parties, and each of the Parties
shall cooperate and shall cause their Representatives to cooperate
with such requests of the Independent Accounting Firm. The
Independent Accounting Firm shall determine, based solely on the
materials so presented by the Parties and upon information
received in response to such requests for additional or clarifying
information and not by independent review, only those issues in
dispute specifically set forth in the Dispute Notice and shall
render a written report to the Company and the Reinsurer (the
"Adjustment Report") in which the Independent Accounting Firm
shall, after considering all matters set forth in the Dispute
Notice, determine what adjustments, if any, should be made to the
amounts and computations set forth in the Adjusted Commutation
Statement solely as to the disputed items and shall determine the
appropriate Commutation Amount and Commutation Balances on that
basis.
(vi)The Adjustment Report shall set forth, in reasonable detail, the
Independent Accounting Firm's determination with respect to each
of the disputed items or amounts specified in the Dispute Notice,
and the revisions, if any, to be made to the Adjusted Commutation
Statement, together with supporting calculations. In resolving any
disputed item, the Independent Accounting Firm (i) shall be bound
to the principles of this
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Article III and the terms of this Agreement, (ii) shall limit its
review to matters specifically set forth in the Dispute Notice and
(iii) shall not assign a value to any item higher than the highest
value for such item claimed by either Party or less than the
lowest value for such item claimed by either Party.
(vii)All fees and expenses relating to the work of the Independent
Accounting Firm shall be shared equally by the Company and the
Reinsurer. Subject to paragraph (ix) below, the Adjustment Report
shall be final and binding upon the Company and the Reinsurer, and
shall be deemed a final arbitration award that is binding on each
of the Company and the Reinsurer, and, absent fraud, no party
shall seek further recourse to courts, other tribunals or
otherwise, other than to enforce the Adjustment Report.
(viii)The final form of the Commutation Balance Sheet as of the
Effective Time as finally determined pursuant to this Article III
is referred to herein as the "Final Commutation Balance Sheet".
Notwithstanding anything to the contrary contained in this
Agreement but subject to paragraph (ix) below, the provisions of
this Article III represent the sole and exclusive method for
determining the Final Commutation Balance Sheet, including the
Commutation Amount and the Commutation Balances derived therefrom.
(ix)Notwithstanding anything contained in this Agreement to the
contrary, any items set forth in any Dispute Notice delivered
pursuant to this Article III shall be resolved by the Parties or
by the Independent Accounting Firm consistent with (and in
conjunction with) the determination of the Final Balance Sheet
pursuant to Section 2.5 of the Stock Purchase Agreement. In
addition, if any adjustments to the Final Balance Sheet require
corresponding adjustments to the Final Commutation Balance Sheet,
final Commutation Amount or final Commutation Balances, such
adjustments shall be made, and the Parties shall make any
corresponding payments, whether or not a Dispute Notice was
delivered pursuant to this Article III.
Section 3.4. Company Release of the Reinsurer with respect to the Commuted
Business. In consideration of the receipt of the payments described in
Section 3.1, the transfer of the Commutation Balances described in
Section 3.2(b) and the release provided in Section 3.5, as of the Effective
Time, the Company hereby forever releases and discharges the Reinsurer, and its
predecessors, successors, affiliates, agents, officers, directors, employees
and shareholders, from any and all past, present, and future obligations,
adjustments, liability for payment of interest, offsets, actions, causes of
action, suits, debts, sums of money, accounts, premium payments, reckonings,
bonds, bills, covenants, contracts, controversies, agreements, promises,
damages, judgments, liens, rights, costs and expenses (including attorneys'
fees and costs actually incurred), claims and demands, liabilities and losses
of any nature whatsoever, all whether known or unknown, vested or contingent,
that the Company now has, owns, or holds or claims to have, own, or hold, or at
any time had, owned, or held, or claimed to have had, owned, or held, or may
after the execution of this Agreement have, own, or hold or claim to have, own,
or hold, against the Reinsurer, arising from, based upon, or in any way related
to the Commuted Business, it being
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the intention of the Parties that this release operate as a full and final
settlement of the Reinsurer's current and future liabilities to the Company
under and in connection with the Commuted Business, provided, however, that
this release does not discharge obligations of the Reinsurer (i) that have been
undertaken or imposed by the terms of this Agreement or any other agreement
between the Parties other than the Subject Reinsurance Agreements or (ii) that
have been undertaken or imposed by the terms of any other Transaction
Agreements (as such term is defined in the Stock Purchase Agreement).
Section 3.5. Reinsurer Release of the Company with respect to the Commuted
Business. In consideration of the commutation set forth in Article II, the
transfer of the Commutation Balances described in Section 3.2(b) and the
release provided in Section 3.4, as of the Effective Time, the Reinsurer hereby
forever releases and discharges the Company, and its predecessors, successors,
affiliates, agents, officers, directors, employees and shareholders, from any
and all past, present, and future obligations, adjustments, liability for
payment of interest, offsets, actions, causes of action, suits, debts, sums of
money, accounts, premium payments, reckonings, bonds, bills, covenants,
contracts, controversies, agreements, promises, damages, judgments, liens,
rights, costs and expenses (including attorneys' fees and costs actually
incurred), claims and demands, liabilities and losses of any nature whatsoever,
all whether known or unknown, vested or contingent, that the Reinsurer now has,
owns, or holds or claims to have, own, or hold, or at any time had, owned, or
held, or claimed to have had, owned, or held, or may after the execution of
this Agreement have, own, or hold or claim to have, own, or hold, against the
Company, arising from, based upon, or in any way related to the Commuted
Business, it being the intention of the Parties that this release operate as a
full and final settlement of the Company's current and future liabilities to
the Reinsurer under and in connection with the Commuted Business, provided,
however, that this release does not discharge obligations of the Company
(i) that have been undertaken or imposed by the terms of this Agreement or any
other agreement between the Parties other than the Subject Reinsurance
Agreements or (ii) that have been undertaken or imposed by the terms of any
other Transaction Agreements (as such term is defined in the Stock Purchase
Agreement).
Article IV.
MISCELLANEOUS
Section 4.1. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally or by overnight courier (providing proof of delivery) to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice):
(a)if to Company:
Lincoln Benefit Life Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
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(b)if to the Reinsurer:
Allstate Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Email: ▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
with copy to:
Allstate Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
Notice given by personal delivery or overnight courier shall be
effective upon actual receipt.
Section 4.2. Entire Agreement; Third Party Beneficiaries. This Agreement
(including any annexes and schedules hereto) constitutes the entire agreement,
and supersedes all prior agreements, understandings, representations and
warranties, both written and oral, among the Parties with respect to the
subject matter of this Agreement. Unless the Stock Purchase Agreement is
terminated, the Buyer shall be a third party beneficiary under this Agreement.
Except as provided in the immediately preceding sentence, this Agreement is not
intended to confer upon any Person other than the Parties hereto any rights or
remedies.
Section 4.3. Governing Law. This Agreement and any dispute arising hereunder
shall be governed by, and construed in accordance with, the laws of the State
of New York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
Section 4.4. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise (other than following the Execution Date
by operation of law in a merger or scheme of arrangement), by either Party
without the prior written consent of the other Party, and any such assignment
that is not consented to shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the Parties and their respective successors and assigns.
Section 4.5. Jurisdiction; Enforcement.
(a) Each of the Parties hereto hereby irrevocably and unconditionally
submits to the exclusive jurisdiction of any court of the United States or any
state court, which in either case is located in the City and County of New York
(each, a "New York Court") for purposes of enforcing this Agreement or
determining any claim arising from or related to the transactions contemplated
by this Agreement. In any such action, suit or other proceeding, each of the
Parties hereto irrevocably and unconditionally waives and agrees not to assert
by way of motion, as a defense or otherwise any claim that it is not subject to
the jurisdiction of any such New York
12
Court, that such action, suit or other proceeding is not subject to the
jurisdiction of any such New York Court, that such action, suit or other
proceeding is brought in an inconvenient forum or that the venue of such
action, suit or other proceeding is improper; provided, that nothing set forth
in this sentence shall prohibit any of the Parties hereto from removing any
matter from one New York Court to another New York Court. Each of the Parties
hereto also agrees that any final and unappealable judgment against a Party
hereto in connection with any action, suit or other proceeding will be
conclusive and binding on such Party and that such award or judgment may be
enforced in any court of competent jurisdiction, either within or outside of
the United States. A certified or exemplified copy of such award or judgment
will be conclusive evidence of the fact and amount of such award or judgment.
Any process or other paper to be served in connection with any action or
proceeding under this Agreement shall, if delivered or sent in accordance with
Section 4.1, constitute good, proper and sufficient service thereof.
(b) The Parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that, without the necessity of posting bond or other
undertaking, the Parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in accordance with this Agreement,
this being in addition (subject to the terms of this Agreement) to any other
remedy to which such Party is entitled at law or in equity. In the event that
any Action is brought in equity to enforce the provisions of this Agreement, no
Party hereto shall allege, and each Party hereto hereby waives any defense or
counterclaim, that there is an adequate remedy at law.
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES
THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OR ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER
VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.5(c).
Section 4.6. Severability.
(a) Whenever possible, each provision or portion of any provision of this
Agreement will be interpreted in such manner as to be effective and valid under
Applicable Law, but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any Applicable Law in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any
provision in such jurisdiction, and this Agreement will be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
13
(b) This Agreement may be amended or a provision hereof waived only by a
written instrument signed by each of the Company and the Reinsurer.
(c) No delay on the part of any Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any Party of any right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
Section 4.7. No Offset. No Party to this Agreement may offset any amount due
to the other Party hereto or any of such other Party's affiliates against any
amount owed or alleged to be owed from such other Party or its affiliates under
this Agreement or any other agreement without the written consent of such other
Party.
Section 4.8. Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the Parties and
delivered to the other Party. Each Party may deliver its signed counterpart of
this Agreement to the other Party by means of electronic mail or any other
electronic medium utilizing image scan technology, and such delivery will have
the same legal effect as hand delivery of an originally executed counterpart.
[Remainder of page intentionally left blank]
14
IN WITNESS WHEREOF, the Reinsurer and the Company have caused this
Agreement to be signed by their respective duly authorized officers, all as of
the date first written above.
ALLSTATE LIFE INSURANCE COMPANY
By: -----------------------------
Name:
Title:
By: -----------------------------
Name:
Title:
LINCOLN BENEFIT LIFE COMPANY
By: -----------------------------
Name:
Title:
15
SCHEDULE 1
Certain Specified Life Business - Term Policies
The Company's Guaranteed Term and 10 year level Best Term business sold from
2000 through 2009 as well as the Company's 2006 era TrueTerm product sold in
2006 through 2009, with a limited number of policies having issue dates in 2010.
16
SCHEDULE 2
Commuted Business
"Commuted Business" includes policies with the following coding in the general
ledger for company code
034. A code key is provided in the Commutation Accounting Principles.
--------SAP Profit Center--------
-------------------------------------
Statutory Balance Sheet Line Channel Market Center Product Group
Page 3, Line 1 611 1E 31
611 1E 32
699 1E 32
611 1E 33
611 1E 34
699 1E 34
601 1A 50
611 1E 50
601 1A 51
601 1R 51
611 1E 51
611 1R 51
601 1A 53
611 1E 53
611 1E 63
699 1E 63
601 1A 69
611 1E 69
611 1E 3A
611 1E 3C
611 1E 3D
Page 3, Line 2 601 1A 42
611 1E 42
Page 3, Line 3 611 1E 32
699 1E 32
611 1E 63
Page 3, Line 4.1 ▇▇▇ ▇▇ ▇▇
▇▇▇ ▇▇ 32
611 1E 33
611 1E 3A
611 1E 3C
611 1E 3D
611 1E 63
Page 3, Line 4.2 611 1E 42
Page 3, Line 27 601 1A 52
601 1A 58
17
--------SAP Profit Center--------
-------------------------------------
Statutory Balance Sheet Line Channel Market Center Product Group
601 1A 59
611 1E 52
611 1E 58
611 1E 59
Commuted Business excludes certain Specified Life Business return of premium
riders coded to product group 63.
SCHEDULE 3
Commutation Consideration
The Commutation Consideration (as adjusted pursuant to Section 3.3) shall be
(i) the investment assets set forth on attached electronic Excel file titled
"Commutation Exhibit-LBL Assets 2013 12 31.xlsx", with such additions or
subtractions as agreed by the Parties to reflect the sale or maturity of such
assets, plus (ii) cash in an amount equal to the excess of the Commutation
Amount over the Statutory Book Value of such assets; provided that if the
Statutory Book Value of such assets exceeds the Commutation Amount, assets as
agreed by the Parties shall be subtracted as appropriate.
COMMUTATION ANNEX A
Commutation Accounting Principles
This Commutation Annex A sets forth the Commutation Accounting Principles
referenced in the Agreement. Capitalized terms used and not otherwise defined
in this Commutation Annex A have the respective meanings given in the Agreement.
The Commutation Balance Sheet includes the financial statement impacts related
to the Commuted Business resulting from the execution of the Agreement. The
Commuted Business is identified as set forth in Exhibit 1, Business
Identification. The Commutation Balances are determined using the general
ledger coding key as set forth in Exhibit 1.a. The general ledger accounts are
summarized and reported in the Commutation Balance Sheet as set forth in
Exhibit 1.b.
The Commutation Balance Sheet is prepared using Statutory Accounting Principles
("SAP") defined as statutory accounting practices prescribed or permitted by
the Nebraska Department of Insurance (except where noted otherwise) applied in
a manner consistent with its application in the preparation of the Reference
Balance Sheet (as such term is defined in the Stock Purchase Agreement). The
Commutation Classification Method, Assumptions Utilized and Additional Notes
used in the preparation of the Commutation Balance Sheet are set forth in
Exhibit 2. The following columns comprise the Commutation Balance Sheet (Column
9):
Column 1 - Commutation Consideration equal to Investment Assets and Commuted
Business as set forth in Exhibit 2 and as described in Section 3.1
of the Commutation Agreement.
Column 2 - ▇▇▇▇ to Market Impact
Column 3 - Recognition of Historical IMR
Column 4 - IMR Transferred to Separate Account
Column 5 - Establish AVR
Column 6 - Statutory vs. Tax Reserves
Column 7 - Establish DTA
Column 8 - Transfer of Working Capital
The following columns comprise the LBL Balance Sheet after Commutation (Column
12):
Column 9 - Commutation Balance Sheet
Column 10 - LBL Balance Sheet
Column 11 - Blank
Column 12 - LBL Balance Sheet after Commutation
These Accounting Principles comprise the following Exhibits:
Exhibit 1 - Business Identification
Exhibit 1.a - Statutory Reserve General Ledger Coding Key
Exhibit 1.b - Statutory General Ledger Coding
Exhibit 2 - Assumptions
Exhibit 1 - Business Identification
Exhibit 1.a - Coding Key
G/L Accounts Account Descriptions
------------ -------------------------------------------------
M10010100 LONG TERM FEDERAL GOVERNMENT - U.S.
M10010200 LONG TERM FEDERAL GOVERNMENT - CANADA
▇▇▇▇▇▇▇▇▇ STATES, PROVINCIAL & MUNICIPALS - TAXABLE
M10013100 CORPORATE BONDS
M10013200 CORPORATE BONDS - PRIVATE PLACEMENTS
M10020100 PASS THRU MORTGAGE BACKED SECURITIES
▇▇▇▇▇▇▇▇▇ COLLATERAL MORTGAGE OBLIGATIONS (CMO'S)
M10080000 SHORT TERM TIME DEPOSIT INVESTMENTS
M10080200 SHORT TERM MONEY MARKETS
M10080400 SHORT TERM TREASURY BILLS
M10150231 ▇▇▇▇-▇▇▇▇▇▇ ABO
M10150257 ▇▇▇▇-▇▇▇▇▇▇ ZBA
M10150375 Cash-Firstier Regular
M10150376 CASH-US BANK-VA DEPOSITORY
M10150407 CASH, USBANK #205700310407 FX DEP SWEEP
M10150574 CASH-WACHOVIA NC - LBL Fixed Systems
M10150575 CASH-WACHOVIA NC - LBL Fixed Manual
M10150576 CASH-WACHOVIA NC - LBL Transcend Fixed
M10150584 CASH-WACHOVIA ANNTY (VA) CDA 11475
▇▇▇▇▇▇▇▇▇ CASH-WACHOVIA ANNTY (VA) CDA 11476
M10150918 CASH-LBL Gen Disb-Dep 4443330998
M10150919 CASH-LBL Claims Disb 4443330956
M10150921 CASH-LBL PAC Dep Acct 4443331194
M10150922 CASH-LBL Money Mkt 12760740
M10150953 CASH LBL VA Oper UMB 9871645991
M10150954 CASH LBL VA Disb UMB 9871646009
M10150955 CASH LBL VA Disb UMB 5008012121
M10150956 CASH LBL VA Dep UMB 9871645983
M10151028 LBL Depository Fixed Chase 967384546
M10151029 LBL Depository Var Chase 967384553
M10156035 CASH,CITIBANK MMDA/LIQRES
M10156096 INVESTMENT CASH
M10160021 Investment in Partnership - EMA
M10171020 PREMIUM INSTALLMENTS RECEIVABLE - DUE - Life
M10171026 Reinsurance Premium Receivable
M10190020 REINSURANCE RECOVERABLE ON PAID LOSS-Non Ledger
M10191030 REINSURANCE RECEIVABLE/PAYABLE-INTERCOMPANY-▇▇▇▇
M10191412 Reinsurance Receivable/Payable-I/C-LBRe
▇▇▇▇▇▇▇▇▇ POLICY LOANS
M10220100 INCOME RECEIVABLE FIXED INCOME SECURITIES
M10220500 ACCRUED INTEREST FIXED INCOME SECURITIES
M10227500 ACCRUED INTEREST SHORT TERM BONDS
M10229200 POLICY LOAN ACCRUED INTEREST
M10270004 ACCRUED PREMIUM TAX OFFSET - GFA
M10270005 PREMIUM TAX DEDUCTIBLE - GFA
M10300000 Intercompany Receivable
M10300000 INTERCOMPANY RECEIVABLE
M10330101 Separate Accounts-Common Stock
M10340000 A/R, GENERAL
M10340003 Premium Tax Refund
M10340070 A/R, FIXED MANAGEMENT FEES
M10360407 Reinsurance Recoverable - Expense Allowances
G/L Accounts Account Descriptions
------------ -------------------------------------------------
M19990001 CLEARING ACCOUNT, GENERAL
M20010000 Life Insurance Policy Benefit Reserves
M20010010 Reserve for Accident and Health
M20010030 Policy and Contract Claims - Life
M20010040 Policy and Contract Claims - A & H
M20010310 Unearned Premium - A & H
M20060007 Reinsurance Premium Payable
M20090400 Commissions On Reinsurance Assumed
M20090600 AGENT COMMISSION PAYABLE, EMPLOYEE
M20090601 Agent Commission Payable-Escrow Accrual
M20110000 PREMIUM RECEIVED IN ADVANCE
M20110107 Premium Deposit Fund - ▇▇▇▇
M20160001 Dividend and Coupon Accumulations
M20160100 Dividend Due & Unpaid
▇▇▇▇▇▇▇▇▇ Dividend - Provision
M20200200 ACCRUED FIT - FEDERAL INCOME
M20210104 Accrued Premium Tax
M20210105 Accrued Premium Taxes
M20210107 Accrued Muni Tax
M20210300 ACCRUED STATE INCOME TAXES
M20210800 ACCRUED TAXES - RETALIATORY
M20320000 ACCRUED EXPENSE, GENERAL
M20320064 ACCRUED EXPENSE, DELOITTE & TOUCHE - AUDIT
M20320902 Unearned Investment Income
M20400407 TEFRA WITHHOLDING - 1099 20%
M20400500 FEDERAL TAX WITHHOLDING
M20400501 FEDERAL TAX WITHHOLDING
M20400502 FEDERAL BACKUP W/H
M20400504 STATE W/H
M20400690 Deferred Compensation-Agents
M20410081 TPA-Lodger Payable
M20490000 ABANDONED PROPERTY-CLEARING
M21000200 CONSUMER'S SALES & USE TAX LIABILITY
▇▇▇▇▇▇▇▇▇ A/P, TRADE PAYABLE - VENDOR
M21010100 A/P, TRADE PAYABLE - EMPLOYEE
M21020002 ACCRUED GUARANTY FUND ASSESSMENTS
M29990100 LIFE APPLICATION DEPOSITS
M29990152 POLICY BILLING SUSPENSE
M29990154 CASH WITH APPLICATION DEPOSITS
M29990200 POLICY SUSPENSE
▇▇▇▇▇▇▇▇▇ DISBURSEMENT CLEARING
M29990300 CASH CLEARING
M29990316 CLEARING/SUSPENSE SEPARATE ACCOUNT
M29990356 SAP / NE Cyberlife Intra-System
M29990402 CyberNE Cash W/APP Suspense
M29990403 CyberNe New Business Cash Suspense
M29990430 CyberNE Unapplied Cash Suspense
M29990444 Premium Suspense Credit Card
M29990447 Intersystem Suspense Credit Card
M29990456 CyberNE Misc Disburse Clear
M29990502 Agent Bal Transfer Suspense
M29990503 Surety Reverse Alliance Suspense
G/L Accounts Account Descriptions
------------ -------------------------------------------------
M29990524 CyberNE Misc Suspense Control - Var
M29990528 CyberNE Surrender Clearing - VAR
M29990606 CyberNE Qual Group Premium Susp
M29990608 CyberNE Return Check Suspense
M29990621 CyberNE Premium Refund Suspense
M29990622 CyberNE Daily Cycle Clearing
M29990623 CyberNE Cash W/APP Clearing
M29990624 CyberNE Misc Suspense Control
▇▇▇▇▇▇▇▇▇ CyberNE Group Premium Suspense
M29990626 CyberNE Term Mature Suspense
M29990627 CyberNE Loan Disburse Clearing
M29990628 CyberNE Surrender Disburse Clearing
M29990629 CyberNE Death Claim Clearing
M29990630 CyberNE Misc Checks Unappld -Terminated Policy
M29990635 CyberNE Policy Reinstatements
M29990888 CyberNE Term Conversion Suspense - Fixed
M29990889 CyberNE Term Conversion Suspense - Var
M29990990 PruVA Mapping Suspense
M29990992 PruVA Disbursement Suspense
M29990993 PruVA Deposit Suspense
M29990998 Pru VA Outbound Returned Items
M29999503 CyberNe New Business Cash Suspense - Var
S10080805 SHORT-TERM BOND-BV CASH EQUIVALENT RECLASS
S10157500 CASH, TIME DEPOSIT STAT RECL FROM ST INV'S
▇▇▇▇▇▇▇▇▇ CASH, EQUIVALENT RECLASS FROM INVESTED ASSETS
S10160003 LOW INCOME HOUSING STAT BV ADJ
S10171020 Premium installments receivable - due- Life
S10171030 Deferred Premium
S10190020 Reins. Recoverable on Paid Loss-Non Ledger
S10191030 REINSURANCE RECEIVABLE/PAYABLE-INTERCOMPANY-▇▇▇▇
S10200000 Policy Loans
▇▇▇▇▇▇▇▇▇ ACCRUED INTEREST SHORT TERM BONDS CASH EQUIV RECL
S10229200 MISCELLANEOUS INVESTMENT ACCRUED INTEREST
S10250220 Deferred Federal Income Tax Asset
S10300000 Intercompany Receivable
S10300000 INTERCOMPANY RECEIVABLE
S20010000 Life Insurance Policy Benefit Reserves
S20010010 Reserve for Accident and Health
S20010103 Reserve - MVAA
▇▇▇▇▇▇▇▇▇ Separate Accounts Reserves-VA/Variable
S20010114 Separate Account Liability-CARVM
▇▇▇▇▇▇▇▇▇ Unearned Premium - A & H
S20020300 Interest Maintenance Reserve
S20050000 Asset Valuation Reserve
S20060110 Reinsurance in Unauthorized Companies
▇▇▇▇▇▇▇▇▇ Agent Commission Payable, Non-Employee
S20110000 Advance Premium
S20270000 Intercompany Payable, General
S20270000 Intercompany Payable, General
S20420000 SEP ACCT-PAYABLE TO GENL ACCT
CODES
Distribution Channels Distribution Channel Description
--------------------- --------------------------------
601 Allstate Agents
611 Master Brokerage Agencies (MBA's)
646 Prudential
649 Balance Sheet Entries
650 Capital
699 Total Market Center
Market Center Market Center Description
------------- -------------------------
1A Allstate Agents
1E Master Brokerage Agencies (MBA's)
1I Capital
1P Prudential
1R Closed Annuities
Product Group Product Group Description
------------- -------------------------
Life Products
-------------
31 Interest Sensitive Life
32 Traditional Life
33 Variable Universal Life
34 Indexed Life
63 Coinsured Term & ▇▇▇▇ Re ROP Rider
3A SGUL pre 2013
3B ISL to LB Re pre 2013
3C SGUL post 2012
3D ISL post 2012
Annuity Products
----------------
50 Fixed Annuities - 2010
51 Fixed Annuities
52 MVA Annuities
53 Indexed Annuities
55 Variable Annuity
58 Tactician Plus
59 MVA 2009
69 Equity Indexed Annuities - 2010
00 Unallocated
Reinsurance Categories Category Description
---------------------- --------------------
DB Direct Business
DR Direct Business Retained
AE Assumed Business - External
CL Ceded Business - External
Exhibit 1.b - Statutory General Ledger Coding
For purposes of commutation from Allstate Life Insurance Company, queries
obtained from the general ledgers of the Company and Reinsurer were utilized to
support each financial statement line item. For the avoidance of doubt, the
business was identified using Codes (see listing above - Business
Identification). Items noted as "All" would include any component listed in the
Codes. For reference, the account numbers as of March 31, 2013 are included in
the listing. Certain transactions after March 31, 2013 may utilize additional
account numbers associated with the Commuted Business or the Company.
--------SAP Profit Center--------
--------------------------------- SAP
Account Market Product Reinsurance Classification
Number Channel Center Group Category Method
Page 2, Line 1-4 M10010100 All Company 034 1
M10010200 All Company 034 1
▇▇▇▇▇▇▇▇▇ All Company 034 1
M10013100 All Company 034 1
M10013200 All Company 034 1
M10020100 All Company 034 1
▇▇▇▇▇▇▇▇▇ All Company 034 1
Page 2, Line 5 M10080000 All Company 034 1
(S-T & cash equivalents) M10080200 All Company 034 1
M10080400 All Company 034 1
S10080805 All Company 034 1
▇▇▇▇▇▇▇▇▇ All Company 034 1
Page 2, Line 5 M10150231 All Company 034 1
(Cash & o/s checks) M10150257 All Company 034 1
M10150375 All Company 034 1
M10150376 All Company 034 1
M10150407 All Company 034 1
M10150574 All Company 034 1
M10150575 All Company 034 1
M10150576 All Company 034 1
M10150584 All Company 034 1
▇▇▇▇▇▇▇▇▇ All Company 034 1
M10150918 All Company 034 1
M10150919 All Company 034 1
M10150921 All Company 034 1
M10150922 All Company 034 1
M10150953 All Company 034 1
M10150954 All Company 034 1
M10150955 All Company 034 1
M10150956 All Company 034 1
M10151028 All Company 034 1
M10151029 All Company 034 1
M10156035 All Company 034 1
M10156096 All Company 034 1
S10157500 All Company 034 1
--------SAP Profit Center--------
--------------------------------- SAP
Account Market Product Reinsurance Classification
Number Channel Center Group Category Method
Page 2, Line 6 ▇▇▇▇▇▇▇▇▇ From detail policy inventory DB 1
S10200000 From detail policy inventory DB 1
Page 2, Line 8 M10160021 All Company 034 1
S10160003 All Company 034 1
Page 2, Line 14 M10220100 All Company 034 1
M10220500 All Company 034 1
M10227500 All Company 034 1
M10229200 From detail policy inventory DB 1
▇▇▇▇▇▇▇▇▇ All Company 034 1
S10229200 All Company 034 1
Page 2, Line 15.1a M10171020 611 1E 32 DB 1
M10171020 ▇▇▇ ▇▇ ▇▇ ▇▇, ▇▇ ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇ 63 DB 1
S10171020 611 1E 32 DB 1
S10171020 611 1E 63 DB 1
Page 2, Line 15.1b * M10171026 All Company 034 1
(External Reinsurance) M20060007 All Company 034 1
Page 2, Line 15.2 S10171030 611 1E 32 DB 1
S10171030 611 1E 63 DB 1
Page 2, Line 16.1 * M10190020 All Company 034 1
S10190020 All Company 034 1
Page 2, Line 16.3 Ext * M10360407 All Company 034 1
Page 2, Line 16.3 (▇▇▇▇) M10191030 All Company 034 1
M10191412 All Company 034 1
S10191030 All Company 034 1
Page 2, Line 18.2 S10250220 All Company 034 1
Page 2, Line 19 M10270004 All All All DB 3
M10270005 All All All DB 3
Page 2, Line 25 M10340000 611 1E 42 DB 1
M10340000 649 1E 00 DB 1
M10340000 699 1E 42 DB 1
M10340003 649 1E 00 DB 3
M10340070 611 1E 33 DB 1
Page 2, Line 27 M10330101 All Company 034 1
* Methodology to be refined for novation
--------SAP Profit Center--------
--------------------------------- SAP
Account Market Product Reinsurance Classification
Number Channel Center Group Category Method
Page 3, Line 1 * M20010000 611 1E 3A DB 1
M20010000 699 1E 63 DB 1
S20010000 601 1A 50 DB 1
S20010000 601 1A 51 DB 1
S20010000 601 1A 53 DB 1
S20010000 601 1A 69 DB 1
S20010000 601 1R 51 DB 1
S20010000 611 1E 31 DB,CL 1
S20010000 ▇▇▇ ▇▇ ▇▇ ▇▇,▇▇,▇▇ 1
S20010000 611 1E 33 DB,CL 1
S20010000 611 1E 34 DB,CL 1
S20010000 611 1E 3A DB,CL 1
S20010000 ▇▇▇ ▇▇ ▇▇ ▇▇,▇▇ 1
S20010000 ▇▇▇ ▇▇ ▇▇ DB,CL 1
S20010000 611 1E 50 DB 1
S20010000 611 1E 51 DB,CL 1
S20010000 611 1E 53 DB 1
S20010000 611 1E 63 DB,CL 1
S20010000 611 1E ▇▇ ▇▇ ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇ ▇▇,▇▇,▇▇ 1
S20010000 699 1E 32 DB 1
S20010000 699 1E 34 DB 1
S20010000 699 1E 63 DB 1
Page 3, Line 2 M20010010 611 1E 42 DB,CL 1
S20010010 611 1E 42 DB,CL 1
M20010310 611 1E 42 DB,CL 1
▇▇▇▇▇▇▇▇▇ 611 1E 42 DB,CL 1
Page 3, Line 3 M20110107 611 1E 63 DB 1
M20160001 611 1E 32 DB 1
M20160001 699 1E 32 DB 1
Page 3, Line 4.1 M20010030 611 1E 31 DB,CL 1
M20010030 611 1E 32 DB,CL 1
M20010030 611 1E 33 DB,CL 1
M20010030 611 1E 3A DB,CL 1
M20010030 ▇▇▇ ▇▇ ▇▇ ▇▇,▇▇ 1
M20010030 ▇▇▇ ▇▇ ▇▇ DB,CL 1
M20010030 611 1E 63 DB,CL 1
Page 3, Line 4.2 M20010040 611 1E 42 DB,CL 1
Page 3, Line 5 M20160100 611 1E 32 DB 1
Page 3, Line 6 ▇▇▇▇▇▇▇▇▇ 611 1E 32 DB 1
Page 3, Line 8 M20110000 611 1E 32 DB 1
M20110000 ▇▇▇ ▇▇ ▇▇ ▇▇, ▇▇ ▇
▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇ 63 DB 1
S20110000 611 1E 32 DB 1
* Current coding requires manual exclusion of certain Specified Life Business
return of premium riders coded to product group 63.
--------SAP Profit Center--------
--------------------------------- SAP
Account Market Product Reinsurance Classification
Number Channel Center Group Category Method
Page 3, Line 9.4 S20020300 All Company 034 1
Page 3, Line 10 M20090600 All Company 034 1
M20090601 All Company 034 1
▇▇▇▇▇▇▇▇▇ All Company 034 1
Page 3, Line 11 * M20090400 All Company 034 1
Page 3, Line 12 M20320000 Refer to allocation** DB 2
M20320064 Refer to allocation** DB 2
Page 3, Line 13 S20420000 611 1E 33 DB 1
Page 3, Line 14 M20210104 All All All DB 3
M20210105 All All All DB 3
M20210107 All All All DB 3
M20210300 All All All DB, DR 3
M20210800 All All All DB 3
M21020002 All All All DB 3
Page 3, Line 15.1 M20200200 All Company 034 1
Page 3, Line 16 M20320902 From detail policy inventory DB 1
Page 3, Line 17 M20400407 All All All DB 3
M20400500 All All All DB 3
M20400501 All All All DB 3
M20400502 All All All DB 3
M20400504 All All All DB 3
* Methodology to be refined for novation
** Allocation with further refinement to identify specific company payables.
--------SAP Profit Center--------
--------------------------------- SAP
Account Market Product Reinsurance Classification
Number Channel Center Group Category Method
Page 3, Line 19 M19990001 All Company 034 1
M29990100 From detail policy inventory DB 1
M29990152 From detail policy inventory DB 1
M29990154 From detail policy inventory DB 1
M29990200 From detail policy inventory DB 1
▇▇▇▇▇▇▇▇▇ Combination *** DB 2
M29990300 Combination *** DB 2
M29990402 Combination *** DB 2
M29990403 Combination *** DB 2
M29990430 From detail policy inventory DB 1
M29990456 Combination *** DB 2
M29990502 Combination *** DB 2
M29990524 From detail policy inventory DB 1
M29990528 Combination *** DB 2
M29990606 From detail policy inventory DB 1
M29990608 Combination *** DB 2
M29990621 Combination *** DB 2
M29990622 From detail policy inventory DB 1
M29990623 Combination *** DB 2
M29990624 Combination *** DB 2
▇▇▇▇▇▇▇▇▇ Combination *** DB 2
M29990626 From detail policy inventory DB 1
M29990627 From detail policy inventory DB 1
M29990628 Combination *** DB 2
M29990629 Combination *** DB 2
M29990630 From detail policy inventory DB 1
M29990635 Combination *** DB 2
M29990888 From detail policy inventory DB 1
M29990889 From detail policy inventory DB 1
M29999503 Combination *** DB 2
Page 3, Line 21 M20400690 649 1E 00 DB 1
Page 3, Line 24.01 S20050000 All Company 034 1
Page 3, Line 24.02 S20060110 All Company 034 1
Page 3, Line 24.04 M10300000 All Company 034 1
S10300000 All Company 034 1
S20270000 All Company 034 1
Page 3, Line 25 M20410081 611 1E 42 DB 1
M20490000 All All All DB 3
M21000200 All All All Blank 3
▇▇▇▇▇▇▇▇▇ All All All Blank 3
M21010100 All All All Blank 3
*** Combination of specific identification and some level of allocation.
Parties to true up any adjustments related to refined specific
identification.
--------SAP Profit Center--------
--------------------------------- SAP
Account Market Product Reinsurance Classification
Number Channel Center Group Category Method
Page 3, Line 27 S20010103 601 1A 52 DB 1
S20010103 601 1A 58 DB 1
S20010103 601 1A 59 DB 1
S20010103 611 1E 52 DB 1
S20010103 611 1E 58 DB 1
S20010103 611 1E 59 DB 1
▇▇▇▇▇▇▇▇▇ All Company 034 1
S20010114 All Company 034 1
Exhibit 2
Exhibit 2 provides the inventory of principal assumptions utilized in preparing
the LBL Balance Sheet after Commutation. As used below, the Company is
sometimes referred to as "LBL" and Reinsurer is sometimes referred to as "▇▇▇▇."
Each financial statement line item included in the Commutation Balance Sheet
and LBL Balance Sheet after Commutation is measured according to the following
classification method, as specified in the table below:
(1)Amount is specifically identifiable to the Commuted Business or the
amount is calculated as a function of the Commutation and therefore
specifically identifiable to the Commuted Business.
(2)Specifically identifiable balances and an allocation for balances not
specifically identifiable.
(3)Amount represents the entire obligation of the Company or right to an
asset of the Company to/from an external party to the Company.
For the Commutation items included in Column 8, the Company and Reinsurer will
settle those amounts in accordance with Article III of the Agreement.
A schedule, included as Exhibit 1a, is provided of product groups, market
centers, channels and reinsurance categories, collectively "Codes", accessed
through queries obtained from the general ledgers of the Company and Reinsurer
in support of each financial statement line item. For the avoidance of doubt,
the business is identified using Codes. For reference, the account numbers as
of March 31, 2013 that relate to those Codes are included in the listing.
Certain transactions after March 31, 2013 may utilize additional account
numbers associated with the product groups, market centers and channels
associated with the Commuted Business or the Company.
Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to
Commutation.
Commutation Classification
Financial Statement Line Item Method, Assumptions Utilized and Additional Notes
----------------------------- -------------------------------------------------
Page 2 - Assets
1 - 4 - Invested assets 1
Commutation Balance Sheet Column 1 and ▇▇▇▇ to
Market Impact column sourced from list of
actual assets to be transferred as Commutation
Consideration. The Invested Assets to separate
account in Commutation Balance Sheet Column 1
equals IL basis market value adjusted annuity
("MVAA") book value reserve held on ▇▇▇▇ books
as of Commutation date. ▇▇▇▇ to market impacts
determined utilizing fair value valuation
policies consistent with Reinsurer's existing
practices as disclosed in the statutory
audited financial statement.
5 - Short-term investments 1
and cash equivalents Comprised of: Commutation cash in the amount
needed to balance assets transferred (equal to
Invested Assets line 1-4 plus Contract Loans
plus Investment Income Due and Accrued plus
Accrued Policy Loan Interest plus Invested
Assets From Separate Account) to reserves
(equal to liabilities lines 1-
Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to
Commutation.
Commutation Classification
Financial Statement Line Item Method, Assumptions Utilized and Additional Notes
----------------------------- -------------------------------------------------
4 plus unearned investment income plus
liabilities from separate account) transferred
at the Commutation effective date (Column 1),
plus cash of the Company prior to Commutation
(Column 10).
Includes short term investments and cash
equivalents.
5 - Cash and outstanding 1
checks Includes all cash accounts which includes LBL
outstanding checks
6 - Contract loans 1
Policy loans are calculated at a seriatim
level and sourced to the general ledger from
the policy administration systems.
8 - Other invested assets 1 Balance attributable to low income housing
tax credit investment on LBL entity.
14 - Investment income due 1
and accrued Column 1 sourced from contemplated asset lists
shared with the Company reflecting current
expectations of assets to be transferred.
14 - Accrued policy loan 1
interest Policy loan interest is calculated at a
seriatim level and sourced to the general
ledger from the policy administration systems.
15.1 - Uncollected premiums 1
Premium is sourced from Cyberlife
administration system program that compares
paid-to-date to the valuation date, in
relation to premium mode.
Loading is sourced from a Valuation program
interfaced directly to the ledger.
Reinsurance premium payable is tracked at a
policy/reinsurance treaty level and booked at
a product/channel level.
Commutation amounts shown in Transfer of
Working Capital Column 8.
15.2 - Deferred premiums 1
Premium is sourced from the Cyberlife
administration system program that reflects
premiums from valuation date to next
anniversary date that is neither collected or
due.
Loading is sourced from a Valuation program
interfaced directly to the ledger.
Commutation amounts shown in Transfer of
Working Capital Column 8.
16.1 - Amounts recoverable 1
from reinsurers N/A - No balances expected under commutation.
16.3 - Other amounts
receivable under
reinsurance contracts - 1
others N/A - No balances expected under commutation.
16.3 - Other amounts 1
receivable under Represents expense allowances receivable from
reinsurance contracts - ▇▇▇▇. Transfer of Working Capital Column 8
▇▇▇▇ amount equals the net of all assets and
liabilities in this column such that the net
surplus impact from Column 8 equals zero.
For amounts in Column 10, a general ledger
program that automatically reinsures account
activity between LBL and ▇▇▇▇.
18.2 - Net deferred tax asset 1
For purposes of the Commutation, determined as
a formula prior to giving effect to tax
attribute reductions associated with unified
loss rule impacts of any
Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to
Commutation.
Commutation Classification
Financial Statement Line Item Method, Assumptions Utilized and Additional Notes
----------------------------- -------------------------------------------------
potential LBL sale. The admitted DTA in
Column 12 is sourced from the LBL Balance
Sheet in Column 10 plus the admitted DTA in
the Establish DTA, Column 7. The cap is of
admitted DTA in Column 7 is calculated as
15% multiplied by (i) capital and surplus in
Column 12 less (ii) the Admitted DTA in
Column 12; less the Admitted DTA in
Column 10.
19 - Guaranty funds 1
receivable or on deposit Represents guaranty fund amounts to be taken
as credits on Company's future premium tax
returns.
The receivable based on paid assessments is
sourced from the Tax Department based on
expected tax offsets that can be taken on
future premium tax returns.
The receivable based on accrued assessments
is calculated from an internally developed
database that tracks the Company's exposure
to current insolvencies.
Commutation amounts shown in Transfer of
Working Capital Column 8.
25 - Aggregate write-ins a. 1 - Third party administrator ('TPA")
feed - receivable related to Long Term
Care business.
b. 2- Fund manager payments - Variable Life
fund manager fees receivable - balance
averages $200,000 to $250,000 at each
quarter end. The balance is allocated by
channel with 57% being allocated to MBA.
When the VL Separate Account is separated
post Commutation, the fees will be
specifically identifiable.
c. 3 - Premium tax refund receivable.
Commutation amounts shown in Transfer of
Working Capital Column 8.
27 - Separate account assets 1
If Nebraska requires MVAAs to be placed into
the separate account, assets with a market
value equal to the minimum reserve value
held in the separate account for MVAAs or as
otherwise required by the state of Nebraska
will be transferred from the total of
investment assets in lines 1-4.
Page 3 - Liabilities
1 - Aggregate reserve for 1
life contracts Reserves commuted are calculated at a
seriatim level and recorded by plan code in
the general ledger, therefore, the balances
related to commutation are determined on a
specific identification basis.
The Commutation Balance Sheet reflects the
net of the Company's direct, assumed and
ceded reserves.
2 - Aggregate reserve for 1
accident and health Reserves are calculated by Third Party
contracts Administrator at a seriatim level and
recorded by plan code in the general ledger,
therefore, the balances related to
commutation are determined on a specific
identification basis.
The Commutation Balance Sheet reflects the
net of the Company's direct and ceded
reserves.
3 - Liability for deposit- 1
type contracts Dividend Deposits & Premium Deposit funds
are calculated at a seriatim level recorded
in the general ledger by product/channel,
therefore, the balances related to
commutation are determined on a specific
identification basis.
Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to
Commutation.
Commutation Classification
Financial Statement Line Item Method, Assumptions Utilized and Additional Notes
----------------------------- -------------------------------------------------
The Commutation Balance Sheet reflects the
net of the Company's direct and ceded
reserves.
4 - Contract claims 1
Pending claim reserves are sourced from the
claims system.
IBNR is calculated by valuation actuaries
and is based on an actuarial experience
study and recorded at a product/channel
level as determined utilizing valuation
procedures consistent with Reinsurer's
practices for Reinsurer's retained business
as updated from time to time.
The Commutation Balance Sheet reflects the
net of the Company's direct, assumed and
ceded claims. Contract claim liabilities
will be transferred to the extent Company is
responsible for paying claims after the
Commutation effective date regardless of
claim incurred date.
5 - Dividends and coupons 1
due and unpaid Policyholder dividend information is booked
manually based on section CKVL52TV of the
VL52NE Cyberlife Detail Value report sourced
from Cyberlife, and is available at a policy
level by plan code.
The Commutation Balance Sheet reflects the
net of the Company's direct and ceded
dividends.
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
6.1 - Dividends apportioned 1
for payment Policyholder dividend information is booked
manually based on section CKVL52TV the
VL52NE Cyberlife Detail Value report sourced
from Cyberlife and is available at a policy
level by plan code.
The Commutation Balance Sheet reflects the
net of the Company's direct and ceded
dividends.
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
8 - Premiums received in 1
advance Premium is sourced from the Cyberlife
administration system program that compares
paid-to-date to the valuation date, in
relation to premium mode.
The Commutation Balance Sheet reflects the
net of the Company's direct and ceded
premiums received in advance.
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
9.4 - or Asset Page if 1
Negative - Interest Interest Maintenance Reserve ("IMR") is
Maintenance Reserve comprised of:
1. IMR of the Company calculated as per
the statutory statement prior to the
Commutation, Column 10; plus
2. Column 3, historical unamortized IMR
balance related to business Commuted
from Reinsurer calculated as of the
Commutation date and calculated as
the ratio of the average amount of
reserves to be
Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to
Commutation.
Commutation Classification
Financial Statement Line Item Method, Assumptions Utilized and Additional Notes
----------------------------- -------------------------------------------------
Commuted - the average is calculated
using a simple average of
December 31, 2012 amounts and
Commutation date amounts divided by 2
and then divided by the simple
average of the total reserves of
Reinsurer on those same dates as per
the statutory statement of Reinsurer
divided by 2 (reserves exclude MVAAs
since those reserves were held in a
market value separate account not
subject to IMR through most of the
life of the business); plus
3. Column 2, IMR generated by Reinsurer
attributable to specific assets
transferred at the time of
Commutation to be held in the
Company's general account--equal to
(i) 65% of the fair value less
statutory book value of assets
transferred subject to IMR less (ii)
Column 4, IMR associated with assets
transferred to the separate account
if MVAAs are held in the separate
account.
All portions of the IMR are amortized into
income based on their separate amortization
schedules.
10 - Commissions due and Not included in Commutation Balance Sheet.
accrued
Per SSAP 61, this liability remains with the
Company. Callidus and Ralie feed general
ledger. Also includes manual accruals
associated with bonus programs.
11- Commissions and Not included in Commutation Balance Sheet.
expense allowances on
reinsurance assumed Amounts are tracked at a policy/reinsurance
treaty level via TAI and booked at a
product/channel level.
12 - General expenses due 2
or accrued Includes expenses payable by the Company.
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
13 - Transfers to Separate 1
Accounts Ledger balances are recorded at the
appropriate product /channel level. Balances
result from VUL Commissioner's Reserve
Valuation Method ("CRVM") as provided in
Appendix A-820 Minimum Life and Annuity
Reserve Standards, of the NAIC Accounting
Practices and Procedures Manual. The balance
is calculated based on the excess of fair
value of assets over the statutory minimum
reserve required CRVM in the Separate
account.
The Commutation Balance Sheet reflects the
net of the Company's direct and ceded
transfers to separate accounts.
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
14 - Taxes, licenses and 3
fees due and accrued Represents a Company obligation; entire
amount transferred to Company as of the
Commutation Effective Date.
The accrual is calculated from an internally
developed database that tracks the Company's
exposure to industry insolvencies based on
the annual insolvency cost report received
from the National Organization of Life and
Health Insurance Guaranty Associations
("NOLHGA").
Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to
Commutation.
Commutation Classification
Financial Statement Line Item Method, Assumptions Utilized and Additional Notes
----------------------------- -------------------------------------------------
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
15.1 - Current federal 1
income tax payable Specifically identified - arising from
Commutation. Equal to (i) 35% multiplied by
the statutory gain or loss on reinsurance
Commutation and (ii) 35% multiplied by the
statutory reserves as represented in Annual
Statement Page 3 lines 1-4 and 13 less
associated tax reserves.
16 - Unearned investment 1
income General ledger feed from Cyberlife policy
administration systems at a product/channel
level - sourced from the general ledger.
Amounts relate to Policy Loans or other
investments in the Commutation Balance Sheet.
17 - Amounts withheld 3
Represents a Company obligation; entire
amount transferred to Company as of the
Commutation Effective Date.
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
19 - Remittances and items 2
not allocated Comprised of inbound and outbound suspense
accounts. Transactions are initially
recorded to a non-descript product/channel
and later cleared to the appropriate
product/channel level.
To identify the product/channel splits, the
information included in the Excel files
supporting the account reconciliations is
utilized.
The files contain seriatim listings by
policy number of outstanding transactions.
The policy numbers are compared to the
valuation database to extract the
corresponding product/channel.
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
21 - Liability for benefits 1
for employees and agents Deferred agent compensation plan associated
with the MBA channel. Amounts booked from
reports received from TPA.
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
24.01 - Asset Valuation 1
Reserve Asset Valuation Reserve - Column 5
a. AVR worksheet used in the Company's
filed statutory statement utilized to
calculate the ending AVR
b. Asset values less assets transferred
to market value adjusted annuity
separate account added to worksheet
and the AVR recalculated
24.02 - Reinsurance in Not included in Commutation Balance Sheet.
unauthorized companies
Reserves ceded to Lincoln Benefit
Reinsurance Company. Reserves are calculated
at a seriatim level and recorded by plan
code.
24.04 - Payable to parent, 1
subsidiaries and affiliates Not included in Commutation Balance Sheet.
Accounting Principles
LBL Balance Sheet Column 10 is sourced from LBL entity balance prior to
Commutation.
Commutation Classification
Financial Statement Line Item Method, Assumptions Utilized and Additional Notes
----------------------------- -------------------------------------------------
25 - Aggregate write-ins for Abandoned property and Accounts Payable
liabilities represent Company obligations; therefore the
entire amounts were transferred to Company
as of the Commutation Effective Date.
. 3 - Abandoned property - Tracker system
. 1 - Long-term Care payable - TPA
. 3 - Accounts Payable - Accounts payable
invoices reviewed to ensure that amounts
represent Company payable amounts
Amounts transferred under the commutation
are shown in Transfer of Working Capital
Column 8.
27 - Separate account 1
liabilities If MVAAs are transferred to the separate
account, the reserves are specifically
identified. Column 4, minimum reserve set
equal to book value of market value adjusted
annuity reserve determined under Illinois
SAP plus positive or negative IMR
transferred to the separate account as a
result of the Commutation as defined in IMR
paragraph 3 above.
Other Include other amounts, whether positive or
negative, not contemplated in Exhibit 2
associated with the Commuted Business as
identified consistent with the business
identification methods outlined for the
Commuted Business herein.
COMMUTATION ANNEX B
Form of Omnibus Assignment
[Attached]