EXHIBIT 10.17
INTERESTS AND LIABILITIES AGREEMENT
entered into by and between
LIFEUSA INSURANCE COMPANY
and
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
Minneapolis, Minnesota
(hereinafter referred to as the "SUBSCRIBING REINSURER")
IT IS HEREBY AGREED that the SUBSCRIBING REINSURER shall have a 100% share as
respects policies in the interests and liabilities of the "Reinsurer" as set
forth in the attached Coinsurance Agreement entitled:
COINSURANCE AGREEMENT
Effective: January 1, 1999
IT IS FURTHER AGREED that this Interests and Liabilities Agreement shall become
effective on January 1, 1999, with respect to policies issued on or after that
date, and shall continue in force until terminated in accordance with the
provisions of the attached Coinsurance Agreement.
IT IS ALSO AGREED that the SUBSCRIBING REINSURER'S share in the attached
Coinsurance Agreement shall be separate and apart from the shares of the other
reinsurers, and shall not be joint with the shares of the other reinsurers, it
being understood that the SUBSCRIBING REINSURER shall in no event participate in
the interests and liabilities of the other reinsurers.
IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
representatives have executed this Interest and Liabilities Agreement as of the
dates undermentioned at:
Minneapolis, Minnesota, this 22nd day of December 1998.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇, Senior Vice President and COO
------------------------------------------------------
LIFEUSA INSURANCE COMPANY
Minneapolis, Minnesota, this 22nd day of December 1998.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President of Individual Marketing
------------------------------------------------------
ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA
COINSURANCE AGREEMENT
Effective: January 1, 1999
between
LIFEUSA INSURANCE COMPANY
Minneapolis, Minnesota
And
The subscribing reinsurers whose respective
INTERESTS AND LIABILITIES AGREEMENTS
ARE ATTACHED HERETO
TABLE OF CONTENTS
ARTICLE PAGE
------- ----
I REINSURANCE COVERAGE.............................................1
II REINSURANCE PREMIUMS.............................................3
III CLAIMS...........................................................3
IV REPORTS AND REMITTANCES..........................................4
V EXPENSES.........................................................6
VI INTEREST ON STATEMENTS AND CLAIMS................................6
VII DAC TAX..........................................................6
VIII OVERSIGHTS.......................................................6
IX REDUCTIONS, TERMINATIONS AND CHANGES.............................6
X ACCESS TO RECORDS................................................7
XI UNAUTHORIZED REINSURERS..........................................8
XII INSOLVENCY.......................................................8
XIII ARBITRATION......................................................8
XIV RECAPTURE........................................................9
XV REINSTATEMENTS...................................................9
XVI PARTIES TO THE AGREEMENT.........................................9
XVII SCOPE AND DURATION OF AGREEMENT..................................9
XVIII OFFSET..........................................................10
XIX WRITTEN AGREEMENT...............................................10
XX INTERMEDIARY....................................................10
EXHIBIT I.......................................................11
EXHIBIT II......................................................12
EXHIBIT III.....................................................13
EXHIBIT IV......................................................14
EXHIBIT V.......................................................16
COINSURANCE AGREEMENT
Effective: January 1, 1999
between
LIFEUSA INSURANCE cOMPANY
Minneapolis, Minnesota
(hereinafter referred to as the "Company")
and
THE SUBSCRIBING REINSURERS WHOSE RESPECTIVE
INTERESTS AND LIABILITIES AGREEMENTS
ARE ATTACHED HERETO
(hereinafter referred to as the "Reinsurer")
This Agreement, effective January 1, 1999, is made between the Company and the
Reinsurer as follows:
ARTICLE I - REINSURANCE COVERAGE
A. The Company's individual life insurance, annuities and health insurance,
with a focus towards long term care, issued on the policy forms
specified in Exhibit I shall be reinsured automatically with the
Reinsurer, provided it meets the following requirements:
1. Policy issued according to the Company's then existing regular
new risk underwriting rules.
2. Mortality ratings from Standard to Table 16 (P), inclusive.
3. Issue age 80 or below for life insurance, issue age 85 or below
for annuities, and issue age between 18 and 84 for long term
care insurance.
4. Resident of the United States or Canada.
5. Risk has not been submitted to the Reinsurer for facultative
reinsurance.
6. Company retains the coinsurance percentage specified in Exhibit
II.
7. The face amount of life insurance then applied for in all
companies, including the Company on the life, when added to the
face amount then in force in all companies including the Company
on that life, shall not exceed $2,500,000. For accidental death
benefits, the amount shall not exceed $300,000.
8. The maximum amount to be reinsured automatically on any one life
shall not exceed $500,000 for life insurance and $1,000,000 for
annuities.
B. If the insurance does not meet the automatic requirements specified in
paragraph A, the Company may submit an application for facultative
reinsurance. An application for facultative reinsurance shall be made by
submitting to the Reinsurer a "Preliminary Application for Reinsurance,"
Exhibit III, together with copies of all papers pertaining to the
insurability of the risk. The Reinsurer shall have the option of
accepting or rejecting or rating any application for facultative
reinsurance. The Reinsurer shall promptly notify the Company of its
underwriting action after the Reinsurer has examined the evidence of
insurability submitted.
If the amounts of life insurance issued and applied for in all companies
is less than $1,500,000, the Company shall submit the information
required in the preceding paragraph to Allianz Life Insurance Company of
North America as the designated lead underwriter for the Reinsurer, and
Allianz Life's underwriting decision shall be binding on the Reinsurer.
If the amount of life insurance issued and applied for in all companies
is $1,500,000 or more, the Company shall submit the information required
in the second preceding paragraph to each reinsurer with an Interests
and Liabilities Agreement to this Agreement, and each reinsurer shall
promptly notify the Company of its underwriting action.
C. The liability of the Reinsurer shall begin on the effective date of the
Company's liability on each policy reinsured hereunder. A policy
reinsured hereunder shall be any policy for which the Company assigned
its policy number after the effective date of this Agreement. However,
the Reinsurer's liability for facultative reinsurance on a risk shall
not commence before the Reinsurer has accepted the application for
reinsurance. In no event shall the reinsurance be in force and binding
unless the issuance and delivery of such insurance constituted the doing
of business in the United States of America in a jurisdiction in which
the Company was properly licensed.
D. Reinsurance shall be coinsurance and shall follow the policy forms and
rates of the Company. The Company has furnished the Reinsurer with
copies of its policy forms, applications, rates and values and shall
submit to the Reinsurer policy modifications or new policy forms before
reinsurance shall become effective hereunder.
E. The Reinsurer's share of a policy reinsured hereunder shall remain
unchanged so long as the policy issued by the Company remains in force,
except as provided in ARTICLE VIII - REDUCTIONS, TERMINATIONS AND
CHANGES.
F. Receipt by the Reinsurer of the initial reinsurance premium and of each
subsequent reinsurance premium, in accordance with the provisions of
ARTICLE IV - REPORTS AND REMITTANCES of this Agreement shall be a
condition to the Reinsurer's continuing liability for reinsurance of
each policy reinsured.
G. The Company shall inform the Reinsurer of any reinsurance by means of
the monthly accounting report as described in ARTICLE IV - REPORTS AND
REMITTANCES.
H. If a policy reinsured is changed to a plan of insurance not included in
Exhibit I, reinsurance under this Agreement shall continue only with the
written agree-
- 2 - 02/23/99
ment of the Reinsurer, except as provided in paragraph A of ARTICLE VIII
- REDUCTIONS, TERMINATIONS AND CHANGES.
I. The Reinsurer shall establish and assume liability for all statutory
reserves, as required under law by the State of Minnesota, in proportion
to the Reinsurer's liability for reinsurance on each policy reinsured.
ARTICLE II - REINSURANCE PREMIUMS
A. The Company shall pay the Reinsurer as reinsurance premiums, the
reinsured portion of the premiums and deposits received by the Company
from its insureds, including the policy fee.
B. The Reinsurer shall pay the Company the allowances described in Exhibit
IV.
C. The Reinsurer shall not reimburse the Company for the amount of any
premium taxes.
D. The Company will pay all payments assessed by the various state guaranty
associations based on the Covered Products business. The Reinsurer will
reimburse the Company for the Reinsurer's share of such assessments and
participate in any premium tax offsets based on the coinsurance
percentages in Exhibit II. The Company and Reinsurer agree that
assessments will be sought to be recovered either through future premium
tax offsets or additional margins on inforce business.
ARTICLE III - CLAIMS
The Reinsurer shall reimburse the Company for the reinsured portion of all
claims. Reinsured claims shall be reported by the Company and paid by the
Reinsurer on the following basis:
A. The Reinsurer shall be liable to the Company for the insurance benefits
reinsured under this Agreement as the Company shall be liable for such
benefits. All reinsurance claim settlements shall be subject to the
terms and conditions of the particular form of contract under which the
Company is liable.
B. When the Company is advised of a claim, it shall promptly notify the
Reinsurer.
C. The Company shall submit to the Reinsurer a copy of each paper connected
with the claim to the extent that such papers are requested by the
Reinsurer in accordance with criteria established from time to time by
the Reinsurer. After reviewing such claim papers, the Reinsurer shall
give its opinion as to how it would have handled the claim had it been a
claim of the Reinsurer. The Reinsurer shall give its opinion within ten
working days after the Reinsurer shall have received a copy of each
paper connected with the claim. If no response is received within this
ten-day period, it will be presumed the Reinsurer is agreeable to
payment of the claim.
D. Payment of reinsurance proceeds shall be on the same basis as settlement
is made by the Company under the policy reinsured hereunder.
- 3 - 02/23/99
E. The Company shall promptly notify the Reinsurer of its intention to
contest insurance reinsured under this Agreement or to assert defenses
to a claim for such insurance. If the Company's contest of such
insurance results in the reduction of its liability, the Reinsurer's
share of such reduction shall be the percentage set forth in Exhibit II,
based on the date the policy was first reinsured under this Agreement.
If the Reinsurer should decline to participate in the contest or
assertion of defenses, the Reinsurer then shall discharge all of its
liability by the payment of the full amount of reinsurance to the
Company, and the Reinsurer shall not share in any subsequent reduction
in liability.
F. If the amount of insurance provided by a policy reinsured under this
Agreement is increased or reduced because of a misstatement of age or
sex established at claim of the insured, the Reinsurer's share of such
increase or reduction shall be the percentage set forth in Exhibit II,
based on the date the policy was first reinsured under this Agreement.
G. The Company alone shall pay the routine expenses incurred in connection
with settling claims. These expenses may include compensation of agents
and employees and the cost of routine investigations.
H. The Reinsurer shall share with the Company all expenses which are not
routine. Expenses which are not routine shall be those directly incurred
in connection either with the contest of insurance or the assertion of
defenses to insurance or with the possibility of a contest or assertion
of defenses. The Reinsurer's share of these expenses shall be the
percentage set forth in Exhibit II, based on the date the policy was
first reinsured under this Agreement. However, if the Reinsurer has
discharged its liability under paragraph E of this Article, the
Reinsurer shall not share in any expenses incurred after the date it has
discharged its liability. The term "claim expenses" shall mean statutory
interest payable on insurance proceeds, court costs, interest upon
judgments, and allocated investigation, adjustment and legal expenses,
but the term "claim expenses" shall not include salaries paid to
employees of the Company.
I. Any particular reinsurer shall be obligated to reimburse the Company for
the percentage set forth in that reinsurer's Interests and Liabilities
Agreement of any amount paid by the Company for punitive, exemplary or
compensatory damages arising out of the conduct of the Company in the
investigation, trial or settlement of any claim or failure to pay or
delay in payment of any benefit under a policy reinsured by this
Agreement, but only if that particular reinsurer shall have, in advance
of any such conduct by the Company, counseled with the Company and
concurred in the Company's course of conduct.
ARTICLE IV - REPORTS AND REMITTANCES
The following rules for Monthly Reinsurance Accounting are required:
A. The reinsurance premiums required under this Agreement shall be payable
to the Reinsurer on the same basis as the insurance premiums and
deposits are payable to the Company.
- 4 - 02/23/99
B. Within ten days following the close of each month, the Company shall
provide the Reinsurer with a statement listing the total and the
reinsured portions of all premiums, deposits, refunds, allowances,
claims, surrender benefits, policy loans, reserves and other mutually
agreed upon items applicable to the month just ended. The format and
methods of calculation of such items shall be in a form mutually
acceptable to all parties.
C. For administrative purposes only, if a statement shows that a net
balance is payable to the Reinsurer, the Company shall include with the
statement its payment for the amount of the net balance due the
Reinsurer. If payment for the full amount of the net balance due the
Reinsurer is not included with the statement, the reinsurance premiums
for all of the risks listed on the statement shall be in default. If a
statement shall not be received by the Reinsurer within thirty days
after the close of the month, the reinsurance premiums for all of the
risks that would have been listed on such a statement shall be in
default.
Also for administrative purposes only, if a statement shows that a net
balance is payable to the Company, the Reinsurer shall pay to the
Company the amount of the net balance within thirty days after the day
on which the Reinsurer receives the monthly statement from the Company.
D. It is the understanding of both parties that both parties desire the
payment of net balances due no less frequently than weekly. Either party
may, at its option and with the cooperation and consent of the other
party, implement appropriate procedures designed to accomplish such
transfers along with the appropriate statements. Such procedures may
involve the establishment of special bank accounts and the use of wires,
express mail or equivalent means. The establishment of such procedures,
however, does not remove from either party any of the rights or
obligations set forth in the other paragraphs of this Article.
E. The Reinsurer shall have the right to terminate the reinsurance on risks
for which reinsurance premiums are in default by giving ninety days
written notice of termination to the Company. As of the close of the
last day of this ninety-day notice period, all of the Reinsurer's
liability for reinsurance on risks which are the subject of the
termination notice shall terminate unless the Reinsurer shall have been
paid the amount in default prior to that time.
Notwithstanding termination of reinsurance as provided by this
paragraph, the Company shall continue to be liable to the Reinsurer for
all unpaid reinsurance premiums earned by the Reinsurer under this
Agreement.
F. There shall be no reinstatement of reinsurance terminated under
paragraph E of this Article.
G. The first day of the ninety-day notice of termination under paragraph E
of this Article shall be the day the notice shall be deposited in the
mail addressed to the Company's Home Office, or, if the mail is not
used, the day it is delivered to the Company's Home Office or to an
Officer of the Company.
H. Within thirty days following the close of each calendar quarter, the
Company shall prepare and submit to the Reinsurer an in force listing of
all risks reinsured under this Agreement setting forth pertinent data
mutually agreed upon by all parties.
- 5 - 02/23/99
I. All amounts payable under this Agreement shall be payable in the lawful
money of the United States; except, however, that they shall be payable
in the lawful money of Canada if the Company's insurance is based on
Canadian currency.
ARTICLE V - EXPENSES
The Company shall bear the expense of all medical examinations, inspection fees
and other charges incurred in connection with the issuance of the Company's
insurance policies reinsured.
ARTICLE VI - INTEREST ON STATEMENTS AND CLAIMS
A. Interest accrual on all amounts owed from one party to the other begins
on the tenth day following the end of the month. All interest credited
shall be simple interest.
B. This arrangement shall take effect beginning with the January 1999
statement. Interest accrual for the January 1999 statement shall begin
on February 10, 1999.
C. On the twentieth day of the month preceding the end of each calendar
quarter (on the following business day if the twentieth day falls on a
weekend or holiday), the interest rate shall be established which shall
apply to any statements or claims due during the following calendar
quarter.
D. The interest rate shall be the three-month Treasury ▇▇▇▇ rate as stated
in the Wall Street Journal.
ARTICLE VII - DAC TAX
The Company and the Reinsurer hereby agree that any DAC tax paid and credits
received pursuant to Section 848 of the Internal Revenue Code of 1986 as a
result of the Reinsured Policies will be shared proportionally according to the
coinsurance percentages in Exhibit II.
ARTICLE VIII - OVERSIGHTS
It is understood and agreed that if failure to comply with the terms of this
Agreement is shown to be unintentional and the result of a misunderstanding or
oversight on the part of either the Company or the Reinsurer, both the Company
and the Reinsurer shall be restored to the positions they would have occupied
had no such misunderstanding or oversight occurred, provided the failure is
rectified within a reasonable time after discovery.
ARTICLE IX - REDUCTIONS, TERMINATIONS AND CHANGES
A. If there is a contractual or non-contractual replacement or change in
the insurance reinsured under this Agreement, the insurance shall
continue to be reinsured with the Reinsurer.
B. If the insurance reinsured under this Agreement increases and:
- 6 - 02/23/99
1. The increase is subject to new underwriting evidence, the
provisions of ARTICLE I - REINSURANCE COVERAGE shall apply to
the increase in reinsurance.
2. The increase is not subject to new underwriting evidence, the
Reinsurer shall accept automatically the increase in
reinsurance, provided that the total amount ceded does not
exceed the Reinsurer's automatic binding limit.
C. If the amount of insurance provided by a policy reinsured under this
Agreement is increased or reduced, the Reinsurer's share of such
increase or reduction shall be the percentage set forth in Exhibit II,
based on the date the policy was first reinsured under this Agreement.
D. If insurance reinsured under this Agreement is increased or reduced, the
Reinsurer's share of any adjustments to cash values, reserves, policy
loans, or other shared values shall be the percentage set forth in
Exhibit II, based on the date the policy was first reinsured under this
Agreement.
E. If insurance reinsured under this Agreement is terminated, the
reinsurance for the individual risk involved shall be terminated on the
effective date of termination.
F. On facultative reinsurance, if the Company wishes to reduce the
mortality rating, this reduction shall be reunderwritten on a
facultative basis under the facultative provisions of this Agreement.
G. The Reinsurer shall refund to the Company all unearned reinsurance
premiums not including policy fees, less applicable allowances, arising
from reductions, terminations and changes as described in this Article.
H. If there is a contractual or non-contractual replacement or change in
the insurance reinsured under this Agreement, the reinsurance allowances
set forth in Exhibit IV shall be calculated, based on policy duration
from the original date of issue, unless full new underwriting evidence
according to the Company's regular underwriting rules is required. If
such evidence is required, then the reinsurance allowance shall be based
on the effective date of the replacement or change, but only in the
proportion and to the extent that full first year compensation is
payable, and subject to approval of the Reinsurer.
ARTICLE X - ACCESS TO RECORDS
A. The Reinsurer, by its duly authorized and appointed representatives,
shall have the right at any reasonable time to examine at the office of
the Company or the offices of any of the agencies which produce business
for the Company, all papers and documents relating to reinsurance under
this Agreement.
B. At least once each year, the independent auditors of the Company shall
perform certain confirmation procedures, agreed upon by the Company and
the Reinsurer, in connection with the reinsurance. A copy of the report
of the independent auditor shall be furnished to the Reinsurer.
- 7 - 02/23/99
ARTICLE XI - UNAUTHORIZED REINSURERS
The Reinsurer agrees to fund its share of the Company's ceded statutory reserves
by:
1. Escrow or trust accounts for the benefit of the Company; and/or
2. Cash advances;
if, without such funding, a penalty would accrue to the Company on any financial
statement it is required to file with the insurance regulatory authorities
involved.
ARTICLE XII - INSOLVENCY
A. In the event of the insolvency of the Company, this reinsurance shall be
payable directly to the Company or to its liquidator, receiver,
conservator or statutory successor immediately upon demand, with
reasonable provision for verification, on the basis of the liability of
the Company without diminution because of the insolvency of the Company
or because the liquidator, receiver, conservator or statutory successor
of the Company has failed to pay all or a portion of any claim. It is
agreed, however, that the liquidator, receiver, conservator or statutory
successor of the Company shall give written notice to the Reinsurer of
the pendency of a claim against the Company indicating the policy or
bond reinsured which claim would involve a possible liability on the
part of the Reinsurer within a reasonable time after such claim is filed
in the conservation or liquidation proceeding or in the receivership,
and that during the pendency of such claim, the Reinsurer may
investigate such claim and interpose, at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or
defenses that it may deem available to the Company or its liquidator,
receiver, conservator or statutory successor. The expense thus incurred
by the Reinsurer shall be chargeable, subject to the approval of the
Court, against the Company as part of the expense of conservation or
liquidation to the extent of a pro rata share of the benefit which may
accrue to the Company solely as a result of the defense undertaken by
the Reinsurer.
B. Where two or more reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the
expense shall be apportioned in accordance with the terms of this
Agreement as though such expense had been incurred by the Company.
ARTICLE XIII - ARBITRATION
A. It is the intention of the parties that customs and usages of the
business of reinsurance shall be given full effect in the interpretation
of this Agreement. The parties shall act in all things with the highest
good faith. A dispute or difference between the parties with respect to
the operation or interpretation of this Agreement on which an amicable
understanding cannot be reached shall be decided by arbitration. The
arbitrators are empowered to decide all questions or issues and shall be
free to reach their decisions from the standpoint of equity and
customary practices of the insurance and reinsurance industry rather
than from that of strict law.
B. There shall be three arbitrators who shall be active or retired officers
of life insurance companies other than the contracting companies or
their affiliates.
- 8 - 02/23/99
Each of the contracting companies shall appoint one of the arbitrators
and these two arbitrators shall select the third. In the event that
either contracting company should fail to choose an arbitrator within
thirty days after the other contracting company has given notice of its
arbitrator appointment, that contracting company may choose two
arbitrators, who shall in turn choose a third arbitrator before entering
arbitration. If the two arbitrators are unable to agree upon the
selection of a third arbitrator within thirty days following their
appointment, each arbitrator shall nominate three candidates within ten
days thereafter, two of whom the other shall decline and the decision
shall be made by drawing lots.
C. The arbitrators shall decide by a majority of votes and from their
written decision there can be no appeal. Within 45 days after the
closing of the arbitration hearings, the decisions of the arbitrators
will be presented to the parties to the arbitration. The cost of
arbitration, including the fees of the arbitrators, shall be borne by
the losing party unless the arbitrators decide otherwise.
ARTICLE XIV - RECAPTURE
Unless otherwise mutually agreed by the parties to this Agreement, insurance
reinsured under this Agreement shall not be eligible for recapture.
ARTICLE XV - REINSTATEMENTS
If insurance shall lapse for nonpayment of premium and if it is reinstated in
accordance with its terms and the rules of the Company, the applicable
reinsurance shall be reinstated by the Reinsurer, subject to the condition that
the Company shall pay to the Reinsurer all reinsurance premiums in the same
manner as the Company shall receive its premiums under its policy.
ARTICLE XVI - PARTIES TO THE AGREEMENT
This Agreement is for indemnity reinsurance solely between the Company and the
Reinsurer. The acceptance of reinsurance shall not create any right or legal
relation whatever between the Reinsurer and the insured or any other person
having an interest in any kind of insurance issued by the Company.
ARTICLE XVII - SCOPE AND DURATION OF AGREEMENT
A. This Agreement shall be effective on January 1, 1999. This Agreement
will remain in place at least as long as the Credit Agreement, dated
December 22, 1998, between CAPITAL BANKERS LIFE INSURANCE COMPANY and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION remains in place. During
this period, ALLIANZ LIFE INSURANCE COMPANY OF NORTH AMERICA will
reinsure at least 25% of the business written by CAPITAL BANKERS LIFE
INSURANCE COMPANY. This Agreement may be terminated with respect to new
business to be reinsured thereafter at any time, subject to paragraph B
of this Article, by either party giving ninety days written notice of
termination to the other party. Reinsurance of policies in force on the
date of termination shall remain in force until the extinction of the
Company's liability under the policies reinsured.
- 9 - 02/23/99
B. Notwithstanding the provisions of paragraph A of this Article, if the
Reinsurer terminates this Agreement with respect to new reinsurance and
the Company has not arranged for a replacement reinsurer for new
reinsurance prior to the date of termination under paragraph A of this
Article, the Company may, by written notice to the Reinsurer prior to
expiration of the ninety day period referred to in paragraph A of this
Article, require that this Agreement shall continue in effect for up to
an additional ninety days.
ARTICLE XVIII - OFFSET
Any debts or credits, liquidated or unliquidated, in favor of or against either
the Reinsurer or the Company with respect to this Agreement only shall be
set-off and only the balance shall be allowed or paid.
ARTICLE XIX - WRITTEN AGREEMENT
A. This Agreement shall constitute the entire Agreement between the parties
with respect to the business being reinsured hereunder, and there are no
other understandings between the parties other than as expressed in this
Agreement.
B. Any change or modification to this Agreement shall be null and void
unless made by amendment to this Agreement and signed by both parties.
ARTICLE XX - INTERMEDIARY
Reinsurance Alternatives - Reinsurance Intermediaries, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, is hereby recognized as the intermediary with
regard to this Agreement.
- 10 - 02/23/99
EXHIBIT I
COINSURANCE AGREEMENT
Effective: January 1, 1999
between
LIFEUSA INSURANCE COMPANY
Minneapolis, Minnesota
And The Reinsurers
The format of EXHIBIT I includes only Policy Forms and Plan Codes. However, this
Agreement shall coinsure all state variations and qualified and non-qualified
versions of the Policy Forms and Plan Codes in EXHIBIT I.
PLAN CODE DESCRIPTION
1C - P - Y 1101X Ideal Care - Comprehensive
1F - P - Y 1102X Ideal Care - Facility Care
1H - P - Y 1103X Ideal Care - Home and Community
Based Care
Y = "N" for non-qualified and "Q" for qualified versions
X = State variation code
- 11 - 02/23/99
EXHIBIT II
COINSURANCE AGREEMENT
Effective: January 1, 1999
between
LIFEUSA INSURANCE COMPANY
Minneapolis, Minnesota
And The Reinsurers
COINSURANCE PERCENTAGES
For all policies reinsured under this Agreement, the Company and the Reinsurer
shall share the risks in accordance with the following schedule of coinsurance
percentages:
Policies First Company's Reinsurer's
Reinsured Between: Share Share
----------------------- --------- -----------
01/01/99 and Thereafter 0.00% 100.0%
- 12 - 02/23/99
EXHIBIT III
COINSURANCE AGREEMENT
Effective: January 1, 1999
between
LIFEUSA INSURANCE COMPANY
Minneapolis, Minnesota
And The Reinsurers
Exhibit III will consist of the Preliminary Application for Reinsurance to be
agreed by the Reinsurers. Copy of the Preliminary Application for Reinsurance
used by LifeUSA Insurance Company will be Exhibit III.
- 13 - 02/23/99
EXHIBIT IV
COINSURANCE AGREEMENT
Effective: January 1, 1999
between
LIFEUSA INSURANCE COMPANY
Minneapolis, Minnesota
And The Reinsurers
ALLOWANCES
The REINSURER shall pay to the COMPANY an allowance equal to the coinsurance
percentage reinsured multiplied by the following allowances:
I. Ideal Care - Comprehensive, Facility Care, Home and Community Based Care
1. Per policy allowances
A. ISSUE ALLOWANCE
----------------------- -----------------------------
ISSUE AGE ALLOWANCE AT ISSUE
----------------------- -----------------------------
< 65 $35
----------------------- -----------------------------
65 - 74 $105
----------------------- -----------------------------
75+ $245
----------------------- -----------------------------
B. MAINTENANCE ALLOWANCE: $30 All Years
- 14 - 02/23/99
2. Percent of premium allowances
A. PLANS OTHER THAN COMPOUND INFLATION PLAN:
------------------- ------------------ ------------------ ------------------
ISSUE AGE YR 1 YRS 2-10 YRS 11+
--------- ---- -------- -------
------------------- ------------------ ------------------ ------------------
40-44 119.7% 23.0% 13.0%
------------------- ------------------ ------------------ ------------------
45-49 114.7% 23.0% 13.0%
------------------- ------------------ ------------------ ------------------
50-54 109.7% 23.0% 13.0%
------------------- ------------------ ------------------ ------------------
55-59 104.7% 23.0% 13.0%
------------------- ------------------ ------------------ ------------------
60-64 99.7% 23.0% 13.0%
------------------- ------------------ ------------------ ------------------
65-69 94.7% 23.0% 13.0%
------------------- ------------------ ------------------ ------------------
70-74 89.7% 23.0% 13.0%
------------------- ------------------ ------------------ ------------------
75-79 84.7% 23.0% 13.0%
------------------- ------------------ ------------------ ------------------
80+ 79.7% 23.0% 13.0%
------------------- ------------------ ------------------ ------------------
B. COMPOUND INFLATION PLANS:
------------------- ------------------ ------------------ ------------------
ISSUE AGE YR 1 YRS 2-10 YRS 11+
--------- ---- -------- -------
------------------- ------------------ ------------------ ------------------
40-44 116.8% 22.3% 12.3%
------------------- ------------------ ------------------ ------------------
45-49 111.8% 22.3% 12.3%
------------------- ------------------ ------------------ ------------------
50-54 106.8% 22.3% 12.3%
------------------- ------------------ ------------------ ------------------
55-59 101.8% 22.3% 12.3%
------------------- ------------------ ------------------ ------------------
60-64 96.8% 22.3% 12.3%
------------------- ------------------ ------------------ ------------------
65-69 92.2% 22.3% 12.3%
------------------- ------------------ ------------------ ------------------
70-74 87.5% 22.3% 12.3%
------------------- ------------------ ------------------ ------------------
75-79 82.9% 22.3% 12.3%
------------------- ------------------ ------------------ ------------------
80+ 78.2% 22.3% 12.3%
------------------- ------------------ ------------------ ------------------
3. Claim Allowance: 5% of incurred claims
- 15 - 02/23/99
EXHIBIT V
COINSURANCE AGREEMENT
Effective: January 1, 1999
between
LIFEUSA INSURANCE COMPANY
Minneapolis, Minnesota
And The Reinsurers
LINESLIP
As of January 1, 1999, LifeUSA Insurance Company of Minneapolis, Minnesota,
entered into a Coinsurance Agreement (the "Agreement") with Allianz Life
Insurance Company of North America of Minneapolis, Minnesota. For the purposes
of this Letter of Understanding, the reinsurer will be referred to as the
LifeUSA Lineslip ("Lineslip").
The Agreement provides, among other things, for reinsurance commissions and
reinsurance allowances to be paid by the Lineslip to LifeUSA, as provided in
Exhibit IV to the Agreement. This Letter of Understanding acknowledges that
those allowances were developed in such a way as to provide the Lineslip with an
agreed rate of return, based on assumptions provided by LifeUSA and based on a
methodology agreed to by the Lineslip.
The Lineslip reinsurers will participate in certain aspects of managing the
profitability of the policies reinsured under the Agreement as members of a
Product Management Committee which will, among other things, advise LifeUSA as
to investment strategy, agree to an algorithm for determining the rate of
interest to be credited to policyholders by LifeUSA, agree to underwriting
guidelines by LifeUSA, and agree to the cost of insurance and premium rates
charged to new and existing policyholders by LifeUSA.
This Letter of Understanding acknowledges that if LifeUSA unilaterally decides
to take an action, or to not take an action, which is outside the agreed
parameters, without agreement by the Product Management Committee, and if such
action or inaction continues for three months after the Product Management
Committee has notified LifeUSA of its recommendation, the reinsurance shall be
repriced. LifeUSA shall have an obligation to adjust ongoing reinsurance terms
to reestablish the rates of return to the Lineslip as originally agreed.
If the terms of this Letter of Understanding are in conflict with any state
insurance regulations which would preclude LifeUSA from taking reserve credits
in its Statutory Annual Statement for the reinsurance under the Agreement, the
terms of this Letter of Understanding will be deemed to conform with those
statutes in such a way that (1) LifeUSA may take full credit for the reinsured
statutory reserves and (2) the spirit of this Letter of Understanding is
maintained consistent with (1).
- 16 - 02/23/99