Exhibit 1-A(8)(e)
MODIFIED COINSURANCE
AGREEMENT
BETWEEN
THE AMERICAN FRANKLIN LIFE INSURANCE COMPANY
OF
SPRINGFIELD, ILLINOIS
AND
THE FRANKLIN LIFE INSURANCE COMPANY
OF
SPRINGFIELD, ILLINOIS
TABLE OF CONTENTS
SECTION ITEM PAGE
------- ---- ----
A Reinsurance Coverage 3
B Placing Reinsurance in Effect 4
C Payment by Reinsured 5
D Payments by Reinsurer 7
E Terms of Reinsurance 11
F Unusual Expenses and Adjustments 13
G Policy Changes 14
H Oversights 15
I Reductions 15
J Inspection of Records 15
K Arbitration 16
L Insolvency 17
M Parties to Agreement 18
N Effective Date 19
O Payments Upon Termination of Agreement 19
P Duration of Agreement 20
Q Entire Contract 20
R Execution 21
SCHEDULE
--------
I Policies Subject to Reinsurance 22
II Amount of Reinsurance 23
III Periodic Report 24
IV Annual Reports 25
V Administration Charges 26
VI Expense Allowance 27
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MODIFIED COINSURANCE AGREEMENT
between
THE AMERICAN FRANKLIN LIFE INSURANCE COMPANY
of
Springfield, Illinois,
hereinafter referred to as "REINSURED," and
THE FRANKLIN LIFE INSURANCE COMPANY
of
Springfield, Illinois
hereinafter referred to as the "REINSURER."
A. REINSURANCE COVERAGE
1. The insurance policies issued by the REINSURED as listed in Schedule I shall
be reinsured with the REINSURER on a modified coinsurance basis.
2. The reinsurance shall cover the portion of the risk under the policies as
specified in Schedule II.
3. The liability of the REINSURER shall begin simultaneously with that of the
REINSURED, but in no event prior to the effective date of this Agreement.
Reinsurance with respect to any policy shall not be in force unless issuance
and delivery of the policy constituted the doing of business in a state of
the United States of America, the District of Columbia, or a country in
which the REINSURED was properly licensed.
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4. Reinsurance hereunder shall be on a calendar year basis, as follows:
a) with respect to a policy on any of the forms listed in Schedule I
(including policy forms hereafter added by mutual agreement)
which is issued by the REINSURED on or after the effective date
of this Agreement, the reinsurance with respect to such policy
shall cover the period commencing with the effective date of the
policy and ending at midnight at the end of the last day of the
calendar year in which such policy was issued;
b) all reinsurance hereunder shall automatically renew for each
succeeding calendar year annually as of midnight at the beginning
of January 1.
The reinsurance under this Agreement with respect to any policy shall be
maintained in force without reduction so long as the liability of the
REINSURED under such policy reinsured hereunder remains in force without
reduction, unless reinsurance is terminated or reduced as provided herein.
B. PLACING REINSURANCE IN EFFECT
Reinsurance with respect to policies issued after the effective date of this
Agreement shall become effective simultaneously with the liability of the
REINSURED, provided, however, that the REINSURED shall give notification of such
reinsurance to the REINSURER simultaneously with the quarterly reconciliation
prescribed in Section E, paragraph 5.
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C. PAYMENTS BY REINSURED
1. REINSURANCE PREMIUMS
The REINSURED shall pay the REINSURER each day, as reinsurance premiums,
the gross contributions or premiums the REINSURED receives after the
effective date of this Agreement with respect to the portions of policies
reinsured hereunder.
2. DISBURSEMENTS AND DEDUCTIONS FROM POLICYHOLDER ACCOUNT VALUES
The REINSURED shall pay the REINSURER each day with respect to the portions
of policies reinsured hereunder the following amounts:
a) Monthly deductions for the costs of insurance and rider and
benefit charges.
b) Any monthly administrative charges, including such charges made
only for the first policy year.
c) Charges instituted at policyholder request, e.g., for partial
withdrawals, increases and decreases in face amount and transfers
among investment options.
d) Surrender charges made upon surrender or decreases in face
amount.
e) Any deductions waived under a waiver of monthly deduction
benefit.
f) Any other amounts deducted from policyholder account values.
3. REDUCTION IN POLICYHOLDER ACCOUNT VALUES FOR BENEFITS PAID
The REINSURED shall pay the REINSURER each day with respect to the portions
of policies reinsured hereunder the amounts of policyholder cash values
paid as surrender
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benefits and partial withdrawal benefits and the amounts of account values
included in death benefits.
4. CHARGES FOR MORTALITY AND EXPENSE RISKS
The REINSURED shall pay the REINSURER each day with respect to the portions
of policies reinsured hereunder, the charge made against the Separate
Accounts of the REINSURED for mortality and expense risks under the
policies.
5. MISCELLANEOUS GAINS AND LOSSES
The REINSURED shall pay the REINSURER each day with respect to the portions
of the policies reinsured hereunder, the net gains (or "breakage") caused
by delays in moving funds to and from the Separate Account of the
REINSURED. If such amounts are net losses, then they shall be paid by the
REINSURER to the REINSURED.
6. MISCELLANEOUS INCOME
The REINSURED shall pay the REINSURER each day with respect to the portions
of the policies reinsured hereunder, the amounts of any miscellaneous
income not included elsewhere in this Agreement.
7. GROSS INVESTMENT INCOME AND NET REALIZED AND UNREALIZED CAPITAL GAINS AND
LOSSES
Gross investment income and net capital gains and losses, determined in
accordance with the REINSURED's investment year method (or such other
method as agreed upon by the REINSURED and REINSURER) used to allocate such
income and capital gains and losses derived from the assets of the
REINSURED held in relation to the reserves established in and other funds
held in the general account of the REINSURED on the portions of the
policies reinsured hereunder, shall be paid at the
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end of each year by the REINSURED to the REINSURER, as a part of the
consideration for the reinsurance hereunder. This payment shall be reduced
by the amounts of interest credited to the policyholder account values or
any items in the nature of interest paid under the policies on the portions
of the policies reinsured hereunder.
8. RESERVE ADJUSTMENT ALLOWANCE
The REINSURED shall provide an allowance to the REINSURER at the end of
each accounting period to reflect the change in surrender charges, if any,
used to calculate reserves on the portions of the policies reinsured
hereunder. Such allowance shall be ceded to the REINSURER, but will
continue to be settled on a cash basis.
9. MODIFICATION OF RESERVE BASIS
If the REINSURED shall modify the basis used in computing its reserve
liability with respect to the portion of any policy reinsured hereunder
after the effective date of this Agreement, reinsurance amounts paid to the
REINSURER under this section in the year of the modification shall be
adjusted by adding any increase or deducting any decrease in reserves due
to such modification.
D.PAYMENTS BY REINSURER
1. DISTRIBUTION ALLOWANCE
The REINSURER shall pay the REINSURED each day a distribution allowance equal to
5% of the reinsurance premiums plus 95% of such premiums which are for the first
policy year and which are not greater than the amounts defined as commissionable
"target"
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premiums by the REINSURED with regard to the portions of the policies reinsured
hereunder.
The REINSURER shall pay the REINSURED each day an additional distribution
allowance equal to any commissions paid by the REINSURED on increases in face
amount, with respect to the portions of policies reinsured hereunder.
2. CONTRIBUTIONS TO POLICYHOLDER ACCOUNT VALUES
The REINSURER shall pay the REINSURED each day the portion of contributions
or premiums which after deductions are deposited to the Policy Accounts
with respect to the portions of policies reinsured hereunder.
3. BENEFITS
The REINSURER shall pay the REINSURED each day with respect to the portions
of the policies reinsured hereunder:
a) the gross amounts of all death benefits paid by the REINSURED
(i.e., without deduction for reserves);
b) the cash surrender values and withdrawal benefits paid by the
REINSURED;
c) interest paid on claims;
d) monthly deductions waived by the REINSURED under a waiver of
monthly deduction benefit.
Benefits that may be paid in more than one sum or under another form of
payment (i.e., a settlement option), shall, for the purposes of the
reinsurance agreement, be deemed to be paid in one sum.
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4. ADMINISTRATION CHARGES
The REINSURER shall pay the REINSURED issue, underwriting and
administrative charges with respect to the portion of policies reinsured
hereunder in the amounts defined in Schedule V for each reinsured policy.
5. EXPENSE ALLOWANCE
The REINSURER shall pay the REINSURED, as an expense allowance a
reimbursement for certain fees for service paid by the REINSURED under the
Servicing Agreement with respect to the portions of policies reinsured
hereunder in the amounts defined in the Schedule VI for each reinsured
policy.
6. INVESTMENT EXPENSES AND FEDERAL INCOME TAXES
The REINSURER shall be obligated for and shall pay to the REINSURED the
investment expenses incurred in each accounting period in respect of the
gross investment income payable to the REINSURER in accordance with Section
C, paragraph 7. The REINSURER shall be obligated for and shall pay federal
income taxes imposed on the REINSURER.
7. STATE PREMIUM TAXES
When the REINSURER is not required to pay state premium taxes upon the
reinsurance premiums received from the REINSURED, the REINSURER shall pay the
REINSURED on a quarterly basis any such taxes the REINSURED may be required to
pay with respect
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to that part of the contributions or premiums received under the REINSURED's
original policies which are paid to the REINSURER as reinsurance premiums.
8. MISCELLANEOUS DISBURSEMENTS
The REINSURER shall pay the REINSURED each day with respect to the portions
of the policies reinsured hereunder the amounts of any miscellaneous
disbursements not included elsewhere in this agreement.
9. ANNUAL RESERVE ADJUSTMENTS - WAIVER
a) Annual reserve adjustments for disabled life reserves under waiver of
monthly deduction riders shall be computed by deducting (i) the total
amount of such reserves on the last day of the preceding accounting
period on the portions of the policies reinsured hereunder from (ii)
the total amount of such reserves on the last day of the current
accounting period on the portions of the policies reinsured hereunder
and then in force under this Agreement. Such reserves shall be
calculated on the same basis used by the REINSURED in computing its
reserve liability. With respect, however, to the accounting period
during which the effective date of this Agreement occurs, the
reference in (ii) above, to "the last day of the current accounting
period" shall refer to the day immediately prior to the terminal
accounting date.
b) For any accounting period in which "(ii)" exceeds "(i)" in (a), above,
the REINSURER shall pay the REINSURED such excess. For any accounting
period in which "(i)" exceeds "(ii)", the REINSURED shall pay the
REINSURER such excess.
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10. MISCELLANEOUS LIABILITIES AND ACCRUAL ITEMS
The REINSURER shall be responsible for miscellaneous reserves and accrual
items on the portions of the policies reinsured hereunder; e.g. unearned
premium reserves, incurred but unreported claims, etc., incurred by the
REINSURED at the end of each accounting period. Such liabilities shall be
ceded to the REINSURER, but such ceded amounts will continue to be settled
on a cash basis.
E. TERMS OF REINSURANCE
1. OWNERSHIP OF ASSETS
The REINSURED shall retain ownership of all of the assets held in relation
to the reserves on the portions of the policies reinsured hereunder, and
the REINSURER shall have no legal, equitable, or security interest in such
assets.
2. CAPITAL GAINS AND LOSSES
The REINSURER shall not participate in capital gains and losses of the
REINSURED except as specified in Section C, paragraph 7. No part of the
gains and losses of the REINSURED from, or considered as from, sales and
exchanges of capital assets shall be treated as gains and losses from sales
and exchanges of capital assets of the REINSURER.
3. AMOUNTS DUE REINSURER OR REINSURED
Except as otherwise specifically provided herein, all amounts, other than
those paid daily, due to be paid to either the REINSURER or the REINSURED
shall be
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determined or estimated on a net basis as of the last day of the month
preceding the end of each accounting period and shall be due and payable as
of such date. If such amounts cannot be determined at such later date on
an exact basis, such payments may be paid on an estimated basis and any
final adjustments are to be made within 3 months after the end of such
accounting period.
4. ACCOUNTING PERIOD
The accounting period for this Agreement shall be a calendar year, except
that the first accounting period hereunder shall run from the effective
date of this Agreement through December 31 of the calendar year in which
the effective date of this Agreement falls. The REINSURED and the
REINSURER, however, shall each reconcile the reinsurance transactions
hereunder as prescribed in Schedule III at the end of each calendar
quarter.
5. REPORTS
a) Annual Statement information as prescribed in Schedule IV,
paragraph A shall be provided by the REINSURED to the REINSURER
not later than 30 working days after the end of each accounting
period.
b) Periodic Reports as prescribed in Schedule III shall be provided
by the REINSURED to the REINSURER no later than 30 working days
after the end of each calendar quarter.
6. CLAIMS
The settlement made by the REINSURED for a death claim under a policy reinsured
under this agreement shall be binding on the REINSURER. However, the REINSURER
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shall be consulted before any admission of liability on the claim is made by the
REINSURED if the claim amount reinsured is equal to or greater than $200,000 or
when death occurs during the contestable period. The REINSURED shall furnish
the REINSURER with copies of the proofs of loss and any information the
REINSURER may request.
F. UNUSUAL EXPENSES AND ADJUSTMENTS
1. Any unusual expenses incurred by the REINSURED in defending or
investigating a claim for policy liability or rescinding a policy reinsured
hereunder shall be participated in by the REINSURER in the same proportion
as its reinsurance bears to the total insurance under such policy.
2. For purposes of this Agreement (but not as a limitation on the REINSURER's
liability under paragraph 1), it is agreed that penalties, attorney's fees,
and interest imposed automatically by statute against the REINSURED and
arising solely out of a judgment rendered against the REINSURED in a suit
for policy benefits reinsured hereunder shall be considered unusual
expenses.
3. In no event, however, shall the following categories of expenses or
liabilities be considered for purposes of this Agreement as "unusual
expenses":
a) routine investigative or administrative expenses;
b) expenses incurred in connection with a dispute or contest arising
out of conflicting claims of entitlement to policy proceeds or
benefits which the REINSURED admits are payable;
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c) expenses, fees, settlements, or judgments arising out of or in
connection with claims against the REINSURED for punitive or
exemplary damages; and
d) expenses, fees, settlements, or judgments arising out of or in
connection with claims made against the REINSURED and based on
alleged or actual bad faith, failures to exercise good faith, or
tortuous conduct.
4. In the event that the amount of liability provided by a policy or policies
reinsured hereunder is increased or reduced because of a misstatement of
age or sex, the reinsurance liability of the REINSURER shall increase or
reduce in the proportion that the reinsurance liability of the REINSURER
bore to the sum of the retained liability of the REINSURED and the
liability of other reinsurers immediately prior to the discovery of such
misstatement of age or sex.
G. POLICY CHANGES
1. If a change is made in the terms and conditions of a policy issued by the
REINSURED which affects the risk reinsured hereunder in respect of such
policy, and which is evidenced by the issuance of a new policy form, the
REINSURED shall notify the REINSURER promptly of such change.
2. For purposes of this Agreement, any such change shall be deemed to be the
issuance of a new policy form by the REINSURED. The REINSURER shall inform
the REINSURED whether the REINSURER will include such new policy form under
this Agreement, or will terminate or modify the reinsurance hereunder in
respect of such policy.
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H. OVERSIGHTS
It is understood and agreed that, if failure to comply with any terms of this
Agreement is shown to be unintentional and the result of misunderstanding or
oversight on the part of either the REINSURED or the REINSURER, both the
REINSURED and the REINSURER shall be restored to the positions they would have
occupied had no such misunderstanding or oversight occurred.
I. REDUCTIONS
If a portion of the insurance issued by the REINSURED on a life reinsured
hereunder is terminated, reinsurance on that life hereunder shall be reduced.
J. INSPECTION OF RECORDS
The REINSURER and the REINSURED each shall have the right at any reasonable time
to inspect, at the office of the other, all books and documents relating to the
reinsurance under this Agreement.
K. ARBITRATION
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1. 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 decision from the standpoint of equity and customary
practices of the insurance and reinsurance industry rather than from that
of the strict law.
2. The court of arbitration shall be held in the city where the Home Office of
the REINSURER is located and shall consist of three arbitrators who must be
officers of life insurance companies other than the parties to this
Agreement or their affiliates or subsidiaries. The REINSURED shall appoint
one arbitrator and the REINSURER the second. These two arbitrators shall
then select the third before arbitration begins. Should one of the parties
decline to appoint an arbitrator or should the two arbitrators be unable to
agree upon the choice of a third, such appointment shall be left to the
president of the American Council of Life Insurance or its successor
organization.
3. The arbitrators shall decide by a majority of votes and from their written
decision there can be no appeal. The cost of arbitration, including the
fees of the arbitrators, shall be borne by the losing party unless the
arbitrators decide otherwise.
L. INSOLVENCY
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1. In the event of the insolvency of the REINSURED, all reinsurance shall be
payable directly to the liquidator, receiver, or statutory successor of the
REINSURED, without diminution because of the insolvency of the REINSURED.
2. In the event of insolvency of the REINSURED, the liquidator, receiver, or
statutory successor shall give the REINSURER written notice of the pendency
of a claim on a policy reinsured within a reasonable time after such claim
is filed in the insolvency proceeding. During the pendency of any such
claim, the REINSURER may investigate such claim and interpose in the name
of the REINSURED (its liquidator, receiver, or statutory successor), but at
its own expense, in the proceeding where such claim is to be adjudicated
any defense or defenses which the REINSURER may deem available to the
REINSURED or its liquidator, receiver, or statutory successor.
3. The expense thus incurred by the REINSURER shall be chargeable, subject to
court approval, against the REINSURED as part of the expense of liquidation
to the extent of a proportionate share of the benefit which may accrue to
the REINSURED solely as a result of the defense undertaken by the
REINSURER. Where two or more reinsurers are participating in the same
claim and a majority in interest elect to interpose a defense or defenses
to any such claim, the expense shall be apportioned in accordance with the
terms of the reinsurance agreement as though such expenses had been
incurred by the REINSURED.
4. In the event that (a) the REINSURER shall execute and file articles of
dissolution or (b) the Illinois Insurance Department shall be directed to
rehabilitate or liquidate the REINSURER pursuant to an order of
rehabilitation or liquidation, reinsurance
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hereunder shall, at the option of the REINSURED, be terminated as of a date
concurrent with or subsequent to the filing of the articles of dissolution
or issuance of the order of liquidation, as selected by the REINSURED.
Written notification of such termination and date shall be given by the
REINSURED to the REINSURER. Termination under this paragraph shall be
subject to the provisions of the Illinois Insurance Code. The scope of
this paragraph and the option of the REINSURED to terminate pursuant hereto
shall not be limited or otherwise affected by any other provision of this
Agreement.
M. PARTIES TO AGREEMENT
This is an Agreement for indemnity reinsurance solely between the REINSURED and
the REINSURER. The acceptance of reinsurance hereunder shall not create any
right or legal relation whatever between the REINSURER and the insured or the
beneficiary under any policy reinsured hereunder, and the REINSURED shall be and
remain solely liable to such insured or beneficiary under any such policy.
N. EFFECTIVE DATE
The effective date of this Agreement is January 1, 1997.
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O. PAYMENTS UPON TERMINATION OF AGREEMENT
1. In the event that this Agreement is terminated pursuant to any provision
hereof, a terminal accounting and settlement shall take place.
2. The terminal accounting date for the termination shall be the effective
date of termination pursuant to any notice of termination given under this
Agreement or such other date as shall be mutually agreed to in writing.
3. The terminal accounting period shall be the period commencing on January 1
of the calendar year in which the termination is effective and ending on
the terminal accounting date.
4. The terminal accounting and settlement shall consist of a terminal reserve
adjustment by the REINSURED, as described in paragraph 5 below; and an
amount paid by the REINSURER, as described in paragraph 6 below.
5. The REINSURED shall pay to the REINSURER a terminal reserve adjustment in
an amount equal to the reserves established in the general account of the
REINSURED on the day immediately prior to the terminal accounting date on
the portions of the policies reinsured hereunder.
6. The REINSURER shall pay to the REINSURED an amount equal to the reserves
established in the general account of the REINSURED on the day immediately
prior to the terminal accounting date on the portions of the policies
reinsured hereunder.
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P. DURATION OF AGREEMENT
1. Except as otherwise provided herein, this Agreement shall be unlimited in
duration.
2. This Agreement may be terminated at any time by either party giving 90 days
written notice of termination.
3. During the 90 day period, this Agreement shall continue to operate in
accordance with its terms.
4. The REINSURER and the REINSURED shall remain liable after termination, in
accordance with the terms and conditions of this Agreement, with respect to
all reinsurance ceded to the REINSURER prior to termination of this
Agreement.
Q. ENTIRE CONTRACT
This agreement shall constitute the entire agreement between the parties with
respect to the business being reinsured thereunder and that there are no
understandings between the parties other than in this agreement.
Any changes or modifications to the agreement shall be null and void unless made
by amendment to the agreement and signed by both parties.
R. EXECUTION
IN WITNESS WHEREOF the said
THE AMERICAN FRANKLIN LIFE INSURANCE COMPANY OF Springfield, Illinois
and the said
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THE FRANKLIN LIFE INSURANCE COMPANY OF Springfield, Illinois,
have by their respective officers executed this Agreement in duplicate on the
dates shown below.
THE AMERICAN FRANKLIN LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇ ▇. Friend
------------------------ ----------------------------
Title President TITLE Sr. V.P., Gen. Counsel &
-------------------- ------------------------------
Secretary
------------------------------
Date August 8, 1997 Date August 8, 1997
--------------------- -------------------------
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Title Vice President
--------------------
Date August 8, 1997
---------------------
THE FRANKLIN LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------ -------------------------------------
Title Sr. V.P.-Actuarial TITLE V.P., Assoc. Gen. Counsel & Asst.
-------------------- ---------------------------------------
Secretary
---------------------------------------
Date August 8, 1997 Date August 8, 1997
--------------------- ----------------------------------
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Title V.P.-Actuarial
--------------------
Date August 8, 1997
---------------------
(Original SCHEDULE I replaced in Amendment I, 9-1-97)
SCHEDULE I
POLICIES SUBJECT TO REINSURANCE
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Policies on Policy Form T1735 sold by registered representatives of Franklin
Financial Services Corporation, are subject to reinsurance hereunder, except as
provided in Schedule II. Riders, by whomever sold, attached to such policies
are also subject to reinsurance hereunder.
As of January 1, 1997, only policies issued in the following states will be
included in this reinsurance agreement:
Alabama Arkansas
District of Columbia Hawaii
Idaho Illinois
Indiana Iowa
Kansas Kentucky
Maryland Minnesota
Mississippi Missouri
Montana Nebraska
Nevada New Mexico
Oklahoma North Dakota
Oregon South Carolina
South Dakota Tennessee
Utah Washington
Wisconsin Wyoming
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(Original SCHEDULE II replaced in Amendment I, 9-1-97)
SCHEDULE II
AMOUNT OF REINSURANCE
The portion of the risk reinsured under this Agreement shall be 30% on any
policy to the extent reinsured hereunder, as provided in Schedule I, in
accordance with the following rules:
1. There shall be no reinsurance on any benefit under this Agreement
where the REINSURED does not retain its normal retention of risk on a
policy hereunder.
2. There shall be no reinsurance on policies issued as term conversions
from or replacements of policies originally issued by The Franklin
Life Insurance Company, which were originally reinsured under other
reinsurance agreements.
3. There shall be no reinsurance on an automatic basis for any risk
offered on a facultative basis by the REINSURED to any company.
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SCHEDULE III
PERIODIC REPORT
Period Beginning:
Period Ending:
INDIVIDUAL INSURANCE
Reserves in the General Account
Beg. Of Period
End of Period
Receipts
Premiums
1st Yr.
Renewal
S/A Transfers
Others
Disbursements of Insurance Death Benefits
Death Benefit Payments
S/A Transfers
Premium Taxes
Policy Expense Allowances
Commissions
1st Yr.
Renewal
Allowance
Investment Expense Allowances
Other
Life Insurance Issued (Number and
Face Amount)
Life Insurance in Force (Number and
Face Amount)
Term Insurance Riders Inforce
(face amount)
ADB Inforce (face amount)
Waiver Benefit in Force
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SCHEDULE IV
ANNUAL REPORTS
A. ANNUAL STATEMENT
All the appropriate entries for the following parts of the REINSURER'S NAIC
blank shall be furnished to the REINSURER by the REINSURED:
Page 5 Analysis of operations by lines of business
Page 6 Analysis of increase in reserves during the year
Exhibit 1 Premiums and annuity considerations
Exhibit 6 Taxes, licenses and fees
Exhibit 11 Policy and contract claims
Page 15 Exhibit of Life Insurance
Schedule T Premiums and annuity considerations
B. TAX RETURN INFORMATION
All information used in preparing the REINSURED'S Federal Income Tax Return
(Form 1120L) and which is necessary for the REINSURER to complete each item
in its Federal Income Tax Return with respect to the reinsurance hereunder
shall be furnished to the REINSURER by the REINSURED on a timely basis.
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SCHEDULE V
ADMINISTRATION CHARGES
1. For each policy issued and reinsured during a calendar year, the REINSURER
shall pay the REINSURED $30.00 (30% of $100.00) to cover issue and
underwriting expenses incurred by the REINSURED.
However, if such policy is a term conversion from or a replacement of a
policy originally written by The Franklin Life Insurance Company, where
full evidence of insurability has not been secured, the REINSURER shall pay
the REINSURED a reduced amount of $15 (30% of $50.00).
2. The REINSURER shall pay the REINSURED each year an amount to cover
administrative expenses incurred by the REINSURED. This amount shall be
calculated by multiplying $3.00 (30% of $10.00) by .5 times the following:
b) the number of reinsured policies inforce at the end of the prior
calendar year, plus
c) the number of policies in force at the end of the current calendar
year, plus
d) the number of policies issued and reinsured during the current
calendar year.
The above unit charges will apply during the first year of this agreement
and will subsequently be redetermined to follow future experience.
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SCHEDULE VI
EXPENSE ALLOWANCE
1. For each policy issued and reinsured during a calendar year, the REINSURER
shall pay the REINSURED $54.00 (30% of $180.00) as an expense allowance to
cover service fees for issue and acquisition incurred by the REINSURED.
2. The REINSURER shall pay the REINSURED each year an expense allowance to
cover administrative service fees incurred by the REINSURED. This
allowance shall be calculated by multiplying $18.00 (30% of $60.00) by .5
times the following:
(a) the number of reinsured policies in force at the end of the prior
calendar year, plus
(b) the number of policies in force at the end of the current calendar
year, plus
(c) the number of policies issued and reinsured during the current
calendar year.
The above unit charges will apply during the first year of this agreement
and will subsequently be redetermined to follow future experience.
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