COINSURANCE AND YEARLY RENEWABLE TERM REINSURANCE AGREEMENT
BETWEEN
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
West Des Moines, Iowa
AND
ATLANTIC INTERNATIONAL REINSURANCE COMPANY LTD.
Bridgetown, Barbados, West Indies
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COINSURANCE AND YEARLY RENEWABLE TERM REINSURANCE
ARTICLE PAGE
------- ----
I. PREAMBLE AND REINSURANCE PROVIDED......................... 3
II. TERM, TERMINATION AND RECAPTURE........................... 3
III. REINSURANCE COVERAGE...................................... 4
IV. REINSURANCE PREMIUMS AND EXPENSE ALLOWANCES............... 5
V. EXPERIENCE ACCOUNT BALANCE................................ 7
VI. CASH BALANCE.............................................. 8
VII. CASH SETTLEMENT ADJUSTMENTS............................... 9
VIII. FINANCIAL COVENANTS....................................... 10
IX. REPORTS AND REMITTANCES................................... 12
X. NET RETAINED LINES........................................ 13
XI. EXCLUSIONS................................................ 14
XII. INSOLVENCY................................................ 15
XIII. ARBITRATION............................................... 16
XIV. AGREEMENT, AMENDMENTS AND MERGER.......................... 17
XV. MISCELLANEOUS............................................. 18
XVI. SECURITY.................................................. 20
XVII. SERVICE OF SUIT........................................... 24
XVIII. REINSURANCE INTERMEDIARY.................................. 24
SIGNATURE PAGE............................................ 26
EXHIBIT 1 - SAMPLE REPORTING FORMAT
Schedule A - SUBJECT BUSINESS CONTRACTS (TYPES)
Schedule B - YRT BASE RATE BY AGE (NEAREST BIRTHDAY)
Schedule C - TARGET CASH BALANCES
Schedule D - COMPANY INFORMATION
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ARTICLE I: PREAMBLE AND REINSURANCE PROVIDED
1.01 - This is an Agreement of Coinsurance and Yearly Renewable Term
Reinsurance between:
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
West Des Moines, Iowa
(hereinafter referred to as the "Company")
and
ATLANTIC INTERNATIONAL REINSURANCE COMPANY LTD.
Bridgetown, Barbados, West Indies
(hereinafter referred to as the "Reinsurer")
whereby, the Reinsurer agrees to indemnify the Company for
Covered Losses paid by the Company subject to all of the terms
and conditions of this Agreement.
ARTICLE II: TERM, TERMINATION AND RECAPTURE
2.01 - EFFECTIVE DATE: The Effective Date of this Agreement shall be
12:01 a.m., Central Standard Time, January 1, 2001.
2.02 - TERM: This Agreement shall remain in force and the Term of this
Agreement shall be from the Effective Date until the earlier of
(i) the date of death of the last contract holder of a Subject
Business agreement, or (ii) the Recapture Date.
2.03 - NEW BUSINESS TERMINATION DATE: With respect to new policies
issued by the Company, this Agreement shall terminate as follows
(a) on the termination date requested by the Reinsurer,
subject to written notice to the Company at least
one-hundred-twenty (120) days prior such termination date;
(b) immediately upon failure by the Company to comply with one
or more of the Financial Covenants set forth in Section
8.02 herein; or
(c) immediately once the Cash Balance equals or exceeds
fifteen-million dollars ($15,000,000).
The date on which this Agreement terminates with respect to new
policies shall hereinafter be referred to as the "New Business
Termination Date".
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2.04 - TERMINATION AND RECAPTURE: The Company may terminate this
Agreement and recapture all business reinsured hereunder at any
time after June 29, 2001 by providing written notice to the
Reinsurer by registered or certified mail, return receipt
requested, at least one-hundred-twenty (120) days in advance,
such notice to include the effective date of termination and
recapture.
The Reinsurer may terminate this Agreement only if the Company
fails to pay any Reinsurance Premium when due in accordance with
Section 4.01, subject to ninety (90) days' notice and demand for
such Reinsurance Premium by the Reinsurer.
The date on which this Agreement is terminated by the Company or
by the Reinsurer as set forth in this Section 2.04 shall
hereinafter be referred to as the "Recapture Date". On the
Recapture Date, the Company shall pay to the Reinsurer the Cash
Balance as of the Recapture Date, that being the Cash Balance on
the Settlement Date immediately preceding the Recapture Date
adjusted to include interest through the Recapture Date, and the
Reinsurer shall be released from all current and future
liabilities under this Agreement.
ARTICLE III: REINSURANCE COVERAGE
3.01 - COVERAGE:
(a) SECTION A: The Reinsurer shall indemnify the Company for
Section A Covered Losses paid by the Company.
(b) SECTION B: The Reinsurer shall indemnify the Company for
Section B Covered Losses paid by the Company.
3.02 - SUBJECT BUSINESS: Subject Business shall mean all contracts
issued by the Company on or after the Effective Date that are
classified as one of the types of contracts listed on Schedule A
attached hereto and incorporated herein; provided, however, that
Subject Business shall not include any contracts issued by the
Company on or after the New Business Termination Date.
It is understood and agreed that the Company shall continue to
administer the Subject Business during the Term of this
Agreement.
3.03 - SUBJECT LOSSES:
(a) Section A Subject Losses shall mean all benefits paid by
the Company to contract holders of the Subject Business
contracts, including surrender values paid, death benefits
paid, and interest and premium bonuses credited in
accordance with the terms of such Subject Business
contracts. Section A Subject Losses shall not include
rider benefits, extracontractual payments,
extracontractual damages, and other benefits not intended
under the terms of the Subject Business contracts.
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(b) Section B Subject Losses shall mean all surrender charges
waived by the Company upon death of the contract holders
of the Subject Business contracts, but only as respects
that portion of the Subject Business that is not reinsured
under Section A of this Agreement.
3.04 - COVERED LOSSES:
(a) Section A Covered Losses shall equal two percent (2%) of
Section A Subject Losses.
(b) Section B Covered Losses shall equal Section B Subject
Losses, subject to the Section B Aggregate Limit.
(c) The sum of Section A Covered Losses and Section B Covered
Losses shall hereinafter be referred to collectively as
"Covered Losses".
3.05 - SECTION B AGGREGATE LIMIT: The Section B Aggregate Limit for
the sum of all Section B Covered Losses indemnified by the
Reinsurer under this Agreement shall equal fifty-million dollars
($50,000,000).
The Section B Aggregate Limit is the maximum amount recoverable
by the Company under Section B of this Agreement. Under no
circumstances shall the Reinsurer pay more than the Section B
Aggregate Limit under Section B.
ARTICLE IV: REINSURANCE PREMIUMS AND EXPENSE ALLOWANCES
4.01 - REINSURANCE PREMIUM:
(a) Section A Reinsurance Premium for each Accounting Period
shall equal two percent (2%) of all single, first-year and
renewal premiums received by the Company for that
Accounting Period on Subject Business.
(b) Section B Reinsurance Premium shall equal, for the
Accounting Period commencing July 1, 2001 and each
Accounting Period thereafter, the sum of the following:
(i) for each Subject Business contract in force,
twenty-five percent (25%) of the applicable rate
from Schedule B attached hereto and incorporated
herein, based on the contract holder's age at the
nearest birthday at the beginning of that Accounting
Period, MULTIPLIED BY the arithmetic average of the
Net Amount at Risk at the beginning of that
Accounting Period and the Net Amount at Risk at the
end of that Accounting Period;
(ii) a policy fee of eighteen-dollars-and-seventy-five-
cents ($18.75) for each Subject Business contract in
force at the beginning of that Accounting Period;
and
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(iii) fifty-percent (50%) of the amount by which the
account value exceeds the cash surrender value paid
by the Company on each partial surrender and each
full surrender of Subject Business contracts during
that Accounting Period.
"Net Amount at Risk" as used herein shall mean, as
respects each Subject Business contract, the amount by
which the account value payable to the beneficiary upon
death of the contract holder exceeds the cash surrender
value at such time.
(c) The sum of Section A Reinsurance Premium and Section B
Reinsurance Premium shall hereinafter be referred to
collectively as the "Reinsurance Premiums". The
Reinsurance Premiums for each Accounting Period shall be
due and payable from the Company to the Reinsurer as part
of the Total Settlement for that Accounting Period in
accordance with Section 9.06.
4.02 - EXPENSE ALLOWANCES:
(a) SECTION A:
(i) For each Accounting Period, the Section A First Year
Expense Allowances shall equal the portion of the
Section A Reinsurance Premium paid for that
Accounting Period that relates to single and
first-year premiums received by the Company.
(ii) For each Accounting Period, the Section A Renewal
Expense Allowances shall be equal to twenty-five
cents ($0.25) for each Subject Business contract in
force.
The Section A First Year Expense Allowances and the
Section A Renewal Expense Allowances for each Accounting
Period shall hereinafter be referred to collectively as
the "Section A Expense Allowances".
(b) SECTION B: Section B Expense Allowances for each
Accounting Period shall equal:
(i) the sum of
(x) two-and-twenty-five-hundredths percent (2.25%)
of single and first-year premiums paid to the
Company during that Accounting Period,
excluding any premium bonuses, for Subject
Business contracts (other than SPDA 6-5
contracts) with a first-year surrender charge
of fifteen percent (15%) or less; and
(y) three percent (3%) of single and first-year
premiums paid to the Company during that
Accounting Period, excluding any premium
bonuses, for Subject Business contracts with
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a first-year surrender charge in excess of
fifteen percent (15%); and
(z) for Subject Business contracts classified as
SPDA 6-5 contracts, one percent (1%) of single
and first-year premiums paid to the Company
during that Accounting Period, excluding any
premium bonuses;
MINUS
(ii) the absolute value of any negative Cash Settlement
Adjustment for that calendar quarter as determined
in accordance with Section 7.01.
(c) The Section A Expense Allowances and the Section B Expense
Allowances for each Accounting Period shall hereinafter be
referred to collectively as the "Expense Allowances". The
Expense Allowances for each Accounting Period shall be due
and payable from the Reinsurer to the Company as part of
the Total Settlement for that Accounting Period in
accordance with Section 9.06.
(d) It is understood and agreed that the Reinsurer shall have
no obligation to reimburse the Company for any direct or
allocable expenses or taxes.
ARTICLE V: EXPERIENCE ACCOUNT BALANCE
5.01 - EXPERIENCE ACCOUNT BALANCE: An Experience Account Balance
("EAB") shall be calculated at the end of each Accounting
Period. The EAB as of the Effective Date, and at any time
thereafter until the end of the first Accounting Period, shall
be equal to zero (0). The EAB at the end of the first Accounting
Period shall be equal to the Experience Account Gain for that
Accounting Period. The EAB at the end of each Accounting Period
thereafter shall equal the EAB at the end of the prior
Accounting Period plus the Experience Account Gain for that
Accounting Period.
5.02 - EXPERIENCE ACCOUNT GAIN: The Experience Account Gain for each
Accounting Period shall equal the sum of:
(a) the Section A Reinsurance Premium for that Accounting
Period; and
(b) the Coinsurance Reserves at the end of the prior
Accounting Period;
minus the sum of
(c) the Section A Expense Allowances for that Accounting
Period;
(d) the Section A Covered Losses for that Accounting Period;
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(e) the Coinsurance Reserves at the end of that Accounting
Period; and
(f) the Risk and Expense Charge for that Accounting Period.
5.03 - COINSURANCE RESERVES: The Coinsurance Reserves at the end of
each Accounting Period shall equal two percent (2%) of the
statutory reserves held for the Subject Business as of the end
of that Accounting Period.
5.04 - RISK AND EXPENSE CHARGE: The Risk and Expense Charge for each
Accounting Period shall equal (a) eight-tenths-of-one-percent
(0.8%), MULTIPLIED BY (b) the number of days in that Accounting
Period divided by three-hundred-sixty (360) days, MULTIPLIED BY
(c) the absolute value of the EAB at the end of the prior
Accounting Period.
ARTICLE VI: CASH BALANCE
6.01 - CASH BALANCE: The Cash Balance on the Effective Date
shall be equal to zero (0). The Cash Balance for the first
Accounting Period shall be determined on the Settlement Date for
that Accounting Period in an amount equal to the Total
Settlement for that Accounting Period. The Cash Balance for each
Accounting Period thereafter shall be determined on the
Settlement Date for that Accounting Period in an amount equal to
(a) the Total Settlement for that Accounting Period, PLUS (b)
the Interest on Cash Balance at that Settlement Date, PLUS (a)
the Cash Balance for the prior Accounting Period, as determined
on the applicable Settlement Date.
6.02 - INTEREST ON CASH BALANCE: The Interest on Cash Balance at the
first Settlement Date shall be equal to zero (0). The Interest
on Cash Balance at each Settlement Date thereafter shall equal
(a) the Cash Balance Rate on that Settlement Date, MULTIPLIED BY
(b) the Cash Balance on the prior Settlement Date.
6.03 - CASH BALANCE RATE: The Cash Balance Rate at each Settlement
Date shall equal (a) the ninety (90) day London Interbank
Offered Rate ("LIBOR"), as reported on Telerate Page 3750 as of
11:00 a.m., London time, on the last Business Day prior to that
Settlement Date, plus one-and-four-tenths percent (1.4%),
MULTIPLIED BY (b) the ratio that the number of days during that
Accounting Period for which the Cash Balance is positive bears
to three-hundred-sixty (360) days.
"Telerate Page 3750" means the display page currently so
designated on the Dow ▇▇▇▇▇ Market Service or any successor
service (or such other page as may replace that page on the Dow
▇▇▇▇▇ Market Service or any successor service for the purpose of
displaying comparable rates or prices).
6.04 - TARGET CASH BALANCE: The Target Cash Balance at the end of each
Accounting Period shall be the amount set forth in Schedule C
attached hereto and incorporated herein for that Accounting
Period.
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ARTICLE VII: CASH SETTLEMENT ADJUSTMENTS
7.01 - CASH SETTLEMENT ADJUSTMENTS: The Cash Settlement Adjustment for
each Accounting Period shall be calculated on or before the
Settlement Date for that Accounting Period in an amount equal
to:
(a) the Target Cash Balance at the end of that Accounting
Period;
MINUS
(b) the Tentative Settlement for that Accounting Period;
MINUS
(c) the Loss Carryover for the prior Accounting Period;
MINUS
(d) the Cash Balance for the prior Accounting Period as of the
applicable Settlement Date;
MINUS
(e) the Interest on Cash Balance for that Accounting Period;
MINUS
(f) the Risk and Expense Charge for that Accounting Period.
If the Cash Settlement Adjustment for an Accounting Period is
greater than zero (0) AND the Company is not, and was not, in
violation of one or more of the Financial Covenants at any time
during that Accounting Period or any prior Accounting Periods,
an Experience Refund in an amount equal to such Cash Settlement
Adjustment shall be paid by the Reinsurer to the Company as part
of the Total Settlement for that Accounting Period in accordance
with Section 9.06. If the Cash Settlement Adjustment for an
Accounting Period is less than zero (0), the absolute value of
such Cash Settlement Adjustment shall be deducted from the
Section B Expense Allowances for that Accounting Period as set
forth in Section 4.02.
At the sole option of the Reinsurer, the Experience Refund may
be recalculated at the end of any Accounting Period in
accordance with the above formula, where items (b), (e) and (f)
include all Accounting Periods within the calendar year as
opposed to individual Accounting Periods, and items (c) and (d)
are valued as of the end of the last Accounting Period of the
prior calendar year. Upon any such recalculation of the
Experience Refund, the Total Settlement will be recalculated
accordingly.
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7.02 - LOSS CARRYOVER: The Loss Carryover at the end of the first
Accounting Period shall be equal to zero (0). The Loss Carryover
at the end of each Accounting Period thereafter shall equal the
greater of (i) zero (0), or (ii) an amount equal to:
(a) the Cash Balance for the prior Accounting Period as
calculated on the applicable Settlement Date,
PLUS
(b) the Interest on Cash Balance for that Accounting Period as
calculated on the applicable Settlement Date,
PLUS
(c) the Total Settlement for that Accounting Period,
MINUS
(d) the Target Cash Balance at the end of that Accounting
Period.
ARTICLE VIII: FINANCIAL COVENANTS
8.01 - NON-COMPLIANCE WITH FINANCIAL COVENANTS: The Company shall
notify the Reinsurer within five (5) Business Days of any
failure by the Company to comply with one or more of the
Financial Covenants. As provided in Section 2.03, this Agreement
will terminate as respects new policies issued by the Company
immediately upon failure by the Company to comply with one or
more of the Financial Covenants.
8.02 - FINANCIAL COVENANTS: The Financial Covenants are:
(a) the Company shall maintain Risk Based Capital, as measured
by the formula prescribed by the insurance department of
the Company's state of domicile, of no less than
two-hundred-fifteen percent (215%) of the Company Action
Level;
(b) the Company shall maintain Total Surplus of no less than
one-hundred-twenty-five-million dollars ($125,000,000);
(c) there shall be no Change of Control of the Company, where
"Change of Control" is signaled by the requirement that
the Company, or the parent of the Company, file such
change with any insurance department or with the
Securities Exchange Commission;
(d) there shall be no material change in the Company's
underwriting guidelines from those in effect as of the
Effective Date, unless the
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Company obtains the prior written approval of the
Reinsurer to such change;
(e) there shall be no material change in the overall credit
quality of the Company's investment portfolio from the
Effective Date;
(f) the insurance financial strength rating of the Company as
assigned by A.M. Best Company shall not be less than "A-";
(g) the Financial Leverage Ratio (as defined in Section 8.03)
of the Company and its corporate parent combined shall not
be greater than sixty percent (60%); and
(h) the Cash Coverage Ratio (as defined in Section 8.04) of
the Company and its parent combined shall not be less than
one-and-two-tenths (1.2).
8.03 - FINANCIAL LEVERAGE RATIO: The Financial Leverage Ratio at any
time shall be determined as follows, with the result expressed
as a percentage:
(a) the sum of (i) the principal amount of loans outstanding
at
American Equity Investment Life Holding Company (the
"Holding Company"), and (ii) the principal amount of loans
outstanding at American Equity Investment Service Company
(the "Service Company"), excluding any such loans that may
be included in (a)(i) herein;
DIVIDED BY
(b) the sum of (i) the Company's Total Capital and Surplus,
(ii) the Company's Asset Valuation Reserve, and (iii) the
Company's Interest Maintenance Reserve, where items (i),
(ii) and (iii) are the respective amounts as reported on
the Company's most recent certified statutory financial
statements.
8.04 - CASH COVERAGE RATIO: The Cash Coverage Ratio at any time shall
equal:
(a) the sum of (i) amounts available to the Company at that
time for dividends to stockholders in accordance with the
statutes and regulations of the State of Iowa, (ii) any
commissions paid by the Company to the Service Company
during the current Accounting Period, (iii) investment
income of the Holding Company, excluding income from
investments in subsidiaries, during the current Accounting
Period, (iv) cash operating expenses of the Holding
Company during the current Accounting Period, and (v)
restricted payments (dividends paid to shareholders) by
the Holding Company during the current Accounting Period;
DIVIDED BY
(b) the sum of (i) interest on loans outstanding at the
Holding Company, (ii) distribution by the Holding Company
on trust preferreds, and (iii) twenty
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percent (20%) of the principal amounts of loans
outstanding at the Holding Company and at the Service
Company.
ARTICLE IX: REPORTS AND REMITTANCES
9.01 - COMPANY REPORTS: The Company shall provide to the Reinsurer, no
less than three (3) Business Days prior to each Settlement Date,
all information and data required by the Reinsurer to fulfill
its obligations and rights under this Agreement and to satisfy
its legal reporting requirements. A suggested format for such
reporting is attached hereto as Exhibit 1. The Company shall
also furnish to the Reinsurer, on a quarterly basis, a copy of
its certified statutory financial statements at the time such
statements are submitted by the Company to the regulatory
authority in its state of domicile, and shall furnish the
Reinsurer with a statement at the end of each Accounting Period
that demonstrates the Company's compliance with the Financial
Covenants.
9.02 - ACCOUNTING PERIOD: Accounting Period shall mean each calendar
quarter during the Term of this Agreement. In the event the
Recapture Date occurs at any time other than at the end of a
calendar quarter, the last Accounting Period shall be the period
from the beginning of that calendar quarter to the Recapture
Date, both dates inclusive.
9.03 - SETTLEMENT DATES: The Settlement Date for each Accounting
Period shall be the first Business Day on or after fifteen (15)
days after the end of that Accounting Period.
9.04 - BUSINESS DAY: Business Day shall mean any day other than a
Saturday, a Sunday, or a day on which commercial banks in
Bridgetown, Barbados, the State of
New York, or the State of
Iowa are authorized by law or executive order to close.
9.05 - TENTATIVE SETTLEMENT: The Tentative Settlement for each
Accounting Period shall be determined as follows:
(a) any amounts due to the Company under Section A of this
Agreement for that Accounting Period;
PLUS
(b) any amounts due to the Company under Section B of this
Agreement for that Accounting Period;
MINUS THE SUM OF
(c) any amounts due to the Reinsurer under Section A of this
Agreement for that Accounting Period; and
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(d) any amounts due to the Reinsurer under Section B of this
Agreement for that Accounting Period.
For the avoidance of doubt, the Experience Refund for an
Accounting Period shall not be included in the computation of
the Tentative Settlement for that Accounting Period.
9.06 - TOTAL SETTLEMENT: The Total Settlement for each Accounting
Period shall equal (a) the Tentative Settlement for that
Accounting Period, plus (b) the Experience Refund, if any, for
that Accounting Period, MINUS (c) the cost for that Accounting
Period of any Security provided by the Reinsurer in accordance
with Article XVI - SECURITY. If the Total Settlement for an
Accounting Period is greater than zero, then such Total
Settlement shall be due and payable by the Reinsurer to the
Company on the Settlement Date for that Accounting Period.
If the Total Settlement is less than zero, then the absolute
value of such Total Settlement shall be due and payable by the
Company to the Reinsurer on the Settlement Date for that
Accounting Period.
ARTICLE X: NET RETAINED LINES
10.01 - APPLICATION OF OTHER REINSURANCE PROCEEDS: This Agreement
applies only to that portion of insurance or reinsurance which,
after the application of all reinsurance other than the
reinsurance hereunder, the Company retains net for its own
account. In calculating the amount of loss hereunder for which
the Company shall be reimbursed, only the loss with respect to
such retained portion shall be included.
10.02 - COLLECTION OF OTHER REINSURANCE PROCEEDS: The amount of the
Reinsurer's liability hereunder shall not be increased by reason
of the Company's inability to collect from any other reinsurers,
whether specific or general, any amounts which may have become
due from them, whether such inability arises from the insolvency
of such other reinsurers, or otherwise.
10.03 - OTHER REINSURANCE: In order to provide that the Reinsurer's
liability under this Agreement shall not be increased in any
calendar year by a change in reinsurance ceded or recoverable by
the Company, the reinsurance arrangements, including treaties,
facultative certificates and interpretations with respect to
obligations thereunder, which were in effect on January 1, 2001
are deemed to continue in effect for purposes of all
computations hereunder.
ARTICLE XI: EXCLUSIONS
11.01 - EXTRACONTRACTUAL DAMAGES: This Agreement does not cover
extracontractual damages or extracontractual liability resulting
from fraud, oppression, bad faith, strict liability, or
negligent, reckless or intentional wrongs on the part of the
Company or its directors, officers, employees and agents. The
following types of damages are examples of damages excluded
under this Agreement for the
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conduct described above: actual damages, damages for emotional
distress, and punitive or exemplary damages.
11.02 - INSOLVENCY FUNDS: The Reinsurer shall not be obligated to pay to
the Company any share of any liability of the Company arising,
bycontract, operation of law, or otherwise, from its
participation or membership, whether voluntary or involuntary,
in any insolvency fund or from reimbursement of any person for
any such liability. "Insolvency Fund" includes any guaranty or
insolvency fund, plan, pool, association, or other arrangement
howsoever denominated, established or governed, which provides
for any assessment of or payment or assumption by any person or
part of all of any claim, debt, charge, fee or other obligation
of any insurer, or its successors or assigns which has been
declared to be insolvent, or which is otherwise deemed unable to
meet any claim, debt, charge, fee or other obligation in whole
or in part.
11.03 - DIVIDENDS: The Reinsurer shall not participate in the
determination of, nor reimburse the Company for, any
policyholder or other dividends paid by the Company.
ARTICLE XII: INSOLVENCY
12.01 - REINSURER'S OBLIGATION: In the event of the insolvency of the
Company, the reinsurance afforded by this Agreement shall be
payable by the Reinsurer on the basis of the liability of the
Company under the Subject Business, without diminution because
of such insolvency, directly to the Company or its liquidator,
receiver, conservator, or statutory successor.
12.02 - REINSURER'S NOTICE AND DEFENSE OF CLAIMS: The Reinsurer shall
be given written notice of the pendency of each claim or loss
which may involve the reinsurance afforded by this Agreement
within a reasonable time after such claim or loss is filed in
the insolvency proceedings. The Reinsurer shall have the right
to investigate each such claim or loss and interpose at its own
expense, in the proceeding where the claim or loss is to be
adjudicated, any defense which it may deem available to the
Company or its liquidator, receiver, conservator, or statutory
successor. If more than one reinsurer is involved, such
reinsurers may designate one reinsurer to act for all.
12.03 - DEFENSE EXPENSE: The expense thus incurred by the Reinsurer
shall be chargeable, subject to court approval, against the
insolvent Company as part of the expense of liquidation to the
extent of a proportionate share of the benefit which may accrue
to the Company solely as a result of the defense undertaken by
the Reinsurer.
12.04 - OFFSET: Any debts or credits, liquidated or unliquidated, in
favor of or against either party on the date of the receivership
or liquidation order (except where the obligation was purchased
by or transferred to be used as an offset) are deemed mutual
debts or credits and shall be set off with the balance only to
be allowed or
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paid. Although such claim on the part of either party may be
unliquidated or undetermined in amount on the date of the entry
of the receivership or liquidation order, such claim will be
regarded as being in existence as of such date and any credits
or claims then in existence and held by the other party may be
offset against it.
12.05 - RIGHTS OF PARTIES: Nothing hereinabove set forth in this Article
shall in any way change the relationship or status of the
parties hereto, nor enlarge the obligations of any party to any
other except as specifically hereinabove provided, to wit, to
pay the statutory successor on the basis of the amount of
liability determined in the liquidation or receivership
proceeding, rather than on the basis of the actual amount of
loss (dividends) paid by the liquidator, receiver, conservator,
or statutory successor to allowed claimants. Nor, except as
hereinabove specifically provided, shall anything in this
Article in any manner create any obligation or establish any
right against the Reinsurer in favor of any third parties or any
other persons not parties to this Agreement.
ARTICLE XIII: ARBITRATION
13.01 - RESOLUTION OF DISPUTES: As a condition precedent to any right
arising under this Agreement, any dispute between the Company
and the Reinsurer arising out of the provisions of this
Agreement, or concerning its interpretation or validity, whether
arising before or after termination of this Agreement, shall be
submitted to arbitration in the manner set forth in this
Article. Either party may initiate arbitration of any dispute
arising out of the provisions of this Agreement by giving
written notice to the other party, by registered or certified
mail, return receipt requested, of its intention to arbitrate
and of its appointment of an arbitrator in accordance with
Section 13.03.
13.02 - COMPOSITION OF PANEL: Unless the parties agree upon a single
arbitrator within fifteen (15) days after the receipt of a
notice of intention to arbitrate, all disputes shall be
submitted to an arbitration panel composed of two arbitrators
and an umpire, chosen in accordance with Section 13.03 and
Section 13.04.
13.03 - APPOINTMENT OF ARBITRATORS: The members of the arbitration panel
shall be chosen from disinterested persons knowledgeable in the
insurance and reinsurance business. The party requesting
arbitration (hereinafter referred to as the "claimant") shall
appoint an arbitrator and give written notice thereof, by
registered or certified mail, return receipt requested, to the
other party (hereinafter referred to as the "respondent")
together with its notice of intention to arbitrate. Unless a
single arbitrator is agreed upon within fifteen (15) days after
the receipt of the notice of intention to arbitrate, the
respondent shall, within thirty (30) days after receiving such
notice, also appoint an arbitrator and notify the claimant
thereof in a like manner. Before instituting a hearing, the two
arbitrators so appointed shall choose an umpire. If, within
twenty (20) days after they are both appointed, the arbitrators
fail to agree upon the appointment of an umpire, the umpire
shall be appointed by the President of the American Arbitration
Association.
15
13.04 - FAILURE OF PARTY TO APPOINT ARBITRATOR: If the respondent
fails to appoint an arbitrator within thirty (30) days after
receiving a notice of intention to arbitrate, such arbitrator
shall be appointed by the President of the American Arbitration
Association, and shall then, together with the arbitrator
appointed by the claimant, choose an umpire as provided in
Section 13.03.
13.05 - CHOICE OF LAW AND FORUM: Any arbitration instituted pursuant to
this Article shall be held in
New York,
New York, or in a
location to be mutually agreed upon by the Company and the
Reinsurer and the laws of the State of
New York, without regard
to its conflict of laws rules, shall govern the interpretation
and application of this Agreement.
13.06 - SUBMISSION OF DISPUTE TO PANEL: Unless otherwise extended by
the arbitration panel, or agreed to by the parties, each party
shall submit its case to the panel within thirty (30) days after
the selection of an umpire.
13.07 - PROCEDURE GOVERNING ARBITRATION: All proceedings before the
panel shall be informal and the panel shall not be bound by the
formal rules of evidence. The panel shall have the power to fix
all procedural rules relating to the arbitration proceeding. In
reaching any decision, the panel shall give due consideration to
the customs and usage of the insurance and reinsurance business.
13.08 - ARBITRATION AWARD: The arbitration panel shall render its
decision within sixty (60) days after termination of the
proceeding, which decision shall be in writing, stating the
reasons therefor. The decision of the majority of the panel
shall be final and binding on the parties to the proceeding.
13.09 - COST OF ARBITRATION: Unless otherwise allocated by the panel,
each party shall bear the expense of its own arbitrator and its
own witnesses and shall jointly and equally bear with the other
parties the expense of the umpire and the arbitration.
13.10 - LIMIT OF JURISDICTION: The arbitration panel does not have the
jurisdiction to authorize any punitive damage awards between the
parties.
ARTICLE XIV: AGREEMENT, AMENDMENTS AND MERGER
14.01 - AGREEMENT: This Agreement states the agreement originally made
between the Company and the Reinsurer effective January 1, 2001
as evidenced by the Reinsurance Binder dated December 29, 2000.
This Agreement replaces that Reinsurance Binder as the statement
of the terms and conditions which the Company and the Reinsurer
have agreed shall govern the obligations originally undertaken
in the Reinsurance Binder.
14.02 - AMENDMENTS: This Agreement may be amended only by mutual
consent of the parties expressed in a written addendum executed
by the parties with the same formalities as this Agreement, and
such addendum shall be deemed to be an integral part of this
Agreement and binding on the parties hereto.
16
14.03 - MERGER CLAUSE: The parties hereto acknowledge that they have
read this Agreement, understand it, and agree to be bound by its
terms and
conditions. Further, the parties hereto agree that this
Agreement is the complete and exclusive statement of the
Agreement between the parties, superseding all proposals or
prior agreements, oral or written, and all other communications
between the parties relating to the subject matter hereof.
ARTICLE XV: MISCELLANEOUS
15.01 - ACCESS TO RECORDS: The Reinsurer shall have the right to
examine, at any reasonable time, all papers, books, accounts,
documents and other records of the Company relating to the
Subject Business. Upon request, the Company shall supply the
Reinsurer, at the Reinsurer's expense, with copies of the whole
or any part of such papers, books, accounts, documents and other
records relating to the Subject Business. The Reinsurer's right
of inspection under this Section 15.01 shall continue to exist
after termination of this Agreement as long as one of the
parties hereto has a claim against the other arising from this
Agreement.
15.02 - ALTERNATE CALCULATIONS:
(a) If any calculation described in this Agreement produces a
result which is substantially different from that
contemplated by the parties to this Agreement, an
alternate calculation which preserves the same principles
as exemplified herein shall be prepared by the parties and
mutually agreed upon. Any dispute with respect to such
alternate calculation shall be resolved by Arbitration as
provided in ARTICLE XIII: ARBITRATION.
(b) If any pattern of actual transactions which has taken
place is a pattern for which this Agreement does not
specify a particular set of calculations, an alternate set
of calculations which preserves the same principles as
exemplified herein shall be prepared by the parties and
mutually agreed upon. Any dispute with respect to such
alternate set of calculations shall be resolved by
Arbitration as provided in ARTICLE XIII: ARBITRATION.
15.03 - COUNTERPARTS: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
15.04 - CURRENCY: All payments hereunder shall be made in United
States dollars. All monetary amounts herein are in United States
dollars. All reports and accounts hereunder shall be rendered in
United States dollars. For the purpose of this Agreement where
the Company receives premiums or pays losses in currencies other
than United States dollars, such premiums and losses shall be
converted
17
into United States dollars at the actual rate of exchange at
which such premiums and losses are entered in the Company's
books.
15.05 - DISCLOSURES AND APPROVALS: The Company represents and
warrants, with respect to this Agreement and the transactions
hereunder and with respect to any insurance or reinsurance
written or assumed by the Company which is covered by this
Agreement and all transactions thereunder, that all disclosures
and approvals which are necessary or appropriate under any law
or regulation have been made or obtained, or will be made or
obtained in a timely manner.
15.06 - ENTIRE AGREEMENT: The terms expressed herein constitute the
entire agreement between the parties with respect to the Subject
Business. There are no understandings between the parties with
respect to the Subject Business other than as expressed in this
Agreement.
15.07 - ERRORS AND OMISSIONS: Inadvertent errors and omissions of any
nature made by either party shall neither increase nor reduce
the liability of either party from what that liability would
have been had no such error or omission taken place. Upon
discovery, the party committing an error or omission shall
correct such error or supply such omission retroactively to the
time such error or omission occurred, and advise the other party
thereof as soon as possible.
15.08 - PARTIES TO THIS AGREEMENT: This Agreement is a reinsurance
agreement solely between the Company and the Reinsurer, and
performance of the obligations of each party under this
Agreement will be rendered solely to the other party. In no
instance will any party other than the Company and the Reinsurer
have any rights under this Agreement, and the Company will be
and shall remain the only party hereunder that is liable to any
contract holder or beneficiary of any Subject Business contract.
This Agreement shall be binding upon all successors, assignees
and transferees of the parties to this Agreement, provided,
however, that neither this Agreement nor any rights or
obligations under this Agreement may be assigned or transferred
by either party without the prior written consent of the other
party.
15.09 - RELIANCE ON INFORMATION SUPPLIED BY THE COMPANY: The Company
acknowledges that, at the Reinsurer's request, it has provided
the Reinsurer, prior to execution of this Agreement by the
parties, with the information described in Schedule D attached
hereto and incorporated herein (hereinafter, the "Company
Information"),. The Company represents that any assumptions the
Company made in preparing the Company Information were based
upon informed judgment and are consistent with sound actuarial
principles. The Company represents that all factual information
contained in the Company Information was, as of the date
provided, complete and accurate in all material respects to the
best of the Company's knowledge and belief. The Reinsurer has
relied on Company Information and the foregoing representations
in entering into this Agreement.
15.10 - RIGHT OF OFFSET: Both the Company and the Reinsurer shall have,
and may exercise at any time, the right to offset any balance or
balances due the other.
18
Such offset may include balances due under this Agreement and
any other agreements heretofore or hereafter entered into
between the Company and the Reinsurer, regardless of whether
such balances are in respect of premiums, or losses or
otherwise, and regardless of the capacity of any party, whether
as reinsurer or reinsured or otherwise, under the various
agreements involved.
15.11 - TAXES: The Company shall be liable for all taxes, except
income and profit taxes of the Reinsurer, on amounts paid to the
Reinsurer under the terms of this Agreement, and shall indemnify
and hold the Reinsurer harmless for any taxes which the
Reinsurer may become obligated to pay on the Company's behalf.
ARTICLE XVI: SECURITY
16.01 - SECURITY: Upon the Company's written request, the Reinsurer
shall provide security to the Company for its obligations to the
Company by providing access to funds held in Trust or Letters of
Credit for the benefit of the Company, in accordance with the
provisions set forth in this Article, or by providing any other
form of security that would permit the Company to take credit
for the reinsurance ceded hereunder.
16.02 - LETTER OF CREDIT:
(a) Upon the written request of the Company, the Reinsurer
agrees that it will be the applicant for and provide the
Company with a Letter or Letters of Credit, in a form
acceptable to the Company and in conformity with the
applicable regulations of the State of Iowa as respects
credit for reinsurance, in an amount no less than the
Reinsurer's remaining liability to the Company, as
determined by the Company, to secure the obligations of
the Reinsurer to the Company under this Agreement. The
cost of such Letter(s) of Credit, if any, shall be borne
by the Company.
(b) The Reinsurer and the Company agree that the Letter(s) of
Credit provided by the Reinsurer pursuant to the
provisions of this Agreement may be drawn upon at any
time, notwithstanding any other provisions in this
Agreement, and shall be utilized by the Company or any
successor by operation of law of the Company including,
without limitation, any liquidator, rehabilitator,
receiver, or conservator of the Company only for one or
more of the following purposes:
(i) to reimburse the Company for the Reinsurer's share
of premiums returned to the owners of policies
reinsured under this Agreement, on account of
cancellations of such policies;
(ii) to reimburse the Company for the Reinsurer's share
of surrenders and benefits or losses paid by the
Company pursuant to the provisions of the policies
reinsured under this Agreement;
19
(iii) to fund an account with the Company in an amount at
least equal to the deduction, for reinsurance ceded,
from the Company's liabilities for reinsurance ceded
under this Agreement. Such amount shall include, but
not be limited to, amounts for policy reserves,
reserves for claims and losses incurred (including
losses incurred but not reported), reserves for loss
adjustment expenses and reserves for unearned
premiums; and
(iv) to pay any other amounts the Company claims are due
under this Agreement.
All of the foregoing shall be applied without diminution
because of insolvency on the part of the Company or the
Reinsurer.
(c) Should amounts be held pursuant to (b)(iii) above, then
the Company shall pay interest at the Prime Rate on such
funds as may be held from time to time.
(d) Should any amounts drawn down on the Letters of Credit be
in excess of the actual amounts required for (b)(i),
(b)(ii), or (b)(iii) above, or should any amounts
subsequently be determined not to be due under (b)(iv)
above, then such excess amounts and amounts not due shall
be returned to the Reinsurer forthwith and the Company
shall pay interest at the Prime Rate on such funds from
the date they were drawn down to the date they are
returned.
(e) Any interest calculated pursuant to the provisions of
paragraphs (c) and (d) above shall be offset against any
other obligations of the Reinsurer.
16.03 - TRUST FUNDS:
(a) Upon the written request of the Company, the Reinsurer may
at its option provide funds in Trust for the benefit of
the Company as an alternative or supplement to Letter(s)
of Credit. Any such Trust Funds shall be held in
accordance with the applicable regulations of the State of
Iowa as respects credit for reinsurance. The cost of such
Trust Funds, if any, shall be borne by the Company.
(b) The assets deposited in the trust account shall be valued,
according to their current fair market value, and shall
consist only of cash (United States legal tender),
certificates of deposit (issued by a United States bank
and payable in United States legal tender), and
investments of the types specified in the applicable
regulations of the State of Iowa as respects credit for
reinsurance, provided that such investments are issued by
an institution that is not the parent, subsidiary, or
affiliate of either the Reinsurer or the Company.
(c) Prior to depositing assets into the Trust account, the
Reinsurer shall execute assignments, endorsements in
blank, or transfer legal title to the trustee of all
shares, obligations or any other assets requiring
20
assignments, in order that the Company, or the trustee
upon the direction of the Company, may whenever necessary
negotiate any such assets without consent or signature
from the Reinsurer or any other entity.
(d) All settlements of account between the Company and the
Reinsurer shall be made in cash or its equivalent.
(e) The Reinsurer and the Company agree that the assets in the
Trust account, established by the Reinsurer pursuant to
the provisions of this Agreement, may be withdrawn by the
Company at any time, notwithstanding any other provisions
in this Agreement, and shall be utilized and applied by
the Company or any successor by operation of law of the
Company including, without limitation, any liquidator,
rehabilitator, receiver or conservator of the Company only
for one or more of the following purposes:
(i) to reimburse the Company for the Reinsurer's share
of premiums returned to the owners of policies
reinsured under this Agreement, on account of
cancellations of such policies;
(ii) to reimburse the Company for the Reinsurer's share
of surrenders and benefits or losses paid by the
Company pursuant to the provisions of the policies
reinsured under this Agreement;
(iii) to fund an account with the Company in an amount at
least equal to the deduction, for reinsurance ceded,
from the Company's liabilities for reinsurance ceded
under this Agreement. Such amount shall include, but
not be limited to, amounts for policy reserves,
reserves for claims and losses incurred (including
losses incurred but not reported), reserves for loss
adjustment expenses and reserves for unearned
premiums; and
(iv) to pay any other amounts the Company claims are due
under this Agreement.
All of the foregoing shall be applied without diminution
because of insolvency on the part of the Company or the
Reinsurer.
(f) The Company shall give the Reinsurer the right to seek
approval from the Company to withdraw from the
aforementioned Trust account all or any part of the assets
contained therein and transfer such assets to the
Reinsurer, provided:
(i) the Reinsurer shall at the time of such withdrawal,
replace the withdrawn assets with other qualified
assets having a market value equal to the market
value of the assets withdrawn so as to maintain at
all times the deposit in the required amount, or
21
(ii) after such withdrawal and transfer, the market value
of the Trust account is no less than one-hundred-two
percent (102%) of the required amount.
(g) Should amounts be held pursuant to (e)(iii) above, then
the Company shall pay interest at the Prime Rate on such
funds as may be held from time to time.
(h) Should any amounts withdrawn from the Trust account be in
excess of the actual amounts required for (e)(i), (e)(ii),
or (e)(iii) above, or should any amounts subsequently be
determined not to be due under (e)(iv) above, then such
excess amounts and amounts not due shall be returned to
the Reinsurer forthwith and the Company shall pay interest
at the Prime Rate on such funds from the date they were
withdrawn to the date they are returned.
(i) Any interest calculated pursuant to the provisions
of paragraphs (g) and (h) above shall be offset
against any other obligations of the Reinsurer.
16.04 - OTHER FORMS OF SECURITY: The Reinsurer may, at its option, as
an alternative or supplement to Letter(s) of Credit and Trust
Funds, provide security in any other form that would permit the
Company to take credit for the reinsurance ceded hereunder. Any
such other form of security shall be in accordance with Iowa
Insurance Department regulations. The cost of such other form(s)
of security shall be borne by the Company.
16.05 - PRIME RATES: Prime Rates shall be determined for each business
day in
New York City, and for non-business days shall equal the
Prime Rate as determined for the most recent preceding business
day. The PRIME RATES as published in The Wall Street Journal
(Eastern Edition) shall be the primary source for the Prime
Rates. If The Wall Street Journal does not publish such a rate
for a business day, the Prime Rate shall be the maximum of the
rates publicly announced by major banks in
New York City as
their "Prime Rates" applicable to such day.
ARTICLE XVII: SERVICE OF SUIT
17.01 - SUBMISSION TO JURISDICTION: It is agreed that in the event of
the failure of the Reinsurer to pay any amount claimed to be due
under this Agreement, the Reinsurer, at the request of the
Company, will submit to the jurisdiction of any Court of
competent jurisdiction within the United States of America and
will comply with all requirements necessary to give such Court
jurisdiction; and all matters arising hereunder shall be
determined in accordance with the law and practice of such
Court.
17.02 - SERVICE OF PROCESS: It is further agreed that service of
process in any suit instituted against the Reinsurer arising out
of this Agreement, may be made upon ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
22
10178-0060, U.S.A., Attention: ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, and that in
such suit the Reinsurer will abide by the final decision of such
Court or of any Appellate Court in the event of an appeal.
17.03 - APPEARANCE: ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP are authorized and
directed to accept service of process on behalf of the Reinsurer
in any such suit and/or upon the request of the Company to give
a written undertaking to the Company that they will enter a
general appearance upon the Reinsurer's behalf in the event such
a suit shall be instituted.
17.04 - INSURANCE OFFICIAL AS ATTORNEY FOR SERVICE OF PROCESS: Further,
pursuant to any statute of any State, Territory or District of
the United States of America which makes provision therefor, the
Reinsurer hereby designates the Superintendent, Commissioner or
Director of Insurance or other officer specified for that
purpose in the statute, or his successor or successors in
office, as their true and lawful attorney upon whom may be
served any lawful process in any action, suit or proceeding
instituted by or on behalf of the Company or any beneficiary
hereunder arising out of this Agreement, and hereby designates
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP as the party to whom the said
officer is authorized to mail such process or a true copy
thereof.
ARTICLE XVIII: REINSURANCE INTERMEDIARY
18.01 - REINSURANCE INTERMEDIARY: Swiss Re Atrium Corporation, ▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, U.S.A., is hereby
recognized as the Reinsurance Intermediary negotiating this
Agreement.
18.02 - COMMUNICATIONS: All communications, including but not limited to
notices, reports, and statements, relating to this Agreement,
shall be transmitted to the Company and the Reinsurer through
the Reinsurance Intermediary.
18.03 - PAYMENTS: All payments, including but not limited to premiums,
expense allowances, and losses, relating to this Agreement shall
be made directly between the Company and the Reinsurer, and not
through any intermediary.
23
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives,
In West Des Moines, Iowa, this day of , 2001
------------------ ---------------
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
By: By:
----------------------------- ----------------------------
Name: Name:
----------------------------- --------------------------
Title: Title:
----------------------------- -------------------------
And in
New York,
New York, this day of , 2001
------------- -----------------
ATLANTIC INTERNATIONAL REINSURANCE COMPANY LTD.
By: By:
-------------------------- -----------------------------
Name: Name:
-------------------------- ---------------------------
Title: Title:
-------------------------- ---------------------------
24
EXHIBIT 1 - SAMPLE REPORTING FORMAT
QUARTERLY REPORT OF ACTIVITY AND SETTLEMENTS
FROM: AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
TO: ATLANTIC INTERNATIONAL REINSURANCE COMPANY LTD.
ACCOUNTING PERIOD:
REPORT DATE:
SECTION A: COINSURANCE
1. Section A Reinsurance Premium (Section 4.01(a))
a. First- year Premiums
b. Single Premiums
c. Renewal Premiums
Total Section A Reinsurance Premium
2. a. Section A Subject Losses (Section 3.03(a))
b. Section A Covered Losses (Section 3.04(a))
3. Section A Expense Allowances (Section 4.02(a))
a. First Year Expense Allow = 100% * (First year + Single Prems)
b. Renewal Exp Allow = $.25 per Subject Business contract
Total Section A Expense Allowances
4. Section A Cash Settlement = 2b + 3 -1
5. Risk and Expense Charge (Section 5.04)
6. Increase in Coinsurance Reserves
7. Experience Account Gain = - 4 - 5 - 6 (Section 5.02)
8. Experience Account Balance = Prior EAB + 7 (Section 5.01)
SECTION B: YEARLY RENEWABLE TERM
1. Section B Reinsurance Prem (Section 4.01(b))
a. Age related portion calculated using Schedule B
b. Policy fee of $18.75 per contract in force at beginning of period
c. 50% of Surrender gains for period
Total Section B Reinsurance Premium
2. a. Section B Subject Losses (Section 3.03(b))
b. Section B Covered Losses (Section 3.04(b))
CALCULATED
3. Section B Expense Allowances (Section 4.02(b)) ALLOWANCE PREMIUMS ALLOWANCE
--------- -------- ---------
a. 2.25% of Single & first year prem on contracts w/s.c.< = 15%
b. 3% of single & first year premium on contracts w/s.c. > 15%
c. 1% of single premium on SPDA 6-5 contracts
d. Absolute value of any negative Cash Settlement Adjustment per
Section 7.01
Total Section B Expense Allowances = a + b + c - d
4. Section B Cash Settlement = 2b + 3 - 1
LOSS CARRYOVER (Section 7.02)
1. Cash Balance at last Settlement Date
2. Interest on Cash Balance from last Settlement Date to current SD
3. Total Settlement for Accounting Period
25
4. TARGET CASH BALANCE AT END OF ACCOUNTING PERIOD (SCHED. C)
5. Loss Carryover = max (0, 1 + 2 + 3 - 4)
EXPERIENCE REFUND OR SECTION B EXPENSE ALLOWANCE ADJUSTMENT ( Section 7.01)
1. Target Cash Balance at end of Accounting Period (Schedule C)
2. Tentative Settlement for Accounting Period
3. Cash Balance at last Settlement Date
4. Interest on Cash Balance from last Settlement Date to current SD
5. Loss Carryover for prior Accounting Period
6. Risk and Expense Charge
7. Adjustment = 1 - 2 - 3 - 4 - 5 - 6. If negative, reduce Sect. B
Expense Allowances; if positive, pay to AE as Experience Refund
TOTAL SETTLEMENT (Section 9.06)
1. Tentative Settlement: Section A, (7) + Section B, (4)
2. Experience Refund
3. Cost of Security
4. Total Settlement 1 + 2 - 3. If positive, pay to AE; if negative, pay to
Reinsurer
CASH BALANCE (Section 6.01)
1. Cash Balance at prior Settlement Date
2. Total Settlement from above
3. Interest on Cash Balance from last Settlement Date to current SD
Cash Balance = 1 + 2 + 3
INTEREST ON CASH BALANCE FROM LAST SETTLEMENT DATE TO CURRENT SD
1. Cash Balance at prior Settlement Date
2. Cash Balance Rate for period (Section 6.03)
3. Interest on Cash Balance = 1 * 2
SUPPLEMENTAL INFORMATION ACCOUNT SURRENDER GROSS
------------------------ NUMBER OF VALUES IN VALUES IN STATUTORY
CONTRACTS FORCE FORCE RESERVES
Beginning of Period
+ Additions
- Terminations
End of Period
Cash Balance Rate
90 Day LIBOR
Number of Days Cash Balance > 0 during Accounting Period
Prior Accounting Period Date
SAP Entries
Premiums Ceded (sum of Coins. & YRT)
Other income (allowances & adjustments, pos. or neg.)
Death Benefits Ceded
Surrender Benefits Ceded
Increase in Reserves Ceded
Effect on Statutory Income:
Cumulative Effect on Stat. Income:
GAAP Entries - Income
Interest Paid on Deposits
Possibly entries for change in assets and change in liabilities
26
-Balance Sheet
Asset: Cash & Invested Assets
Liability: Deposits
27
SCHEDULE A-
SUBJECT BUSINESS CONTRACT (TYPES)
FPDA 1
FPDA 1 (3%)
▇▇▇▇ ▇
▇▇▇▇ ▇
▇▇▇▇ ▇
▇▇▇▇ 6
Super7
SPDA 1
SPDA 2
SPDA 6 with a 5-year interest guarantee only ("SPDA 6-5")
Index 1
Index 3
Infinity (Index 4)
Ultimate (Index 5)
New Horizons (Index 6)
Optimum (Index 8)
The Dow (Index 10)
The ▇▇▇▇▇▇▇ 2000 FIA (Index 12)
The Performance Annuity (Index 13)
The New Millenium (Index 2000)
El Toro Bravo
28
SCHEDULE B -
YRT BASE RATES BY AGE (NEAREST BIRTHDAY)
-------------------- ------------------ ------------------ ------------------- ------------------- -------------------
AGE YRT RATE AGE YRT RATE AGE YRT RATE
-------------------- ------------------ ------------------ ------------------- ------------------- -------------------
0 0.02994 35 0.00777 69 0.09795
1 0.00231 36 0.00816 70 0.10629
2 0.00165 37 0.00852 71 0.11517
3 0.00120 38 0.00885 72 0.12477
4 0.00099 39 0.00909 73 0.13509
5 0.00087 40 0.00936 74 0.14628
6 0.00081 41 0.00972 75 0.15840
7 0.00075 42 0.01023 76 0.17166
8 0.00066 43 0.01092 77 0.18621
9 0.00057 44 0.01176 78 0.20127
10 0.00045 45 0.01272 79 0.21987
11 0.00048 46 0.01377 80 0.23964
12 0.00072 47 0.01488 81 0.26184
13 0.00126 48 0.01596 82 0.28698
14 0.00195 49 0.01713 83 0.34737
15 0.00273 50 0.01839 84 0.37389
16 0.00348 51 0.01983 85 0.40257
17 0.00405 52 0.02163 86 0.43437
18 0.00441 53 0.02382 87 0.46662
19 0.00456 54 0.02634 88 0.49854
20 0.00468 55 0.02916 89 0.53100
21 0.00489 56 0.03213 90 0.56544
22 0.00501 57 0.03534 91 0.60375
23 0.00507 58 0.03879 92 0.64626
24 0.00519 59 0.04254 93 0.69240
25 0.00522 60 0.04653 94 0.73923
26 0.00528 61 0.05709 95 0.78447
27 0.00540 62 0.05535 96 0.82314
28 0.00558 63 0.06018 97 0.85962
29 0.00585 64 0.06537 98 0.89391
30 0.00615 65 0.07083 99 0.92601
31 0.00642 66 0.07671 100 0.95595
32 0.00669 67 0.08313 101 0.98376
33 0.00702 68 0.09021 102 1.00000
34 0.00735
29
SCHEDULE C -
TARGET CASH BALANCES
END OF ACCOUNTING
PERIOD TARGET CASH BALANCE
1 $15,000,000
2 15,000,000
3 14,318,000
4 13,636,000
5 12,954,000
6 12,272,000
7 11,590,000
8 10,908,000
9 10,226,000
10 9,544,000
11 8,862,000
12 8,180,000
13 7,498,000
14 6,816,000
15 6,134,000
16 5,452,000
17 4,770,000
18 4,088,000
19 3,406,000
20 2,724,000
21 2,042,000
22 1,360,000
23 678,000
24 and thereafter 0
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SCHEDULE D -
COMPANY INFORMATION
1. Facsimile Transmission (subject: Information Requested by Will) dated
November 22, 2000 from ▇▇▇▇▇ ▇▇▇▇▇▇ to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
2. Memorandum (subject: Reinsurance Term Sheet) dated December 11, 2000 from
▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
3. Statement of Investment Objectives and Policy for American Equity Investment
Life Insurance Company
4. Schedule of Future Production Estimates (2001 - 2003) and Production History
(1997 - 2000) for American Equity Investment Life Insurance Company
5. Schedule of Partial Withdrawals, Surrenders and Deaths for the time period
January 1, 2000 - September 30, 2000 for policies issued in 1997, 1998,
1999, and 2000
6. Schedule dated February 17, 2000 of Partial Withdrawals and Surrenders for
the time period January 1, 1999 - December 31, 1999 for policies issued in
1997, 1998, 1999 and 2000
7. Schedule entitled "Asset Model - Mutliple Scenario Summary" (model name:
IST06) dated August 14, 2000
8. Schedule entitled "Asset Model - Multiple Scenario Summary" (model name:
FST06) dated August 14, 2000
9. Asset Model dated October 26, 2000 for calendar years 2000 through 2019,
Level and Uniformly Increasing
10. TAS-Data Entry Facility screen shot entitled "Asset/Liability Model
Crediting Data [aelap] - Excess Lapse"
11. Draft of Schedule D - Part 1 dated October 5, 2000 of the Annual Statement
for the Year 2000 of American Equity Investment Life Insurance Company
12. Draft of the Actuarial Appraisal of American Equity Investment Life
Insurance Company prepared by ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, Inc., as of December 31,
1999 and dated April 10, 2000
13. Facsimile Transmission (subject: Cash Flow Testing Summaries) dated October
23, 2000 from ▇▇▇▇▇ ▇▇▇▇▇▇ to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
14. Agent's Kit for American Equity Investment Life Insurance Company
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