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EXHIBIT 10.6
Automatic Flexible Premium Variable Life Reinsurance Agreement Number 2
(Referred to as the Agreement)
Between
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
of Largo, Florida
(referred to as the Reinsured)
and
WMA LIFE INSURANCE COMPANY LIMITED
of ▇▇▇▇▇▇▇▇, Bermuda
(referred to as the Reinsurer)
Effective April 1, 1998
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TABLE OF CONTENTS
ARTICLE TITLE PAGE
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I. BASIS OF REINSURANCE 3
II. DEFINITIONS 4
III. LIABILITY 5
IV. THE AMOUNT REINSURED 6
V. REDUCTION AND TERMINATIONS 6
VI. PREMIUMS 7
VII. PAYMENTS BY REINSURER 7
VIII. REPORTING 7
IX. DEPOSITS OF THE MODIFIED COINSURANCE RESERVE 8
X. INTEREST CREDIT (DEBIT) ON MODIFIED COINSURANCE
RESERVE AND MODIFIED COINSURANCE RESERVE
ADJUSTMENT 8
XI. REINSURANCE RESERVES 8
XII. SETTLEMENT OF CLAIMS 10
XIII. GENERAL PROVISIONS 12
XIV. REINSTATEMENTS 17
XV. POLICY CHANGES 17
XVI. RECAPTURE 17
XVII. ARBITRATION 17
XVIII. IMPROPER SOLICITATION OF REINSURED PLAN OWNERS 18
XIX. DAC TAX (Section 1.848-2(g)(8) Election) 19
XX. DURATION OF AGREEMENT 20
XXI. WRITTEN NOTICE 21
XXII. EXECUTION 22
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This Agreement is entered into by the Reinsured and the Reinsurer on
the Execution Date. The Reinsured and the Reinsurer mutually agree to reinsure
on the terms and conditions set out below.
I. BASIS OF REINSURANCE
1. Insurance. The reinsured will cede on an automatic basis and the
Reinsurer will accept as reinsurance the individual Reinsured Plans
(policies) written by the Reinsured as shown in Schedule A.
2. Risks are reinsured on the same plan as the original policy (e.g.
mortality, morbidity, lapse, surrender, expense, investment
performance).
3. Coverages. The individual Reinsured Plans reinsured as shown in
Schedule A, are the Financial Freedom Builder contracts and any
riders, supplemental benefits or endorsements attached thereto,
with an issue date after March 31, 1998. Reinsurance will be
limited in percentage as provided in Schedule Bl. Only plans sold
by a Producer registered with an affiliated broker-dealer
identified in Exhibit A shall be reinsured under this Agreement.
4. The Separate Account Value will be reinsured on a modified
coinsurance basis.
5. The Fixed Account Value will be reinsured on a coinsurance basis.
6. In no event shall reinsurance under this Agreement be in force with
respect to a Reinsured Plan unless the issuance and delivery of the
Reinsured Plan is in compliance with the laws of all applicable
jurisdictions and the Reinsured's corporate charter.
7. The Reinsured declares and agrees that all Reinsured Plans and
benefits covered under this Agreement shall be issued in accordance
with its normal practices in effect when the Reinsured Plan is
issued. These practices will be provided to the Reinsurer on
request. The Reinsured will also notify the Reinsurer of any
material changes made to these practices before applying them to
Reinsured Plans and benefits covered by this Agreement.
8. Reinsurance Outside This Agreement. The Reinsured retains the right
to reinsure, with any reinsurer, any or all of its plans or
coverages automatically in excess of the Reinsured's normal
retention and facultatively, where appropriate. The Reinsured
agrees to notify the Reinsurer in writing of any change in its
normal retention schedule that may affect the Reinsured Plans.
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II. DEFINITIONS
"AMOUNT REINSURED" OR "AMOUNT OF REINSURANCE" means the amount of
reinsurance ceded by the Reinsured to the Reinsurer under this Agreement on the
life of an insured person(s). It is the amount of life insurance ceded for which
the Reinsurer is at risk under this Agreement on the life of the insured
person(s). The Amount Reinsured per insured life is calculated as set forth in
Paragraph 1 of Article IV.
"ARTICLE" OR "PARAGRAPH" refers to an Article or Paragraph of this
Agreement.
"EFFECTIVE DATE", with respect to Reinsured Plans, means the date shown
in Article XXII, Execution. The Reinsured is liable for Reinsurance Premiums,
less applicable Reinsurance Allowances, due on or after the Effective Date of a
Reinsured Plan; and the Reinsurer is liable for any reinsured benefits occurring
on or after the Effective Date.
"EXECUTION DATE" means the date as of which this Agreement has been
executed, as shown in Article XXII, Execution.
"EXHIBIT" AND "SCHEDULE" mean, respectively, an exhibit or schedule
attached to this Agreement and shall be considered part of this Agreement.
"FIXED ACCOUNT" means allocation option(s) other than the Separate
Account.
"FIXED ACCOUNT VALUE" means the value of the Fixed Account on any
valuation date.
"GENERAL ACCOUNT STATUTORY RESERVES AND LIABILITIES" OR "GA STATUTORY
RESERVES AND LIABILITIES" refers to statutory reserves and liabilities
associated with the Fixed Account as held by the Reinsured for the reinsured
contracts.
"MONTHIVERSARY" has the same meaning ascribed to it in a reinsured
policy. It is the day of each calendar month coinciding with a policy's Policy
Date.
"PARTY" or "PARTY" refers to either the Reinsured or the Reinsurer as
appropriate, and PARTIES refers to both collectively.
"POLICY DATE" means the policy date as set forth in the Policy Schedule
of a reinsured policy. It is the date coverage is effective under the Policy and
the date monthly deductions commence under the Policy. Policy months, years,
Monthiversaries and anniversaries are measured from the Policy Date.
"PREMIUMS" means initial premium and additional premiums as set forth
in the Policy Value Provisions.
"PRODUCER" means a licensed representative with a broker-dealer
identified in Exhibit A.
"REINSURED PLAN" means any life insurance policy form or rider form
reinsured under this Agreement, as set forth in Schedule A.
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"SERIES FUND" means a designated mutual fund from which each
sub-account of the Separate Account will buy shares.
"SETTLEMENT INTEREST RATE" means the interest rate for ninety (90) day
dealer commercial paper as published in The Wall Street Journal or a successor
or substitute publication, as agreed upon by both parties if The Wall Street
Journal should cease to exist. The Settlement Interest Rate for a given month
will be the Settlement Interest Rate published on the fifteenth (15th) of the
month or the next following business day if the fifteenth (15th) of the month is
not a publication date of The Wall Street Journal.
"SPECIFIED AMOUNT" means the Specified Amount as set forth in the
Policy Schedule of a reinsured policy.
"SEPARATE ACCOUNT" means a separate investment account shown on the
Policy Schedule page which is composed of several sub-accounts established to
receive and invest net premiums under the policy.
"SUB-ACCOUNT" means a subdivision of the Separate Account. Each
Sub-account invests exclusively in the shares of a specified Series Fund
portfolio.
III. LIABILITY
1. The liability of the Reinsurer on any reinsurance under this
Agreement begins upon the effective date of this Agreement as set
forth in Article XXII, Execution and ends after all Reinsured Plans
reinsured have been terminated or recaptured, as set forth in
Article XVI, Recapture.
2. The liability of the Reinsurer to the Reinsured under this
Agreement will be coexisting with the liability of the Reinsured
under the Reinsured Plans reinsured and may exceed the Reinsured's
contractual liability under the terms of the Reinsured Plans as
described in Paragraph 3, Article XIII, General Provisions.
3. For a Reinsured Plan or rider reinsured under this Agreement: (i)
the liability of the Reinsurer under this Agreement shall commence
simultaneously with the beginning of the Reinsured's liability
under each corresponding Reinsured Plan or any application or
conditional receipt therefor; and (ii) the liability of the
Reinsured for Reinsurance Premiums under this Agreement shall begin
as of the Policy Date of the reinsured policy or as of the
effective date of reinsured rider, if different. The Reinsured
represents that its normal underwriting practice is to promptly
return any premium payment taken with an application which the
Reinsured has declined without a counteroffer; however, failure of
the Reinsured to do so shall not relieve the Reinsurer for its
liability under this Paragraph.
4. In no event shall the Reinsurer's liability for reinsurance
continue after termination of the Reinsured's liability for any
claims relating to its corresponding reinsured policy or rider.
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5. On an ongoing basis the liability of the Reinsurer, reinsurance
premiums, benefits and other items due to or from each party shall
be accounted for and settled and paid quarterly on the basis of the
quarterly reports prepared by the Reinsured in the form of
Schedules C1 and C2 and sent to Reinsurer via facsimile
transmission or such other medium mutually acceptable to both
parties. Also included will be any adjustments made necessary by
changes in reinsurance effective during the previous quarter, or
changes due to any agreed upon errors on a previous report. Payment
of any amount due to be paid by the Reinsurer or the Reinsured
shall be determined on a net basis and shall be paid, in United
States currency, within two (2) weeks after receipt by Reinsurer of
the quarterly report.
6. The settlement, as shown in Schedule C1 and C2 will include
interest on premiums received, net transfers, mortality and expense
charges, and asset based allowances as shown in Schedule E1, and
interest on commission and expense allowances, and interest on
benefits from the Fixed Account, as shown in Schedule D1 accruing
from the fifteenth (15th) of every month to the settlement date.
The interest rate will be the Settlement Interest Rate of the month
named on the Schedules D1 and E1. Interest will be earned from the
fifteenth (15th) of the month named on Schedules D1 and E1 to the
next following settlement date.
IV. THE AMOUNT REINSURED
1. The Amount Reinsured will be the quota share percentage, as
specified in Schedule B1, of the death benefit and all other
benefits provided by the Reinsured Plan, including any riders,
supplementary benefits or endorsements attached thereto, as
specified in Schedule A.
V. REDUCTIONS AND TERMINATIONS
1. If any of the Reinsured Plans reinsured under this Agreement are
reduced or terminated by payment of a death benefit, withdrawal,
surrender or termination due to lapsation, maturation or expiration
of the Reinsured Plan, the reinsurance will be reduced
proportionately. Any policy change which affects the Death Benefit
Proceeds, such as a change in Option Type, a change in the policy's
Specified Amount, a change in the Face Amount of a rider, or an
addition or deletion of a rider, will result in a proportional
change in the Amount Reinsured. If the change affects the plan, the
amount of reinsurance, premiums, commissions or policy changes
under cession, the Reinsured shall inform the Reinsurer in
subsequent Reinsurance Reports.
2. With regard to liability of the Reinsured under the terms of an
application for a policy or rider to be reinsured under this
Agreement or under the terms of a conditional receipt issued in
connection with such application, the liability of the Reinsurer
under this Agreement shall be equal to the quota share percentage
of the Reinsured's liability, plus any amounts for which the
Reinsurer is responsible under Article III.
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3. For purposes of Paragraph I of this Article, changes in a policy's
death benefit which are due to normal cash value fluctuation shall
be calculated and reported quarterly as described in Article VIII.
Other changes in the Amount Reinsured due to a policy change shall
be recalculated and reported under this Agreement in or for the
quarter in which the policy change occurs. For this purpose, such
policy changes may include, for example, a change in Option Type, a
change in the policy's Specified Amount, a change in the Face
Amount of a rider, and an addition or deletion of a rider.
VI. PREMIUMS
1. The premium to be paid to the Reinsurer by the Reinsured with
respect to each reinsured policy, as specified in Schedule A, will
be the quota share percentage, as specified in Schedule B1 of:
(i) The total amount "Due WMA", as shown in Schedule C1, and
(ii) The total amount "Due WMA" as shown in Schedule C2.
VII. PAYMENTS BY REINSURER
1. The Reinsurer shall pay to the Reinsured the Reinsurer's quota
share percentage of:
(i) The total amount "Due WRL", as shown in Schedule C1, and
(ii) The total amount "Due WRL", as shown in Schedule C2.
VIII. REPORTING
1. The Reinsured shall assume responsibility for the administration of
all reinsurance under this Agreement and will provide the Reinsurer
with information as set forth in Schedule C1 through Schedule K of
this Agreement. The Reinsurer may request, at its option, to
review, at the administrative office of the Reinsured, any papers
associated with the issuance of any Reinsured Plan subject to
Automatic Reinsurance under this Agreement. In addition, the
Reinsured will provide the Reinsurer with information necessary to
properly account for the business reinsured and exercise its
obligation as a member of the Investment Management Committee.
2. Not later than twenty (20) days after the end of each quarter, the
Reinsured will submit a report substantially in accordance with
Schedules C1 and C2 accompanied by ▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇, ▇▇, ▇▇, ▇▇,
and I. The Reinsured agrees to provide or make available to the
Reinsurer such documentation as may be necessary to support the
items reported.
3. Not later than twenty (20) days after the end of each month, the
Reinsured will submit a report substantially in accordance with
Schedules D1, E1, J, and K.
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4. Not later than thirty (30) days after the end of each calendar
year, the Reinsured will submit a report substantially in
accordance with Schedule F.
5. Not later than ninety (90) days after the end of each calendar
year, the Reinsured will provide a copy of its statutory statement
as filed with the State of Ohio.
6. Not later than one hundred twenty (120) days after the end of each
calendar year, the Reinsurer will provide a copy of The WMA
Corporation Form 10-K.
7. Not later than sixty (60) days after the end of each quarter, the
Reinsurer will provide a copy of The WMA Corporation Form 10-Q.
IX. DEPOSITS OF THE MODIFIED COINSURANCE RESERVE
1. The Reinsurer shall deposit with the Reinsured the modified
coinsurance reserves identified in Schedule H, for the business
reinsured under this Agreement.
2. For the purpose of this Article, modified coinsurance reserves are
defined to be the quota share percentage of the total Separate
Account Value of the Reinsured Plan.
X. INTEREST CREDIT (DEBIT) ON MODIFIED COINSURANCE RESERVE AND MODIFIED
COINSURANCE RESERVE ADJUSTMENT
1. The Reinsurer shall receive an interest credit (debit) on the
modified coinsurance reserve. The amount of the credit (debit) will
be determined as set forth in Schedule G.
2. The Reinsured shall receive a modified coinsurance reserve
adjustment. The amount of the adjustment will be determined as set
forth in Schedule H.
3. Both the interest credit (debit) and the modified coinsurance
reserve adjustment will be made at the end of each calendar
quarter.
XI. REINSURANCE RESERVES
1. The Reinsured shall set up an Account Payable liability in its
financial statements equal to the quota share percentage of the
excess, if any, of the total Separate Account Value of the
Reinsured Plan over the total Separate Account Statutory Reserve of
the Reinsured Plan. The Reinsurer shall set up an Account
Receivable asset equal to the Account Payable liability set up by
the Reinsured.
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2. The Reinsurer shall set up an Account Payable liability in its
financial statements equal to the quota share percentage of the
excess, if any, of the total Separate Account Statutory Reserve of
the Reinsured Plan over the total Separate Account Value of the
Reinsured Plan. The Reinsured shall set up an Account Receivable
asset equal to the Account Payable liability set up by the
Reinsurer.
3. The Reinsured will reduce its General Account Statutory Reserves
and Liabilities by the quota share percentage of the total General
Account Statutory Reserves and Liabilities attributable to the
Reinsured Plan, as shown in Schedule C2. The Reinsurer will set up
General Account Statutory Reserves and Liabilities equal to the
reduction taken by the Reinsured.
4. For purposes of Paragraphs 1, 2 and 3 of this Article, the
Statutory Reserves shall be calculated by the Reinsured according
to the "Commissioners Reserve Valuation Method For Universal Life
Policies" as prescribed in the NAIC Standard Valuation Law and
approved by the State of Ohio Department of Insurance. The General
Account Statutory Reserves and Liabilities will be the reserves
associated win the Fixed Account and will include the reserves for
the Terminal Illness Accelerated Death Benefit Rider.
5. In the event the Reinsurer is not licensed or otherwise accredited
or authorized as a reinsurer in the State of Ohio, and in any other
jurisdiction where the Reinsured is licensed to do business, the
Reinsurer agrees to provide Letter(s) of Credit or other forms of
security acceptable to the State of Ohio otherwise available. Such
Letter(s) of Credit or other method(s) shall be issued in
compliance with the statutes and regulations of the State of Ohio
and shall be issued by a financial institution located in the
United States chosen by the Reinsurer, which has applied for and
has met the standards of financial conditions set forth by the
NAIC's Securities Valuation Office.
6. The Letter(s) of Credit in favor of the Reinsured will be an amount
which at all times must equal or exceed the reinsurance credits
taken or reasonably estimated to be taken by the Reinsured in
connection with this Agreement under Exhibit 8, and under Exhibit
11, Part 1, Column 3, Line 4c, and any other liabilities held for
the Reinsured Policies and reported on the Reinsured's statutory
financial statements. Subject to the approval of the State of Ohio
Department of Insurance, the amount of the Letter of Credit may be
reduced by the quota share percentage of the excess of the Separate
Account Value over the Separate Account Statutory Reserve. Should
the reinsurance credit not be allowed, as a result of this
reduction in any applicable jurisdiction, the Letter of Credit will
be restored to the value that it would have been without this
reduction.
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7. The Letter(s) of Credit shall be substantially in the form set
forth in Exhibit B or in such other form as the Ohio Insurance
Department or other applicable state Insurance Department may
require or permit. The terms of the Letter(s) of Credit shall
provide that: it is not conditioned on the delivery of any other
documents or materials; it is irrevocable without the consent of
the Reinsured; it is automatically renewable as provided in
Exhibit B; and its initial term is for a period of not less than
one (1) year. Such Letter(s) of Credit may be drawn upon at any
time, notwithstanding any other provisions in this Agreement, but
shall be utilized by the Reinsured or its successors only for one
or more of the following reasons:
(i) to fund an account on behalf of the Reinsured in an amount at
least equal to the deduction, for reinsurance ceded, from the
Reinsured's reserves and liabilities for Reinsured Plans, as
specified in this Article; and
(ii) to pay any other amounts the Reinsured claims are due under
this Agreement.
8. Such Letter(s) of Credit shall be promptly issued and delivered to
the Reinsured; but in no event shall the Letter(s) of Credit be
issued or confirmed later than December 31 in respect of the year
for which the Reinsured is taking credits for such reinsurance in
its statutory financial statements, and in no event shall the
Letter(s) of Credit be delivered to the Reinsured later than thirty
(30) days after such December 31.
XII. SETTLEMENT OF CLAIMS
1. Notice. On a monthly basis, the Reinsured shall provide notice to
the Reinsurer of any death claims reported, paid, or outstanding in
a report in the form of Schedule K. On a quarterly basis, the
Reinsured shall account to the Reinsurer for any death claims due,
as provided in Paragraph I of Article IV. Reinsured agrees to
furnish Reinsurer with copies of the proof of loss or other written
materials relating to a specific claim upon request of Reinsurer or
as provided in Paragraph 5 of this Article.
2. Standard Claim Practices. Reinsured agrees to act in accord with
its standard practices applicable to all claims in enforcing the
terms and conditions of the reinsured policies or reinsured riders
and with respect to the administration, negotiation, payment,
denial, or settlement of any claim or legal proceeding.
3. Payment and Settlement of Claim. Reinsurer agrees to accept the
good faith decision of the Reinsured in payment or settlement of
any claim for which Reinsurer has received the required notice.
Reinsurer agrees to pay Reinsured the Amount Reinsured on which
Reinsurance Premiums have been computed upon receiving proper
evidence the Reinsured has paid a policy claim.
4. The Reinsurer agrees to pay an expense allowance as set forth in
Schedules D1 and D2 for all claims as specified.
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5. Reinsurer's Liability for Covered Claim Expenses. Except as
provided in Paragraph 6 of this Article, Reinsurer's liability
shall include indemnification of the quota share percentage of any
covered claim expenses incurred by Reinsured in defending or
investigating a policy claim. Covered claim expenses are in
addition to the claim expense allowance and shall include, but not
be limited to, cost of investigation, legal fees, court costs and
interest charges and cost of interpleader proceedings. Covered
claim expenses shall not include:
a) Compensation of salaried officers and employees;
b) routine investigative expenses of incontestable claims;
6. Contested, Litigated or Compromised Claims. The Reinsured shall
promptly notify Reinsurer of its intention to contest, compromise
or litigate any claim on a Reinsured Plan or its intention to
investigate or defend any litigation initiated against the
Reinsured in response to the Reinsured's denial of a claim on a
Reinsured Plan. With or immediately following such notice, the
Reinsured shall furnish Reinsurer with copies of written materials
relating to such claim. Reinsurer shall promptly notify Reinsured
of its decision whether or not to accept any such action. If
Reinsurer declines to accept any such action, it will pay the full
Amount Reinsured, as if there had been no such contest, compromise
or litigation, and will be fully discharged as of the date of such
payment from any further liability on that claim under Paragraph 5
of this Article. If the Reinsurer accepts such action, then: (i)
Reinsurer shall continue to share in the covered claim expenses as
described in Paragraph 5; (ii) the Reinsured shall keep the
Reinsurer informed of the status of any legal proceeding or
settlement negotiations in connection with such claim; and (iii) if
the contest or compromise reduces the amount of the Reinsured's
liability, the Reinsurer's liability shall be reduced to its quota
share percentage of the reduced amount.
7. Recovery from Third Party. The Reinsured shall promptly notify
Reinsurer if the Reinsured should assert or bring a claim or action
against a third party for contribution, indemnification or similar
grounds to recover from the third party any monies paid or expenses
incurred by the Reinsured in connection with a policy claim
reinsured under this Agreement. Upon request, the Reinsured shall
furnish Reinsurer with copies of written materials relating to such
third party claim or action. Reinsurer shall promptly notify
Reinsured of its decision whether or not to share in the expenses
and potential recovery of any such proceeding. If Reinsurer
declines to so accept any such proceeding, Reinsurer shall not
participate in any costs of such proceeding and shall not share in
any monies so recovered by the Reinsured. If the Reinsurer accepts
such action, then the Reinsurer shall continue to share in the
expenses of that proceeding and the Reinsurer shall share in any
monies recovered by the Reinsured. The Reinsured shall keep the
Reinsurer informed of the status of such proceeding or settlement
negotiations in connection with such proceeding.
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8. Adjustments for Misstatements. If the amount claimed as death
benefit under a reinsured policy or reinsured rider is increased or
reduced because of a misstatement of age, sex or smoker status, the
Reinsured Amount will be calculated based on the adjusted amount of
death benefit and the Amount Reinsured will, if applicable, be
increased or decreased proportionately.
9. Interest. If the Reinsured pays interest on a claim, Reinsurer
agrees to pay the interest on the Amount Reinsured computed at the
same rate and for the same period as that paid by the Reinsured,
but in no event later than the date the claim is finally
adjudicated by the Reinsured.
10. Statutory Penalties. If the Reinsured is required to pay penalties
or interest imposed automatically by statute, other than penalties
or interest arising from Reinsured's negligent or intentional
violation of such a statute, Reinsurer shall indemnify the
Reinsured for the quota share percentage of such penalties and
interest.
11. Terminal Illness Accelerated Death Benefit Rider. The Reinsurer
shall participate in any claim under any Terminal Illness
Accelerated Death Benefit Rider in connection with the Reinsured
Plans. A claim for accelerated death benefits shall be treated
under this Agreement as though it were a death claim and as though
the death occurred on the date the claim was made. If the claimant
elects to take less than 100% of the benefit under the Terminal
Illness Accelerated Death Benefit Rider and the reinsured policy
thereby remains in force, then the Reinsurer shall pay the
Reinsured for the Terminal Illness Accelerated Death Benefit Rider
an amount equal to the accelerated percentage elected by the
claimant multiplied by the present value, calculated in accordance
with the rider form, of the Amount Reinsured; and the reduced
Amount Reinsured for the policy shall be equal to the original
Amount Reinsured reduced by the same percentage used to calculate
the benefits paid under the Terminal Illness Accelerated Death
Benefit Rider.
XIII. GENERAL PROVISIONS
1. Parties to Agreement. This Agreement is a contract solely between
the Reinsurer and the Reinsured. The acceptance of reinsurance
hereunder shall not create any right or legal relation between the
Reinsurer and the insured, beneficiary, or any other party to any
Reinsured Plan hereunder.
2. Reinsurance Conditions. The reinsurance is subject to the same
limitations and conditions as the insurance under the Reinsured
Plan written by the Reinsured on which the coinsurance is based.
3. Expenses. The Reinsurer will have liability equal to the quota
share percentage of any extra-contractual damages which are
rendered against the Reinsured as a result of acts, commission or
course of conduct committed by a Producer of an affiliated
broker-dealer identified in Exhibit A, in connection with the
Reinsured Plans. The Reinsurer will receive the quota share
percentage of any reimbursement that the Reinsured collects from
World Marketing Alliance, Inc.
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or its affiliates. In no event whatsoever will the Reinsured have
any liability for extra-contractual damages assessed against the
Reinsurer as a result of acts, omissions, or course of conduct
committed by the Reinsurer in connection with the reinsurance of
the Reinsured Plans under this Agreement.
4. Oversights. If failure to pay any premium due or to perform any
other act required by this Agreement is unintentional and is caused
by misunderstanding oversight or clerical error, the Reinsured and
the Reinsurer shall be restored to the position they would have
occupied had the misunderstanding, oversight or clerical error not
occurred.
5. Inspection. The Reinsured and the Reinsurer, their auditors and any
regulators having authority over the Reinsured and/or the
Reinsurer, shall have the right, at all reasonable times, and at
their expense, to inspect at the office of the other party all
books, records, procedures, and documents of the other party
relating to this Agreement. A party or its auditor conducting such
inspection shall give the other party one (1) week advance written
notice. The Reinsured, its auditors and regulators shall have the
same right to inspect, verify and value any assets held in a trust
account or otherwise held for the benefit of the Reinsured. The
party being audited or inspected agrees to cooperate in the audit,
including providing any information requested by the other party or
its auditor in advance of the audit or inspection. Upon request,
the Reinsured agrees to permit the Reinsurer, at all reasonable
times and at Reinsurer's expense, to inspect at the office of the
Reinsured, any underwriting information in the Reinsured's files
pertaining to a reinsured policy or reinsured rider.
It is mutually agreed by the Reinsured and the Reinsurer that any
information that is made available for inspection under this
section of the Agreement shall, to the extent legally possible, be
kept confidential and under no circumstances may this information
be disclosed to, or made available for inspection by, any third
party without the prior consent of the other contracting party.
6. Assignment or transfer. In no event shall either the Reinsured or
the Reinsurer assign any of its rights, duties or obligations under
this Agreement without the prior written approval of the other
party. Such approval shall not unreasonably be withheld.
In no event shall either the Reinsured or the Reinsurer transfer
either the Reinsured Plans reinsured under this Agreement or the
reinsurance without the prior written approval of the other party.
Such approval shall not unreasonably be withheld.
7. Entire Agreement. This Agreement represents the entire agreement
between the Reinsurer and the Reinsured and supersedes any prior
oral or written agreements between the parties regarding its
subject matter.
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8. Alterations to Agreement. Any alteration which may from time to
time become necessary in this Agreement shall be made by amendment
attached to the Agreement embodying such alterations as may be
agreed upon and taken as part of this Agreement and equally
binding. No modification or waiver of any provision of this
Agreement shall be effective unless set forth in written amendment
to this Agreement, which is executed by both parties. A waiver
shall constitute a waiver only with respect to the particular
circumstance for which it is given and not a waiver of any future
circumstance.
9. If any provision of this Agreement shall be held or made invalid by
an order of a court of competent jurisdiction, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be construed in accordance with the
applicable federal law and the laws of the State of Ohio and the
rights and obligations of this Agreement shall, at all times, be
regulated under the laws of the State of Ohio.
10. Taxes. The Reinsurer shall reimburse the Reinsured for any U.S.
Excise Tax the Reinsured is required to pay under the U.S. Internal
Revenue Code for the reason that the Reinsurer fails to make an
election or terminates its election to file U.S. federal income tax
returns or otherwise ceases or fails to file such return. The
Reinsurer shall reimburse the Reinsured for the quota share
percentage of any other federal or state taxes or state guaranty
fund assessments the Reinsured may be required to pay with respect
to the Reinsured Plans, but not including federal income tax paid
with respect to the Reinsured Plans. This Paragraph does not
diminish in any way the provisions of Article XIX, DAC Tax.
11. Insolvency of the Reinsured.
(a) The Reinsured shall immediately give Reinsurer written notice
of an event constituting insolvency of the Reinsured. However,
whether such notice is timely given or not, in the event of the
insolvency of the Reinsured, all amounts relating to reinsurance
made, ceded, renewed or otherwise becoming effective under this
Agreement shall be payable by the Reinsurer directly to the
Reinsured or to its liquidator, receiver or statutory successor on
the basis of the liability of the Reinsured without diminution
because of the insolvency of the Reinsured or because the Reinsured
or Reinsured's legal representative has failed to pay all or a
portion of amounts owed to Reinsurer under this Agreement. It is
understood, however, that in the event of the insolvency of the
Reinsured, the liquidator or receiver or statutory successor of the
insolvent Reinsured shall give written notice to the Reinsurer of
the pendency of a claim against the insolvent Reinsured on the
policy reinsured within a reasonable time after such claim is filed
in the insolvency proceeding and that during the pendency of such
claim that the Reinsurer may investigate such claim and interpose
in the name of the Reinsured (or its liquidator, receiver or
statutory successor), at the Reinsurer's own expense, in the
proceeding where such claim is to be adjudicated any defense or
defenses which it may deem available to the Reinsured or its
liquidator or receiver or statutory successor.
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(b) It is further understood that the expenses thus incurred by the
Reinsurer shall be chargeable, subject to court approval, against
the insolvent 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. When two or more reinsurers are participating in the
same claim and a majority in interest elect to interpose a defense
or defenses to such claim, the expense shall be apportioned in
accordance with the terms of this Agreement as though such expense
had been incurred by the Reinsured.
12. Insolvency of the Reinsurer. The Reinsurer shall immediately give
the Reinsured written notice of an event constituting insolvence of
the Reinsurer. Upon the insolvency of the Reinsurer, whether notice
thereof was given by the Reinsurer or not, the Reinsured has the
right to immediately, by written notice, terminate this Agreement
and recapture all reinsurance under this Agreement. Notwithstanding
such termination or recapture, Reinsurer or its legal
representative shall continue to be liable to the Reinsured for any
obligations of the Reinsurer under this Agreement still outstanding
after giving effect to such recapture.
13. For the purpose of this Agreement, either the Reinsurer or the
Reinsured shall be deemed "insolvent" under the following
circumstances:
(a) when a cease and desist order or injunction has been issued by
the commissioner or a court of competent jurisdiction in its
state or jurisdiction of domicile ordering either party to
cease and desist from transacting, soliciting or writing any
new business of any kind and is reasonably expected to result
in conservatorship, rehabilitation, receivership, or
liquidation; or
(b) when a court of competent jurisdiction order is issued
voluntarily or involuntarily placing either party into
conservatorship, rehabilitation, receivership, or liquidation,
or appointing a conservator, rehabilitator, receiver or
liquidator to take over the business of either party; or
(c) when it files or consents to the filing of a petition in
bankruptcy, seeks reorganization or an arrangement with
creditors or takes advantage of any bankruptcy, dissolution,
liquidation or similar law or statute.
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14. Offset. The Reinsurer and the Reinsured shall consider any balance
due and unpaid, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, whether on account
of premiums, allowances, policy charges, losses, claims expenses,
or any other amount in accordance with the terms of this Agreement,
or any other reinsurance agreement, due from one party to another
to be mutual debits or credits under this Agreement and shall be
offset and only the balance allowed or paid. If either the
Reinsured or Reinsurer is then under any formal insolvency
proceedings, this right of offset shall be subject to the laws of
the domiciliary jurisdiction of the then insolvent party.
15. Non-Guaranteed Charges, Benefits and Interest Rates. The Reinsured
agrees to manage the non-guaranteed charges, benefits, and interest
rates in a way that balances the interests of the owners, agents,
stockholders, contract owners, and the Reinsurer, while exercising
sound actuarial professional judgment. Any changes in the
non-guaranteed contract charges, benefits, and interest rates will
be accompanied by an actuarial report prepared in accordance with
the standards described in the Actuarial Standards of Practice No.
1, as Reformatted and Readopted in 1990 by the Actuarial Standards
Board. The actuarial report should disclose a description of the
framework within which the actuary's advice has been developed, a
description of the facts, methods, procedures and assumptions upon
which the advice was based, and the other information called for by
the Actuarial Standard of Practice No. 1. Should the Reinsurer
determine that the Reinsured has not balanced the interests of the
Reinsured with the interests of the Reinsurer and agreement cannot
be reached, any claims may be settled by arbitration in accordance
with Article XVII, Arbitration.
16. Investment Management Committee. The parties shall form an
Investment Management Committee consisting of one (1) member each
from the Reinsured and the Reinsurer. The Reinsured shall provide
the Reinsurer copies of its investment policies and crediting rate
strategies. The Reinsurer shall provide the Reinsured its
investment policies. If either party changes its investment
policies or crediting rate strategies, it shall promptly provide
the other party a copy of such changes. The purpose and function of
the Investment Management Committee shall be to recommend crediting
rates to the Reinsured for approval in accordance with the
provision set forth in Exhibit C, Guidelines for Crediting Rates.
17. Forms and Manuals. The Reinsured agrees to make available to the
Reinsurer copies of all appropriate policy forms, prospectuses,
application forms, and other related material. If new material is
published, or changes are made in the material already filed, the
Reinsured agrees to promptly provide the Reinsurer with copies of
such material.
18. Headings. The headings of the Articles, Paragraphs and any
subparagraphs and Schedules of this Agreement are inserted for
convenience of reference only and shall not constitute a part of
this Agreement.
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19. Definitions. Any defined term used in this Agreement shall have the
meaning ascribed to it in this Article. Any term not defined in
this Agreement which is in general usage in the life reinsurance
industry shall be given the same meaning as such general usage
ascribes to that term, giving due consideration to the context in
which the term is used in this Agreement.
XIV. REINSTALLMENTS
1. Should a Reinsured Plan lapse and subsequently be reinstated in
accordance with its terms and the normal rules of the Reinsured,
the reinsurance shall be reinstated automatically.
XV. POLICY CHANGES
1. Should the Reinsured make any material changes (including but not
limited to a change in Face Amount, Specified Amount or Rating
Classification) in the provisions and conditions of a Reinsured
Plan issued to an insured and upon which reinsurance shall have
been granted hereunder, the Reinsured shall reflect such policy
changes, as appropriate, in the monthly reports called for in
Article VIII, Reporting.
2. The Reinsured agrees to notify the Reinsurer in writing of any
anticipated material changes in the terms and conditions of the
Reinsured Plans.
XVI. RECAPTURE
1. Business reinsured under this Agreement will not be eligible for
recapture, except the Reinsured reserves the right to recapture any
business that has been enforce thirty-five (35) years after the
policy issue date. Furthermore, should a state regulatory body rule
that this Agreement is not valid for any reason, and there is no
remedial action available to correct the situation, the Reinsured
reserves the right to recapture that portion of the business that
was reinsured. Any adjustment in values as a result of recapture
will be agreed upon at the time of the recapture. If agreement
cannot be reached, any claims will be settled in accordance with
the provision of Article XVII, Arbitration.
XVII. ARBITRATION
1. Any controversy or claim between the Reinsured and the Reinsurer,
arising out of or relating to this Agreement or the breach thereof
or the coverage of this arbitration provision, shall be settled by
arbitration.
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2. There shall be three (3) arbitrators who shall be current or former
officers of life insurance companies or life reinsurers. However,
unless otherwise consented to in writing by the parties, such
person shall not be a current or former employee of, or current or
former consultant to, the parties or any affiliate or reinsurer of
the parties; nor shall he or she have any current employment or
affiliation with, consulting or contractual engagement with, or
financial interest in: a party to this Agreement or persons or
companies affiliated or associated with a party to this Agreement.
The Reinsured shall appoint one of the arbitrators and the
Reinsurer shall appoint a second arbitrator and these two
arbitrators shall select the third. If either party shall fail to
appoint an arbitrator within thirty (30) days after the other party
has given notice of its appointment of an arbitrator, the
appointment of the arbitrator for the party which has so failed to
appoint an arbitrator shall be left to the other party. Should the
two arbitrators appointed by or for the parties fail to agree on
the choice of the third, within sixty (60) days of their
appointment then each of them shall name three (3) individuals, of
whom the other shall decline two (2), and the decision shall be
made by drawing lots.
3. Arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association which
shall be in effect on the date of delivery of demand for
arbitration; except, however, that arbitrators shall be appointed
in accordance with the provisions of Paragraph 2 of this Article
and that, to the extent any other terms or provisions of this
Article are inconsistent with or in conflict with the Commercial
Arbitration Rules, this Article shall control.
4. The arbitration shall be conducted in a location to be determined
by a majority of the Arbitrators.
5. The Reinsured and the Reinsurer shall each pay that part of the
expense of arbitration which shall be apportioned to it by the
arbitrators.
6. The award rendered by the arbitrators shall be final, and judgment
may be entered upon it in any court having jurisdiction thereof.
7. The Arbitrators shall base their decision on the terms and
conditions of this Agreement and, as necessary, on the customs and
practices of the life reinsurance and life insurance industries
rather than on a strict interpretation of applicable law.
XVIII. IMPROPER SOLICITATION OF REINSURED PLAN OWNERS
1. Neither party, nor any affiliate thereof, shall contact or
authorize any other person to contact owners of the Reinsured Plans
for the purpose of soliciting surrender of the Reinsured Plans,
conversion of the Reinsured Plans to another form of insurance,
making policy loans or withdrawals without prior written approval
of the other party.
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XIX. DAC TAX - SECTION 1.848 2(g)(8) ELECTION
1. The Reinsurer and the Reinsured each acknowledge that it is subject
to taxation under Subchapter "L" of the Internal Revenue Code of
1986 (The "Code").
2. The Reinsured and the Reinsurer hereby agree to the following
pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations
issued December 1992, under Section 848 of the Internal Revenue
Code of 1986, as amended. This election shall be effective for 1998
and for all subsequent taxable years for which this Agreement
remains in effect.
3. The terms used in this Article are defined by reference to
Regulation Section 1.848-2 in effect December 1992.
4. Each party agrees to attach a schedule to its federal income tax
return which identifies this Agreement for which the joint election
under the Regulation has been made.
5. The party with the net positive consideration for this Agreement
for each taxable year will capitalize specified policy acquisition
expenses with respect to this Agreement without regard to the
general deductions limitation of Section 848(C)(1).
6. Both Parties agree to exchange information pertaining to the amount
of net consideration under this Agreement each year to ensure
consistency or as otherwise required by the Internal Revenue
Service.
7. The Reinsured will submit a schedule to the Reinsurer by May 1, of
each year, of its calculation of the net consideration for the
preceding calendar year. This schedule of calculations will be
accompanied by a statement signed by an officer of the Reinsured
stating that the Reinsured will report such net consideration on
its tax return for the preceding calendar year.
8. The Reinsurer may contest such calculation by providing an
alternative calculation to the Reinsured in writing within thirty
(30) days of the Reinsurer's receipt of the Reinsured's
calculation. If the Reinsurer does not so notify the Reinsured, the
Reinsurer will report the net consideration as determined by the
Reinsured in the Reinsurer's tax return for the previous calendar
year.
If the Reinsurer contests the Reinsured's calculation of the net
consideration, the parties will act in good faith to reach an
agreement as to the correct amount within thirty (30) days of the
date the Reinsurer submits its alternative calculation. If the
Reinsured and the Reinsurer reach agreement on an amount of net
consideration, each party shall report such amount in their
respective tax returns for the previous calendar year.
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XX. DURATION OF AGREEMENT
1. Except as provided in Article XVI, Recapture, inforce reinsurance
which has been ceded under this Agreement shall be unlimited as to
its duration and shall be maintained in force for so long as such
policies shall remain in force and the reinsurance premiums and
payments referenced in Articles VI and VII, Premiums and Payments
By Reinsurer are paid when due.
2. Term of Agreement. The initial term of this Agreement shall be five
(5) years. During and after the initial term, this Agreement may be
canceled as it pertains to the reinsurance of new business
thereafter:
(a) immediately upon written notice by a party if the other party
becomes insolvent, dissolves, ceases to legally exist, or
otherwise ceases to be legally authorized to act as a
reinsurer or insurer, respectively, in its domiciliary
jurisdiction;
(b) upon thirty (30) days written notice by a party if the other
party has materially breached this Agreement and has failed to
cure such breach within such thirty (30) days;
(c) when and as agreed upon by the parties in writing.
3. After the initial term of this Agreement, this Agreement may also
be canceled by either party, as it pertains to the reinsurance of
new business thereafter, by giving three hundred sixty-five (365)
days advance notice of cancellation in writing. In such case, the
Reinsured shall continue to cede, and the Reinsurer shall continue
to accept reinsurance, under this Agreement on policies and riders
issued during the three hundred sixty-five (365) day period, and
the interest of the Reinsurer in new business shall cease at the
end of the three hundred sixty-five (365) day period.
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XXI. WRITTEN NOTICE
1. Any notice given in connection with this Agreement shall be deemed
to be provided when it is sent by facsimile to the numbers shown
below, or by first class mail or by courier to the addresses set
forth below, or to the last address or facsimile number of record
such party designates in writing:
If to the Reinsured: With a Copy to:
------------------- --------------
Western Reserve Life Assurance Co. of Western Reserve Life Assurance Co. of
Ohio Ohio
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Chief Actuary Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Managing Actuary
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Reinsurer: With a Copy to:
------------------- --------------
WMA Life Insurance Company Limited The WMA Corporation
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Manager Attn: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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XXII. EXECUTION
In witness of the above, the Reinsured and the Reinsurer, by their
respective officers have executed this Agreement in duplicate at the
dates and places indicated and shall be effective as of April 1, 1998.
WESTERN RESERVE LIFE WMA LIFE INSURANCE
ASSURANCE CO. OF OHIO LIMITED COMPANY
at Largo, FL at Atlanta, GA
--------------------------- ---------------------------------
on August 12, 1998. on August 13, 1998.
------------------ -----------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------- --------------------------------
Title: VP & Managing Actuary Title: Exec. VP
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------- --------------------------------
Title: VP Title: VP & Actuary
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EXHIBIT A
PRODUCER
Flexible Premium Variable Life policies, applicable riders, and endorsements
must be sold by and distributed through: WMA Securities, Inc. (and/or its
successors) and its affiliates.
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EXHIBIT B
FORM OF LETTER OF CREDIT
Effective Date
Western Reserve Life Assurance Co. of Ohio
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
We have established this clean, irrevocable and unconditional Letter of Credit
in your favor as beneficiary for drawings up to ______________________________
effective immediately. This Letter of Credit is issued, and payable at our
office at ___________________________________________ and expires with our close
of business on _______________________. Except when the amount of this Letter of
Credit is increased, this Letter of Credit cannot be modified or revoked without
your consent.
The term "Beneficiary" includes any successor by operation of law of the named
Beneficiary. If a court of law appoints a successor in interest to the named
Beneficiary, then the named Beneficiary includes and is limited to the court
appointed domiciliary receiver (including conservator, rehabilitator or
liquidator).
We hereby undertake to promptly honor your sight draft(s) drawn on us,
indicating our Letter of Credit No. ______, for all or any part of this Letter
of Credit upon presentation of your draft drawn on us at our office specified in
paragraph one on or before the expiration date hereof or any automatically
extended expiry date.
Except as expressly stated herein, this undertaking is not subject to any
agreement, requirement or qualification. Our obligation under this Letter of
Credit is our individual obligation and is in no way contingent upon
reimbursement with respect thereto, or upon our ability to perfect any lien,
security interest or any other reimbursement.
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This Letter of Credit is deemed to be automatically extended, without amendment,
for one year from the expiration date hereof, or any future expiration date,
unless at least thirty days prior to such expiration date we notify you by
Registered Mail or Certified Mail that this Letter of Credit will not be renewed
for any such additional period.
This Letter of Credit is subject to and governed by the Laws of the State of
Ohio and the 1993 Revision of the Uniform Customs and Practice for Documentary
Credits of the International Chamber of Commerce (Publication 500) and, in the
event of any conflict, the Laws of the State of Ohio will control. If this
Letter of Credit expires during an interruption of business as described in
Article 17 of said Publication 500, we hereby specifically agree to effect
payment if this Letter of Credit is drawn against within thirty days after the
resumption of business.
Very truly yours,
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EXHIBIT C
GUIDELINES FOR CREDITING RATES
The Investment Management Committee adopts the following guidelines for
recommending crediting rates:
1. In each quarter, the Investment Management Committee will present
its recommended crediting rates for the following quarter to the
Reinsured for approval. In recommending such rates, the Investment
Management Committee shall consider the expected earned rate for the
quarter (the reinsured portion of which will be provided by the
Reinsurer), the assumed pricing spread, and any potential adverse
impact which rate changes may have on the persistency of the block of
business.
2. It is expected the Investment Management Committee and the reinsured
will be able to reach agreement. However, if the Investment Management
Committee and the reinsured are unable to reach agreement, the
Reinsured may establish the renewal crediting rates.
3. Should the ownership of the Reinsured change from that which existed
at the inception of this Agreement, or should the total amount of the
Fixed Account premiums ceded to any one reinsurer exceed the Fixed
Account premiums retained for the Reinsured Plans for any quarter, the
Reinsured may not set a crediting rate that exceeds the rate in effect
at the time of the change in ownership or retention for three years
from that change.
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Schedule A
BUSINESS REINSURED
FORM NUMBER DESCRIPTION
----------- -----------
VL.03 Flexible Premium Variable Life Insurance
ACCDB-10/94 Standard Accelerated DB Rider
ACCDB CT-10/94 Accelerated DB Rider -- CT
ACCDB IN-10/94 Accelerated DB Rider -- IN
ACCDB MN-10/94 Accelerated DB Rider -- MN
ACCDB MS-01/95 Accelerated DB Rider -- MS
ACCDB SC-02/95 Accelerated DB Rider -- SC
ACCDBTX Accelerated DB Rider -- TX
AG.41.07.80-SD All SD Replacements
END.05.04.79 All IL policies
EVL123MT-1997 MT FFBs
Form IGAIL All IL policies
IGAKS All KS policies
IGAMD All MD policies
IGAMT All MT policies
IGANC All NC policies
IGANH-V All variable NH policies
IGATX All TX policies
IGA.NP.TX2 All TX FFBs
IGA00012 All CA policies
IGA00013 All NV policies
IGA00015 All HI Variable policies
IGA00016 All AR policies
IGA00017 All CO policies
IGA00019-09/92R All LA policies
IGA00020 - 11/92 All NJ policies
IGA00021 - 11/92 All UT policies
IGA00022 - 06/93 All DC policies
IGA.01.03.89-MO-R3 All MO policies
IGA.02.06.89-OK-R All OK policies
IGA.03.02.90-SD All SD policies
IGA.05.04.90-TN All variable TN policies
IGA.08.07.90-ND All ND policies
IGA.09.12.90 All OH policies
IGA.10.05.91 All WY policies
IGA24194-WV All WV policies
ITPCA30L All CA policies - Owner 60 and over
ITP.01.09.88 VA policies - Agent info filled in by Assembly area
ITP0007 All TX policies
ITP.02.09.88 AR policies - Agent info filled in by Assembly area
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ITP.03.09.88 All TN & UT policies
ITP.06.12.90-R3 All CA policies
ITP9L All Replacement policies - CA, CO, DE, ID, IN, IA, KS, LA, MD, MA,
MN, MO, NE, NM, NC, OH, OK, OR, PA, SC, TN, UT, VT. WA, WI, WY
LD00084-12/96 Welcome letter
PIR10 Standard PIR
PIR11 Standard PIR+
PIR10-AA PIR - PA, WV
PIR11-AA PIR+ - PA, WV
PIR10MO PIR - MO
PIR1lMO PIR+ - MO
PIR10NC PIR-NC
PIR11NC PIR+ - NC
PIR10ND PIR+ ND
RE.END.02.05.89 All VT WRL (internal) Replacements
RE.END.03.06.90 All KS (life) Replacements
SUIC.01.06.84 All CO FFBs
ULB1.01.05.84 Standard Disability Waiver Rider
ULB1.02.08.84 Disability Waiver Rider - NJ, PA (although FFB not available)
ULB1.03.08.84 Disability Waiver Rider - SC, WV
ULB1.04.08.84 Disability Waiver Rider - VT
ULB1.05.11.84 Disability Waiver Rider - CA
ULB2.01.05.84 Standard Accidental Death Benefit Rider
ULB2.02.06.84 Accidental Death Benefit Rider - TN
ULB2.03.07.84 Accidental Death Benefit Rider - IN, MN
ULB2.04.07.84 Accidental Death Benefit Rider - AR, GA, MO, NH, SC, WA
ULB2.05.08.84 Accidental Death Benefit Rider - PA (although FFB not available)
ULB2.06.11.84 Accidental Death Benefit Rider - CA, WV
ULB2.07.11.84 Accidental Death Benefit Rider - CT
ULB2.08.11.84 Accidental Death Benefit Rider - NJ (although FFB not available)
ULB4.01.03.86 Standard Disability Waiver and Income Rider
ULB4.03.04.86 Disability Waiver and Income Rider - SC, WV
ULB4.04.04.86 Disability Waiver and Income Rider - VT
ULB4.05.04.86 Disability Waiver and Income Rider - MO, SD
ULB4.06.05.86 Disability Waiver and Income Rider - TN
ULB4.07.12.86 Disability Waiver and Income Rider - CT
ULR2.01.05.84 Standard Other Insured Rider
ULR2.02.08.84 Other Insured Rider - WV, PA (although FFB not available in PA)
ULR2.03.10.84 Other Insured Rider - TX (although FFB not available in TX)
ULR3.01.05.84 Standard Children's Insurance Rider
ULR3.02.08.84 Children's Insurance Rider - WV, PA (although FFB not available in PA)
ULR3.03.10.86 Children's Insurance Rider - NJ (although FFB not available in NJ)
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Schedule B1
AMOUNT OF REINSURANCE
The amount of reinsurance under this Agreement shall be the Reinsurer's quota
share percentage shown below of the liability of the Reinsured on all Reinsured
Plans in the forms listed in Schedule A, Business Reinsured.
Quota Share Percentages for Issue Dates in 1998: For issue dates in 1998, the
quota share percentage will be 20%.
Quota Share Percentages for Issue Dates in 1999 and later: The Reinsurer and the
Reinsured will jointly determine the quota share percentages no later than
December 1st applicable to new issues in the following calendar year. The
determining factors for the quota share percentage are the expected WMA Total
Flexible Premium Variable Life First Year Target Premiums Collected by the
Reinsured and the expected WMA Total Flexible Premium Variable Life First Year
Target Premiums written with all insurance companies for the calendar year that
the quota share percentage will be applicable. This determination of the quota
share percentage will be on a mutually acceptable basis, recognizing the good
faith nature of this Agreement, and with references to the estimates made by
both parties, based on the prior periods' target premiums.
The Scheduled Quota Share Percentages for each threshold of expected WMA Total
Flexible Premium Variable Life First Year Target Premiums Collected by the
Reinsured are shown in the following table:
WMA TOTAL FLEXIBLE PREMIUM
VARIABLE LIFE FIRST YEAR TARGET SCHEDULED
PREMIUMS COLLECTED QUOTA SHARE
BY THE REINSURED (IN MILLIONS) PERCENTAGE
$ 50-149 20%
$150-199 25%
$200-249 30%
$250-599 35%
$600+ 40%
For each threshold of expected WMA Total Flexible Premium Variable Life First
Year Target Premiums Collected by the Reinsured, a certain percentage of WMA
Total Flexible Premium Variable Life First Year Target Premiums is expected to
be collected by the Reinsured. The thresholds are as follows:
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30
WMA TOTAL FLEXIBLE PREMIUM WRL'S SHARE OF MAXIMUM "OTHER
VARIABLE LIFE FIRST YEAR TARGET WMA'S INDIVIDUAL CARRIER'S" SHARE OF
PREMIUMS COLLECTED PRODUCTION WMA'S INDIVIDUAL
BY THE REINSURED (IN MILLIONS) PRODUCTION
$ 50-149 90% 10%
$150-199 85% 10%
$200-249 80% 10%
$250-349 75% 10%
$350-599 70% 10%
$600+ 70% 10%
The scheduled quota share percentages may be reduced if:
1. The percentage of expected WMA Total Flexible Premium Variable Life
First Year Target Premiums Collected by the Reinsured is less than the
Scheduled Percentage of expected WMA Total Flexible Premium Variable
Life First Year Target Premiums to be Collected by the Reinsured, and/or
2. The growth rate in expected WMA Total Flexible Premium Variable Life
First Year Target Premiums Collected by the Reinsured declines, as
measured by the financial reports of the Reinsured.
If the percentage of expected WMA Total Flexible Premium Variable Life First
Year Target Premiums Collected by the Reinsured to expected WMA Total Flexible
Premium Variable Life First Year Target Premiums Collected from all sources is
less than the Scheduled Percentage of expected WMA Total Flexible Premium
Variable Life First Year Target Premiums Collected by the Reinsured:
The quota share percentage may be reduced 5% for each full 10% reduction in the
Reinsured's Scheduled Percentage of expected WMA Total Flexible Premium Variable
Life First Year Target Premium Collected by the Reinsured, as estimated by WMA's
financial statements. As an example, if the expected WMA Total Flexible Premium
Variable Life First Year Target Premiums Collected by the Reinsured is $175
Million, but the $175 Million is only 75% of expected WMA Total Flexible Premium
Variable Life First Year Target Premiums, the quota share percentage may be
reduced from 25% to 20%.
VOLUME QUOTA SHARE % OF PRODUCTION
TO REINSURED
$150-199 20% 75%
30
31
Schedule B2
DUE REINSURED
Commission and Expense Allowances*
1. Issue and Maintenance Expense Allowance
2. Sales and Marketing Premium Expense Allowance
3. Commission Allowance
4. Claim Expense Allowance
5. Target Surplus allowance
* all multiplied by the quota share percentage.
1. Issue and Maintenance Expense Allowances
a. Issue Expense Allowance - * base per policy
- * per rider
- * per unit, base & rider (unit=$1,000 of specified
amount / face amount)
b. Maintenance Expense Allowance - * per policy in force at end of each calendar
(all years) month
- * per rider in force at end of each calendar month
- * of collected premium.
- * per premium collection.
- * of Separate Account Value in force at the end
of each calendar quarter.
c. Exhibit 6 Expense Allowance (intended to reflect Exhibit 6 type expenses.)
- Exhibit 6 Taxes Paid * for 1998 (to be reviewed annually thereafter.
- Other, including guaranteed fund Per the Reinsured Ledger
assessments
d. Investment Operations Tax Accrued amount of reserve for any taxes that may result
from investment operations of sub-accounts
e. Gains/Losses All gains/losses incurred by Reinsured.
2. Sales and Marketing Premium Expense Allowance
a. Marketing Expense * of collected target premium
3. Commission Allowances
Actual commissions paid per the Reinsured Ledger. Commission schedules, for
information purposes only, are as follows:
POLICY TARGET EXCESS ASSET
YEAR PREMIUM PREMIUM TRAIL*
1 * * *
2 * * *
3 * * *
4 * * *
5-10 * * *
11+ * * *
* Paid beginning of first anniversary on cash value of policies with a cash
value, net of policy loans, of $5,000 or more.
* Material omitted pursuant to Rule 24b-2 under the Securities Exchange Act of
1934.
32
Schedule B2
4. Claim Expense Allowance
a. Death Claim Expense $* per death claim on base policy, OIR and CPR
($0 on PIR)
b. Lapse Termination Expense (CSV=0) $* per lapse
c. Surrender Termination Expense (CSV>0) $* per surrender
5. Target Surplus Allowance Currently, * of Separate Account Value less prior
Target Surplus balance accrued at an effective annual
interest rate of * (if positive); if amount is
negative, balance is paid to Reinsurer. If the
Reinsured's method or percent used in calculating Target
Surplus on the Reinsured Plans changes, which results in
an immediate change in the Target Surplus balance, the
Reinsurer may request a grade in period of no more than
five (5) years.
6. DAC Proxy Tax * on Premiums and net transfers into Separate Account
from Fixed Account.
* Material omitted pursuant to Rule 24b-2 under the Securities Exchange Act of
1934.
33
Schedule C1 - Quarterly Reports
Quarterly Settlement Report
WRL Financial Freedom Builder
Modified Coinsurance Settlement
30-Jun-1998
Total Quota Share Source
----- ----------- ------
A. Due WMA
1. Premiums Ceded 0 0 G(qr)
2. Transfers-in form from the Fixed Allocation Account 0 0 G(qr)
3. Mortality and Expense Risk Charges 0 0 E2(qpr)
4. Asset-Based Allowances 0 0 E2(qpr)
5.a. Administrative Charges 0 0 E2(qpr)
5.b. less: Administrative Charges from Fixed Account 0 0 E2(qpr)
5.c. equals: Administrative Charges from Separate Account 0 0 E2(qpr)
6. Policyholder Investment Gains on Separtate Account Values 0 0 G(qr)
7. Gain/(Loss) Adjustment on Transaction Processing 0 0 Stat
8. Investment Income on SA Target Surplus 0 0 l(qr)
9. Commission Allowance Chargebacks 0 0 Ext
----- -----------
10. Total Amount Due WMA = (1)+(2)+(3)+(4)+(5c)+(6)+(7)+(8)+(9) 0 0
B. Due WRL
1. Commission and Expense Allowances 0 0
a. Issue Expense Allowance 0 0 D2(qr)
b. Maintenance Expense Allowance 0 0 D2(qr)
c. Sales and Marketing Premijm Expense Allowance 0 0 D2(qr)
d. Commission Allowance (including end of quarter accruals) 0 0 D2(qr)
e. Premium Collection Expense Allowance 0 0 D2(qr)
f. Termination Expense Allowance 0 0 D2(qr)
----- -----------
g. Total Commission and Expense Allowances = sum (a) to (f) 0 0
2. Benefits Ceded
a1. Surrenders 0 0
a2. less: Surrender Charges 0 0 E2(qpr)
b. Not-Taken Refunds 0 0 G(qr)
c. Maturities 0 0 G(qr)
d. Terminations due to Disabilities 0 0 G(qr)
e1. Partial Withdrawals 0 0 E2(qpr)
e2. less: Surrender Charges 0 0 E2(qpr)
f. Death Claims Paid (includes riders, interest) 0 0 G(qr)
g. Transfers-out to the Fixed Allocation Account 0 0 G(qr)
----- -----------
h. Total Benefits Ceded = sum (a) to (g) 0 0
3. Modified Coinsurance SA Value Adjustment 0 0 H(qr)
4. SA Target Surplus Adjustment 0 0 l(qr)
5. DAC Tax Allowance 0 0 E2(qpr)
6. Total Amount Due WRL = (1g)+(2h)+(3)+(4)+(5) 0 0
C. Balance During the Period = A(10)-B(6) 0 0
1. If positive, the quota share balance is due to be paid by WRL
2. If negative, the quota share balance is due to be paid by WMA
The column headed "WWMA Quota Share" shows the adjustment by the
Quota Share Percentage.
Sources:
D2(qr) Schedule D2 - Quarterly Commission and Expense Report
E2(qpr) Schedule E2 - Quarterly Production Report
G(qr) Schedule G - Quartelry Interest Credit on Reserve Report
H(qr) Schedule H - Quarterly ModCo Reserve Adjustment Report
I(qr) Schedule I - Quarterly Target Surplus Adjustment Report
Ext WMA VUL Mod-Co Seriatim File
Stat WRL Stat file (Accounting general ledger)
34
Schedule C2 - Quarterly Reports
Quarterly Reserve and Settlement Report
WRL Financial Freedom Builder
Coinsurance Settlement
30-Jun-1998
WMA
Total Quota Share Source
----- ----------- ------
Reinsured FFB CRVM Statutory Reserves - GA only 0 0 E3(qrr)
Reinsured Mortality Charge Reserves - GA Only 0 0 E3(qrr)
Reinsured IPC Reserves - GA only 0 0 E3(qrr)
Total Other GA Reserves and Liabilities 0 0 E3(qrr)
----- -----------
Total GA Reserves and Liabilities 0 0
Reinsured FFB SA Values 0 0 Ext
Reinsured FFB GA Values
a. Fixed Fund 0 0
b. Loan Collateral Fund 0 0
c. Total Reinsured FFB GA Values 0 0 Ext
----- -----------
Total Reinsured FFB Cash Values 0 0
Quarterly Settlement
WMA
A. Coinsurance Amounts Due WMA Total Quota Share Source
1. Transfers-in to the Fixed Account 0 0 C1(qr)
2. Loan Principal Repaid during quarter 0 0 Stat
3. Loan Interest Paid during quarter 0 0 Stat
4. Interest on Premiums and Net Transfers to Fixed Account 0 0 E2(qpr)
5. Interest on M & E Risk Charges and A-B Allowances 0 0 E2(qpr)
----- -----------
6. Total Due WMA 0 0
B. Coinsurance Amounts Due WRL
1. Transfers-out from the Fixed Account 0 0 C1(qr)
2. New Loans taken during quarter 0 0 E2(qpr)
3. Interest on Commission and Expense Allowances 0 0 E2(qpr)
4. Interest on Benefits from Fixed Account 0 0 E2(qpr)
----- -----------
5. Total Due WRL 0 0
C. Balance During the Period = A(6) - B(5) 0 0
D. Total Reinsurance Premiums (Schedule C1 and Schedule C2) 0 C1 & C2
E. Total Payments by the Reinsurer (Schedule C1 and Schedule C2) 0 C1 & C2
F. Total Reinsurance Settlement for the Period: (D - E) 0
1. If positive, the quota share balance is due to be paid by WRL
2. If negative, the quota share balance is due to be paid by WMA
Sources:
Stat WRL Status file (Accounting general ledger)
C1(qr) Schedule ▇▇ - ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇(▇▇) Schedule C2 - Quarterly Reserve and Settlement Report
E2(qpr) Schedule E2 - Quarterly Production Report
E3(qrr) Schedule E3 - Quarterly Reserve Report
Acct Financial Reporting Accounting and Death Claim Report
35
Schedule D1 - Monthly Reports
Detail of Commission and Expense Allowances
WRL Financial Freedom Builder
Modified Coinsurance
30-Jun-1998
WMA
Total Quota Share Source
1. Expense Allowances
a. Issue Expense Allowance 0 0
($* per base policy issued, -* for NTO) 0 E1(mpr)
($* per rider issued, -$* for NTO) 0 E1(mpr)
($* per unit, base & rider, -$* for NTO) 0 E1(mpr)
b. Maintenance Expense Allowance 0 0
* per inforce base policy end of month 0 E1(mpr)
* per inforce rider end of month 0 E1(mpr)
* of all premiums collected 0 E1(mpr)
* of .*% of SA Values 0 E3(qrr)
Premium Tax equals: 0
Premium taxes paid 0 WRL
-Premium tax offsets 0 WRL
Other, including guaranteed fund assessments 0
Guar. Fund Costs 0 WRL
2. Sales and Marketing Premium Expense Allowance 0 0
a. * of collected first year target premium 0 E1(mpr)
3. Commission Allowances 0 0
a. First Year Commissions 0
Target Premiums 0 DSS
Excess Premiums 0 DSS
Asset Trails 0 DSS
b. Renewal Years 2-10 0
Target Premiums 0 DSS
Excess Premiums 0 DSS
Asset Trail 0 DSS
c. Renewal Years 11+ 0
Target Premiums 0 DSS
Excess Premiums 0 DSS
Asset Trails 0 DSS
4. Premium Collection Expense Allowance ($1 per collection) 0 0 E1(mpr)
5. Termination Expense Allowance 0 0
a. Death Claim Expense ($* per death, base) 0 E1(mpr)
b. Death Claim Expense ($* per death, OIR or CIR) 0 E1(mpr)
c. Lapse Expense ($* per lapse with net SV = 0) 0 E1(mpr)
d. Surrender Expense ($* per surrender with net SV > 0) 0 E1(mpr)
6. DAC Tax Allowance 0 0 E1(mpr)
(*% of total net transfers, including
premium paid, to Separate Account)
Total Commission and Expense Allowance ----- -----
0 0
The column headed "WMA Quota Share" shows the adjustment by the
Quota Share Percentage.
Sources:
--------
E1(mpr) Schedule E1 - Monthly Production Report
E3(qrr) Schedule E3 - Quarterly Reserve Report
WRL Actual WRL expenses and methods of reporting
DSS Commission Accounting Extract
* Material omitted pursuant to Rule 24b-2 under the Securities Exchange
Securities Exchange Act of 1934.
36
Schedule D2-Quarterly Reports
Detail of Commission and Expense Allowances
WRL Financial Freedom Builder
Modified Coinsurance
30-Jun-1998
WMA
Total Quota Share Source
----- ----------- ------
1. Expense Allowances
a. Issue Expense Allowance 0 0
($* per base policy issued, -$* for NTO) 0 E2(qpr)
($* per rider issued, -$* for NTO) 0 E2(qpr)
($* per unit, base & rider, -$* for NTO) 0 E2(qpr)
b. Maintenance Expense Allowance 0 0
$* per inforce base pollicy end of month 0 E2(qpr)
$* per inforce rider end of month 0 E2(qpr)
*% of all premiums collected 0 E2(qpr)
*% of SA Values 0 E2(qpr)
Premium Tax equals: 0
Premium taxes paid 0 WRL
-Premium tax offsets 0 WRL
Other, including guaranteed fund assessments 0
Guar. Fund Costs 0 WRL
2. Sales and Marketing Premium Expenses Allowance 0 0
a. *% of collected first year target premium 0 E2(qpr)
3. Commission Allowances 0 0
a. First Year Commissions 0
Target Premiums 0 DSS
Excess Premiums 0 DSS
Asset Trails 0 DSS
b. Renewal Years 2-10 0
Target Premiums 0 DSS
Excess Premiums 0 DSS
Asset Trails 0 DSS
c. Renewal Years 11+ 0
Target Premiums 0 DSS
Excess Premiums 0 DSS
Asset Trails 0 DSS
4. Premium Collection Expense Allowance ($1 per collection) 0 0 E2(qpr)
5. Termination Expense Allowance 0 0
a. Death Claim Expense ($* per death, base) 0 E2(qpr)
b. Death Claim Expense ($* per death, OIR or CIR) 0 E2(qpr)
c. Lapse Expense ($* per lapse with net SV = 0) 0 E2(qpr)
d. Surrender Expense ($* per surrender with net SV > 0) 0 E2(qpr)
6. DAC Tax Allowance
( *% of total net transfers, including premiums paid, to Separate Account) 0 0 Ew(qpr)
--- ---
Total Commission and Expense Allowance 0 0
The column headed "WMA Quota Share" shows the adjustment by the Quota
Share Percentage.
Sources:
--------
E2(qpr) Schedule E2 - Quarterly Production Report
E3(qpr) Schedule E3 - Quarterly Reserve Report
WRL Actual WRL expenses and methods of reporting
DSS Commission Accounting Extract
* Material omitted pursuant to Rule 24b-2 under the Securities Exchange Act of
1934.
37
Schedule E1 -- Monthly Reports
Monthly Production and Policy Loads Report
WRL Financial Freedom Builder
Modified Coinsurance
30-Jun-1998
Riders
Base --------------------- Base Rider 1998 WMA
Policies PIR, PIR+ Others Units Units Quota Share Source
-------- --------- ------ ---------------- ----------- ------
In Force 31-May-1998 0 0 0 0 0 20% E1(mr)
Issues 0 0 0 0 0 LEx
Coverage Increases (decreases) 0 0 0 0 0 LEx
Reinstatements 0 0 0 0 0 LEx
---------------------------------------------------------
Total Increases 0 0 0 0 0
Disabilities 0 0 0 0 0 LEx
Surrenders 0 0 0 0 0 LEx
Not-Takens 0 0 0 0 0 LEx
Maturities 0 0 0 0 0 LEx
Lapses 0 0 0 0 0 LEx
Expiry 0 0 0 0 0 LEx
Deaths 0 0 0 0 0 LEx
---------------------------------------------------------
Total Terminations 0 0 0 0 0
Net Change 30-Jun-1998 0 0 0 0 0
---------------------------------------------------------
In Force 30-Jun-1998 0 0 0 0 0
Allocated to Quota Share of Premiums
-------------------------- --------------------------
Fixed Acct Separate Acct Fixed Acct Separate Acct
---------- ------------- ---------- -------------
Gross Premiums
Target premiums -- Year 1 0 0 0 0 Ext
Excess premiums -- Year 1 0 0 0 0 Ext
--------------------------------------------------------------------- -----------------------------
1st Year -------------------------------------- 0 0 0 0
--------------------------------------------------------------------- -----------------------------
Target Premiums -- Years 2 - 10 0 0 0 0 Ext
Excess Premiums -- Years 2 - 10 0 0 0 0 Ext
--------------------------------------------------------------------- -----------------------------
Renewal Years 2 - 10 -------------------------- 0 0 0 0
--------------------------------------------------------------------- -----------------------------
Target Premiums -- Years 11+ 0 0 0 0 Ext
Excess Premiums -- Years 11+ 0 0 0 0 Ext
--------------------------------------------------------------------- -----------------------------
Renewal Years 11+ ----------------------------- 0 0 0 0
--------------------------------------------------------------------- -----------------------------
--------------------------------------------------------------------- -----------------------------
Total Premiums for all years: ----------------- 0 0 0 0
--------------------------------------------------------------------- -----------------------------
38
Administrative Charges
Base COI Monthly Deductions 0 0 0 0 Ext
Rider Monthly Deductions 0 0 0 0 Ext
Monthly Policy Fee Deductions 0 0 0 0 Ext
Premium Collection Charges 0 0 0 0 Ext
Percent of Premium Charges 0 0 0 0 Ext
------------------------------------------------------------------ ---------------------
Total Policy Administrative Charges:----- 0 0 0 0
------------------------------------------------------------------ ---------------------
Mortality and Expense Risk Charges 0 0 J(mr)
Asset-Based Allowances 0 0 J(mr)
Benefits Paid During Month:
------Fixed Account-------- ------Separate Account-----
Gross With's Surr Charges Gross With's Surr Charges
1. Surrenders 0 0 0 0 Stat
2. Not-Taken Refunds 0 0 Stat
3. Maturities 0 0 Stat
4. Disabilities 0 0 Stat
5. Partial ▇▇▇▇▇▇▇▇▇▇▇ ▇ ▇ ▇ ▇ ▇▇▇▇
▇. Death Claims 0 0 Stat
7. New Loans 0 Stat
Transfers - Fixed to Separate 0 Stat
Transfers - Separate to Fixed 0 Stat
Gross Premiums Allocated to Fixed Accounts 0
Total Net Transfers to Separate Account 0
Settlement Interest Rate on 15-Jun-1998 5.50% WSJ
Interest to End of Month on Premiums and Net Transfers to Fixed Account 0 0 E1(mr)
Interest to EOM on Mortality and Expense Risk Charges and A-B Allowances 0 0 E1(mr)
Interest to End of Month on Commission and Expense Allowances 0 0 D1(mr)
Interest to End of Month on Benefits from Fixed Account 0 0 E1(mr)
The column headed "WMA Quota Share" shows the adjustment by the
Quota Share Percentage.
Sources:
E1(mpr) Schedule E1 - Monthly Production Report from prior month
J(mr) Schedule J - Monthly M&E and Asset-Based Allowances
LEx Life Exhibit Access Database Report
Ext WMA VUL Mod-Co Seriatim File
WSJ Wall Street Journal published on the date shown for the Settlement
Interest Rate
39
Schedule E2 -- Quarterly Report
Quarterly Production and Policy Loads Report
WRL Financial Freedom Builder
Modified Coinsurance
30-Jun-1998
Riders
--------------------
Base Base Rider 1998 WMA
Policies PIR, PIR+ Other Units Units Quota Share Source
-------- --------- ----- ----- ----- ----------- ------
In Force 31-Mar-1998 0 0 0 0 0 20% E1(mr)
Issue 0 0 0 0 0 LEx
Coverage Increase (decreases) 0 0 0 0 0 LEx
Reinstatements 0 0 0 0 0 LEx
--- --- --- --- ---
Total Increases 0 0 0 0 0
Disabilities 0 0 0 0 0 LEx
Surrenders 0 0 0 0 0 LEx
Not-Takens 0 0 0 0 0 LEx
Maturities 0 0 0 0 0 LEx
Lapses 0 0 0 0 0 LEx
Expiry 0 0 0 0 0 LEx
Deaths 0 0 0 0 0 LEx
--- --- --- --- ---
Total Terminations 0 0 0 0 0
Net Change 30-Jun-1998 0 0 0 0 0
--- --- --- --- ---
In Force 30-Jun-1998 0 0 0 0 0
Allocated to Quota Share of Premiums
Fixed Acct Separate Acct Fixed Acct Separate Acct
Gross Premiums
Target Premiums - Year 1 0 0 0 0 Ext
Excess Premiums - Year 1 0 0 0 0 Ext
--- --- --- ---
1st Year................................. 0 0 0 0
--- --- --- ---
Target Premiums - Years 2 - 10 0 0 0 0 Ext
Excess Premiums - Years 2 - 10 0 0 0 0 Ext
--- --- --- ---
Renewal Years 2 - 10..................... 0 0 0 0
--- --- --- ---
Target Premiums - Years 11+ 0 0 0 0 Ext
Excess Premiums - Years 11+ 0 0 0 0 Ext
--- --- --- ---
Renewal Years 11+........................ 0 0 0 0
--- --- --- ---
Total Premiums for all years:............. 0 0 0 0
--- --- --- ---
40
Administrative Charges
Base COI Monthly Deductions 0 0 0 0 Ext
Rider Monthly Deductions 0 0 0 0 Ext
Monthly Policy Fee Deductions 0 0 0 0 Ext
Premium Collection Charges 0 0 0 0 Ext
Percent of Premium Charges 0 0 0 0 Ext
------------------------------------------------------------------ -------------------------
Total Policy Administrative Charges: ------ 0 0 0 0
------------------------------------------------------------------ -------------------------
Mortality and Expense Risk Charges 0 0 J(mr)
Asset-Based Allowances 0 0 J(mr)
Benefits Paid During Month:
_____Fixed Account_____ _______Separate Account_______
Gross With's Surr Charges Gross With's Surr Charges
1. Surrenders 0 0 0 0 Stat
2. Not-Taken Refunds 0 0 0 0 Stat
3. Maturities 0 0 0 0 Stat
4. Disabilities 0 0 0 0 Stat
5. Partial ▇▇▇▇▇▇▇▇▇▇▇ ▇ ▇ ▇ ▇ ▇▇▇▇
▇. Death Claims 0 0 0 0 Stat
7. New Loans 0 0 0 0 Stat
Transfers - Fixed to ▇▇▇▇▇▇▇▇ ▇ ▇ ▇ ▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇▇▇▇ to Fixed 0 0 0 0 Stat
Gross Premiums Allocated to Fixed Account 0
Total Net Transfers to Separate Account 0
Settlement Interest Rate on 35,961 0 WSJ
Interest to End of Month on Premiums and Net Transfers to Fixed Account 0 0 E1(mr)
Interest to EOM on Mortality and Expense Risk Charges and A-B Allowances 0 0 E1(mr)
Interest to End of Month on Commission and Expense Allowances 0 0 D1(mr)
Interest to End of Month on Benefits from Fixed Account 0 0 E1(mr)
The column headed "WMA Quota Share" shows the adjustment by the Quota Share
Percentage.
Sources:
--------
E1(mpr) Schedule E1 - Monthly Production Report from prior month
J(mr) Schedule J - Monthly M&E and Asset-Based Allowances
LEx Life Exhibit Access Database Report
Ext WMA VUL Mod-Co Seriatim File
WSJ Wall Street Journal published on the date shown for the Settlement
Interest Rate
41
Schedule E3 - Quarterly Reports
Quarterly Reserve Report
WRL Financial Freedom Builder
Modified Coinsurance
30-June-1998
WMA
Total Quota Share Source
----- ----------- ------
A. Sources of Reserve Splits:
1. Total FFB Cash Values 0 N/A Ext
2. Reinsured FFB SA Values 0 0 Ext
3. Reinsured FFB GA Values
a. Fixed Account Values 0
b. Loan Collateral Fund 0
c. Total Reinsured FFB GA Values 0 0 Ext
----- ---------
4. Total Reinsured FFB Cash Values 0 0
B. CRVM Statutory Reserves Split between SA and GA:
1. Total FFB CRVM Statutory Reserves 0 N/A Ext
2. Reinsured FFB CRVM Statutory Reserves - Total 0 0 Ext
3. Reinsured FFB CRVM Statutory Reserves - SA only 0 0
4. Reinsured FFB CRVM Statutory Reserves - GA only 0 0
C. Additional Reserves Split between SA and GA:
1. Reinsured Mortality Charge Reserves - GA only 0 0 Ext
2. Reinsured IPC Reserves - Total (.02 x B(2)) 0 0
3. Reinsured IPC Reserves - SA only 0 0
4. Reinsured IPC Reserves - GA only 0 0
D. Other GA Reserves and Liabilities
1. Exhibit II, Part I, Column 3, Line 4a Liability 0 0 Acct
2. Disabled Lives Reserves 0 0 Acct
3. Other Reserves and Liabilities 0 0 Acct
----- ---------
4. Total Other GA Reserves and Liabilities 0 0
E. Total Reinsured FFB SA Reserves and Liabilities 0 0
F. Total Reinsured FFB GA Reserves and Liabilities 0 0
Sources:
Ext WMA VUL Mod-Co Seriatim File
Acct Financial Reporting Accounting and Death Claim Report
42
Schedule F - Annual Reports
Exhibit of Life Insurance (NAIC format)
WRL Financial Freedom Builder
Modified Coinsurance
30-Jun-1998
Ordinary
---------------------------
3 4
Number of Amount of
(Year-to-Date Figures Shown:) Policies Insurance(a) Source
------------- -------------
1. In Force end of Previous Year: 0 0 F(ar)
--------------------------------------------------------------------------------------
2. Issued during year: 0 0 E2(qpr)
--------------------------------------------------------------------------------------
3. Reinsurance Assumed: 0 0
--------------------------------------------------------------------------------------
4. Revived during year: 0 0 E2(qpr)
--------------------------------------------------------------------------------------
5. Increased during year (net): 0 0
--------------------------------------------------------------------------------------
5A. Subtotals, (Lines 2 to 5) 0 0
--------------------------------------------------------------------------------------
6. Additions by dividends: 0 0
--------------------------------------------------------------------------------------
7. Aggregate write-ins for increases: 0 0
--------------------------------------------------------------------------------------
8. Totals (Lines 1 and 5A to 7) 0 0
--------------------------------------------------------------------------------------
Deductions during year:
--------------------------------------------------------------------------------------
9. Death: 0 0 E2(qpr)
--------------------------------------------------------------------------------------
10. Maturity 0 0 E2(qpr)
--------------------------------------------------------------------------------------
11. Disability: 0 0 E2(qpr)
--------------------------------------------------------------------------------------
12. Expiry: 0 0 E2(qpr)
--------------------------------------------------------------------------------------
13. Surrender: 0 0 E2(qpr)
--------------------------------------------------------------------------------------
14. Lapse: 0 0 E2(qpr)
--------------------------------------------------------------------------------------
15. Conversion: 0 0
--------------------------------------------------------------------------------------
16. Decreased (net): 0 0
--------------------------------------------------------------------------------------
17. Reinsurance: 0 0
--------------------------------------------------------------------------------------
18. Aggregate write-ins for decreases: 0 0
--------------------------------------------------------------------------------------
19. Totals (Lines 9 to 18): 0 0
--------------------------------------------------------------------------------------
20. In force end of year (Line 8 minus Line 19): 0 0
--------------------------------------------------------------------------------------
21. Reinsurance ceded end of year: XXX 0
--------------------------------------------------------------------------------------
22. Line 20 minus Line 21 XXX 0
--------------------------------------------------------------------------------------
(a) Amounts of life insurance in this exhibit shall be shown in thousands (omit 000).
Sources:
E2(qpr) Schedule E2 - Quarterly Production Report
F(ar) Schedule F - Annual Report from Prior Year
43
Schedule G -- Quarterly Reports
Quarterly Interest Credit (Debit) on Modified Coinsurance Reserve
WRL Financial Freedom Builder
Modified Coinsurance
30-Jun-1998
Change in
Detail of Separate WMA
Transfers-in Account Value Quota Share Source
------------ ------------- ----------- ------
A. S/A Value as of 31-Mar-1998 0 0 G(qr)
B. Increases in Separate Account Value during the quarter
1. Gross premiums (SA + FA) Ceded 0 0 E2(qpr)
2. Transfers-in from the Fixed Account 0 0
Interfund Transfers to Separate Account 0 E2(qpr)
Fixed Account Value of Surrenders 0 E2(qpr)
Fixed Account Value of Not-Taken Refunds 0 E2(qpr)
Fixed Account Value of Maturities 0 E2(qpr)
Fixed Account Value of Disabilities 0 E2(qpr)
Fixed Account Value of Partial Withdrawals 0 E2(qpr)
Fixed Account Value of Death Claims 0 E2(qpr)
------------------------------ -----------
3. Total increases 0 0
Benefits Paid WMA Chg. in Cash Value WMA
S/A + Fixed Quota Share S/A + Fixed Quota Share
------------ ----------- ------------------ -----------
C. Decreases in Separate Account Value
during the quarter
1. Surrenders 0 0 0 0 E2(qpr)
2. Not-Taken Refunds 0 0 0 0 E2(qpr)
3. Maturities 0 0 0 0 E2(qpr)
4. Disabilities 0 0 0 0 E2(qpr)
5. Partial Withdrawals 0 0 0 0 E2(qpr)
6. Death Claims 0 0 0 0 E2(qpr)
7. Transfers-out to the Fixed Account
Gross Premiums to Fixed Account 0 E2(qpr)
Transfers for New Loans Taken 0 E2(qpr)
Transfers-out to Fixed Account 0 E2(qpr)
--------------------------------------------------- -----------
8. Total Decreases 0 0 0 0
D. Separate Account Value as of 30-Jun-1998 0 0 H(qr)
E. Policyholder Investment Gain on Separate Account
Value as of the end of the quarter = D-[A+B(3)-C(8)] 0 0
The Column headed "WMA Quota Share" shows the adjustment by the
Quota Share Percentage.
Sources:
G(qr) Schedule G -- Quarterly Report for prior quarter
H(qr) Schedule H -- Quarterly Mod-Co Reserve Adjustment
E2(qpr) Schedule E2 -- Quarterly Production Report
Ext WMA VA Mod-Co Seriatim File
44
Schedule H - Quarterly Reports
Quarterly Modified Coinsurance Reserve Adjustment
WRL Financial Freedom Builder
Modified Coinsurance
30-Jun-1998
WMA
Total Quota Share Source
Increase in Modified Coinsurance Reserve Payable to WMA to WRL
A. Total Modified Coinsurance Reserve as of 31-Mar-1998 0 0 E3(qrr)
B. Total Modified Coinsurance Reserve as of 30-Jun-1998 0 0 E3(qrr)
C. Increase in Modified Coinsurance Reserve = B - A 0 0
(=Increase in Separaate Account Value)
The column headed "WMA Quota Share" shows the adjustment by the
Quota Share Percentage.
Sources:
E3(qrr) Schedule E3 - Quarterly Reserve Report
45
Schedule I - Quarterly Reports
Quarterly Target Surplus Adjustment
WRL Financial Freedom Builder
Modified Coinsurance
30-Jun-1998
WMA
Total Quota Share Source
----- ----------- --------
A. Total SA Value as of the end of the previous quarter 0 0 E3(qrr)
B. Target Surplus on SA Value (* x A) 0 0 WRL
C. Total SA Value as of the end of the current quarter 0 0 E3(qrr)
D. Target Surplus on SA Value (* x C) 0 0 WRL
E. Increase in SA Target Surplus (D - B) 0 0
(= SA Target Surplus Adjustment)
F. Interest Credit on Target Surplus 0 0 WRL
(B x (* Exp. (#days in quarter/365)-1
The column headed "WMA Quota Share" shows the adjustment
by the Quota Share Percentage.
Sources:
--------
E3(qrr) Schedule E3 - Quarterly Reserve Report
WRL Actual WRL method, based on factors determined by WRL.
* Material omitted pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934.
46
Schedule J - Monthly Report
Monthly M&M and Asset Based Allowance Calculations
WRL Financial Freedom Builder
30-Jun-1998
M&E ANNUAL RATE: 0.90%
NUMBER OF DAYS IN REPORTING PERIOD: 30
NUMBER OF BUSINESS DAYS IN PERIOD: 19
MONEY STRATEGIC EMERGING AGGRESSIVE
TOTAL MARKET BOND GROWTH GLOBAL TOTAL RETURN GROWTH GROWTH BALANCED
----- ------ ---- ------ ------ ------------ ------- ------ --------
A. Average TNA for the current month 0 0 0 0 0 0 0 0 0
B. Average Daily Cash Change (sum of
daily cash changes/# days in
current month) 0 0 0 0 0 0 0 0 0
C. Average Daily M&E fee
(A x M&E)/365 0 0 0 0 0 0 0 0 0
D. Average Daily Dividend Receivable
Balance (Money Market Only) for
the current month 0 0 0 0 0 0 0 0 0
E. Adjusted Monthly Average TNA
(A - B + C - D) 0 0 0 0 0 0 0 0 0
F. Annual Asset Based Allowance
Factor (WRL only) 0.25% 0.25% 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
G. Asset Based Allowance for
Month (Entire Fund)
(F x E x #days in month)/365 0 0 0 0 0 0 0 0 0
H. M&E fees for Month (Entire Fund)
(A x M&E x #days in month)/365 0 0 0 0 0 0 0 0 0
I. S/A Value by Fund for all FFBs 0 0 0 0 0 0 0 0 0
J. S/A Value by Fund for Reinsured
Contracts by Issue Year
1998 0 0 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0 0 0
2000 0 0 0 0 0 0 0 0 0
K. Asset Based Allowance by
Issue Year (G x J)/I
1998 0 0 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0 0 0
2000 0 0 0 0 0 0 0 0 0
L. M&E fees for Month by
Issue Year (H x J)/I
1998 0 0 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0 0 0
2000 0 0 0 0 0 0 0 0 0
47
Growth Tactical C.A.S.E. Real Value International U.S. 3rd Ave.
& Income Asset Growth Estate Equity Equity Equity Value
-------- -------- -------- ------ ------ ------------- ------ --------
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0.35% 0.40% 0.40% 0.40% 0.40% 0.50% 0.40% 0.40%
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0
48
Schedule K
WMA Life Insurance Co., Inc.
Reinsured Death Claims Reported
Claims Reported From: 06/01/1998 To: 06/30/1998
Report Run Date: July 02, 1998
-------------------------------------------------------------------------------------------------------
Claim State Name Sex Issue Policy Risk Option Plan
Age Number Class Code Code
-------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Issue Death Date Face Reinsurance Cash Interest Expense Date Remark
Date Date Reported Amount Amount Value Amount Paid Code Code
---------------------------------------------------------------------------------------------------------------
WMA Life Insurance Co., Inc.
Reinsured Death Claims Paid
Claims Paid From: 06/01/1998 To: 06/30/1998
Report Run Date: July 02, 1998
-------------------------------------------------------------------------------------------------------
Claim State Name Sex Issue Policy Risk Option Plan
Age Number Class Code Code
-------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Issue Death Date Face Reinsurance Cash Interest Expense Date Remark
Date Date Reported Amount Amount Value Amount Paid Code Code
---------------------------------------------------------------------------------------------------------------
WMA Life Insurance Co., Inc.
Reinsured Death Claims Outstanding
Claims Outstanding On: 06/01/1998 To: 06/30/1998
Report Run Date: July 02, 1998
-------------------------------------------------------------------------------------------------------
Claim State Name Sex Issue Policy Risk Option Plan
Age Number Class Code Code
-------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
Issue Death Date Face Reinsurance Cash Interest Expense Date Remark
Date Date Reported Amount Amount Value Amount Paid Code Code
---------------------------------------------------------------------------------------------------------------