Exhibit 7(n)
Exhibit A
Automatic Coinsurance Agreement
Between
Prudential Annuities Life Assurance Corporation
of Shelton, Connecticut U.S.A.
(Reinsured referred to as you, your or Reinsured)
and
Pruco Reinsurance Ltd.
of ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
(referred to as the Reinsurer)
TABLE OF CONTENTS
ARTICLE I.................................................................. 3
Automatic Reinsurance.................................................... 3
ARTICLE II................................................................. 3
Liability................................................................ 3
ARTICLE III................................................................ 4
Plan and Amount of Insurance............................................. 4
ARTICLE IV................................................................. 4
Reinsurance Premiums..................................................... 4
ARTICLE V.................................................................. 4
Payments by Reinsurer.................................................... 4
ARTICLE VI................................................................. 4
Reporting and Cash Settlement............................................ 4
ARTICLE VII................................................................ 5
Deposits on the Reserves................................................. 5
ARTICLE VIII............................................................... 6
Credit for Reinsurance................................................... 6
ARTICLE IX................................................................. 11
General Provisions....................................................... 11
ARTICLE X.................................................................. 15
DAC Tax Agreement........................................................ 15
ARTICLE XI................................................................. 16
Recapture................................................................ 16
ARTICLE XII................................................................ 16
Arbitration.............................................................. 16
ARTICLE XIII............................................................... 17
Duration of Agreement.................................................... 17
ARTICLE XIV................................................................ 17
Entire Agreement......................................................... 17
ARTICLE XV................................................................. 18
Execution................................................................ 18
SCHEDULE A................................................................. 19
Business Reinsured....................................................... 19
SCHEDULE B................................................................. 20
Monthly Settlement Report................................................ 20
SCHEDULE C................................................................. 21
Monthly Business Management Report....................................... 21
SCHEDULE D................................................................. 22
Annual Report............................................................ 22
SCHEDULE E................................................................. 23
Prototype HD GRO Benefit Rider Forms....................................... 23
The Reinsured and the Reinsurer mutually agree to reinsure on the terms and
conditions set out below.
ARTICLE I
Automatic Reinsurance
1. Insurance. The Reinsured will cede and the Reinsurer will accept as
reinsurance the underlying benefit provided by the Highest Daily Guaranteed
Return Option (HD GRO) benefit riders written by the Reinsured as shown in
Schedule A or any amendments to thereto. Prototypes of the HD GRO benefit
riders available as of the effective date of this Agreement are contained
in Schedule E.
2. Coverages. The underlying HD GRO benefit riders may be attached to any
deferred annuity contract written by the Reinsured and were first issued on
the dates specified in Schedule A. Reinsurance under this Agreement will be
provided for the HD GRO benefit riders while such riders are in effect on
the associated annuity contracts.
ARTICLE II
Liability
1. Liability. The liability of the Reinsurer on any reinsurance under this
Agreement begins upon the effective date of this Agreement as set forth in
Article XV, Execution, and ends after all underlying insurance contracts
associated with the reinsured HDGRO benefit riders have terminated or the
business reinsured is otherwise recaptured or terminated. The liability of
the Reinsurer to the Reinsured under this Agreement will be the HD GRO
benefit obligation to any covered contract holder on the maturity date of
the guarantee to the extent the guarantee exceeds the contract's account
value, subject to the limits defined in Schedule A(2).
2. The liability of the Reinsurer will be settled and paid to the Reinsured
monthly on the basis of the monthly reports prepared by the Reinsured in
the form of Schedule B. Payment of any amount due to be paid by the
Reinsurer or the Reinsured will be determined on a net basis and will be
paid within 5 business days after receipt of the monthly report.
3. This is a contract solely between the Reinsured and the Reinsurer. The
obligations under this contract of the Reinsurer are solely to the
Reinsured and those of the Reinsured solely to the Reinsurer.
Page 3 of 23
ARTICLE III
Plan and Amount of Insurance
1. Plan. Reinsurance under this Agreement will be on the coinsurance basis in
accordance with the underlying HD GRO benefit riders issued by the
Reinsured and listed on Schedule A while such riders are in effect on the
associated insurance contracts.
2. Reduction and Terminations. If any HD GRO benefit rider is terminated or
any of the underlying insurance contracts associated with the HD GRO
benefit rider reinsured under this Agreement are terminated by payment of a
death benefit, surrender or annuitization, the reinsurance with respect to
that contract will be terminated subject to any party's right to payment
under this Agreement with respect to such terminated rider.
ARTICLE IV
Reinsurance Premiums
After the effective date of this Agreement, the Monthly Premium due the
Reinsurer by the Reinsured with respect to each insurance contract reinsured is
specified in Schedule B or any amendments thereto.
ARTICLE V
Payments by Reinsurer
1. Benefits. The Reinsurer will pay the Reinsured the remaining obligation
under the HD GRO benefit rider on the maturity date of the guarantee, to
the extent that the guarantee exceeds the contract's account value, subject
to the limits defined in Schedule A(2).
2. Expense Allowance. As more fully described on Schedule B, the Reinsurer
will pay the Reinsured a monthly expense allowance.
ARTICLE VI
Reporting and Cash Settlement
1. The Reinsured will provide the Reinsurer with information necessary to
properly account for the business reinsured.
2. Not later than ten (10) business days after the end of each month, the
Reinsured will submit to the Reinsurer a report substantially in accordance
with Schedule B. The Reinsured agrees to provide or make available to the
Reinsurer such documentation as may be necessary to support the items
reported.
Page 4 of 23
3. Not later than ten (10) business days after the end of each month, the
Reinsured will submit to the Reinsurer a report substantially in accordance
with Schedule C.
4. Not later than ten (10) business days after the end of each calendar year,
the Reinsured will submit to the Reinsurer a report substantially in
accordance with Schedule D.
5. The Reinsurer and the Reinsured shall consider any balance due and unpaid,
whether on account of premiums, allowances, losses or claims expenses, to
be mutual debits or credits under this Agreement and will offset, if
permitted under the applicable law. Only the balance will be considered in
determining the liability of the Reinsurer.
6. Cash settlement of balances due between Reinsured and Reinsurer will be
made within five (5) business days of receipt of Schedule B each month.
7. The Reinsurer may contest any calculation contained a report from the
Reinsured by providing an alternative calculation to the Reinsured in
writing within 30 days of the Reinsurer's receipt of the Reinsured's
calculation. If the Reinsurer does not so notify the Reinsured, the
Reinsured may consider the reports final.
If the Reinsurer contests the Reinsured's calculation, the parties will act
in good faith to reach an agreement as to the correct amount within 30 days
of the date the Reinsurer submits its alternative calculation. If the
Reinsured and the Reinsurer do not reach agreement on the calculation
within such 30-day period, then the calculation shall be determined by an
independent accounting firm or other independent third party acceptable to
both the Reinsured and the Reinsurer within 20 days after the expiration of
such 30-day period.
ARTICLE VII
Deposits on the Reserves
The Reinsurer will hold reserves that are at least as great as those required
by Bermuda laws and regulations.
Page 5 of 23
ARTICLE VIII
Credit for Reinsurance
Page 6 of 23
Page 7 of 23
Page 8 of 23
Page 9 of 23
Page 10 of 23
ARTICLE IX
General Provisions
1. Reinsurance Conditions. The reinsurance is subject to the same limitations
and conditions as the HD GRO benefit riders written by the Reinsured on
which the reinsurance is based.
2. Expenses. In no event will the Reinsurer have any liability for any
extra-contractual damages which are rendered against the Reinsured as a
result of administrative errors, acts, omissions or course of conduct
committed by the Reinsured in connection with the annuity contracts
associated with the HD GRO benefit riders reinsured under this Agreement.
In no event will the Reinsured have any liability for extra-contractual
damages against the Reinsurer as a result of acts, omissions, or course of
conduct committed by the Reinsurer in connection with the reinsurance of
the HD GRO benefit riders under this Agreement.
3. 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 or oversight, the Reinsured and the Reinsurer will adjust
the situation to what it would have been had the misunderstanding or
oversight not occurred.
4. Inspection. At any reasonable time, the Reinsurer and the Reinsured may
inspect the original papers and any other books or documents at the Home
Office of the other relating to or affecting reinsurance under this
Agreement.
Page 11 of 23
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 will 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 written consent of the other contracting party.
5. Assignment or transfer. In no event will either the Reinsured or the
Reinsurer assign any of its rights, duties and or obligations under this
Agreement without the prior written approval of the other party. Such
approval will not unreasonably be withheld. In no event will either the
Reinsured or the Reinsurer transfer either the HD GRO benefit riders
reinsured under this Agreement or the reinsurance without the prior written
approval of the other party. Such approval will not unreasonably be
withheld. No assignment or transfer shall be effective unless such
assignment or transfer is (i) filed with the Reinsured's appropriate
domiciliary regulator(s) at least 30 days prior to the proposed effective
date, (ii) not disapproved, (iii) made in writing and (iv) signed by the
parties hereto.
6. If any provision of this Agreement will be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby. This Agreement will be construed in accordance
with the applicable federal law and the laws of the State of Connecticut.
7. Premium Taxes. The Reinsurer will reimburse the Reinsured for any
applicable premium taxes incurred that are directly attributable to the
reinsured HD GRO riders.
8. Insolvency. In the event of the declared insolvency of the Reinsured, and
the appointment of a domiciliary liquidator, receiver, conservator or
statutory successor for the Reinsured, this reinsurance will be payable
immediately upon demand, with reasonable provision for verification,
directly to the Reinsured or its domiciliary liquidator, receiver, or
conservator or statutory successor, on the basis of the liability of the
Reinsured without diminution because of the insolvency of the Reinsured or
because the liquidator, receiver, conservator or statutory successor of the
Reinsured has failed to pay all or a portion of any claim.
Every liquidator, receiver, conservator or statutory successor of the
Reinsured or guaranty fund or association will give written notice to the
Reinsurer of the pendency of a claim involving the Reinsured indicating
which of the underlying insurance contracts would involve possible
liability on the part of the Reinsurer to the Reinsured or its domiciliary
liquidator, receiver, conservator or statutory successor, within a
reasonable amount of time after the claim is filed in the conservation,
liquidation, receivership or other proceeding. Failure to give such notice
shall not excuse the obligation of the Reinsurer unless it is substantially
prejudiced thereby.
During the pendency of any claim, the Reinsurer may investigate the same
and interpose, at its own expense, in the proceeding where that claim is to
be adjudicated, any defense or defenses that it may deem available to the
Reinsured, to its contract owner, or to any liquidator, receiver or
statutory successor of the Reinsured or guaranty fund or
Page 12 of 23
association. The expenses thus incurred by the Reinsurer will be
chargeable, subject to approval of the applicable court, against the
Reinsured as part of the expense of conservation or liquidation to the
extent of a pro rata share of the benefit which may accrue to the Reinsured
as a result of the defense undertaken by the Reinsurer.
This reinsurance will be payable directly to the Reinsured or to its
domiciliary liquidator, receiver, conservator or statutory successor,
except as expressly required otherwise by applicable insurance law.
9. Insolvency of the Reinsurer. In the event of the insolvency, bankruptcy,
receivership, rehabilitation or dissolution of the Reinsurer, the Reinsured
may retain all or any portion of any amount then due or which may become
due to the Reinsurer under this Agreement and use such amounts for the
purposes of paying any and all liabilities of the Reinsurer incurred under
this Agreement. When all such liability hereunder has been discharged, the
Reinsured will pay the Reinsurer, its successor or statutory receiver, the
balance of such amounts withheld as may remain.
10. Confidentiality. The Reinsurer agrees to regard and preserve as
confidential all information and material which is related to the
Reinsured's business and/or customers that may be obtained by the Reinsurer
from any source as a result of this Agreement. The Reinsurer will not,
without first obtaining the Reinsured's prior written consent disclose to
any person, firm or enterprise, or use for its own benefit or for the
benefit of any third party any information designated by the Reinsurer as
Confidential Information or Customer Information except as necessary for
retrocession purposes, external auditors, as required by court order, or as
required by law or regulation. "Confidential Information" includes, but is
not limited to any and all financial data, statistics, programs, research,
developments, information relating to the Reinsured's insurance and
financial products, planned or existing computer systems architecture and
software, data, and information of the Reinsured as well as third party
confidential information to which the Reinsured has access. "Customer
Information" includes all information provided by or at the direction of
the Reinsured about a customer of the Reinsured or any affiliates of the
Reinsured, including but not limited to name, address, telephone number,
email address, account or policy information, and any list or grouping of
customers.
Notwithstanding the foregoing, this provision shall not apply with respect
to disclosing of Confidential Information which is or becomes publicly
known through no wrongful act of the Reinsurer; or is received from a third
party without similar restriction and without breach of this Amendment; or
is independently developed by the Reinsurer; or is approved for release by
written authorization of the Reinsured; or is placed in or becomes party of
the public domain pursuant to or by reason of operation of law. The
foregoing exceptions do not apply to the disclosure of Customer
Information, which may not be disclosed without the Reinsured's prior
written consent.
These provisions regarding Confidential Information shall survive the
termination of the parties' obligations under this Agreement for a period
of two years, and the provisions regarding Customer Information shall
survive the termination of the parties' obligations under this Agreement
indefinitely.
Page 13 of 23
The Reinsurer certifies that it has implemented and will maintain an
effective information security program to protect the Reinsured's Customer
Information, which program includes administrative, technical, and physical
safeguards:
(a) to ensure the security and confidentiality of Customer Information;
(b) to protect against any anticipated threats or hazards to the
security or integrity of such Customer Information; and
(c) to protect against unauthorized access to or use of Customer
Information which could result in substantial harm or
inconvenience to the Reinsured or its affiliates, or to customers
of any of them.
In the event that the Reinsurer is in material breach of any provisions of
these provisions, it shall immediately advise the Reinsured and take steps
to remedy such breach, including but not limited to protecting customers,
the Reinsured, and the Reinsured's affiliates against the consequences of
any disclosure or use of Customer Information in violation of these
provisions.
11. Notices. Notices regarding this Agreement shall be in writing and deemed
delivered if personally delivered, sent via facsimile or other agreed upon
electronic means, or dispatched by certified or registered mail, return
receipt requested, postage prepaid, addressed to the parties as follows:
Chief Actuary - Annuities
Prudential Annuities Life Assurance Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to: Prudential Annuities - Actuarial
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
Pruco Reinsurance Ltd.
c/▇ ▇▇▇▇▇ Management Services (Bermuda) Ltd.
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
Copy to: Pruco Reinsurance Ltd - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax No: ▇▇▇-▇▇▇-▇▇▇▇
Notice shall be deemed given on the date it is deposited in the mail or
sent via facsimile or other electronic means in accordance with the
foregoing. Any party may change the address to which to send notices by
notifying the other party of such change of address in writing in
accordance with the foregoing.
Page 14 of 23
ARTICLE X
DAC Tax Agreement
1. The Reinsured and the Reinsurer, herein collectively called the "Parties",
or singularly the "Party", hereby enter into an election under Treasury
Regulations Section 1.848-2(g) (8) as promulgated under the Internal
Revenue Code, as found in Title 26 of the United States Code, hereinafter
referred to as the Regulations and the IRC. Both parties agree to make the
election contemplated by this Section 14 by timely attaching to their U.S.
tax returns the schedule contemplated by Section 1.848-2(g)(8)(ii) of the
Regulations. Furthermore, the parties agree to the following:
a. For each taxable year under this Agreement, the party with the net
positive consideration, as defined in the Regulations, will capitalize
specified policy acquisition expenses with respect to this Agreement
without regard to the general deductions limitation of Section 848
(c) (1);
b. The Reinsured and the Reinsurer agree to exchange information
pertaining to the net consideration under this Agreement each year to
insure consistency or as otherwise required by the U.S. Internal
Revenue Service;
c. The Reinsured will submit to the Reinsurer by May 1 of each year its
calculation of the net consideration for the preceding calendar year.
d. The Reinsurer may contest such calculation by providing an alternative
calculation to the Reinsured in writing within 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;
e. 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 30 days of the date the Reinsurer
submits its alternative calculation. If the Reinsured and the Reinsurer
do not reach agreement on the net amount of consideration within such
30-day period, then the net amount of consideration for such year shall
be determined by an independent accounting firm acceptable to both the
Reinsured and the Reinsurer within 20 days after the expiration of such
30-day period.
f. The Reinsured and the Reinsurer agree that this election shall first be
effective for the 2008 calendar tax year and will be effective for all
subsequent taxable years for which this Agreement remains in effect.
The Reinsured represents and warrants that it is subject to U.S. taxation
under either Subchapter L of Chapter 1, or Subpart F of Subchapter N of
Chapter 1 of the IRC of 1986, as amended. The Reinsurer represents and
warrants that it has duly elected to be subject to U.S. taxation under
Section 953(d) of the IRC of 1986, as amended.
Page 15 of 23
ARTICLE XI
Recapture
The business reinsured under this Agreement will not be eligible for recapture,
except through mutual agreement of both parties.
ARTICLE XII
Arbitration
1. Any controversy or claim arising out of or relating to this Agreement will
be settled by arbitration.
2. There must be three arbitrators who will be active, prior or retired
officers of life insurance companies other than the contracting companies
or their subsidiaries or affiliates. Each of the contracting companies will
appoint one of the arbitrators and these two arbitrators will select the
third.
In the event either contracting company fails to choose an arbitrator
within thirty (30) days after the other contracting company has given
written notice of its arbitrator appointment, the contracting company which
has given written notice may choose two arbitrators who will in turn choose
a third arbitrator before entering arbitration. If the two arbitrators are
unable to agree upon the selection of a third arbitrator within thirty
(30) days following their appointment, each arbitrator will nominate three
candidates within ten (10) days thereafter, and the final selection will be
made by a court of competent jurisdiction from among the submitted names
(three each) or any other persons the court finds to be a qualified and
impartial arbitrator.
3. With regard to (2) above, arbitration must be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
that will be in effect on the date of delivery of demand for arbitration.
4. Each contracting company will pay its arbitrator and its arbitration
expenses and the two companies will share equally the third arbitrator's
expenses.
5. The award agreed to by the arbitrators will be final and binding upon the
parties, and judgment may be entered upon it in any court having
jurisdiction.
Page 16 of 23
ARTICLE XIII
Duration of Agreement
1. This Agreement may be terminated with respect to new HD GRO benefit riders
at any time by either party giving ninety (90) days' written notice of
termination. The day the notice is deposited in the mail addressed to the
Home Office or to an Officer of either company will be the first day of the
ninety (90) day period. No termination shall be effective unless such
termination is (i) filed with the Reinsured's appropriate domiciliary
regulator(s) at least 30 days prior to the proposed effective date,
(ii) not disapproved, (iii) made in writing, and (iv) signed by the parties
hereto.
2. During the ninety (90) day period, this Agreement will continue to remain
in force.
3. After termination, the Reinsurer and the Reinsured will remain liable for
all reinsurance that became effective prior to the termination of the
Agreement.
ARTICLE XIV
Entire Agreement
This Agreement including any Schedules and Amendments will constitute the
entire agreement between the parties with respect to the business being
reinsured hereunder. There are no understandings between the parties other than
as expressed in this Agreement. Any change or modification to this Agreement
will be null and void unless made by amendment to this Agreement and signed by
both parties.
No change or modification to the Agreement shall be effective unless such
change or modification is (i) filed with the Reinsured's appropriate
domiciliary regulator(s) at least 30 days prior to the proposed effective date,
(ii) not disapproved, (iii) made in writing, and (iv) signed by the parties
hereto.
Page 17 of 23
ARTICLE XV
Execution
In witness of the above, this Agreement is signed in duplicate at the dates and
places indicated and will be effective as of the 28/th/ day of January 2008.
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
At Shelton, Connecticut
On:
------------------------------
Signature:
------------------------------
By:
------------------------------
Title:
------------------------------
PRUCO REINSURANCE LTD.
At
On:
------------------------------
Signature:
------------------------------
By:
------------------------------
Title:
------------------------------
Page 18 of 23
SCHEDULE A
Business Reinsured
Form Name and Type First Issue Dates Form Number
------------------ ------------------------ -------------------------
HDGRO Rider January 28, 2008 RID-HDGRO (1/08)
SCH-HDGRO (1/08)
1. The Reinsured may seek to amend this Schedule A to add HD GRO benefit rider
forms that become available after the effective date of the Agreement in
accordance with the terms of the Agreement.
2. Claims arising under the HD GRO benefit rider are equal to the remaining HD
GRO protected value under a contract on the guaranteed maturity dates to
the extent that the protected value exceeds the account value paid as due
under the HD GRO benefit rider. Claims will not include any amounts that
are paid by the Reinsured as a result of administrative errors.
Page 19 of 23
SCHEDULE B
Monthly Settlement Report
Page 20 of 23
SCHEDULE C
Monthly Business Management Report
A. Informational Reports
1. Reserve Report showing the statutory reserves, Account Values and
Surrender Value.
2. Production report with premiums (split by initial and additional
premiums) and contract counts, including the number of insurance
contracts in force at the beginning and at the end of the month.
Page 21 of 23
SCHEDULE D
Annual Report
The annual report will provide the following information:
"Exhibit of Number of Policies, Contracts and Certificates for Annuities":
from the NAIC-prescribed annual statement
Page 22 of 23
SCHEDULE E
Prototype HD GRO Benefit Riders
Page 23 of 23