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Reinsurance Agreement
No. 5090-01
for
NORTH AMERICAN SECURITY
LIFE INSURANCE COMPANY
2
Automatic Modified-Coinsurance (Mod-Co) Reinsurance Agreement
(No. 5090-01)
Between
NORTH AMERICAN SECURITY
LIFE INSURANCE COMPANY
of Boston, Massachusetts
(Reinsured referred to as you, your)
and
TRANSAMERICA OCCIDENTAL
LIFE INSURANCE COMPANY
of Los Angeles, California
(Reinsurer referred to as we, us, our)
Effective November 1, 1995
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CONTENTS
ARTICLES
I Automatic Reinsurance . . . . . . . . . . . . . . . . . . 1
II Liability . . . . . . . . . . . . . . . . . . . . . . . . 1
III Plan and Amount of Insurance . . . . . . . . . . . . . . 2
IV Reinsurance Premiums . . . . . . . . . . . . . . . . . . 2
V Payments by Reinsurer . . . . . . . . . . . . . . . . . . 2
VI Reporting . . . . . . . . . . . . . . . . . . . . . . . . 3
VII Annuitization . . . . . . . . . . . . . . . . . . . . . . 3
VIII Deposits of the Reserve . . . . . . . . . . . . . . . . . 3
IX Interest Credit on Modified Coinsurance Reserve
and Modified Coinsurance Reserve Adjustment . . . . . . . 4
X Account Payable Liability and Reserve Basis . . . . . . . 4
XI General Provisions . . . . . . . . . . . . . . . . . . . 4
XII Recapture . . . . . . . . . . . . . . . . . . . . . . . . 6
XIII Exclusion of the Fixed Account . . . . . . . . . . . . . 6
XIV Arbitration . . . . . . . . . . . . . . . . . . . . . . . 7
XV Improper Solicitation of Policyowners . . . . . . . . . . 8
XVI DAC Tax - Section 1.848-2(g)(8) Election . . . . . . . . 8
XVII Duration of Agreement . . . . . . . . . . . . . . . . . . 9
VIII Modification of Allowances and Product Design . . . . . . 9
XIX Entire Agreement . . . . . . . . . . . . . . . . . . . . 10
XX Execution . . . . . . . . . . . . . . . . . . . . . . . . 11
SCHEDULES
A Business Reinsured
B Basis of Reinsurance
C Monthly Settlement Report
D Commission and Expense Allowances
E Monthly Business Management Report
F Annual Report
G Interest Credit on Modified Coinsurance Reserve
H Modified Coinsurance Reserve Adjustment
I Transfer Factors
All schedules attached will be considered part of this agreement.
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ARTICLE I
AUTOMATIC REINSURANCE
1. Insurance. The Reinsured will cede and the Reinsurer will accept as
reinsurance the policies written by the Reinsured as shown in Schedule
A. No riders or supplementary benefits are included under this
Agreement.
2. Coverages. The policies reinsured in Schedule A are the Variable
Universal Life policies issued after November 1, 1995. Reinsurance
will be limited in percentage as provided in Schedule B.
3. This Agreement will cover only the Variable Account of the policies.
The Fixed Account will be excluded from this Agreement as set forth in
Article XIII.
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 XX, Execution, and ends after all policies reinsured
have been terminated. The liability of the Reinsurer to the Reinsured
under this Agreement will be coexisting with the liability of the
Reinsured under the policies reinsured.
2. The liability of the Reinsurer shall be settled and paid to the
Reinsured monthly on the basis of the monthly reports prepared by the
Reinsured in the form of Schedule C. 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 within ten (10) 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.
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ARTICLE III
PLAN AND AMOUNT OF INSURANCE
1. Plan. Reinsurance under this Agreement will be on the modified
coinsurance basis in accordance with the policy forms issued by the
Reinsured and listed on Schedule A.
2. Reduction and Terminations. If any of the policies reinsured under
this Agreement are reduced or terminated by transfers to the fixed
account, payment of a death benefit, withdrawal or surrender, the
reinsurance will be reduced proportionately.
ARTICLE IV
REINSURANCE PREMIUMS
The premium to be paid to the Reinsurer by the Reinsured with respect to each
policy reinsured, as specified in Schedule A, will be the quota share
percentage, as specified in Schedule B, of the gross premium corresponding to
the reinsured portion of the policy.
ARTICLE V
PAYMENTS BY REINSURER
1. Benefits
The Reinsurer shall pay the Reinsured the Reinsurer's quota share of
(a) the death benefits paid by the Reinsured,
(b) the surrender values paid by the Reinsured,
(c) the withdrawal benefits paid by the Reinsured and
(d) the policy proceeds at the commencement of a settlement
option, in the event that the policy proceeds, death benefits
or surrender values, are paid in accordance with a settlement
option under the contract.
2. Commission and Expense Allowances. The Reinsurer will pay the
Reinsured commission and expense allowances as outlined in Schedule D
on the Reinsurer's quota share portion of the policies. The
maintenance expense allowances will be paid to the Reinsured monthly,
beginning at the end of the calendar month in which the contract is
issued.
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ARTICLE VI
REPORTING
1. The Reinsured will provide the Reinsurer with information necessary to
properly account for the business reinsured.
2. Not later than ten (10) days after the end of each month, the
Reinsured will submit a report substantially in accordance with
Schedule C. 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 calendar
quarter, the Reinsured will submit a report substantially in
accordance with Schedule E.
4. Not later than forty-five (45) days after the end of each calendar
year, the Reinsured will submit a report substantially in accordance
with Schedule F.
ARTICLE VII
ANNUITIZATION
Any policy annuitizing (going into pay-out status under an immediate annuity
plan) shall be deemed to be recaptured by the Reinsured.
ARTICLE VIII
DEPOSITS OF THE RESERVE
1. The Reinsurer shall deposit with the Reinsured the reserves for the
business reinsured under this Agreement.
2. For the purpose of this Article, reserves are defined to be the total
Account Value of the policies reinsured.
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ARTICLE IX
INTEREST CREDIT ON MODIFIED COINSURANCE RESERVE
AND MODIFIED COINSURANCE RESERVE ADJUSTMENT
1 The Reinsurer shall receive an interest credit on the modified
coinsurance reserve. The amount of the credit 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 and the reserve adjustment will be made at
the end of each month.
ARTICLE X
ACCOUNT PAYABLE LIABILITY AND RESERVE BASIS
1. The Reinsured shall set up an Account Payable liability in its
financial statements equal to the difference between the total Account
Value of the reinsured policies and the total Statutory Reserve of the
policies as determined in Schedule H. The Reinsurer shall set up an
Account Receivable asset equal to the Account Payable liability set up
by the Reinsured.
2. For purposes of Section 1 of this Article, the Statutory Reserve shall
be calculated by the Reinsured according to the "Commissioner's
Reserve Valuation Method" as prescribed in the Standard Valuation Law.
ARTICLE XI
GENERAL PROVISIONS
1. Reinsurance Conditions. The reinsurance is subject to the same
limitations and conditions as the insurance under the policy or
policies 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 acts, omissions or course of conduct committed by the
Reinsured in connection with the contracts 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 contracts under this Agreement.
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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.
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 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.
5. 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 policies reinsured under this Agreement or the reinsurance
without the prior written approval of the other party. Such approval
shall not unreasonably be withheld.
6. If any provision of this Agreement shall be held or made invalid by a
court decision, 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 Delaware.
7. Premium Taxes. The Reinsurer will pay the Reinsured 2.25% of
reinsurance premiums to provide reimbursement for any premium taxes
which the Reinsured will be required to pay on the reinsurance
premiums payable under this Agreement.
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 shall be
payable immediately upon demand, with reasonable provision for
verification, directly to the Reinsured or its domiciliary liquidator,
receiver, 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.
For purposes of the paragraph above, 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 debts 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.
Every liquidator, receiver, conservator or statutory successor of the
Reinsured or guaranty fund or association shall give written notice to
the Reinsurer of the pendency of a claim involving the Reinsured
indicating which of the policies 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.
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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 policyholder, or to any liquidator,
receiver or statutory successor of the Reinsured or guaranty fund or
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 shall be payable directly by the Reinsurer 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 shall pay
the Reinsurer, its successor or statutory receiver, the balance of
such amounts withheld as may remain.
ARTICLE XII
RECAPTURE
1. With the exception of the provisions in Article VII and in Section 2
of this Article, business reinsured under this Agreement will not be
eligible for recapture.
2. Business reinsured under this Agreement may be recaptured after the
end of the twentieth policy year. The Reinsured shall notify the
Reinsurer at least thirty (30) days prior to the end of the twentieth
policy year if the Reinsured elects to recapture such business.
3. Upon recapture, the Reinsurer will pay the Reinsured an amount for
each recaptured policy equal to the surrender value of the policy.
The Reinsured will transfer to the Reinsurer the modified coinsurance
reserve of the policy which equals the Account Value of the policy.
ARTICLE XIII
EXCLUSION OF THE FIXED ACCOUNT
1. The Fixed Account of the policies will be excluded from this
Agreement. Any transfers between the Fixed Account and the Variable
Account will be subject to a transfer adjustment as specified in
Sections 2 and 3 of this Article.
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2. For any transfer from the Variable Account to the Fixed Account, the
Reinsured shall pay the Reinsurer a transfer adjustment which equals
the quota share of the amount transferred multiplied by the applicable
Transfer Factor as provided in Schedule I.
3. For any transfer from the Fixed Account to the Variable Account, the
Reinsurer shall pay the Reinsured a transfer adjustment which equals
the quota share of the amount transferred multiplied by the applicable
Transfer Factor as provided in Schedule I.
ARTICLE XIV
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 shall in
turn choose a third arbitrator before entering arbitration. If the
two arbitrators are unable to agree upon the selection of a third
arbitrator within thirty (30) days following their appointment, each
arbitrator shall nominate three candidates within ten days thereafter,
and the final selection shall be made 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 which will be in effect on the date of delivery of demand
for arbitration.
4. Each contracting company shall pay its arbitrator and its arbitration
expenses and the two companies shall share equally the third
arbitrator's expenses.
5. The award agreed by the arbitrators will be final and binding upon the
parties, and judgment may be entered upon it in any court having
jurisdiction.
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ARTICLE XV
IMPROPER SOLICITATION OF POLICYOWNERS
1. Neither party shall contact or authorize any other person to contact
owners of the policies for the purpose of soliciting surrender of
the policies, conversion of the policies to another form of insurance,
making policy loans or withdrawals without prior written approval of
the other party.
2. The Reinsured will not cause or permit the existence of this
Reinsurance Agreement to be communicated to any current or prospective
policyholder without the prior written approval of the Reinsurer,
except as where required by state or federal laws. In the event this
provision is violated, the Reinsurer may terminate this Agreement by
giving ninety (90) days' written notice of termination.
ARTICLE XVI
DAC TAX - SECTION 1.848-2(G)(8) ELECTION
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 1993 and for all subsequent taxable years for which this
Agreement remains in effect.
1. The term "party" will refer to either the Reinsured or the Reinsurer
as appropriate.
2. The terms used in this Article are defined by reference to Regulation
Section 1.848-2 in effect December 1992.
3. 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).
4. 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.
5. 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 in its tax return for the
preceding calendar year.
6. 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.
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7. 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.
ARTICLE XVII
DURATION OF AGREEMENT
1. Submission or acceptance of new business under this Agreement may be
terminated at any time after December 31, 1998, by either company
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-day
period.
2. During the ninety (90) day period, this Agreement will continue to be
in force.
3. After termination, you and we are both liable under the terms of this
Agreement for all automatic reinsurance which becomes effective prior
to termination of this Agreement. After termination we are both
liable for all automatic and facultative reinsurance which has an
application date on or before the effective date of the termination.
ARTICLE XVIII
MODIFICATION OF ALLOWANCES AND PRODUCT DESIGN
1. All reinsurance premium rates and reinsurance expense allowances
specified in this Agreement will be guaranteed until November 1, 1996.
2. After November 1, 1996, we reserve the right to examine the actual to
expected experience of the business and revise the reinsurance premium
rates and reinsurance expense allowances. You agree to provide, upon
request, any report or information reasonably required by us to make
the examination.
3. You may also review the experience to determine your expected profit
based on actual experience to determine if any modifications are
required. The modifications allowed may include upon your request an
increase in policy cost factors, or changes in compensation,
reinsurance expense allowance, underwriting practices, or any other
aspect of the reinsurance arrangement.
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4. Requested modifications shall only apply to new business and shall be
implemented only upon mutual agreement. If new terms are not mutually
agreed to within ninety (90) days after the date the proposal of the
new reinsurance arrangement and/or any product design changes are
made, this Reinsurance Agreement will terminate.
5. Nothing in this article shall be construed as limiting your right to
request the redesign of the products reinsured under this treaty.
Examples of reasons that might cause you to request such a redesign
include, but would not be limited to: to adjust pricing to take into
account emerging experience that is more favorable than that assumed
in the pricing; to adjust pricing to compensate for any adverse
deviations from pricing assumptions; or to accommodate new financial
objectives.
ARTICLE XIX
ENTIRE AGREEMENT
This Agreement shall 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 shall be null and void unless made by amendment
to this Agreement and signed by both parties.
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ARTICLE XX
EXECUTION
In witness of the above, this Agreement is signed in duplicate at the dates and
places indicated and shall be effective as of November 1, 1995.
NORTH AMERICAN SECURITY LIFE TRANSAMERICA OCCIDENTAL
INSURANCE COMPANY LIFE INSURANCE COMPANY
at Boston, Massachusetts, at Charlotte, North Carolina,
On April 15, 1996. On April 12, 1996
------------------------- -------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇▇▇ By:
------------------------- -------------------------
Title: Vice President & Product Actuary
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------- -------------------------
Title: Sr. Vice President, CFO Second Vice President
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SCHEDULE A
BUSINESS REINSURED
- TYPE OF BUSINESS Individual and last survivor life
insurance issued by you. The insureds
must be residents of the United States
and issue age 80 or under.
- PLANS OF INSURANCE Venture Life (all policy form numbers
beginning with "VENLIFE"). The Fixed
Accounts of the policies are excluded
from this Agreement subject to provisions
of Article XIII.
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SCHEDULE B
BASIS 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 policies
in the forms listed in Schedule A. The reinsurance will cover only the
Variable Account of the policy.
- QUOTA SHARE PERCENTAGE 50%
- JUMBO LIMIT $10,000,000
- BINDING LIMIT $3,500,000
- YEARS TO RECAPTURE 20
The specific amount of reinsurance is as follows:
50% times VDB
where:
TDB = Total Death Benefit
VDB = Variable Death Benefit
TAV = Total Account Value, including loan
collateral account VAV = Variable Account
Value, sum of all separate account
investment options
VDB = TDB times (VAV / TAV).
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SCHEDULE C
MONTHLY SETTLEMENT REPORT
A. Due Reinsurer
(1) Initial Premium Ceded
(2) Additional/Renewal Premiums Ceded
(3) Interest Credit on Modified Coinsurance Reserve (per
Schedule G)
(4) Transfers-in from the Fixed Account
(5) Adjustment for transfers from the Variable Account to the
Fixed Account (per Article XIII)
(6) Total Amount Due Reinsurer (Total 1-5)
B. Due Reinsured
(1) Commission and Expense Allowances (per Article V)
(a) Commission Allowance
(b) Per Policy Issue Expense Allowance
(c) Sales and Marketing Expense Allowance
(d) Maintenance Expense Allowance
Subtotal
(2) Benefits Ceded
(a) Surrenders
(b) Transfers Out to Fixed
(c) Penalty Free Surrender
(d) Partial Withdrawals
(e) Death Claims
Subtotal
(3) Adjustment for transfers from the Fixed Account to the
Variable Account (per Article XIII)
(4) Adjustment for Additional/Renewal Premium
(5) Modified Coinsurance Reserve Adjustment (per Article IX)
(6) Premium Tax Reimbursement
(7) Total Amount Due Reinsured = (1) + (2) + (3) + (4) + (5) + (6)
C. Balance During the Period = A(6) - B(7)
If positive, the balance is due to be paid by the Reinsured.
If negative, the balance is due to be paid by the Reinsurer.
The above information shall be provided by the Reinsured on an aggregate basis.
The individual policy data shall be available to the Reinsurer on a computer
tape or diskette upon request.
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SCHEDULE D
COMMISSION AND EXPENSE ALLOWANCES
1. Expense Allowances. The Reinsurer will grant the Reinsured the
following expense allowances on the portion of the business reinsured:
Policy Issue Expense
0.40% of reinsurance premiums paid on the effective date of
the policy
90% of the Quota Share Percentage of $165
90% of the Quota Share Percentage of additional $165, if the
policy is issued on a joint life basis
0.005% of premium for incorrect investment allocations
Total
Maintenance Expense (First and Renewal Years)
0.215% of variable funds annually, payable monthly
90% of the Quota Share Percentage of $40.00 per year, payable
monthly
Total
Sales and Marketing Develop Expense (% of Premium)
0.145% of variable funds payable monthly in arrears
Additional 0.12% of variable funds payable monthly in arrears,
if the policy is issued on a joint life basis
Total
2. Commission Allowances. The Reinsurer will grant the Reinsured
commission allowances, on the reinsured business following the
schedule below:
8.5% of reinsurance premiums
0.03% of variable funds payable annually
Total
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SCHEDULE E
QUARTERLY BUSINESS MANAGEMENT REPORT
A. Informational Reports
1. Actual to Expected Mortality Report
2. Persistency Report
3. Production Report - Distribution of Premiums by Issue
Age (initial and renewal)
Distribution of Face Amount by Issue
Age Distribution of Average Premium
by Issue Age
4. Reserve Report showing the statutory reserves, account values
and cash surrender values
5. Policy Loads Report showing the mortality and expense risk
charges and the administration charges, and other charges
deducted from the contract values.
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SCHEDULE F
ANNUAL REPORT
The annual report shall provide the following information:
A. Exhibits 1 and 8 from the NAIC-prescribed annual statement
B. Page 6, "Analysis of Increase in Reserve" from the
NAIC-prescribed annual statement.
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SCHEDULE G
INTEREST CREDIT ON MODIFIED COINSURANCE RESERVE
The amount of the interest credit payable by the Reinsured to the Reinsurer
will be determined according to the schedule below:
A. Account Value as of the beginning of the month _________
B. Increases in Account Value during the month
(1) Initial Premiums _________
(2) Additional/Renewal Premium
(3) Transfers-in from the Fixed Account _________
(4) Total increase ((1) + (2) +(3)) _________
C. Decreases in Account Value during the month
(1) Deaths benefits paid
(2) Benefits Paid Upon Surrender
(3) Deferred Sales Charge Deductions
(4) Partial Withdrawals _________
(5) Transfers-out to the Fixed Account _________
(6) M&E Deductions _________
(7) Cost of Insurance Deductions _________
(8) Miscellaneous Charges _________
(9) Total Decrease (sum of (1) through (8)) _________
D. Additional Revenue Fee Reimbursement
(0.45% of variable funds, payable monthly) _________
E. Account Value as of the end of the month _________
F. Interest Credit on Modified Coinsurance Reserve as of the
end of the month (i.e., increase in policyholders' accounts
attributable to investment fund increases)
= E - A - B(4) + C(9) + D _________
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SCHEDULE H
MODIFIED COINSURANCE RESERVE ADJUSTMENT
The reserve adjustment will be calculated as (B) minus (A), where (A) and (B)
are defined as follows:
Increase in Mod-Co Reserve Payable by the Reinsurer to the Reinsured:
A. Account Value as of the beginning of the month _________
B. Account Value as of the end of the month _________
C. Increase in Mod-Co Reserve (B - A) _________
D. Statutory Reserve - End of Month _________
E. Account Payable to Reinsurer - End of Month (B - D) _________
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SCHEDULE I
TRANSFER ADJUSTMENTS
In the event that the amount of reinsurance with respect to a particular
contract under the reinsurance agreement increases due to a transfer of amounts
from the Fixed Account to the Separate Account, then the Company will pay to
the Reinsurer the aggregate of such amounts, less transfer adjustments equal to
(i) times (ii) where:
(i) equals the account value transferred into the Separate
Account, and
(ii) equals the transfer adjustment factors in the
table below.
In the event that the amount of reinsurance with respect to a particular
contract under the reinsurance agreement decreases due to a transfer of amounts
from the Separate Account to the Fixed Account, then the Reinsurer will pay to
the Company the aggregate of such amounts, less transfer adjustments equal to
(i) times (ii) where:
(i) equals the account value transferred into the Fixed Account,
and
(ii) equals the transfer adjustment factors in the table
below.
Policy Transfer Adjustment Factors Policy Transfer Adjustment Factors
Year Single Life Last Survivor Year Single Life Last Survivor
1 11..2% 11.6% 11 5.2% 5.0%
2 10..3% 10.7% 12 4.9% 4.6%
3 9.4% 9.6% 13 4.5% 4.2%
4 8.8% 8.9% 14 4.0% 3.8%
5 8.2% 8.1% 15 3.6% 3.3%
6 7.6% 7.4% 16 3.1% 2.9%
7 7.0% 6.8% 17 2.6% 2.3%
8 6.3% 6.1% 18 2.0% 2.0%
9 6.0% 5.7% 19 2.0% 2.0%
10 5.7% 5.4% 20 2.0% 2.0%