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EXHIBIT 10.1
AMENDMENT No 3 TO REINSURANCE AGREEMENT
BETWEEN
AEGON USA COMPANIES AND UICI COMPANIES
EFFECTIVE DATE APRIL 1, 1996
Reference is hereby made to that certain Reinsurance Agreement
(effective January 1, 1995) (the "UGA Reinsurance Agreement"), among National
Manager's Life Insurance Company, United Group Reinsurance Inc., U.S. Managers
Life Insurance Company, Financial Services Reinsurance Company, and MEGA Life
and Health Insurance Company (hereinafter collectively referred to as "UICI
Companies") and PFL Life Insurance Company, Life Investors Insurance Company of
America, Bankers United Life Assurance Company, and Monumental Life Insurance
Company (hereinafter referred to as "AEGON Companies").
WHEREAS, the AEGON Companies entered into that certain Asset Purchase
Agreement dated as of April 1, 1996 with United Insurance Company, Inc.
("UICI") (the "Purchase Agreement") whereby UICI purchased certain insurance
operations owned by the AEGON Companies and located at the Insurance Center,
North Richland Hills, Texas (the "Insurance Center"), the business of which was
primarily produced by United Group Association ("UGA"), an independent
insurance agency and such business was reinsured by the UICI Companies pursuant
to the UGA Reinsurance Agreement and administered by employees of the AEGON
Companies at the Insurance Center (the "UGA Business");
WHEREAS, pursuant to the Purchase Agreement, Mega Life and Health
Insurance Company ("Mega") and the AEGON Companies have entered into the Mega
Service Agreement pursuant to which Mega is authorized to service the UGA
Business until such time as the AEGON Companies' liabilities and obligations
with respect to the UGA Business have expired, been satisfied or been
transferred;
WHEREAS, pursuant to the Purchase Agreement, the UICI Companies and
the AEGON Companies have agreed to certain modifications of this UGA
Reinsurance Agreement;
NOW THEREFORE, for good and valuable consideration and the mutual
promises herein, the parties agree as follows:
1. The last paragraph of Paragraph 1 of the UGA Reinsurance
Agreement is modified to read as follows:
"1. Where applicable in states which have limits on
reinsurance ceded rates for what they term as "Small Group Health
Insurance" the applicable Reinsurance Ceded Percentage as defined in
"Exhibit A" shall not exceed the maximum ceded rate in applicable
states for health insurance policies referred to as "Small Employer
Health Insurance." AEGON Companies will increase the ceded percentage
rate on other health insurance policies and certificates included in
the reinsurance pool "Exhibit A" to achieve an overall Reinsurance
Ceded Percentage defined in "Exhibit A". In the event state laws or
regulations are amended to render impossible the reinsurance
arrangements contemplated herein, the parties shall enter into a
financially equivalent settlement to the extent legally permissible."
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2. Paragraph 3 of the UGA Reinsurance Agreement is hereby
modified to read as follows:
"3. "Exhibit B" Annual Settlements. As referenced above
in Section 1. and "Exhibit A", the Reinsurance Percentage increases in
each calendar year from 1995 through 1997. During the first quarter
of each accounting period subsequent to a Reinsurance Percentage
change, the settlement sheet shown as "Exhibit B" will be completed by
each AEGON Company. In completing the settlement sheet, "Net Assets
Transferred" means with respect to each AEGON Company, the amount of
additional assets to be transferred from the AEGON Company to the UICI
Companies to reflect this increase in the Reinsurance Ceded
Percentage. Each AEGON Company will transfer assets equal to the "Net
Assets Transferred" multiplied by the "Quota Share Percentage" defined
in "Exhibit C" to each UICI Company."
3. The first sentence of Paragraph 4 of the UGA Reinsurance
Agreement is hereby modified to read as follows:
"4. Reinsurance Cash Flow Payable. The UICI Companies on
a monthly basis will prepare a worksheet showing the monthly cash
activity within each AEGON Company bank account in regard to the
Reinsurance Pool."
4. Paragraph 6 of the UGA Reinsurance Agreement dated January 1,
1995, is hereby modified to read as follows:
"6. Claims. Pursuant to the Mega Service Agreement, the
AEGON Companies have delegated to Mega certain authorization to
adjust, settle and pay claims on Policies reinsured hereunder. Each
AEGON Company will accept the decision of Mega on payment of a claim
under policies reinsured hereunder.
The balance of paragraph 6 is deleted in its entirety.
4. Paragraph 7 of the UGA Reinsurance Agreement shall be modified
to read as follows:
"7. Inspection. UICI Companies' Designated
Representative or the AEGON Companies' Designated Representative shall
have the right at any time to inspect all records concerning any
policy reinsured hereunder or concerning any claim made against a
policy reinsured hereunder. Upon request made by the UICI Companies'
Designated Representative or the AEGON Companies' Designated
Representative, the Insurance Center employees shall make all such
records available to the requesting party during normal business hours
at the administrative offices in North Richland Hills, Texas. Upon
request made by UICI Companies' Designated Representative or the AEGON
Companies' Designated Representative, the Insurance Center employees
shall deliver to the appropriate Designated Representative, copies of
all papers connected with claims made on any policy reinsured
hereunder."
5. The first paragraph of Paragraph 9 of the UGA Reinsurance
Agreement is hereby modified to read as follows:
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"9. Term and Cancellation. This Agreement shall continue
in effect until all of the AEGON Companies' liabilities and obligations
relating to the Policies reinsured hereunder have expired, been satisfied or
been assumed through novation by UICI."
6. Paragraph 13 of the UGA Reinsurance Agreement is hereby
modified to read as follows:
"13. Administration. The inforce hereunder shall be
administered by Mega Life and Health Insurance Company ("Mega")
pursuant to a service agreement dated April 1, 1996 among the parties
hereto (the "Mega Service Agreement") Administration shall include all
functions necessary to service and administer all insurance policies,
including but not limited to premium billing and the payment of policy
benefits. The services to be provided hereunder shall more fully be
set forth in the Mega Service Agreement entered into on April 1, 1996
between the parties hereto. Such Mega Service Agreement sets forth
the basis of the administration fees to be paid by the AEGON Companies
to Mega for its services hereunder."
7. Exhibit A of the UGA Reinsurance Agreement is hereby modified
to add that business commonly referred to by the parties as Division 10 and 12
business and is further modified to include Divisions 7,8,9 and 14 (the
"Unreinsured Business) as of January 1, 2001. Exhibit A is further modified to
reflect the following Reinsurance Ceded Percentage:
Calendar Year PFL or Affiliates Share UICI Companies Share
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01/01/96 to 12/31/96 42.5% 57.5%
01/01/97 to 12/31/97 40.0% 60.0%
01/01/98 to 12/31/98 40.0% 60.0%
01/01/99 to 12/31/99 40.0% 60.0%
01/01/00 to 12/31/00 40.0% 60.0%
01/01/01 and thereafter 0.0% 100.0%
Mega agrees to automatically become the 100% reinsurer of the policies
reinsured under this Agreement if the policies reinsured hereunder are not
replaced or novated by policies issued by duly licensed UICI insurance
subsidiaries by January 1, 2001.
8. Exhibit D, dated July 1, 1995, of the UGA Reinsurance
Agreement is hereby modified to read as set forth in Schedule 1 of the Mega
Service Agreement.
All terms and conditions of the UGA Reinsurance Agreement not
otherwise amended herein shall remain in full force and effect.
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IN WITNESS HEREOF, the parties have caused this amendment to the UGA
Reinsurance Agreement to be executed by their respective officers this 1st day
of April, 1996.
AEGON COMPANIES UICI COMPANIES
PFL Life Insurance Company National Managers Life
Insurance Company
/s/ Rex B. Eno /s/ Richard J. Estell
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Executive Vice President President
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Life Investors Insurance United Group Reinsurance Inc.
Company of America
/s/ Rex B. Eno /s/ Robert B. Vlach
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Executive Vice President Secretary
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Bankers United Life Assurance Company U.S. Managers Life Insurance Company
/s/ Rex B. Eno /s/ Richard J. Estell
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Executive Vice President Director
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Monumental Life Insurance Company Financial Services Reinsurance Company
/s/ Rex B. Eno /s/ Richard J. Estell
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Executive Vice President Director
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MEGA Life Insurance Company
/s/ Richard J. Estell
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President
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