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EXHIBIT 10b
COINSURANCE LIFE, ANNUITY AND DISABILITY INCOME
REINSURANCE AGREEMENT
Entered into between
EMPLOYERS REASSURANCE CORPORATION
of
Overland Park, Kansas
(hereinafter called the CORPORATION)
and
OHIO LIFE INSURANCE COMPANY
of
Hamilton, Ohio
(hereinafter called the CEDANT)
EFFECTIVE DATE: January 1, 1995
TRANSFER DATE: October 2, 1995
In consideration of the mutual covenants hereinafter contained, the parties
hereto do hereby agree as follows:
ARTICLE I
APPLICATION OF AGREEMENT. This agreement applies to loss under the policies
described in the following Schedule (hereinafter called policies or policy) paid
by the CEDANT on or after the effective date of this agreement.
Policy Form Schedule
All individual life, annuity and disability income insurance contracts
of the CEDANT in force on the effective date of this agreement and
issued by the CEDANT to become effective on or after the effective date
of this agreement, including all riders originally written therewith or
later added thereto.
All supplementary insurance contracts of the CEDANT in force on the
effective date of this agreement and issued by the CEDANT to become
effective on or after the effective date of this agreement.
All structured settlements of the CEDANT in force on the effective date
of this agreement and written by the CEDANT to become effective on or
after the effective date and prior to the transfer date of this
agreement.
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Policy Form Schedule (continued)
All individual accident and health insurance contracts issued by Ohio
Casualty Insurance Company before the effective date of this agreement
and reinsured by CEDANT, including all riders originally written
therewith.
All group life insurance of the CEDANT (including plans issued to its
agents and to its affiliates) in force on the effective date of this
agreement and issued by the CEDANT to become effective on or after the
effective date of this agreement.
All group accident and health insurance of the CEDANT (including
accidental death and dismemberment plan issued to its affiliate) in
force on the effective date of this agreement and issued by the CEDANT
to become effective on or after the effective date of this agreement.
All group life insurance policies reinsured by the CEDANT prior to the
effective date of this agreement and certificates issued thereunder to
become effective on or after the effective date of this agreement.
All group accident and health insurance policies (including long term
care) reinsured by the CEDANT prior to the effective date of this
agreement and certificates issued thereunder to become effective on or
after the effective date of this agreement.
The word "policies" includes conversions, replacements, exchanges and
reinstatements thereof.
The term "other reinsurance" means those contracts entered into by the CEDANT
with insurance companies other than the CORPORATION which reinsure the policies.
ARTICLE II
REINSURANCE AND MISCELLANEOUS OBLIGATIONS. The CORPORATION is obligated to the
CEDANT for 100% of loss to which this agreement applies.
The CORPORATION is also obligated to the CEDANT for 100% of each of the
following three items: (1) experience refund payments made by the CEDANT under
the policies; (2) premium and other deposit fund payments made by the CEDANT to
the insureds under the policies; (3) supplementary contract payments made by the
CEDANT to the insureds under the policies. For purposes of this paragraph, the
word "insureds" includes policy owners and policy beneficiaries. The three
preceding items are hereinafter referred to as miscellaneous obligation
payments.
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ARTICLE III
DEFINITION OF LOSS. The word "loss" means only those amounts which are actually
paid by the CEDANT for benefits afforded under the policies, in settlement of
claims for benefits under the policies, or in satisfaction of judgments for
benefits under the policies, provided that, in the event of insolvency of the
CEDANT, "loss" shall mean the amount of policy benefits which the CEDANT has
incurred or is liable for, and payment by the CORPORATION shall be made to the
liquidator, receiver or other statutory successor of the CEDANT in accordance
with the provisions of the Insolvency Clause attached to and made a part of this
agreement. The word "loss" includes cash values paid by the CEDANT because of
policy surrenders. The word "loss" includes policy settlement options which have
been selected even though they remain unpaid by the CEDANT. The word "loss"
excludes:
(a) claim expenses;
(b) salaries paid to employees of the CEDANT;
(c) any amount paid by the CEDANT for punitive, exemplary or compensatory
damages arising out of the conduct of the CEDANT in the investigation,
trial or settlement of any claim or failure to pay or delay in payment
of any benefits under any policy; provided that, this subparagraph (c)
shall not apply if the CORPORATION has, in advance of any such conduct
by the CEDANT, counseled with the CEDANT and concurred in the CEDANT'S
course of conduct;
(d) any statutory penalty imposed upon the CEDANT because of any unfair
trade practice or any unfair claim practice;
(e) claims under litigation as of the effective date of this agreement,
including, but not limited to, those which are listed by attachment to
this agreement;
(f) claims with respect to which litigation is overly threatened prior to
the effective date of this agreement, including, but not limited to,
those which are listed by attachment to this agreement;
(g) amounts collected under other reinsurance.
ARTICLE IV
POLICY LOANS. The CORPORATION shall be obligated to the CEDANT for the policy
loan increases. The CEDANT shall be obligated to the CORPORATION for the policy
loan decreases.
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ARTICLE V
PRODUCER COMMISSION. The CORPORATION is obligated to the CEDANT for the
commissions paid by the CEDANT to its producers of the policies.
ARTICLE VI
INITIAL CONSIDERATION. The CEDANT is obligated to the CORPORATION for an initial
consideration equal to 100% of the life and accident and health policy reserves
as of the effective date, plus miscellaneous reserves and liabilities as of the
effective date, less policy loans as of the effective date, and less
miscellaneous assets as of the effective date ($337,602,844). The obligation
calculated in accordance with the preceding sentence shall be segregated as
follows:
1. Assets pertaining to a $140,000,000 part thereof shall be deposited on
August 3, 1995 into a Custodial Account between CEDANT, the CORPORATION
and Great Southern Life Insurance Company; and
2. Assets pertaining to the remaining part thereof as of the effective date
shall be adjusted by the proportionate increase or decrease between July
28, 1995 an the last trading day preceding the transfer date in the
value of the 6.5% U.S. Treasury Bond due May 15, 2005, as quoted by
Solomon Brothers at 5:00 p.m. New York time.
The CORPORATION is obligated to the CEDANT for a ceding commission of
$48,200,000 minus the ceding commission adjustment.
The ceding commission shall also be increased or decreased by the decrease or
increase in subparagraph 1 above from July 28, 1995 to the transfer date and by
the decrease or increase in subparagraph 2 above from July 28, 1995 to the
transfer date.
The ceding commission adjustment is defined as the CEDANT'S statutory earnings
before taxes from the effective date of this agreement to the transfer date of
this agreement as taken from line 29 of the Analysis of Operations by Lines of
Business for the CEDANT's 1995 third quarter end statutory statement and as
computed by the CEDANT on a basis consistent with practices used by the CEDANT
as of December 31, 1994:
(a) less investment income assumed at the rate of 7.5% per annum for the
period from the effective date to the transfer date on the outstanding
balance of capital and surplus plus the Asset Valuation Reserve and the
Interest Maintenance Reserve all as of the effective date;
(b) plus 15% of general expenses incurred (direct and allocated), premium
taxes, licenses and fees incurred from the effective date to the
transfer date;
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(c) plus the increase or minus the decrease in the CEDANT's life and
accident and health policy reserves and miscellaneous reserves and
liabilities from the effective date to the transfer date;
(d) plus the decrease or minus the increase in the policy loans from the
effective date to the transfer date;
(e) plus the decrease or minus the increase in the miscellaneous assets from
the effective date to the transfer date;
(f) plus the losses incurred or minus the gains received between the
effective date and the transfer date on claims identified in
subparagraphs (e) and (f) of the definition of loss.
"Miscellaneous reserves and liabilities" means the sum of the following:
(1) reserves for supplementary contracts;
(2) policy and contract claims;
(3) liability for premium and other deposit funds;
(4) provision for experience rating refunds;
(5) due or accrued agents commissions;
(6) commissions and expense allowances on reinsurance described in the
Policy Form Schedule contained in Article I;
(7) premiums due or accrued on other reinsurance;
(8) advance premiums.
"Miscellaneous assets" means the sum of the following:
(1) gross due and deferred life premiums;
(2) gross due accident and health premiums;
(3) amounts recoverable under other reinsurance.
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ARTICLE VII
REINSURANCE PREMIUM. The CEDANT is obligated to the CORPORATION for reinsurance
premiums after the effective date of this agreement, in accordance with Article
VI. At the end of each calendar quarter after the transfer date, the CEDANT
shall owe the CORPORATION a reinsurance premium equal to the policies' insurance
premium collected by the CEDANT during the quarter, less premiums on other
reinsurance after reduction for allowances thereon, plus considerations for
supplementary contracts and other deposit funds collected by the CEDANT. The
CORPORATION shall owe the CEDANT an expense allowance equal to the following
percentages of this agreement's reinsurance premium after the transfer date:
Life reinsurance premium: 20%
Disability reinsurance premium: 20%
Annuity reinsurance premium: 6.5%
The CORPORATION shall owe the CEDANT an expense allowance in an amount equal to
.0625% of the assets set forth in the 1995 Escrow Agreement between the
CORPORATION and Great Southern Life Insurance Company, as of the end of each
calendar quarter after the transfer date.
ARTICLE VIII
REPORTING, ACCOUNTING AND SETTLEMENTS. On the transfer date, the CEDANT will pay
the CORPORATION the estimated initial consideration calculated per the first
sentence of the first paragraph of Article VI, minus the ceding commission, as
adjusted by the third paragraph of Article VI and minus the ceding commission
adjustment. Within 30 days after the transfer date, the CEDANT shall pay the
CORPORATION the amount by which the actual net amount due under Article VI
exceeds the previously paid estimate (or the CORPORATION shall return the amount
by which the estimate exceeded the actual). Within 25 days after the end of each
calendar quarter after the transfer date, the CEDANT or its administrator shall
furnish to the CORPORATION a report (in a form satisfactory to the CORPORATION)
of the following information for the quarter:
A. The following amounts due the CORPORATION:
1. Reinsurance premium;
2. Policy loan decrease;
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B. The following amounts due the CEDANT:
1. Producer commission paid;
2. Reinsurance losses paid;
3. Expense allowance;
4. Policy loan increase;
5. Miscellaneous obligation payments;
C. Balance due CORPORATION or CEDANT.
If the amount shown in subparagraph C is due the CORPORATION, the CEDANT'S
payment thereof shall accompany the report. If the amount shown in subparagraph
C is due the CEDANT, the CORPORATION'S payment thereof shall be made to the
CEDANT within 25 days after the CORPORATION receives the CEDANT'S report.
The CEDANT agrees to pay to the CORPORATION simple interest on the estimated net
initial consideration per Article VI not received by the CORPORATION on the
transfer date and on the difference between estimated and actual from the
transfer date until the difference is received by the CORPORATION (or the
CORPORATION will pay the CEDANT interest on the part of the estimated which is
returned to the CEDANT). The CORPORATION and the CEDANT each agree to pay the
other simple interest on all amounts due and not remitted within 45 days after
the end of any calendar quarter.
The interest rate for the late quarterly payments and for funds remitted
subsequent to the transfer date is the three month LIBOR rate at noon indicated
by Solomon Brothers, New York, on the last day of the quarter involved or as of
September 30, 1995 with respect to transfer date payments.
The report for the third calendar quarter of each calendar year shall include
the information pertaining to the policies which is necessary for preparing the
CORPORATION'S Annual Statement. The report for the fourth calendar quarter of
each calendar year shall include the CEDANT'S cash flow analysis for the
policies which is sufficient for the CORPORATION'S use in preparing its
actuarial opinion.
ARTICLE IX
CLAIMS. The CEDANT shall itself investigate, pay, settle or defend all claims
arising under the policies or contract with another company (satisfactory to the
CORPORATION) to do so. Other than with respect to damages to which this
agreement may apply by virtue of subparagraph (c) of the definition of loss, the
CORPORATION will abide by the claim handling decisions of the CEDANT or of its
administrator.
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ARTICLE X
INSPECTION OF RECORDS. The CORPORATION may inspect the records of the CEDANT
pertaining to the policies.
ARTICLE XI
ADMINISTRATION. The CORPORATION has no responsibility or authority to administer
the insurance afforded by the policies. The CORPORATION has the right to review
and require changes to the administration agreement to be entered into by the
CEDANT with respect to the policies.
ARTICLE XII
INSOLVENCY CLAUSE. The Insolvency Clause attached to this agreement is hereby
made a part of this agreement.
ARTICLE XIII
ASSIGNMENTS AND CHANGES OF INTEREST. No assignment or change of either party's
interest hereunder, whether voluntary of involuntary and whether by merger or
reinsurance of its entire business with another company or otherwise, shall be
binding upon the other party, provided that this article does not apply to:
(1) the CORPORATION'S assignment of its interests and liabilities as the
reinsurer to Great Southern Life Insurance Company, but only with
respect to those policies on which said company is not named as the
direct insurer;
(2) the CEDANT's assignment of its rights and duties as the ceding company
to Great Southern Life Insurance Company, but only with respect to those
policies on which said company is named as the direct insurer.
ARTICLE XIV
OFFSET. The CEDANT or the CORPORATION may offset any balance, whether on account
of premiums, commissions, loss or claim expenses due from one party to the other
under this agreement or under any other reinsurance agreement heretofore or
hereafter entered into between the CEDANT and the CORPORATION, whether acting as
ceding company or assuming reinsurer.
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ARTICLE XV
ENTIRE AGREEMENT. This agreement shall constitute the entire agreement between
the parties with respect to the business being reinsured hereunder. There are no
other 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.
ARTICLE XVI
RECAPTURE. The CORPORATION has no obligation to allow the CEDANT to recapture
the policies.
ARTICLE XVII
TERMINATION. Either party shall have the right to terminate this agreement with
respect to new business by giving to the other party not less than 90 days
advance notice, by registered mail or express delivery service, stating the
first day of any calendar quarter which shall be the termination date.
This agreement does not apply to policies issued to become effective on or after
the termination date.
If the CORPORATION does not permit recapture, the reinsurance afforded by this
agreement applicable to each policy in force on the termination date shall
continue to apply thereto until the policy naturally expires.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed
in duplicate.
EMPLOYERS REASSURANCE
OHIO LIFE INSURANCE COMPANY CORPORATION
By:___________________________________ By:___________________________________
Title:________________________________ Title:________________________________
Date:_________________________________ Date:_________________________________
By:___________________________________ By:___________________________________
Title:________________________________ Title:________________________________
Date:_________________________________ Date:_________________________________
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INSOLVENCY CLAUSE
The ceding insurer and the reinsurer agree that, in the event of the
insolvency of the ceding insurer, as to all reinsurance made, ceded, renewed or
otherwise becoming effective after the effective date of this agreement, the
reinsurance shall be payable by the reinsurer on the basis of the amount of
liability of the ceding insurer under the contract or contracts reinsured,
without diminution because of the insolvency of the ceding insurer; furthermore,
that such amount shall be paid directly to the ceding insurer or its liquidator,
receiver or other statutory successor.
It is understood and agreed, however, that the obligations of the ceding
company as set forth in the reinsurance contract, including, among others, the
duty to investigate, settle and defend all claims arising under policies with
respect to which reinsurance is afforded by this agreement, shall remain
unimpaired and unaffected by the insolvency of the ceding insurer and shall be
assumed by the liquidator, receiver or statutory successor of the ceding insurer
in the liquidation or receivership proceeding and that such liquidator, receiver
or statutory successor shall give written notice to the reinsurer of the
pendency of a claim against the ceding insurer 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 the reinsurer may investigate such claim and
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which it may deem available to the ceding
insurer, its liquidator, receiver or statutory successor. The expense thus
incurred by the reinsurer shall be chargeable, subject to court approval,
against the insolvent ceding insurer as a part of the expense of liquidation to
the extent of a proportionate share of the benefit which may accrue to the
ceding insurer solely as the result of the defense undertaken or asserted by the
reinsurer.
Where two or more reinsurers are involved in the same claim and a
majority in interest elect to interpose a defense to such claim, the expense
shall be apportioned in accordance with the terms of this reinsurance agreement
as though such expense had been incurred by the ceding insurer.
Nothing hereinabove set forth in this insolvency clause shall in anywise
change the relationship or status of the parties hereto, to wit, that of ceding
insurer and reinsurer, nor enlarge the obligations of either party to each
other, except as specifically hereinabove provided, to wit, to pay the statutory
successor on the basis of the amount of liability of the ceding insurer under
the contract or contracts reinsured, rather than on the basis of the actual
amount of loss (dividends) paid by the liquidator, receiver or statutory
successor to allowed claimants, nor shall anything in this insolvency clause in
any manner create any obligations or establish any rights against the reinsurer
in favor of any third parties or any persons not parties to this reinsurance
contract.
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