REINSURANCE
AGREEMENT
Between
SAVERS LIFE INSURANCE COMPANY
and
OXFORD LIFE INSURANCE COMPANY
REINSURANCE AGREEMENT
between
SAVERS LIFE INSURANCE COMPANY
of
WINSTON-SALEM, NORTH CAROLINA
hereinafter referred to as "SAVERS," and
OXFORD LIFE INSURANCE COMPANY
of
Phoenix, Arizona,
hereinafter referred to as "OXFORD"
A. REINSURANCE COVERAGE
1.The Medicare Supplement policies (referred to herein as the "Policies") in
force as of the Effective Date and when issued by SAVERS on the forms listed in
Schedule I shall be automatically reinsured with OXFORD, as of the Effective
Date, subject to the provisions of this Agreement.
2.The reinsurance shall cover the quota share of the Policies as specified in
Schedule II. All benefits provided by the Policies shall be reinsured
hereunder in the portion specified in Schedule II.
3.The liability of OXFORD shall begin simultaneously with that of SAVERS but in
no event prior to the Effective Date of this Agreement. Reinsurance with
respect to any Policy shall not be in force and binding unless the insurance
issued directly by SAVERS is in force and unless the issuance and delivery of
such insurance constituted the doing of business in a state of the United
States of America (including the District of Columbia) in which SAVERS was
properly licensed and authorized to do business. SAVERS shall give
notification of such reinsurance to OXFORD simultaneously with the monthly
periodic report prescribed in Schedule III.
4.The liability of OXFORD under this Agreement shall follow the same fortunes
of SAVERS under the Policies, but in no event will its liabilities exceed its
portion of the benefits payable under the Policies.
5.The reinsurance under this Agreement with respect to any Policy shall be
maintained in force without reduction so long as the liability of SAVERS under
such Policy reinsured hereunder remains in force without reduction, unless
reinsurance is terminated or reduced as provided herein.
B. POLICY ADMINISTRATION
SAVERS will be responsible for administration of the Policies renewed hereunder
and for all accounting for such Policies until the Date of Administrative
Transfer. OXFORD will begin administration of the Policies reinsured hereunder
and for the accounting for such Policies as of the Date of the Administrative
Transfer.
OXFORD and SAVERS will work together to establish a Date of Administrative
Transfer. In no event will this date be before January 1, 1999 or after
December 31, 1999.
2.POLICYHOLDER SERVICES
(a)SAVERS will be responsible for providing customary general services to
individuals under the Policies. The services provided will include the
following:
1.responding to inquiries with respect to the scope and amounts of coverage
provided under the Policies;
2.supplying claimants, Policyholders, agents and insured individuals with
appropriate instructions and forms for reporting claims and submitting relevant
information;
3.subject to timely notice by OXFORD to SAVERS, issuing timely notices with
respect to any changes in the coverage provided under the Policies, including
any endorsements thereto, and any changes in the amounts payable toward
premiums with respect to the coverage under the Policies;
4.processing and recording changes in the Policy and endorsements thereto,
including any necessary reissue thereof. Such changes may include, but are not
limited to, changes of ownership, beneficiary, options under the Policy and
endorsements, changes in address and changes in other data related to the
Policyholder and persons insured under the Policy and endorsements;
5.issuing timely notices of termination to the Policyholder;
6.providing instructions for completing forms in compliance with administrative
procedures.
(b)SAVERS will use forms and supplies, authorized by OXFORD, in the performance
of these Policyholder services.
(c)SAVERS will maintain, at its own expense, an accurate information system for
use in the administration of the Policies and in the production and supplying
of reports and data to OXFORD sufficient for OXFORD to complete all regulatory
statements.
(d)SAVERS will utilize the same conservation efforts for the Policies as used
by OXFORD for similar OXFORD policies, as such are adopted from time to time,
including conservation calls to agents and Policyholders. OXFORD will provide
financial information that can be used by SAVERS for conservation efforts.
(e)Perform such other Policyholder services as may be agreed upon in advance by
the parties to this Agreement in writing.
3.CLAIM ADMINISTRATION SERVICES
(a)SAVERS will perform the following services and functions in connection with
the administration of claims under the Policies:
(1)review and pay by SAVERS check all claims for a benefits up to $10,000 per
Policy, which SAVERS' review determines to be qualified for payment; but if
such review determines that any such claim is not qualified for payment, then
further review such claim jointly with OXFORD and secure OXFORD's approval
prior to any compromise or denial of such claim;
(2)review jointly with OXFORD any claim over $10,000, and secure OXFORD's
approval prior to the approval, compromise or denial of such claim;
(3)communicate with claimants with respect to the submission, approval and
payment, compromise or denial of claims made under the Policies and
endorsements administered under this Agreement;
(4)maintain full and complete claim records to the same extent as maintained by
SAVERS for its own claims;
(5)refer to OXFORD any legal process or communications from attorneys or
governmental agencies with respect to contested disposition of any claims. If
any such legal process or communications name SAVERS, SAVERS shall be entitled
to represent its own interests at its own costs;
(6)in the performance of these claims administration functions, SAVERS will
follow the Policy provisions and any rules, procedures, guidelines, and
instructions acceptable to OXFORD and agreed to by SAVERS and any other written
instructions issued by OXFORD and agreed to by SAVERS from time to time.
(b)SAVERS will use forms, checks and supplies reasonably acceptable to and
approved in advance by OXFORD, in the performance of these claims
administration functions.
(c)SAVERS agrees to maintain and preserve full and complete records necessary
for the processing of claims and claim payments in a manner satisfactory to
OXFORD and SAVERS, and all such records shall be and remain the property of
OXFORD.
(d)SAVERS will be responsible for providing providers with Internal Revenue
Service forms 1099.
4.SAVERS will be responsible for all Administrative Expenses, including non-
Policy expenses.
OXFORD is not responsible for:
(a)Usual investigative or administrative expenses, except as specified on
Schedule V attached hereto;
(b)Expenses incurred in connection with a dispute or contest arising out of or
in connection with conflicting claims of entitlement to Policy proceeds or
benefits which SAVERS admits are payable;
(c)Expenses, fees, settlements or judgments arising out of or in connection
with claims against SAVERS for punitive or exemplary damages;
(d)Expenses, fees, settlements or judgments arising out of or in connection
with claims made against SAVERS and based on alleged or actual bad faith,
failure to exercise good faith or tortuous conduct; and
(e)Claims, liabilities or penalties arising out of or related to the sales,
marketing or distribution of the Policies by SAVERS or its producers.
5.UNUSUAL EXPENSES
Any other expenses that in the customs and practices of the Medicare Supplement
insurance business are defined or treated as "unusual expenses", that have not
specifically been addressed in this Agreement, shall not be the liability of,
nor in any way be participated in by OXFORD.
C. PAYMENTS BY SAVERS
1.INITIAL CONSIDERATION
The Initial Consideration to be paid to OXFORD by SAVERS on the Settlement Date
is set forth in Schedule V, with interest at an annual effective rate of six
per cent (6%) compounded daily from the Effective Date to the Settlement Date
of this Agreement.
2.REINSURANCE PREMIUMS
SAVERS shall pay OXFORD reinsurance premiums, equal to OXFORD'S quota share, of
the gross collected contributions or premiums including premium loads and
policy fees, if any, SAVERS receives on or after the Effective Date on the
Policies reinsured hereunder.
D. PAYMENTS BY OXFORD
1.INITIAL CEDING ALLOWANCE
SAVERS shall receive on the Settlement Date:
(a)the proceeds of the Escrow Account dated August 14, 1998;
(b)80% of the Initial Ceding Allowance, with interest at an annual effective
rate of six per cent (6%) compounded daily from the Effective Date to the
Settlement Date of this Agreement.
OXFORD shall deposit 10% of the Initial Ceding Allowance, with interest at an
annual effective rate of six per cent (6%) compounded daily from the Effective
Date to the Settlement Date of this Agreement, into a Reserve Adequacy Escrow
Account.
Reserve Adequacy Escrow Account - Based on January 31, 1999 data, the Initial
Consideration will be adjusted to reflect the Revised Initial Consideration, an
estimate of what the Initial Consideration should have been as of June 30,
1998, pursuant to Schedule VIII attached hereto. The calculation of the
Revised Initial Consideration shall be presented by OXFORD to SAVERS by
February 19, 1999. Any excess of the Revised Initial Consideration over the
original Initial Consideration will be paid to OXFORD with a pro rata share of
interest from the Reserve Adequacy Escrow Account. The remainder of the
Reserve Adequacy Account will be disbursed to SAVERS by February 26, 1999.
2.BENEFITS
OXFORD shall pay SAVERS, OXFORD'S quota share of the benefits paid by SAVERS,
without deduction for reserves.
3.POLICY EXPENSE ALLOWANCES
OXFORD shall pay SAVERS the Monthly Reinsurance Allowances as defined in
Schedule V on OXFORD'S quota share of the Policies reinsured hereunder.
Neither party hereto shall be liable to the other for taxes, assessments or any
expenses, except as specified in Schedule V, resulting from reinsurance
hereunder.
E. SETTLEMENT OF REINSURANCE
1.AMOUNTS DUE SAVERS OR OXFORD
Except as otherwise specifically provided herein, all amounts due to be paid to
OXFORD or SAVERS shall be determined on a net basis as of the last day of the
calendar month to which such amount is attributable. All amounts shall be due
and accrued as of such date, but in no case prior to the Settlement Date. The
payment of such amounts shall be submitted in accordance with the provisions of
Schedule III. All settlements of account between OXFORD and SAVERS shall be
made in cash or its equivalent.
2.PAYMENT DATES
(a)Not later than fifteen (15) days after the end of each calendar month,
SAVERS shall submit a Monthly Periodic Report substantially in accord with
Schedule III. Any amounts indicated in the Periodic Report as due OXFORD shall
accompany such report.
(b)Not later than fifteen (15) days after the receipt of the Monthly Periodic
Report, any amounts indicated in the Periodic Report as due SAVERS shall be
paid by OXFORD.
(c)Not later than twenty (20) days after the end of each calendar year, SAVERS
shall submit to OXFORD an Annual Report substantially in accord with Schedule
IV.
(d)As specified in Schedule VI, interest shall be paid on amounts not paid when
due.
3.SECTION 1.848-2(G)(8) ELECTION
The parties elect to have this Agreement treated in accordance with Section
1.848-2(g)(8) of the Income Tax Regulations issued under Section 848 of the
Internal Revenue Code of 1986. Specific details of this election are set forth
in Schedule VII.
4.OFFSET
Any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or when incurred, in favor of or against SAVERS
or OXFORD with respect to this Agreement, and any other agreement or with
respect to any other claim of one party against the other are deemed mutual
debts or credits, as the case may be, and shall be set off, and only the
balance shall be allowed or paid.
F. TRUST AGREEMENT
OXFORD shall enter into the Trust Agreement with SAVERS. OXFORD agrees to
deposit and maintain assets, in trust, the market value of which shall at all
times be greater than or equal to the Trust Assets. The term "Trust Assets" is
defined as the amount of statutory liabilities, reserves, and claim reserves on
Policies reinsured.
OXFORD shall be entitled, pursuant to the Trust Agreement, to withdraw assets
from the trust provided that the market value of the assets which remain in
trust is greater than or equal to the Trust Assets. Assets shall be deposited
from time to time as needed to cover increases in the amount of Trust Assets.
The Trust Agreement shall be effective as of the Settlement Date of this
Agreement and shall continue in full force and effect for so long as any
liability of SAVERS remains under the policies and business reinsured pursuant
to this Agreement or until OXFORD exercises its right of assumption. Assets
deposited and maintained in trust pursuant to the Trust Agreement shall at all
times meet all applicable regulatory requirements. OXFORD shall provide a
listing within 30 days after the end of each calendar quarter showing the
market value of all assets held under the Trust Agreement.
Upon written notice of OXFORD, SAVERS may withdraw the assets held under the
Trust Agreement in an Event of Default. An Event of Default shall be deemed to
have occurred if:
OXFORD files a voluntary petition of bankruptcy or makes an assignment for the
benefit of creditors, or if OXFORD is declared insolvent or is placed in
rehabilitation, liquidation, or supervision by the Director of Insurance of the
insurance department of its state of domicile;
(b)OXFORD fails to maintain assets under the Trust Agreement as set forth in
Section F.1 hereof, and such shortfall of assets remains uncured for a period
of fifteen (15) days following notice of such shortfall by SAVERS to OXFORD;
(c)OXFORD fails to satisfy the minimum capital and surplus and other
requirements necessary for SAVERS to receive a full statutory statement offset
from its state of domicile on the business reinsured hereunder, and such
failure has not been remedied after a period of fifteen (15) days following
notice of such failure by SAVERS to OXFORD.
In the event assets held by OXFORD under the Trust Agreement are withdrawn by
SAVERS as provided above, SAVERS shall hold such assets and shall establish and
maintain a liability for such funds held pursuant to this Agreement until such
time as the Event of Default which gave rise to such withdrawal is cured by
OXFORD. Such assets shall be held for safe keeping by SAVERS on behalf of
OXFORD with respect to such assets provided that such investment directions are
consistent with this Agreement. The requirements set forth in Sections F.1 and
F.2 shall continue to apply during any such period.
G. RIGHT OF ASSUMPTION
OXFORD has the sole right to exercise an assumption of the Policies reinsured
hereunder and SAVERS cannot sell, assign or reinsure the Policies reinsured
herein, at any time without OXFORD's written permission. OXFORD will undertake
its best efforts to complete its assumption of the Policies on or prior to
December 31, 1999 and shall comply with all applicable statutes and regulations
pertaining to assumption of policies in the effected jurisdictions.
H. ERRORS
If either SAVERS or OXFORD shall fail to perform an obligation under this
Agreement and such failure shall be the result of an error on the part of
SAVERS or OXFORD, such error shall be corrected by restoring both SAVERS and
OXFORD to the positions they would have occupied had no such error occurred.
An "error" is a clerical mistake made inadvertently and excludes errors of
judgment and all other forms of error.
I. POLICY CHANGES
1.If SAVERS proposes to make a change in the terms or conditions of a Policy
reinsured hereunder, and such change is likely to affect the risk reinsured
hereunder in respect of such Policy, SAVERS shall notify OXFORD of such
proposed changes.
2.For purposes of this Agreement, any change made to a Policy reinsured
hereunder which has not been approved by OXFORD shall be deemed to be the
issuance of a new policy form by SAVERS and is not reinsured under this
Agreement unless both parties agree it should be included in the Agreement.
OXFORD shall inform SAVERS whether OXFORD will include such new policy form
under this Agreement or will terminate or modify the reinsurance hereunder in
respect of such policy.
SAVERS will not unreasonably withhold implementation of policy changes
requested by OXFORD.
J. REDUCTIONS
1.If a portion of the insurance issued by SAVERS on a Policy reinsured
hereunder is terminated, reinsurance on that Policy hereunder shall be reduced
proportionally.
2.If SAVERS should contest or compromise any claim or proceeding and the amount
of net liability thereby be reduced, or if at any time SAVERS should recover
monies from any third party in connection with or arising out of any claim
SAVERS by OXFORD, OXFORD's reinsurance liability shall be reduced or OXFORD
shall share in the recovery, as the case may be, in the proportion that the net
liability of OXFORD bore to the total net liability existing as of the
occurrence of the claim. As used in this section, "recovery" shall include,
but not be limited to settlements, judgments, awards and insurance payments of
any kind.
K. AUDIT OF RECORDS AND PROCEDURES
Upon a reasonable request, OXFORD and SAVERS each shall have the right to
audit, during normal business hours and at the office of the other, all records
and procedures relating to reinsurance under this Agreement. The expenses of
any such audit shall be borne by the party initiating the audit.
L. ARBITRATION
It is the intention of SAVERS and OXFORD that customs and practices of the
insurance and reinsurance industry shall be given full effect in the operation
and interpretation of this Agreement. The parties shall act in all things with
the highest good faith. If SAVERS and OXFORD cannot mutually resolve a dispute
which arises out of or relates to this Agreement, the dispute shall be decided
by arbitration. The arbitrators are empowered to decide all questions or
issues and shall be free to reach their decision from the standpoint of equity
and customary practices of the insurance and reinsurance industry rather than
from that of the strict law. The decision of the arbitrators shall be binding
and final.
To initiate arbitration, either SAVERS or OXFORD shall notify the other party
in writing of its desire to arbitrate, stating the nature of its dispute and
the remedy sought. The party to which the notice is sent shall respond to the
notification in writing within ten (10) days of its receipt.
The arbitration hearing shall be before a panel of three arbitrators, each of
whom must be a present officer of an insurance or reinsurance company. An
arbitrator may not be a present or former officer, attorney, or consultant of
SAVERS or OXFORD or either's affiliates.
SAVERS and OXFORD shall each name five (5) candidates to serve as an
arbitrator. SAVERS and OXFORD shall each choose one candidate from the other
party's list, and these two candidates shall serve as the first two
arbitrators. If one or more candidates so chosen shall decline to serve as an
arbitrator, the party which named such candidate shall add an additional
candidate to its list, and the other party shall again choose one candidate
from the list. This process shall continue until two arbitrators have been
chosen and have accepted. SAVERS and OXFORD shall each present their initial
lists of five (5) candidates by written notification to the other party within
twenty-five (25) days of the date of the mailing of the notification initiating
the arbitration. Any subsequent additions to the list which are required shall
be presented within ten (10) days of the date the naming party receives notice
that a candidate that has been chosen declines to serve.
The two arbitrators shall then select the third arbitrator from the eight (8)
candidates remaining on the lists of SAVERS and OXFORD within fourteen (14)
days of the acceptance of their position as arbitrators. If the two
arbitrators cannot agree on the choice of the third, then this choice shall be
referred back to SAVERS and OXFORD. SAVERS and OXFORD shall take turns
striking the name of one of the remaining candidates from the initial eight (8)
candidates until only one candidate remains. If the candidate so chosen shall
decline to serve as the third arbitrator, the candidate whose name was stricken
last shall be nominated as the third arbitrator. This process shall continue
until a candidate has been chosen and has accepted. This candidate shall serve
as the third arbitrator. The first turn at striking the name of a candidate
shall belong to the party that is responding to the other party's initiation of
the arbitration. Once chosen, the arbitrators are empowered to decide all
substantive and procedural issues by a majority of votes.
It is agreed that each of the three arbitrators should be impartial regarding
the dispute and should resolve the dispute on the basis described herein.
Therefore, at no time will either SAVERS or OXFORD contact or otherwise
communicate with any person who is to be or has been designated as a candidate
to serve as an arbitrator concerning the dispute, except upon the basis of
jointly drafted communications provided by both SAVERS and OXFORD to inform
those candidates actually chosen as arbitrators of the nature and the facts of
the dispute. Likewise, any written or oral arguments provided to the
arbitrators concerning the dispute shall be coordinated with the other party
and shall be provided simultaneously to the other party or shall take place in
the presence of the other party. Further, at no time shall any arbitrator be
informed that the arbitrator has been named or chosen by one party or the
other.
The arbitration hearing shall be held on the date fixed by the arbitrators in
Phoenix, Arizona. In no event shall this date be later than six (6) months
after the appointment of the third arbitrator. As soon as possible, the
arbitrators shall establish prearbitration procedures as warranted by the facts
and issues of the particular case. In establishing such procedures the
arbitrators shall make provision for reasonable prehearing examinations of
officers, employees or agents of the parties and for the production of relevant
documentation.
At least ten (10) days prior to the arbitration hearing, each party shall
provide the other party and the arbitrators with a detailed statement of the
facts and arguments it will present at the arbitration hearing. The
arbitrators may consider any relevant evidence, they shall give the evidence
such weight as they deem it entitled to after consideration of any objections
raised concerning it. The party initiating the arbitration shall have the
burden of proving its case by a preponderance of the evidence. Each party
shall be entitled to call any officers, employees or agents of the other party
and such other party shall do everything reasonable to ensure the attendance
and cooperation of any such witnesses. Each party may examine any witness who
testifies at the arbitration hearing. Within twenty (20) days after the end of
the arbitration hearing, the arbitrators shall issue a written decision that
sets forth their findings and any award to be paid as a result of the
arbitration, except that the arbitrators may not award punitive or exemplary
damages. In their decision, the arbitrators shall also apportion the costs of
arbitration, which shall include, but not be limited to, their own fees and
expenses.
M. INSOLVENCY
1.The portion of any risk or obligation assumed by OXFORD, when such portion is
ascertained, shall be payable on demand of SAVERS at the same time as SAVERS
shall pay its net retained portion of such risk or obligation, with reasonable
provision for verification before payment, and the reinsurance shall be payable
by OXFORD, on the basis of the liability of SAVERS under the Policies reinsured
hereunder without diminution because of the insolvency of SAVERS. In the event
of insolvency and the appointment of a conservator, liquidator or statutory
successor of SAVERS, such portion shall be payable to such conservator,
liquidator or statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of claims allowed against SAVERS by
any court of competent jurisdiction or by any conservator, liquidator or
statutory successor of SAVERS having authority to allow such claims, without
diminution because of such insolvency or because such conservator, liquidator
or statutory successor has failed to pay all or a portion of any claims.
2.SAVERS' conservator, liquidator, or statutory successor shall give OXFORD
written notice of the pendency of a claim against SAVERS indicating the Policy
reinsured, within a reasonable time after such claim is filed. OXFORD may
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense or defenses which OXFORD may deem available to SAVERS,
or its conservator, liquidator or statutory successor.
3.Any expense incurred by OXFORD pursuant to paragraph 2, above, shall be
payable subject to court approval out of the estate of SAVERS as part of the
expense of conservation or liquidation to the extent of OXFORD'S quota share of
the benefit which may accrue to SAVERS in conservation or liquidation, solely
as a result of the defense undertaken by OXFORD. Where two or more reinsurers
are participating in the same claim and a majority in interest elect to
interpose defense to such claim, the expense shall be apportioned in accordance
with the terms of this Agreement as though such expense had been incurred by
SAVERS.
▇.▇▇ is expressly agreed that nothing in this Agreement does, or is intended
to, make or require OXFORD to drop down or in any way have any responsibility
for the obligations of SAVERS on the Policies in the event of insolvency of
SAVERS.
N. PARTIES TO AGREEMENT
This is an agreement for indemnity reinsurance solely between SAVERS and
OXFORD. The acceptance of reinsurance hereunder shall not create any right or
legal relation whatever between OXFORD and the insured or the beneficiary under
any Policy reinsured hereunder, and SAVERS shall be and remain solely liable to
such insured or beneficiary under any such Policy.
O. ASSIGNMENT
None of the rights and obligations under this Agreement may be assigned by
either SAVERS or OXFORD except as indicated in Section G. Notwithstanding any
provision of this Agreement, SAVERS may merge into its affiliate, Standard Life
Insurance Company of Indiana, ("Standard Life") and Standard Life shall assume
the rights and obligations under this Agreement.
P. EFFECTIVE DATE
The Effective Date of this Agreement is 12:01 A.M. July 1, 1998.
Q. DURATION OF AGREEMENT
1.Except as otherwise provided herein, this Agreement shall be unlimited in
duration.
2.This Agreement shall automatically terminate at the end of any calendar month
if all Policies reinsured hereunder have terminated and the amount of reinsured
reserves on the Policies reinsured hereunder is zero dollars ($0).
3.SAVERS shall have the right to terminate this Agreement and recapture all
reinsurance hereunder in the event OXFORD becomes subject to any insolvency or
similar proceeding. In the event SAVERS exercises this right to terminate and
recapture reinsurance, SAVERS shall reimburse OXFORD for any unamortized excess
first-year expense allowances (i.e. commissions, fees, etc). For purposes of
this Agreement first year expense allowances will be amortized at a rate of
1/180 per month.
4.The termination of this Agreement, or of the reinsurance in effect under this
Agreement, shall not extend to or affect any of the rights or obligations of
SAVERS and OXFORD applicable to any period prior to the effective date of such
termination. In the event that, subsequent to the termination of this
Agreement, an adjustment is made necessary with respect to any accounting
hereunder, a supplementary accounting shall take place. Any amount owed to
either party by reason of such supplementary accounting shall be paid promptly
upon the completion thereof.
R. AGREEMENT
This Agreement and all schedules attached hereto are the entire agreement
between SAVERS and OXFORD with respect to the Policies reinsured hereunder; it
supersedes any prior oral or written agreements with respect to the Policies
reinsured hereunder, and there are no understandings between SAVERS and OXFORD
with respect to the Policies reinsured hereunder other than as expressed in
this Agreement. Any change or modification to this Agreement and any schedule
attached hereto shall be null and void unless made by amendment to the
Agreement signed by both SAVERS and OXFORD.
S. REPRESENTATION AND WARRANTIES OF SAVERS
1.SAVERS is an insurance corporation presently organized, existing and in good
standing under the laws of the State of North Carolina, and currently holds a
valid, unrevoked Certificate of Authority from that state and each and every
state in which it is currently conducting sales of insurance Policies.
2.Each Policy, Policy amendment, rider, endorsement and form relating to the
Policies reinsured hereunder, has been properly approved by the appropriate
regulatory authorities, and those which have been issued to Policyholders have
been validly issued in compliance with all applicable laws and regulations.
3.SAVERS agrees to refrain, and to cause its employees and affiliates (as
identified in the organization charts of the annual statement of SAVERS as
filed in its state of domicile) and its affiliates' employees to refrain, from
utilizing information regarding the Policies reinsured hereunder for the
purposes of causing or attempting to cause any Policyholder to replace any
Policy with any other policy of insurance of SAVERS or any affiliate of SAVERS
or any other company which provides substantially similar benefits to the
Policies, unless specifically agreed to in writing by OXFORD. SAVERS agrees to
use all reasonable efforts to conserve, maintain and assure the persistency of
the business reinsured and agrees to refrain from taking any action which might
tend to have a materially adverse effect on the persistency of the business
reinsured hereunder, without the prior written consent of OXFORD. SAVERS
agrees not to engage in a replacement program that includes the Policies
hereunder.
4.SAVERS will assign the marketing agreements and the solicitation rights to
the policyholders to OXFORD. SAVERS agrees to work with and assist OXFORD in
securing a continuation of the marketing of new Medicare Supplement business
including continuation of the conservation program of the in force business, by
referral of leads to Celtic until the OXFORD Medicare Supplement product is
available, and thereafter to OXFORD.
SAVERS and its affiliates agree not to write Medicare Supplement business
except for the Policies covered in this Agreement for a period of five years
from the Settlement Date in the states of North Carolina, South Carolina,
Virginia and Florida.
5.Neither the making nor consummation of this Agreement will violate any
provision of SAVERS' Articles of Incorporation, Bylaws, any agreement to which
it is a party, or any law or order of any county, state or other regulatory
authority which it is subject.
6.The execution, delivery and performance of this Agreement has been duly
authorized by the Executive Committee, its Board of Directors, State of North
Carolina or the individual or group whose approval is required for SAVERS to be
authorized to enter into this Agreement.
7.SAVERS warrants that it is not aware of any dispute or claims arising out of
or related to the sales, marketing or distribution of the Policies in this
state or any similar Policies in other states insured by SAVERS. The warranty
includes regulatory claims or investigations.
8.SAVERS warrants that all of its agents, employees and producers who are
involved in the sales, marketing or distribution of the Policies have acquired
all necessary licenses and authorizations.
T. REPRESENTATION AND WARRANTIES OF OXFORD
1.OXFORD is a corporation presently organized, existing and in good standing
under the laws of the State of Arizona, and currently holds a valid, unrevoked
Certificate of Authority from that state and each and every state in which it
is currently conducting sales of insurance Policies.
2.Neither the making nor consummation of this Agreement will violate any
provision of OXFORD'S Articles of Incorporation, Bylaws, any agreement to which
it is a party, or any law or order of any county, state or other regulatory
authority which it is subject.
3.The execution, delivery and performance of this Agreement has been duly
authorized by the Executive Committee of its Board of Directors or by its Board
of Directors.
U. MISCELLANEOUS
1.This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, and the counterparts shall constitute but one and
the same instrument, which shall be sufficiently evidenced by any one
counterpart.
2.The headings of the Sections have been inserted for convenience of reference
only, and shall not be deemed to constitute a part of this Agreement.
3.This Agreement shall be construed and enforced, and any dispute relating to
or arising out of this Agreement, will be subject to the laws of the State of
Arizona, without regard to conflict of law principles.
4.Unless otherwise provided in or pursuant to this Agreement, all notices and
other communications hereunder shall be in writing, telex or telecopy, or if
oral, shall be promptly confirmed in writing, and shall be hand-delivered,
telexed, or telecopied to the following addresses:
If to OXFORD:Oxford Life Insurance Company
Attn: President
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to SAVERS:Savers Life Insurance Company
c/o Standard Management Corporation
Attn: President
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone:(▇▇▇) ▇▇▇-▇▇▇▇
FAX:(▇▇▇) ▇▇▇-▇▇▇▇
Each party may from time to time designate a different address for notices,
directions, requests, demands, acknowledgments and other communications by
giving written notice of such change to the other parties.
V. EXECUTION
IN WITNESS WHEREOF the said
SAVERS LIFE INSURANCE COMPANY
of
Winston-Salem, North Carolina
and the said
OXFORD LIFE INSURANCE COMPANY
of
Phoenix, Arizona
have by their respective officers executed this agreement in duplicate on the
date shown below.
SAVERS LIFE INSURANCE COMPANY
Signed at: Indianapolis, Indiana
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President Title: President
Date: 9/23/98 Date: 9/23/98
OXFORD LIFE INSURANCE COMPANY
Signed at Phoenix, Arizona
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President Title: President
Date: 9/24/98 Date: 9/24/98
SCHEDULE I
POLICIES SUBJECT TO REINSURANCE
All policies issued on the Policy forms listed below on or after the Effective
Date of the Agreement are subject to reinsurance as set forth in the Agreement.
POLICY FORM NUMBER
▇▇▇-▇▇▇▇
▇▇▇-▇▇▇▇
MS1-9001
▇▇▇-▇▇▇▇
▇▇-▇▇▇▇-▇
▇▇-▇▇▇▇-▇
▇▇-▇▇▇▇-▇
MS-9201-D
▇▇-▇▇▇▇-▇
▇▇-▇▇▇▇-▇
MS-9201-G
SCHEDULE II
AMOUNT OF REINSURANCE
The amount of reinsurance under this Agreement shall be OXFORD'S quota share
percentage shown below of the liability of SAVERS on all Policies in the forms
listed in Schedule I. All benefits provided by such Policies shall be
reinsured.
Quota Share % = 100%
SCHEDULE III
MONTHLY PERIODIC REPORT
A.Due OXFORD (1)+(2):
(1)Premiums Collected (multiplied by the quota share percentage)
(2)Increase in Remittances and Items Not Allocated (multiplied by the quota
share percentage)
B.Due SAVERS (1)+(2)+(3):
(1)Allowances and Expense Reimbursements (Per Schedule V)
(a)Monthly Administration Expense Allowance
(b)Premium Tax Reimbursement
(c)Commission Incurred Reimbursement
(2)Benefits Ceded (multiplied by the quota share percentage)
(3)Decrease in Remittances and Items Not Allocated (multiplied by the quota
share percentage)
C.Informational Reports
(1)Reserve Report (STAT, TAX, GAAP)
(2)Required Interest Computed on Tax Basis Reserves
(3)Persistency Report
(4)Loss Reports
(5)Information Which May Be Necessary for OXFORD to Monitor the Experience of
the Policies reinsured hereunder
SCHEDULE IV
ANNUAL REPORT
The annual report shall provide the following information:
(a)Exhibits 1, 9 and 11 and Schedules H & O from the NAIC-prescribed Annual
Statement
(b)"Analysis of Increase in Reserves" from the NAIC-prescribed annual statement
An actuarial opinion that the reported reserves on the Policies reinsured
hereunder equal or exceed those required by the valuation law as interpreted by
the State of North Carolina
Computer files of liability data sufficient to enable OXFORD to perform cash
flow testing on the Policies reinsured hereunder
Information which may be necessary for OXFORD to monitor the experience of the
Policies reinsured hereunder
(f)Medicare Supplement Insurance Experience Exhibit
(g)Any other reports as required by the NAIC or other regulatory authorities
SCHEDULE V
INITIAL CONSIDERATION, ALLOWANCES AND EXPENSE REIMBURSEMENTS
INITIAL CONSIDERATION
The term "Initial Consideration" shall be defined as the statutory liabilities,
reserves and claim reserves as required to be reported to the state of domicile
of SAVERS on the same basis as computed as of the Effective Date and reported
under Exhibits 1, 9 and 11 of the annual statutory statement, as computed at
the end of each calendar quarter for the Policies using amounts as of June 30,
1998.
Advance Premium 416,029
Unearned Premium 3,703,020
Additional Contract Reserves 848,350
Claim Reserves 0
In Course of Settlement 0
Incurred But Not Reported 5,950,000
Less Due Premiums 206,206
TOTAL 10,711,193
INITIAL CEDING ALLOWANCE - $4.2 million
MONTHLY REINSURANCE ALLOWANCES
The following allowances, subject to the quota share percentage described in
Schedule II, shall be:
(1)A monthly administrative expense allowance equal to 7% times the collected
premium from the Effective Date to the Date of Administrative Transfer.
(2)Premium taxes incurred on premiums written after the Effective Date on the
Policies reinsured.
(3)Commission incurred on premiums written after the Effective Date on the
Policies reinsured.
SCHEDULE VI
INTEREST RATE ON LATE PAYMENTS
Interest on delayed payments will be computed according to the following
formula:
The annual effective rate, compounded daily assuming a 360 day year, equal to
90% of the prime interest rate established by Bank of America, or its
successor, on the last day of the calendar month for which settlement is being
made.
SCHEDULE VII
SECTION 1.848-2(G)(8) ELECTION
SAVERS and OXFORD agree to the following pursuant to Section 1.848-2(g)(8) of
the Income Tax Regulations issued under Section 848 of the Internal Revenue
Code of 1986 (hereinafter "Section 1.848-2(g)(8).")
▇.▇▇ used below, the term "party" will refer to SAVERS or OXFORD as
appropriate.
▇.▇▇ used below, the phrases "net positive consideration", "capitalize
specified Policy acquisition expenses", "general deduction limitation", and
"net consideration" shall have the meaning used in Section 1.848-2(g)(8).
3.The party with net positive consideration for this Agreement for any taxable
year beginning with the taxable year prescribed in paragraph 5 below will
capitalize specified Policy acquisition expenses with respect to this Agreement
without regard to the general deductions limitation.
4.The parties agree to exchange information pertaining to the amount of net
consideration under this Agreement to ensure consistency. This will be
accomplished as follows:
(a)SAVERS shall submit to OXFORD by the thirty-first (31st) day of March in
each year its calculation of the net consideration for the preceding calendar
year. Such calculation will be accompanied by a statement signed by an officer
of SAVERS stating that SAVERS will report such net consideration in its tax
return for the preceding calendar year.
(b)SAVERS shall submit to OXFORD by the thirtieth (30th) day of June in each
year its calculation of the net consideration for the preceding fiscal year
ended March thirty-first (31st) Such calculation will be accompanied by a
statement signed by an officer of SAVERS stating that SAVERS will report such
net consideration in its tax return.
(c)OXFORD may contest such calculation by providing an alternative calculation
to SAVERS in writing within thirty (30) days of OXFORD'S receipt of SAVERS'S
calculation If OXFORD does not so notify SAVERS, OXFORD will report the net
consideration as determined by SAVERS in OXFORD'S tax return.
(d)If OXFORD contests SAVERS' calculation of the net consideration, the parties
will act in good faith to reach an agreement as to the current amount within
thirty (30) days of the date OXFORD submits its alternative calculation. If
SAVERS and OXFORD reach agreement on an amount of net consideration, each party
shall report such amount in their respective tax returns for the preceding
calendar year or fiscal year, as appropriate.
5.This election shall be effective for 1998 and all subsequent taxable years
for which the Reinsurance Agreement remains in effect.
SCHEDULE VIII
METHODOLOGY OF REVISED INITIAL CONSIDERATION
1.ADDITIONAL CONTRACT RESERVES
Reserves are calculated using the claims costs from the original product
filing. A new set of factors is created for each issue year thereafter using a
7% inflation adjustment.
Two years full preliminary term is used.
Net premiums equal 65% of gross premiums.
The Additional Contract Reserve is the excess, if any, of the active life
reserve plus the net unearned premium reserve over the gross unearned premium
reserve.
CLAIM RESERVE, ICOS & IBNR
The claims paid through January 31, 1999 for Policies reinsured with incurred
dates prior to the Effective Date, plus the claims liability for Policies
reinsured based on data available as of January 31, 1999 for claims incurred
prior to the Effective Date.
ADVANCE, UNEARNED AND PREMIUM DUE
These amounts are calculated in accordance with NAIC statutory
requirements.
TABLE OF CONTENTS
PAGE
REINSURANCE COVERAGE 1
POLICY ADMINISTRATION 2
PAYMENTS BY SAVERS 5
PAYMENTS BY OXFORD 6
SETTLEMENT OF REINSURANCE 7
TRUST AGREEMENT 8
RIGHT OF ASSIGNMENT 10
ERRORS 10
POLICY CHANGES 10
REDUCTIONS 11
AUDIT OF RECORDS AND PROCEDURES 11
ARBITRATION 11
INSOLVENCY 14
PARTIES TO AGREEMENT 15
ASSIGNMENT 15
EFFECTIVE DATE 15
DURATION OF AGREEMENT 16
AGREEMENT 16
REPRESENTATION AND WARRANTIES OF SAVERS 17
REPRESENTATION AND WARRANTIES OF OXFORD 19
MISCELLANEOUS 19
EXECUTION 21
SCHEDULE I
POLICIES SUBJECT TO REINSURANCE 22
SCHEDULE II
AMOUNT OF REINSURANCE 23
SCHEDULE III
MONTHLY PERIODIC REPORT 24
SCHEDULE IV
ANNUAL REPORT 25
SCHEDULE V
INITIAL CONSIDERATION, ALLOWANCES
AND EXPENSE REIMBURSEMENTS 26
SCHEDULE VI
INTEREST RATE ON LATE PAYMENTS 27
SCHEDULE VII
SECTION 1.848-2(g)(8) ELECTION 28
SCHEDULE VIII
METHODOLOGY OF REVISED INITIAL CONSIDERATION 30
