Exhibit 1-A(8)(c)
MODIFIED COINSURANCE
AGREEMENT
BETWEEN
AMERICAN FRANKLIN LIFE INSURANCE COMPANY
OF
SPRINGFIELD, ILLINOIS
AND
INTEGRITY LIFE INSURANCE COMPANY
OF
PHOENIX, ARIZONA
2/17/89
TABLE OF CONTENTS
SECTION ITEM PAGE
------- ---- ----
A Reinsurance Coverage 1
B Placing Reinsurance in Effect 2
C Payments by Reinsured 3
D Payments by Reinsurer 5
E Terms of Reinsurance 8
F Unusual Expenses and Adjustments 10
G Policy Changes 11
H Oversights 12
I Reductions 12
J Inspection of Records 12
K Arbitration 13
L Insolvency 14
M Parties to Agreement 15
N Effective Date 16
O Payments upon Termination of Agreement 16
P Duration of Agreement 17
Q Execution 19
SCHEDULE
--------
I Policies Subject to Reinsurance 20
II Amount of Reinsurance 21
III Periodic Report 22
IV Annual Reports 23
V Administration Charges 24
VI Underwriting Expenses 25
REINSURANCE AGREEMENT
between
AMERICAN FRANKLIN LIFE INSURANCE COMPANY
of
Springfield, Illinois,
hereinafter referred to as "REINSURED," and
INTEGRITY LIFE INSURANCE COMPANY
of
Phoenix, Arizona
hereinafter referred to as the "REINSURER"
A. REINSURANCE COVERAGE
1. The insurance policies issued by the REINSURED as listed in Schedule I
shall be reinsured with the REINSURER on a modified coinsurance basis.
2. The reinsurance shall cover the portion of the risk under the policies as
specified in Schedule II.
3. The liability of the REINSURER shall begin simultaneously with that of the
REINSURED, but in no event prior to the effective date of this Agreement.
Reinsurance with respect to any policy shall not be in force unless
issuance and delivery of the policy constituted the doing of business in a
state of the United States of America, the District of Columbia, or a
country in which the REINSURED was properly licensed.
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4. Reinsurance hereunder shall be on a calendar year basis, as follows:
(a) with respect to a policy on any of the forms listed in Schedule I
(including policy forms hereafter added by mutual agreement)
which is issued by the REINSURED on or after the effective date
of this Agreement, the reinsurance with respect to such policy
shall cover the period commencing with the effective date of the
policy and ending at midnight at the end of the last day of the
calendar year in which such policy was issued;
(b) all reinsurance hereunder shall automatically renew for each
succeeding calendar year annually as of midnight at the beginning
of January 1.
4. The reinsurance under this Agreement with respect to any policy shall be
maintained in force without reduction so long as the liability of the
REINSURED under such policy reinsured hereunder remains in force without
reduction, unless reinsurance is terminated or reduced as provided herein.
B. PLACING REINSURANCE IN EFFECT
1. Reinsurance with respect to policies issued after the effective date of
this Agreement shall become effective simultaneously with the liability of
the REINSURED, provided, however, that the REINSURED shall give
notification of such reinsurance to the REINSURER simultaneously with the
quarterly reconciliation prescribed in Section E, paragraph 5.
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C. PAYMENTS BY REINSURED
1. REINSURANCE PREMIUMS
The REINSURED shall pay the REINSURER each day, as reinsurance premiums,
the gross contributions or premiums the REINSURED receives after the
effective date of this Agreement with respect to the portions of policies
reinsured hereunder.
2. DISBURSEMENTS AND DEDUCTIONS FROM POLICYHOLDER ACCOUNT VALUES
The REINSURED shall pay the REINSURER each day with respect to the
portions of policies reinsured hereunder the following amounts:
(a) Monthly deductions for the costs of insurance and rider and
benefit charges.
(b) Any monthly administrative charges, including such charges made
only for the first policy year.
(c) Charges instituted at policyholders request, e.g., for partial
withdrawals, increases and decreases in face amount and transfers
among investment options.
(d) Surrender charges made upon surrender or decreases in face amount.
(e) Any deductions waived under a waiver of monthly deduction benefit.
(f) Any other amounts deducted from policyholder account values.
3. REDUCTION IN POLICYHOLDER ACCOUNT VALUES FOR BENEFITS PAID
The REINSURED shall pay the REINSURER each day with respect to the
portions of policies reinsured hereunder the amounts of policyholder cash
values paid as surrender benefits and partial withdrawal benefits and the
amounts of account values included in death benefits.
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4. CHARGES FOR MORTALITY AND EXPENSE RISKS
The REINSURED shall pay the REINSURER each day with respect to the
portions of policies reinsured hereunder, the charge made against the
Separate Accounts of the REINSURED for mortality and expense risks under
the policies.
5. MISCELLANEOUS GAINS AND LOSSES
The REINSURED shall pay the REINSURER each day with respect to the
portions of the policies reinsured hereunder, the net gains (or
"breakage") caused by delays in moving funds to and from the Separate
Account of the REINSURED. If such amounts are net losses, then they shall
be paid by the REINSURER to the REINSURED.
6. MISCELLANEOUS INCOME
The REINSURED shall pay the REINSURER each day with respect to the
portions of the policies reinsured hereunder, the amounts of any
miscellaneous income not included elsewhere in this Agreement.
7. GROSS INVESTMENT INCOME AND NET REALIZED AND UNREALIZED CAPITAL GAINS AND
LOSSES
Gross investment income and net capital gains and losses, determined in
accordance with the REINSURED's investment year method (or such other
method as agreed upon by the REINSURED and REINSURER) used to allocate
such income and capital gains and losses derived from the assets of the
REINSURED held in relation to the reserves established in and other funds
held in the general account of the REINSURED on the portions of the
policies reinsured hereunder, shall be paid at the end of each year by the
REINSURED to the REINSURER, as a part of the consideration for the
reinsurance hereunder. This payment shall be reduced by the amounts of
interest credited to the
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policyholder account values or any items in the nature of interest paid
under the policies on the portions of the policies reinsured hereunder.
8. RESERVE ADJUSTMENT ALLOWANCE
The REINSURED shall provide an allowance to the REINSURER at the end of
each accounting period to reflect the change in surrender charges, if any,
used to calculate reserves on the portions of the policies reinsured
hereunder. Such allowance shall be ceded to the REINSURER, but will
continue to be settled on a cash basis.
9. MODIFICATION OF RESERVE BASIS
If the REINSURED shall modify the basis used in computing its reserve
liability with respect to the portion of any policy reinsured hereunder
after the effective date of this Agreement, reinsurance amounts paid to
the REINSURER under this section in the year of the modification shall be
adjusted by adding any increase or deducting any decrease in reserves due
to such modification.
D. PAYMENTS BY REINSURER
1. DISTRIBUTION ALLOWANCE
The REINSURER shall pay the REINSURED each day a distribution allowance
equal to 5% of the reinsurance premiums plus 85% of such premiums which
are for the first policy year and which are not greater than the amounts
defined as commissionable "target" premiums by the REINSURED with regard
to the portions of the policies reinsured hereunder.
The REINSURER shall pay the REINSURED each day an additional
distribution allowance equal to any commissions paid by the REINSURED
on increases in face amount, with respect to the portions of policies
reinsured hereunder.
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2. CONTRIBUTIONS TO POLICYHOLDER ACCOUNT VALUES
The REINSURER shall pay the REINSURED each day the portion of
contributions or premiums which after deductions are deposited to the
Policy Accounts with respect to the portions of policies reinsured
hereunder.
3. BENEFITS
The REINSURER shall pay the REINSURED each day with respect to the
portions of the policies reinsured hereunder:
(a) the gross amounts of all death benefits paid by the REINSURED
(i.e., without deduction for reserves);
(b) the cash surrender values and withdrawal benefits paid by the
REINSURED
(c) interest paid on claims;
(d) monthly deductions waived by the REINSURED under a waiver of
monthly deduction benefit.
Benefits that may be paid in more than one sum or under another form of
payment (i.e. a settlement option), shall, for the purposes of the
reinsurance agreement, be deemed to be paid in one sum.
4. ADMINISTRATIVE CHARGES
The REINSURER shall pay the REINSURED issue, underwriting and
administrative charges with respect to the portion of policies reinsured
hereunder in the amounts defined in Schedule V for each reinsured policy.
5. EXPENSE ALLOWANCE
The REINSURER shall pay the REINSURED, as an expense allowance a
reimbursement for certain fees for service paid by the REINSURED under the
Servicing Agreement with respect to the portions of policies reinsured
hereunder in the amounts defined in to Schedule VI for each reinsured
policy.
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6. INVESTMENT EXPENSES AND FEDERAL INCOME TAXES
The REINSURER shall be obligated for and shall pay to the REINSURED the
investment expenses incurred in each accounting period in respect of the
gross investment income payable to the REINSURER in accordance with Section
C, paragraph 7. The REINSURER shall be obligated for and shall pay federal
income taxes imposed on the REINSURER.
7. STATE PREMIUM TAXES
When the REINSURER is not required to pay state premium taxes upon the
reinsurance premiums received from the REINSURED, the REINSURER shall pay
the REINSURED an a quarterly basis any such taxes the REINSURED may be
required to pay with respect to that part of the contributions or premiums
received under the REINSURED'S original policies which are paid to the
REINSURER as reinsurance premiums.
8. MISCELLANEOUS DISBURSEMENTS
The REINSURER shall pay the REINSURED each day with respect to the
portions of the policies reinsured hereunder the amounts of any
miscellaneous disbursements not included elsewhere in this agreement.
9. ANNUAL RESERVE ADJUSTMENTS - WAIVER
(a) Annual reserve adjustments for disabled life reserves under waiver
of monthly deduction riders shall be computed by deducting (i) the
total amount of such reserves on the last day of the preceding
accounting period an the portions of the policies reinsured
hereunder from (ii) the total amount of such reserves on the last
day of the current accounting period on the portions of the
policies reinsured hereunder and then in force under this
Agreement. Such reserves shall be calculated on the same basis
used by the REINSURED in computing its reserve
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liability. With respect, however, to the accounting period during
which the effective date of this Agreement occurs, the reference
in "(i)" above, to "the last day of the preceding accounting
period" shall refer to the effective date of this Agreement. With
respect, however, to the accounting period during which the
termination of this Agreement occurs, the reference in (ii) above,
to "the last day of the current accounting period" shall refer to
the day immediately prior to the terminal accounting date.
(b) For any accounting period in which "(ii)" exceeds "(i)" in (a),
above, the REINSURER shall pay the REINSURED such excess. For any
accounting period in which "(i)" exceeds "(ii)", the REINSURED
shall pay the REINSURER such excess.
10. MISCELLANEOUS LIABILITIES AND ACCRUAL ITEMS
The REINSURER shall be responsible for miscellaneous reserves and accrual
items on the portions of the policies reinsured hereunder; e.g. unearned
premium reserves, incurred but unreported claims, etc., incurred by the
REINSURED at the end of each accounting period. Such liabilities shall be
ceded to the REINSURER, but such ceded amounts will continue to be settled
on a cash basis.
E. TERMS OF REINSURANCE
1. OWNERSHIP OF ASSETS
The REINSURED shall retain ownership of all of the assets held in relation
to the reserves on the portions of the policies reinsured hereunder, and
the REINSURER shall have no legal, equitable, or security interest in such
assets.
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2. CAPITAL GAINS AND LOSSES
The REINSURER shall not participate in capital gains and losses of the
REINSURED except as specified in Section C, paragraph 7. No part of the
gains and losses of the REINSURED from, or considered as from, sales and
exchanges of capital assets shall be treated as gains and losses from
sales and exchanges of capital assets of the REINSURER.
3. AMOUNTS DUE REINSURER OR REINSURED
Except as otherwise specifically provided herein, all amounts, other than
those paid daily, due to be paid to either the REINSURER or the REINSURED
shall be determined or estimated on a net basis as of the last day of the
month preceding the end of each accounting period and shall be due and
payable as of such date. If such amounts cannot be determined at such
later date on an exact basis, such payments may be paid on an estimated
basis and any final adjustments are to be made within 3 months after the
end of such accounting period.
4. ACCOUNTING PERIOD
The accounting period for this Agreement shall be a calendar year, except
that the first accounting period hereunder shall run from the effective
date of this Agreement through December 31 of the calendar year in which
the effective date of this Agreement falls. The REINSURED and the
REINSURER, however, shall each reconcile the reinsurance transactions
hereunder as prescribed in Schedule III at the end of each calendar
quarter.
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5. REPORTS
(a) Annual Statement information as prescribed in Schedule IV,
paragraph A shall be provided by the REINSURED to the REINSURER
not later than 30 working days after the end of each accounting
period.
(b) Periodic Reports as prescribed in Schedule III shall be provided
by the REINSURED to the REINSURER not later than 30 working days
after the end of each calendar quarter.
F. UNUSUAL EXPENSES AND ADJUSTMENTS
1. Any unusual expenses incurred by the REINSURED in defending or
investigating a claim for policy liability or rescinding a policy
reinsured hereunder shall be participated in by the REINSURER in the same
proportion as its reinsurance bears to the total insurance under such
policy.
2. For purposes of this Agreement (but not as a limitation on the REINSURER'S
liability under paragraph 1), it is agreed that penalties, attorney's
fees, and interest imposed automatically by statute against the REINSURED
and arising solely out of a judgment rendered against the REINSURED in a
suit for policy benefits reinsured hereunder shall be considered unusual
expenses.
3. In no event, however, shall the following categories of expenses or
liabilities be considered for purposes of this Agreement as "unusual
expenses":
(a) routine investigative or administrative expenses;
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(b) expenses incurred in connection with a dispute or contest arising
out of conflicting claims of entitlement to policy proceeds or
benefits which the REINSURED admits are payable;
(c) expenses, fees, settlements, or judgments arising out of or in
connection with claims against the REINSURED for punitive or
exemplary damages; and
(d) expenses, fees, settlements, or judgments arising out of or in
connection with claims made against the REINSURED and based on
alleged or actual bad faith, failure to exercise good faith, or
tortuous conduct.
4. In the event that the amount of liability provided by a policy or
policies reinsured hereunder is increased or reduced because of a
misstatement of age or sex, the reinsurance liability of the REINSURER
shall increase or reduce in the proportion that the reinsurance
liability of the REINSURER bore to the sum of the retained liability of
the REINSURED and the liability of other reinsurers immediately prior to
the discovery of such misstatement of age or sex.
G. POLICY CHANGES
1. If a change is made in the terms and conditions of a policy issued by the
REINSURED which affects the risk reinsured hereunder in respect of such
policy, and which is evidenced by the issuance of a new policy form, the
REINSURED shall notify the REINSURER promptly of such change.
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2. For purposes of this Agreement, any such change shall be deemed to be the
issuance of a new policy form by the REINSURED. The REINSURER shall inform
the REINSURED whether the REINSURER will include such new policy form
under this Agreement, or will terminate or modify the reinsurance
hereunder in respect of such policy.
H. OVERSIGHTS
It is understood and agreed that, if failure to comply with any terms of this
Agreement is shown to be unintentional and the result of misunderstanding or
oversight on the part of either the REINSURED or the REINSURER, both the
REINSURED and the REINSURER shall be restored to the positions they would have
occupied had no such misunderstanding or oversight occurred.
I. REDUCTIONS
If a portion of the insurance issued by the REINSURED on a life reinsured
hereunder is terminated, reinsurance on that life hereunder shall be reduced.
J. INSPECTION OF RECORDS
The REINSURER and the REINSURED each shall have the right at any reasonable time
to inspect, at the office of the other, all books and documents relating to the
reinsurance under this Agreement.
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K. ARBITRATION
1. It is the intention of the parties that customs and usages of the business
of reinsurance shall be given full effect in the interpretation of this
Agreement. The parties shall act in all things with the highest good
faith. A dispute or difference between the parties with respect to the
operation or interpretation of this Agreement on which an amicable
understanding cannot be reached 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.
2. The court of arbitration shall be held in the city where the Home Office
of the REINSURER is located and shall consist of three arbitrators who
must be officers of life insurance companies other than the parties to
this Agreement or their affiliates or subsidiaries. The REINSURED shall
appoint one arbitrator and the REINSURER the second. These two arbitrators
shall then select the third before arbitration begins. Should one of the
parties decline to appoint an arbitrator or should the two arbitrators be
unable to agree upon the choice of a third, such appointment shall be left
to the president of the American Council of Life Insurance or its
successor organization.
3. The arbitrators shall decide by a majority of votes, and from their
written decision there can be no appeal. The cost of arbitration,
including the fees of the arbitrators, shall be borne by the losing party
unless the arbitrators decide otherwise.
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L. INSOLVENCY
1. In the event of the insolvency of the REINSURED, all reinsurance shall be
payable directly to the liquidator, receiver, or statutory successor of
the REINSURED, without diminution because of the insolvency of the
REINSURED.
2. In the event of insolvency of the REINSURED, the liquidator, receiver, or
statutory successor shall give the REINSURER written notice of the
pendency of a claim on a policy reinsured within a reasonable time after
such claim is filed in the insolvency proceeding. During the pendency of
any such claim, the REINSURER may investigate such claim and interpose in
the name of the REINSURED (its liquidator, receiver, or statutory
successor), but at its own expense, in the proceeding where such claim is
to be adjudicated any defense or defenses which the REINSURER may deem
available to the REINSURED or its liquidator, receiver, or statutory
successor.
3. The expense thus incurred by the REINSURER shall be chargeable, subject to
court approval, against the REINSURED as part of the expense of
liquidation to the extent of a proportionate share of the benefit which
may accrue to the REINSURED solely as a result of the defense undertaken
by the REINSURER. Where two or more reinsurers are participating in the
same claim and a majority in interest elect to interpose a defense or
defenses to any such claim, the expense shall be apportioned in accordance
with the terms of the reinsurance agreement as though such expenses had
been incurred by the REINSURED.
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4. In the event that (a) the REINSURER shall execute and file articles of
dissolution as provided in Arizona Revised Statutes Section 10-092, or (b)
the Arizona Insurance Department shall be directed to rehabilitate or
liquidate the REINSURER pursuant to an order of rehabilitation or
liquidation issued as provided in Arizona Revised Section 20-620 and 621,
reinsurance hereunder shall, at the option of the REINSURED, be terminated
as of a date concurrent with or subsequent to the filing of the articles
of dissolution or issuance of the order of liquidation, as selected by the
Reinsured. Written notification of such termination and date shall be
given by the REINSURED to the REINSURER. Termination under this paragraph
shall be subject to the provisions of the Arizona Insurance Code. The
scope of this paragraph and the option of the REINSURED to terminate
pursuant hereto shall not be limited or otherwise affected by any other
provision of this Agreement.
M. PARTIES TO AGREEMENT
This is an Agreement for indemnity reinsurance solely between the REINSURED and
the REINSURER. The acceptance of reinsurance hereunder shall not create any
right or legal relation whatever between the REINSURER and the insured or the
beneficiary under any policy reinsured hereunder, and the REINSURED shall be and
remain solely liable to such insured or beneficiary under any such policy.
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N. EFFECTIVE DATE
The effective date of this Agreement is April 1, 1989.
O. PAYMENTS UPON TERMINATION OF AGREEMENT
1. In the event that this Agreement is terminated pursuant to any provision
hereof, a terminal accounting and settlement shall take place.
2. The terminal accounting date for the termination shall be the effective
date of termination pursuant to any notice of termination given under this
Agreement or such other date as shall be mutually agreed to in writing.
3. The terminal accounting period shall be the period commencing on January 1
of the calendar year in which the termination is effective and ending on
the terminal accounting date.
4. The terminal accounting and settlement shall consist of a terminal reserve
adjustment by the REINSURED, as described in paragraph 5 below; and an
amount paid by the REINSURER, as described in paragraph 6 below.
5. The REINSURED shall pay to the REINSURER a terminal reserve adjustment in
an amount equal to the reserves established in the general account of the
REINSURED on the day immediately prior to the terminal accounting date on
the portions of the policies reinsured hereunder.
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6. The REINSURER shall pay to the REINSURER an amount equal to the reserves
established in the general account of the REINSURED on the day immediately
prior to the terminal accounting date on the portions of the policies
reinsured hereunder.
P. DURATION OF AGREEMENT
1. Except as otherwise provided herein, this Agreement shall be unlimited in
duration.
2. This Agreement may be terminated at any time by either party giving
two-years written notice of termination or by the REINSURED giving
one-year written notice accompanied by a payment of $500,000. In addition,
if the REINSURED terminates during the initial three years of this
Agreement, the Reinsured shall pay the Reinsurer $500,000 less $10 for
each policy reinsured on the effective date of the termination, but not
less than $0. The date of delivery of the notice to the other party's Home
Office, which delivery shall be made by a mail or express service that
uses a return receipt, shall be the day of notice.
3. During the one-year or two-year period, as the case may be, this Agreement
shall continue to operate in accordance with its terms.
4. The Reinsurer and the Reinsured shall remain liable after termination, in
accordance with the terms and conditions of this Agreement, with respect
to all reinsurance ceded to the Reinsurer prior to termination of this
Agreement.
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5. In the event that any amounts become payable upon termination in
accordance with paragraph 1 of this section and similar payments are
provided for in other agreements between the parties, the REINSURED and
the REINSURER agree that it is their intention that such termination fees
shall be payable only once. It is not the intention of the parties to
create multiple or offsetting penalties in the event that other related
agreements between the parties are terminated.
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Q. EXECUTION
IN WITNESS WHEREOF the said
AMERICAN FRANKLIN LIFE INSURANCE COMPANY OF Springfield, Illinois,
and the said
INTEGRITY LIFE INSURANCE COMPANY of Phoenix, Arizona,
have by their respective officers executed this Agreement in duplicate on the
dates shown below.
AMERICAN FRANKLIN LIFE INSURANCE
COMPANY
By: By:
---------------------------------- -----------------------------------
Title Senior Vice President, General Title Senior Vice President & Actuary
Counsel and Secretary
Date 3/10/89 Date 3/10/89
INTEGRITY LIFE INSURANCE COMPANY
By: By:
------------------------------ -----------------------------------
Title President Title Vice President & Actuary
Date 2/23/89 Date 2/23/89
1337y
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SCHEDULE I
POLICIES SUBJECT TO REINSURANCE
Policies on Policy Form T1755 sold by registered representatives of Franklin
Financial Services Corporation, are subject to reinsurance hereunder, except as
provided in Schedule II. Riders, by whomever sold, attached to such policies are
also subject to reinsurance hereunder.
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SCHEDULE II
AMOUNT OF REINSURANCE
The portion of the risk reinsured under this Agreement shall be 30% on any
policy to the extent reinsured hereunder, as provided in Schedule I, except that
there shall be no reinsurance on any benefit under this Agreement where the
REINSURED does not retain its normal retention of risk on a policy hereunder.
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SCHEDULE III
PERIODIC REPORT
Period Beginning:
Period Ending:
INDIVIDUAL INSURANCE
Reserves in the General Account
Beg. of Period
End of Period
Receipts
Premiums
lst Yr.
Renewal
SIA Transfers
Others
Disbursements of Insurance Death Benefits
Death Benefit Payments
SIA Transfers
Premium Taxes
Policy Expense Allowances
Commissions
1st Yr.
Renewal
Allowance
Investment Expense Allowances
Other
Life Insurance Issued (Number and face amount)
Life Insurance in Force (Number and face amount)
Term Insurance Riders Inforce (face amount)
ADB Inforce (face amount)
Waiver Benefit in Force
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SCHEDULE IV
ANNUAL REPORTS
A. ANNUAL STATEMENT
All the appropriate entries for the following parts of the REINSURER'S
NAIC blank shall be furnished to the REINSURER by the REINSURED:
Page 5 Analysis of operations by lines of business
Page 6 Analysis of increase in reserves during the year
Exhibit 1 Premiums and annuity considerations
Exhibit 6 Taxes, licenses and fees
Exhibit 11 Policy and contract claims
Page 15 Exhibit of Life Insurance
Schedule T Premiums and annuity considerations
B. TAX RETURN INFORMATION
All information used in preparing the REINSURED'S Federal Income Tax
Return (Form 1120L) and which is necessary for the REINSURER to complete
each item in its Federal Income Tax Return with respect to the reinsurance
hereunder shall be furnished to the REINSURER by the REINSURED on a timely
basis.
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SCHEDULE V
ADMINISTRATION CHARGES
1. For each policy issued and reinsured during a calendar year, the REINSURER
shall pay the REINSURED $30.00 (30% of $100.00) to cover issue and
underwriting expenses incurred by the REINSURED.
2. The REINSURER shall pay the REINSURED each year an amount to cover
administrative expenses incurred by the REINSURED. This amount shall be
calculated by multiplying $3.00 (30% of $10.00) by .5 times the following:
(a) the number of reinsured policies in force at the end of the prior
calendar year, plus
(b) the number of policies in force at the end of the current calendar
year, plus
(c) the number of policies issued and reinsured during the current
calendar year.
The above unit charges will apply during the first year of this agreement
and will subsequently be redetermined to follow future experience.
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SCHEDULE VI
EXPENSE ALLOWANCE
1. For each policy issued and reinsured during a calendar year, the REINSURER
shall pay the REINSURED $54.00 (30% of $180.00) as an expense allowance to
cover service fees for issue and acquisition incurred by the REINSURED.
2. The REINSURER shall pay the REINSURED each year an expense allowance to
cover administrative service fees incurred by the REINSURED. This
allowance shall be calculated by multiplying $18.00 (30% of $60.00) by .5
times the following:
(a) the number of reinsured policies in force at the end of the prior
calendar year, plus
(b) the number of policies in force at the end of the current calendar
year, plus
(c) the number of policies issued and reinsured during the current
calendar year.
The above unit charges will apply during the first year of this agreement
and will subsequently be redetermined to follow future experience.
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