EXHIBIT (13)(b)
UNCONDITIONAL CAPITAL MAINTENANCE AGREEMENT
BETWEEN
AMERICAN INTERNATIONAL GROUP, INC.
AND
THE UNITED STATES LIFE INSURNANCE COMPANY IN THE CITY OF NEW YORK
This Unconditional Capital Maintenance Agreement (this "Agreement"), is made,
entered into and effective as of March 30, 2011, by and between American
International Group, Inc., a corporation organized under the laws of the State
of Delaware ("AIG"), and The United States Life Insurance Company of New York, a
corporation organized under the laws of the New York (the "Company").
WITNESSETH:
WHEREAS, the Company is a life insurer subject to certain capital
requirements of the insurance laws and regulations of New York (the "Domiciliary
State");
WHEREAS, the Company is an indirect wholly owned subsidiary of AIG; and
WHEREAS, AIG has an interest in unconditionally maintaining and enhancing
the Company's financial condition:
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties hereto agree as follows:
1. In the event that the Company's Total Adjusted Capital for each of the
Company's first and third fiscal quarters (as determined based on the
Company's first and third fiscal quarterly filed statutory financial
statements, respectively, subject to any adjustments or modifications
thereto required by the Domiciliary State's insurance department or
the Company's independent auditors) falls below the Specified Minimum
Percentage of the Company's projected Company Action Level RBC (in
each case as estimated by the Company as of the end of each such first
and third fiscal quarters, as the case may be), AIG shall, within the
respective time periods set forth under paragraph 4, in accordance
with paragraph 5 and in compliance with applicable law, provide to the
Company cash, cash equivalents, securities or other instruments that
qualify (as admitted assets) for purposes of calculating the Company's
Total Adjusted Capital, as a contribution and not as a loan, in an
amount such that the Company's Total Adjusted Capital as of the end of
each of the Company's second and fourth fiscal quarter, as the case
may be, will be projected to be at least equal to the Specified
Minimum Percentage of the Company's Company Action Level RBC.
Notwithstanding the
foregoing, AIG may, at any time as it deems necessary in its sole
discretion and in compliance with applicable law, make a contribution
to the Company in such amount as is required for the Company's Total
Adjusted Capital to equal a percentage of its Company Action Level RBC
determined to be appropriate by the Company and AIG.
2. In the event that the Company's Total Adjusted Capital (a) for each of
the Company's first, second and third fiscal quarters (as determined
based on the Company's first, second and third fiscal quarterly filed
statutory financial statements, respectively, subject to any
adjustments or modifications thereto required by the Domiciliary
State's insurance department or the Company's independent auditors) is
in excess of the Specified Minimum Percentage of the Company's
projected Company Action Level RBC (in each case as estimated by the
Company as of the end of each such first, second and third fiscal
quarters, as the case may be) or (b) as of each fiscal year end (as
shown in the Company's fiscal year-end filed statutory financial
statements, together with any adjustments or modifications thereto
required by the Domiciliary State's insurance department or the
Company's independent auditors) is in excess of the Specified Minimum
Percentage of the Company's Company Action Level RBC (as shown in such
fiscal year-end statutory financial statements), the Company shall,
within the respective time periods set forth under paragraph 4, in
accordance with paragraph 5 and subject to approval by the Company's
board of directors as required by the laws of the Domiciliary State,
declare and pay dividends ratably to its equity holders in an
aggregate amount equal to the lesser of (i) the amount necessary to
reduce the Company's projected or actual Total Adjusted Capital as of
each of the end of the Company's fiscal quarter or fiscal year, as the
case may be, to a level equal to or not materially greater than the
Specified Minimum Percentage of the Company's Company Action Level RBC
or (ii) the maximum amount permitted by the Domiciliary State's law to
be paid as an ordinary dividend less an amount that the Company and
AIG agree is appropriate to protect the Company from exceeding such
maximum amount allowed by such Domiciliary State's law as a result of
potential audit adjustments or adjustments to the projections on which
such dividend amount is based. For the avoidance of doubt, this
paragraph shall only require the Company to pay ordinary dividends;
under no circumstances shall the Company be required to pay any
dividend which would trigger the extraordinary dividend provisions of
Section 4207 of the Insurance Law of the Domiciliary State or that is
otherwise prohibited by the Domiciliary State. Notwithstanding the
foregoing, this Agreement does not prohibit the payment of
extraordinary dividends to reduce the Company's projected or actual
Total Adjusted Capital to a level equal to or not materially greater
than the Specified Minimum Percentage of the Company's Company Action
Level RBC.
3. For the avoidance of doubt, the terms "Total Adjusted Capital",
"Company Action Level RBC", and "Surplus to Policyholders" shall have
the meanings ascribed thereto under the insurance laws and regulations
of the Domiciliary State, or, with respect to "Total Adjusted Capital"
and "Company Action Level RBC", if not defined therein, shall have the
meanings ascribed thereto in the risk-based capital ("RBC")
instructions promulgated by the National Association of Insurance
Commissioners ("NAIC"). The term "Specified Minimum Percentage" shall
be equal to the percentage set forth on Schedule 1 attached hereto,
which shall be agreed to by AIG and the Company at least once every
year beginning upon the date of the filing of the Company's 2010
Annual Statement with the Domiciliary State's insurance department and
following review against the capital adequacy standards and criteria
("Agency Criteria") of each of Standard & Poor's Corp. ("S&P"),
Xxxxx'x Investors Service ("Moody's") and A.M. Best Company ("A.M.
Best"). Notwithstanding the obligation of the Company and AIG to
review the Specified Minimum Percentage on an annual basis, the
parties hereto agree to review and revise the Specified Minimum
Percentage on a more frequent basis, if the parties agree it is
appropriate, to take into account (a) any material changes after the
date hereof to any Agency Criteria adopted by any of S&P, Moody's or
A.M. Best, on the one hand, or to the law of the Domiciliary State or
NAIC RBC rules or instructions, on the other hand, which causes the
results under the Agency Criteria to diverge from that under the law
of the Domiciliary State or NAIC RBC rules or instructions, (b) the
Company completes a material transaction that is treated materially
differently by the Agency Criteria, on the one hand, and the NAIC RBC
rules or instructions, on the other hand, or (c) any other material
development or circumstance affecting the Company which AIG and the
Company agree merits a reevaluation of the Specified Minimum
Percentage then in effect.
4. The Company and AIG agree that any contribution to be made under
paragraph 1 will take place within the following two time periods per
year, as applicable: (a) during the time beginning on the first
business day after the filing of the Company's first fiscal quarterly
statutory financial statements and ending on the last business day
prior to the end of the Company's second fiscal quarter; and (b)
during the time beginning on the first business day after the filing
of the Company's third fiscal quarterly statutory financial statements
and ending on the last business day prior to the end of the Company's
fourth fiscal quarter. Notwithstanding the foregoing, in compliance
with applicable law, any capital contribution provided for under
paragraph 1 may be made by AIG after the close of any fiscal quarter
or fiscal year of the Company but prior to the filing by the Company
of its statutory financial statements for such fiscal quarter or
fiscal year, respectively, and contributions of this nature shall be
recognized as capital contributions receivable as of the balance sheet
date of the yet to be filed quarterly or annual financial statement
(as the
case may be), pursuant to paragraph 8 of Statement of Statutory
Accounting Principles No. 72, to the extent approved by the
Domiciliary State. The Company and AIG further agree that any
dividends to be made under paragraph 2 will take place as soon as
practicable after the filing by the Company of the relevant fiscal
quarter-end or fiscal year-end statutory financial statements or such
earlier time as may be agreed by the Company and AIG.
5. At the time that any contribution is due under paragraph 4, AIG agrees
that it will either (a) make such contribution to the Company's direct
parent and cause such direct parent to then contribute such funds,
securities or instruments so contributed by AIG to the Company, or (b)
make such contribution directly to the Company without receiving any
capital stock or other ownership interest in exchange therefor,
subject in either case to any required regulatory approvals. At any
time any dividends are due under paragraph 4, the Company agrees that
it will make such dividend to the Company's direct parent and will use
its best efforts to cause such direct parent to then dividend or
otherwise provide such funds to AIG. All contributions and dividends
contemplated under this Agreement shall be approved, declared and
made, as applicable, in compliance with applicable law, including,
without limitation, approval by the board of directors of each
applicable entity (including the Company) and any prior notice
requirements specified under applicable rules and regulations of the
Domiciliary State.
6. Subject to the requirements of applicable law and the approval, to the
extent required, by any or all of the Company's senior management,
relevant management committees, board of directors, and of any
insurance regulator, the Company hereby acknowledges that, in a manner
consistent with past practice and any other reasonable requirements of
AIG, it will comply with all financial and budgetary planning, risk
mitigation, derisking or pricing, corporate governance, investment,
informational and procedural requirements set forth by AIG.
7. AIG hereby waives any failure or delay on the part of the Company in
asserting or enforcing any of its rights or in making any claims or
demands hereunder.
8. Unless earlier terminated in accordance with this paragraph 8, this
Agreement shall continue indefinitely. AIG shall have the absolute
right to terminate this Agreement upon thirty (30) days' prior written
notice to the Company, which notice shall state the effective date of
termination (the "Termination Date"); provided, however, that AIG
agrees not to terminate this Agreement unless (a) AIG significantly
modifies the corporate structure or ownership of the Company, or (b)
AIG sells the Company to an acquirer (i) having a rating from at least
one of S&P, Xxxxx'x, A.M. Best or a substitute agency, which is a
nationally recognized statistical rating organization, that is at
least equal to the lower of (x) AIG's then-current rating from such
agency or (y) the Company's then-current rating as supported by this
Agreement from such agency; or (ii) such that, immediately on the
effective date of the sale by AIG of the Company, the Company's
capitalization is consistent with the minimum capital adequacy
standards and criteria of at least one of S&P, Xxxxx'x, A.M.
Best or a substitute agency, which is a nationally recognized
statistical rating organization, for a rating that is equal to or
better than the Company's then-current rating on the date immediately
preceding such sale. To the extent not terminated previously by AIG
pursuant to the foregoing, this Agreement will terminate automatically
one year after the closing of any sale of the Company by AIG, and all
provisions hereof will be of no further force and effect. For the
avoidance of doubt, the termination of this Agreement pursuant to this
paragraph 8 shall not relieve either party of any obligation it may
owe to the other party hereunder that existed prior to, and remains
outstanding as of, the Termination Date.
9. Any policyholder holding a policy issued by the Company prior to the
termination of this Agreement shall have the right to demand that the
Company enforce the Company's rights under paragraphs 1, 4 and 5 of
this Agreement, and, if the Company fails or refuses to take timely
action to enforce such rights or the Company defaults in any claim or
other payment owed to any such policyholder when due, such
policyholder may proceed directly against AIG to enforce the Company's
rights under paragraphs 1, 4 and 5 of this Agreement; provided,
however, that no policyholder of the Company may take any action
authorized under this paragraph 9 unless and until (a) such
policyholder has given AIG written notice of its intent to enforce the
terms of this Agreement as provided in this paragraph 9, which notice
shall specify in reasonable detail the nature of and basis for the
policyholder's complaint and (b) AIG has failed to comply with this
Agreement within sixty (60) days after such notice is given; and,
provided, further, that upon termination of this Agreement in
accordance with paragraph 8 hereof, the rights of any policyholder as
provided for under this paragraph 9 shall terminate effective as of
the Termination Date, except with respect to the obligation of AIG (if
any) to make capital contributions to the Company pursuant to
paragraphs 1, 4 and 5 of this Agreement solely to the extent such
obligation arose prior to, and remained unsatisfied as of, the
Termination Date (it being understood that upon AIG's satisfaction of
all such obligations after the Termination Date, no such policyholder
shall have any rights against the Company or AIG, as the case may be,
under this paragraph 9).
10. This Agreement is not, and nothing herein contained and nothing done
pursuant hereto by AIG shall constitute or be construed or deemed to
constitute, an evidence of indebtedness or an obligation or liability
of AIG
as guarantor, endorser, surety or otherwise in respect of any
obligation, indebtedness or liability, of any kind whatsoever, of the
Company. This Agreement does not provide, and is not intended to be
construed or deemed to provide, any policyholder of the Company with
recourse to or against any of the assets of AIG.
11. Any notice, instruction, request, consent, demand or other
communication required or contemplated by this Agreement shall be in
writing, shall be given or made or communicated by United States first
class mail, addressed as follows:
If to AIG:
American International Group, Inc.
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Secretary
If to the Company:
The United States Life Insurance Company in the City of New York
c/o SunAmerica Financial Group, Inc.
0000-X Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
with a copy (which shall not constitute notice) to:
The United States Life Insurance Company in the City of New York
c/o SunAmerica Financial Group, Inc.
0000 Xxxxxx xx xxx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: General Counsel
12. The covenants, representations, warranties and agreements herein set
forth shall be mutually binding upon and inure to the mutual benefit
of AIG and its successors and the Company and its successors.
13. This Agreement shall be governed by and construed in accordance with
the laws of New York, without giving effect to the principles of
conflict of laws.
14. If any provision of this Agreement shall be declared null, void or
unenforceable in whole or in part by any court, arbitrator or
governmental agency, said provision shall survive to the extent it is
not so declared and all the other provisions of this Agreement shall
remain in full force and
effect unless, in each case, such declaration shall serve to deprive
any of the parties hereto of the fundamental benefits of or rights
under this Agreement.
15. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussion, whether oral or written, of the parties. This Agreement
may be amended at any time by written agreement or instrument signed
by the parties hereto.
16. This Agreement may be signed by the parties in one or more
counterparts which together shall constitute one and the same
agreement among the parties.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ XXXXX X. XXXXXXXXX
-----------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Executive Vice President
By: /s/ XXXXXX X. GENDER
-----------------------------------
Name: Xxxxxx X. Gender
Title: Senior Vice President and Treasurer
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
By: /s/ XXX X. XXXXXXXX
-----------------------------------
Name: Xxx X. Xxxxxxxx
Title: Senior Vice President and Chief Financial Officer
SCHEDULE 1
The Specified Minimum Percentage shall initially equal 350% of the Company's
Company Action Level RBC.
