EX-99.7(D) 6 b89429a1exv99w7xdy.txt TRANSAMERICA BASE TREATY AND AMENDMENT NO. 1 AUTOMATIC ANNUITY REINSURANCE AGREEMENT (No. ) Between THE TRAVELERS INSURANCE COMPANY of Hartford, Connecticut (referred to as the Reinsured) and TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY of Los Angeles, California (referred to as the Reinsurer) EFFECTIVE OCTOBER 1, 1994 TABLE OF CONTENTS
ARTICLE PAGE No. ---------------------------------------- -------- I Automatic Reinsurance 1 II Liability 1 III Reinsurance Premiums 2 IV Claims 2 V Reporting & Settlement 2 VI General Provisions 3 VII Insolvency of the Reinsured 4 VIII Regulatory Compliance 5 IX Duration of Agreement 5 X Arbitration 6 XI DAC Tax - Section 1.848-2(g)(8) Election 7 XII Entire Agreement 7 XIII Offset 8 XIX Execution 8 SCHEDULE A - Business Reinsured 9 SCHEDULE B - Monthly Reporting 10 SCHEDULE C - Additional Monthly Reporting 11 SCHEDULE D - Quarterly Reporting 12 SCHEDULE E - Annual Reporting 13 SCHEDULE F - Funds or Accounts 14
THE REINSURED AND THE REINSURER MUTUALLY AGREE TO REINSURE ON THE TERMS AND CONDITIONS SET OUT BELOW. ARTICLE I AUTOMATIC REINSURANCE 1. Insurance. The Reinsured will cede and the Reinsurer will accept as reinsurance a 75% quota share of the Mortality Net Amount at Risk as defined in Article V, generated prior to annuitization, on the policies written by the Reinsured on the contract forms shown in Schedule A, and as may be amended for required state variations. 2. Coverages. The policies reinsured in Schedule A are Flexible Premium Deferred Variable Annuity policies. 3. Accounts. Contract Values will initially be invested in the Accounts listed in Schedule F. The Reinsured may amend, substitute, add, or delete separate accounts or underlying funds to the contracts as described in the contract general provisions. No such change will be made by the Reinsured without prior notification to the Reinsurer and without prior approval by the Securities and Exchange Commission as required by law. The Reinsured agrees to maintain at all times a selection of core growth equity funds, growth and income equity funds, investment grade bond funds, and money market funds comparable to those listed in Schedule F to support the policies reinsured under this agreement. ARTICLE II LIABILITY 1. The Reinsurer's liability for reinsurance under this Agreement will begin simultaneously with the Reinsured's liability. The Reinsurer's liability for reinsurance will terminate when the Reinsured's liability terminates. 2. The liability of the Reinsurer shall be settled and paid to the Reinsured monthly on the basis of the monthly reports prepared by the Reinsured in the form of Schedule B. 3. This is an agreement solely between the Reinsured and the Reinsurer. There will be no legal relationship between the Reinsurer and any person having an interest of any kind in the Reinsured's insurance. ARTICLE III REINSURANCE PREMIUMS 1. The daily reinsurance premiums shall be equal to the sum of the day-end account values of the annuities reinsured hereunder multiplied by the quota share applicable to that contract and further multiplied by one of the following daily reinsurance rate factors, depending on the Block reinsured: Block A Rate Factor .00000173 Block B Rate Factor .00000129 2. The sum of the day end account values may be estimated for the purposes of computing reinsurance premiums using a method mutually acceptable to the Reinsured and the Reinsurer. 3. The daily reinsurance premiums will be accumulated without interest and paid monthly to the Reinsurer in accordance with Article V. ARTICLE IV CLAIMS 1. All reinsurance claim settlements are subject to the terms and conditions of the particular contract under which the Reinsured is liable. 2. At the time of claim, the amount payable by the Reinsurer will be the Mortality Net Amount at Risk, defined to be the difference between the death benefit payable by the Reinsured and the cash surrender value for the policy. 3. Payment of reinsurance proceeds will be made in a single sum regardless of the Reinsured's mode of settlement. ARTICLE V REPORTING & SETTLEMENT 1. The Reinsured will provide the Reinsurer with information necessary to properly account for the business reinsured, as specified in this section. 2. Not later than thirty (30) days after the end of each month, the Reinsured will submit reports substantially in accord with Schedules B and C. The Reinsured will submit a report substantially in accord with Schedule D no less frequently than quarterly on a schedule acceptable to both parties. From time to time as necessary, the Reinsured will submit a report substantially in accord with Schedule E. The Reinsured agrees to provide or make available to the Reinsurer such documentation as may be necessary to support the items reported. - 2 - 3. Payment of any amount due to be paid by the Reinsurer or the Reinsured shall be determined on a net basis. If the net balance is due the Reinsurer, the amount should be remitted with the monthly reports. If the net balance is due the Reinsured, it shall be paid within two weeks after receipt of the monthly reports. ARTICLE VI GENERAL PROVISIONS 1. Reinsurance Conditions. The reinsurance is subject to the same limitations and conditions as the insurance under the policy or policies written by the Reinsured on which the reinsurance is based. 2. Expenses. In no event will the Reinsurer have any liability for any extra-contractual damages which are rendered against the Reinsured as a result of acts, omissions or course of conduct committed by the Reinsured in connection with the annuity contracts reinsured under this Agreement. 3. Oversights. If there is an unintentional oversight or misunderstanding in the administration of this Agreement by either company, it can be corrected provided the correction takes place promptly after the oversight or misunderstanding is first discovered. Both companies will be restored to the position they would have occupied had the oversight or misunderstanding not occurred. Interest at a rate to be determined annually will be payable on any amounts due to either party as a result of the oversight or misunderstanding. 4. Inspection. At any reasonable time, the Reinsurer may inspect at the Reinsured's Home Office the original papers and any and all other books or documents relating to or affecting reinsurance under this Agreement. It is agreed by he Reinsurer that any information that is made available for inspection under this section of the Agreement shall be kept confidential and under no circumstances may this information be disclosed to, or made available for inspection by, any third party without the prior consent of the Reinsured. 5. Assignment or transfer. In no event shall either the Reinsured or the Reinsurer assign any of its rights, duties or obligations under this Agreement without the prior written approval of the other party. Such approval shall not unreasonably be withheld. In no event shall either the Reinsured or the Reinsurer transfer either the policies reinsured under this Agreement or the reinsurance without the prior written approval of the other party. Such approval shall not unreasonably be withheld. This provision is not intended to preclude the Reinsurer from retroceding the reinsurance on an indemnity basis. - 3 - 6. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be construed in accordance with the applicable federal law and the laws of the State of California. 7. Premium Taxes. The Reinsurer will not be liable for premium taxes on direct annuity premiums received by the Reinsured. ARTICLE VII INSOLVENCY OF THE REINSURED 1. The reinsurance amount due, when such amount is ascertained, shall be payable upon demand by the Reinsured at the same time as the Reinsured shall pay its net retained portion of such an obligation, with reasonable provision for verification before payment, and the reinsurance shall be payable by the Reinsurer on the basis of the liability of the Reinsured undur the Policies without diminution because of the insolvency of the Reinsured. In the event of insolvency and the appointment of a conservator, liquidator or statutory successor of the Reinsured, such portion shall be payable to such conservator, liquidator or statutory successor immediately upon demand, with reasonable provisions for verification, on the basis of claims allowed against the Reinsured by any court of competent jurisdiction or by a conservator, liquidator or statutory successor of the Reinsured having authority to allow such claims, without diminution because of such insolvency or because such conservator, liquidator or statutory successor had failed to pay all or a portion of any claims. 2. The Reinsured's conservator, liquidator, or statutory successor shall give the Reinsurer written notice of the pendency of a claim against the Reinsured indicating the Policy, within a reasonable time after such claim is filed. The Reinsurer may interpose, 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 conservator, liquidator or statutory successor. 3. Any expense incurred by the Reinsurer pursuant to paragraph 2, above, shall be payable subject to court approval out of the estate of the Reinsured as part of the expense of conservation or liquidation to the extent of the Reinsurer's portion of the benefit which may accrue to the Reinsured in conservation or liquidation, 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 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 the Reinsured. - 4 - ARTICLE VIII REGULATORY COMPLIANCE 1. The Reinsurer agrees to maintain licenses, provide any required security, establish reserves, and to comply with other regulations to the extent necessary for the Reinsured to receive statutory reserve credit in all jurisdictions in which the company is licensed on the Effective Date of the Agreement for the reinsurance ceded under this Agreement. 2. The Reinsurer warrants that it will hold reserves beginning 12/31/94 and continuing throughout the term of this reinsurance Agreement on all reinsurance assumed from the Reinsured or any other insurer to cover variable annuity death benefit guarantees. Such reserves will be calculated as follows: (a) For reinsurance assumed from the Reinsured, an amount no less than the amount established by the Reinsured in accordance with its statutory requirements for the guaranteed minimum death benefits on the business reinsured. (b) For reinsurance assumed from any other insurer, the greater of i) an amount calculated according to an NAIC Model Regulation adopted by 26 states requiring a specific reserve methodology for variable annuity death benefits or ii) an amount calculated according to a California law or regulation detailing reserve requirements for variable annuity death benefits. Before such time as an NAIC Model Regulation is adopted by 26 states or a California standard is adopted, the reserve amount shall be calculated on an actuarially sound basis for the risk assumed. ARTICLE IX DURATION OF AGREEMENT 1. This Agreement shall be unlimited as to its duration but may be reduced or terminated as provided in this Article, below. 2. The Reinsured may reduce the reinsurance quota share ceded on new business to any amount at its option from the percentage specified in Article I, at any time the total Contract Values on the portion of the business ceded to the Reinsurer exceeds 2.4 billion dollars. 3. Any time on or after the tenth anniversary of this Agreement, the Reinsured may, upon 90 days written notice, elect to cancel the reinsurance in force under the Agreement. Upon such termination, the Reinsured will owe the Reinsurer a Recapture Charge (if positive) equal to the accumulated value of claims paid by the Reinsurer to date minus 90% of the accumulated value of the premiums paid by the Reinsured to date, each at an annual effective interest rate of 10%. - 5 - 4. The Reinsured may cancel this Agreement for new business and cancel the inforce reinsurance previously ceded under this Agreement with no Recapture Charge upon the occurrence of either of the following events: (a) The statutory capital and surplus of the Reinsurer falls below the NAIC Authorized Control Level Risk Based Capital; or (b) The Reinsured loses reserve credit in a jurisdiction in which it was licensed on the effective date of this Agreement and the Reinsured and the Reinsurer have not been able to correct the loss of reserve credit within ninety (90) days after receiving notice of the loss. 5. Upon one hundred eighty (180) days written notice, either the Reinsured or the Reinsurer may cancel this Agreement for new business any time on or after the third anniversary of this Agreement. ARTICLE X ARBITRATION 1. In the event of any difference arising hereafter between the contracting parties with reference to any transaction under this Agreement, the same shall be referred to three arbitrators who must be current or former executive officers of life insurance or life reinsurance companies other than the two parties to this agreement or their affiliates, each of the contracting companies to appoint one of the arbitrators and such two arbitrators to select the third. If either party refuses or neglects to appoint an arbitrator within sixty (60) days after receipt of the written request for arbitration, the other party may appoint a second arbitrator. 2. If the two arbitrators fail to agree on the selection of a third arbitrator within sixty (60) days of their appointment, each of them shall name three individuals, of whom the other shall decline two, and the decision shall be made by drawing lots. 3. The arbitrators shall consider this Reinsurance Agreement not merely as a legal document but also as a gentlemen's agreement. In resolving the dispute, the arbitrators will give full consideration to the customs and practices of the life insurance and life reinsurance industry, insofar as they are not in conflict with the specific terms of this Agreement. The arbitrators shall decide by a majority vote. There shall be no appeal from their written decision. 4. Unless the arbitrators decide otherwise, each party shall bear the expense of its own arbitration, including its arbitrator and outside attorney fees, and shall jointly and equally bear with the other party the expense of the third arbitrator. Any remaining costs of the arbitration proceedings shall be apportioned by the Board of Arbitrators. - 6 - ARTICLE XI DAC TAX-SECTION 1.848-2(G)(8) ELECTION 1. The term "party" will refer to either the Reinsured or the Reinsurer as appropriate. 2. The terms used in this Article are defined by reference to Regulation Section 1.848-2 in effect December 1992. 3. The party with the net positive consideration for this Agreement for each taxable year will capitalize specified policy acquisition expenses with respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1). 4. Both parties agree to exchange information pertaining to the amount of net consideration under this Agreement each year to ensure consistency or is otherwise required by the Internal Revenue Service. 5. The Reinsured will submit a schedule to the Reinsurer by May 1 of each year of its calculation of the net consideration for the preceding calendar year. This schedule of calculations will be accompanied by a statement signed by an officer of the Reinsured stating that the Reinsured will report such net consideration in its tax return for the preceding calendar year. 6. The Reinsurer may contest such calculation by providing an alternative calculation to the Reinsured in writing within thirty days of the Reinsurer's receipt of the Reinsured's calculation. If the Reinsurer does not so notify the Reinsured, the Reinsurer will report the net consideration as determined by the Reinsured in the reinsurer's tax return for the previous calendar year. 7. If the Reinsurer contests the Reinsured's calculation of the net consideration, the parties will act in good faith to reach an agreement as to the correct amount within thirty (30) days of the date the Reinsurer submits its alternative calculation. If the Reinsured and the Reinsurer reach Agreement on an amount of net consideration, each party shall report such amount in their respective tax returns for the previous calendar year. ARTICLE XII ENTIRE AGREEMENT 1. This Agreement shall constitute the entire agreement between the parties with respect to business reinsured hereunder. There are no understandings between the parties other than as expressed in this Agreement and any change or modification of this Agreement shall be null and void unless made by amendment to the Agreement and signed by both parties. - 7 - ARTICLE XIII OFFSET 1. The Reinsured and the Reinsurer shall have, and may exercise at any time, the right to offset any balance or balances due one party to the other, its successors or assigns, against balances due the other party under this Agreement. This right of offset shall not be affected or diminished because of insolvency of either party to this Agreement. ARTICLE XIX EXECUTION In witness of the above, this Agreement is signed in duplicate at the dates and places indicated and shall be effective as of October 1, 1994. THE TRAVELERS INSURANCE TRANSAMERICA OCCIDENTAL LIFE COMPANY INSURANCE COMPANY at Hartford, Connecticut, at Charlotte, North Carolina, on December 28, 1994 on December 29, 1994 By: -s- [ILLEGIBLE] By: -s- [ILLEGIBLE] ----------------------- -------------------------- Title: Vice President Title: Vice President By: -s- [ILLEGIBLE] By: -s- [ILLEGIBLE] ----------------------- -------------------------- Title: [ILLEGIBLE] Title: Vice President and Actuary - 8 - SCHEDULE A BUSINESS REINSURED 1. The insureds must purchase contracts from the Reinsured consistent with its normal procedures and practices, and be residents at issue of the United States, Bahamas, British Virgin Islands, Guam, Puerto Rico, or U.S. Virgin Islands. 2. The business reinsured consists of Block A and Block B (excluding Unallocated group accounts with no death benefit guarantee) as follows: Block A Variable Annuity Contracts sold under the Universal Annuity program and issued on or after July 1, 1994, during the accumulation phase (prior to annuitization). Block B Variable Annuity Contracts sold under the Universal Annuity program and inforce as of June 30, 1994, during the accumulation phase (prior to annuitization). Universal Annuity Policy Forms Individual LVA-10FPU-A plus state variations Group LVA-FPG(u) plus state variations with the following death benefit endorsements, where approved: Individual 1) L-13866 2) L-12861 Group 1) L-13869 2) L-12862 - 9 - SCHEDULE B MONTHLY REPORTING 1. Premiums due the Reinsurer 2. Claims Payable by the Reinsurer 3. Current Account Value by fund and split by issue ages 0-64 and 65 +. - 10 - SCHEDULE C ADDITIONAL MONTHLY REPORTING 1. Annualized unit return on each fund 2. Direct premium received by the Reinsured 3. Listing of contracts with account values in excess of $2 million. - 11 - SCHEDULE D QUARTERLY REPORTING 1. Current account value split by fund, sex and attained age 2. Cash Surrender value split by attained age. - 12 - SCHEDULE E ANNUAL REPORTING 1. Notification of any change in fund structure, e.g., addition or deletion of fund, change in investment policy or investment manager, etc, that would require a change to the Prospectus. 2. A schedule of outstanding guaranteed death benefit values and net amounts at risk. - 13 - SCHEDULE F a. The Travelers Growth and Income Stock Account for Variable Annuities (Account GIS) b. The Travelers Quality Bond Account for Variable Annuities (Account QB) c. The Travelers Money Market Account for Variable Annuities (Account MM) d. The Travelers Timed Growth and Income Stock Account for Variable Annuities (Account TGIS) e. The Travelers Timed Short-Term Bond Account for Variable Annuities (Account TSB) f. The Travelers Timed Aggressive Stock Account for Variable Annuities (Account TAS) g. The Travelers Timed Bond Account for Variable Annuities (Account TAS) h. The Travelers Fund U for Variable Annuities (Fund U), consisting of the following underlying funds: Capital Appreciation Fund Fidelity's High Income Portfolio High Yield Bond Trust Fidelity's Equity-Income Portfolio Managed Assets Trust Fidelity's Growth Portfolio U.S. Government Securities Portfolio Fidelity's Asset Manager Portfolio Social Awareness Stock Portfolio American Odyssey International Equity Fund Utilities Portfolio American Odyssey Emerging Opportunities Fund Templeton Bond Fund American Odyssey Core Equity Fund Templeton Stock Fund American Odyssey Long-Term Bond Fund Templeton Asset Allocation Fund American Odyssey Intermediate-Term Bond Fund Dreyfus Stock Index Fund American Odyssey Short-Term Bond Fund Smith Barney Income & Growth Portfolio Alliance Growth Portfolio Smith Barney International Equity Portfolio Putnam Diversified Income Portfolio Gt Global Strategic Income Portfolio Smith Barney High Income Portfolio MFS Total Return Portfolio
- 14 - AMENDMENT No. 1 This Amendment, effective December 31, 1999, made by and between THE TRAVELERS INSURANCE COMPANY, referred to as the Reinsured, and TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, referred to as the Reinsurer, is attached to and becomes a part of the Automatic Annuity Reinsurance Agreement (No. 7022-6), effective October 1, 1994. 1. The Reinsured and the Reinsurer hereby agree that this Agreement is terminated for new business as of the close of December 31, 1999. 2. After termination, the Reinsured and the Reinsurer shall remain liable for all reinsurance which became effective prior to the termination of this Agreement. This Amendment does not alter, amend or modify the Reinsurance Agreement other than as set forth in this Amendment, and it is subject otherwise to all the terms and conditions of the Reinsurance Agreement together with all amendments and supplements thereto. Executed in duplicate by Executed in duplicate by THE TRAVELERS TRANSAMERICA OCCIDENTAL INSURANCE COMPANY LIFE INSURANCE COMPANY at Hartford, Connecticut, at Charlotte, North Carolina, on July 31, 2001. on June 8, 1999. BY: -s- [ILLEGIBLE] BY: -s- [ILLEGIBLE] ---------------------- ------------------------------------------ Title 2nd VP & Actuary President - Reinsurance Division BY: BY: -s- [ILLEGIBLE] ---------------------- ------------------------------------------ Title Vice President & Associate General Counsel SK