FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
QUARTERLY REPORT PURSUANT to SECTION 13 or 15(d)
of the SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT to SECTION 13 or 15(d)
of the SECURITIES EXCHANGE ACT of 1934
Commission file number 1-11340
LIFE RE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 01-0437851
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
969 High Ridge Road
Stamford, Connecticut 06905
(Address of principal executive offices)
(203) 321-3000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Common stock outstanding ($.001 par value) as of November 13, 1996: 13,533,966
shares
TABLE OF CONTENTS
Item Page
PART I - FINANCIAL INFORMATION
1 Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 1996 and December 31, 1995 . . . . . . . . . 3
Condensed Consolidated Statements
of Income (Unaudited)
Three and nine months ended September 30, 1996 and 1995. . 4
Condensed Consolidated Statements
of Cash Flows (Unaudited)
Nine months ended September 30, 1996 and 1995. . . . . . . 5
Notes to Condensed Consolidated Financial
Statements September 30, 1996 (Unaudited). . . . . . . . . 6
2 Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . .11
PART II- OTHER INFORMATION
5 Other Information. . . . . . . . . . . . . . . . . . . . .16
6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . .17
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Part I, Item 1.
Life Re Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
1996 1995
(In thousands,
except share data)
ASSETS
Fixed maturities - at fair value
(amortized cost: $1,475,015 and $1,245,151,
respectively) $1,477,466 $1,316,908
Equity securities - at fair value
(cost: $18,841 and $16,051, respectively) 19,335 16,613
Assets held by ceding company under reinsurance
treaty - at fair value (amortized cost: $107,948
and $115,767, respectively) 109,960 125,958
Mortgage loans and real estate 10,279
Short-term investments 21,625 13,285
Policy loans 55,817 31,411
========= =========
Total investments 1,694,482 1,504,175
Cash 20,904 5,056
Accrued investment income 29,038 24,957
Policy revenues receivable 97,149 105,361
Amounts receivable on reinsurance ceded 289,878 209,313
Deferred policy acquisition costs, including
valuation adjustments of $358 and $(4,853),
respectively 151,766 112,560
Value of business acquired, including valuation
adjustments of $825 and $(1,652), respectively 69,208 53,864
Other assets 27,877 8,811
========= =========
Total assets $2,380,302 $2,024,097
LIABILITIES
Future policy benefits $1,628,434 $1,295,281
Policy claims and benefits payable 235,709 188,788
Commissions and other liabilities 92,749 99,864
Amounts due on reinsurance ceded 40,830 20,851
Loans payable 125,000 140,000
========= =========
Total liabilities 2,122,722 1,744,784
SHAREHOLDERS' EQUITY
Common stock (par value $.001 per share;
authorized 40,000,000 shares; issued 15,691,435
and 15,531,310 shares, respectively) 16 16
Paid in capital 105,040 101,582
Net unrealized appreciation of securities 3,992 49,403
Retained earnings 194,957 158,075
Treasury stock - at cost (2,162,469 and 1,557,969
shares, respectively) (46,425) (29,763)
========= =========
Total shareholders' equity 257,580 279,313
========= =========
Total liabilities and shareholders' equity $2,380,302 $2,024,097
See accompanying notes.
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Life Re Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30,
1996 1995 1996 1995
(In thousands,
except per share data)
REVENUES
Policy revenues $ 123,750 $ 94,232 $ 328,945 $ 280,773
Investment income 32,587 26,149 89,873 70,143
Realized investment gains 1,009 1,535 15,719 1,741
======= ======= ======= =======
Total revenues 157,346 121,916 434,537 352,657
BENEFITS AND EXPENSES
Policy claims and benefits 92,307 67,897 245,628 210,205
Commissions and allowances 28,333 25,143 77,665 67,605
Interest credited to contractholder
accounts 9,523 5,976 24,119 13,311
Amortization of value of business
acquired 1,245 1,363 3,930 2,789
Interest expense 2,042 2,656 6,450 8,113
Other operating expenses 7,823 4,995 20,990 15,028
======= ======= ======= =======
Total benefits and expenses 141,273 108,030 378,782 317,051
Income before federal income taxes 16,073 13,886 55,755 35,606
Provision for federal income taxes 5,623 4,860 14,772 12,462
======= ======= ======= =======
NET INCOME $ 10,450 $ 9,026 $ 40,983 23,144
======= ======= ======= =======
Earnings per share $ 0.76 $ 0.61 $ 2.94 1.53
======= ======= ======= =======
Dividends per share $ 0.10 $ 0.07 $ 0.30 0.21
======= ======= ======= =======
See accompanying notes.
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Life Re Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
1996 1995
(In thousands)
OPERATING ACTIVITIES
Net income $ 40,983 $ 23,144
Adjustments to reconcile net income to net cash
provided by operating activities:
Change in accrued investment income (2,562) (2,341)
Change in policy revenues receivable 974 7,958
Change in future policy benefits and
policy claims and benefits payable 39,436 14,834
Change in reinsurance ceded balances 7,537 3,649
Deferral of policy acquisition costs (18,878) (8,318)
Amortization of policy acquisition costs 4,112 11,150
Net realized gains on investments (15,719) (1,741)
Depreciation and amortization 4,544 2,839
Provision for deferred federal income taxes 6,514 7,125
Other (13,772) (4,560)
======== =======
Net cash provided by operating activities 53,169 53,739
INVESTING ACTIVITIES
Purchases of fixed maturities (323,307) (358,032)
Sales of fixed maturities 133,040 282,861
Maturities of fixed maturities 64,003 47,117
Purchases of equity securities (15,200)
Sales or redemptions of equity securities 26,300 30
Change in short-term investments, policy loans
and other investments 18,830 20,354
Cash consideration in connection with acquisitions
and reinsurance 88,722 (30,778)
Purchases of furniture and equipment, net (723) (677)
======== =======
Net cash used by investing activities (8,335) (39,125)
FINANCING ACTIVITIES
Purchases of common stock for treasury (16,253) (16,836)
Proceeds from exercise of common stock options 3,391
Loan principal repayments (15,000)
Dividends on common stock (4,101) (3,145)
Repayment of stock loan 4
Short-term borrowings 20,000
Changes in contractholder accounts:
Deposits 33,580 23,025
Interest credited 24,119 13,311
Fees and charges deducted (20,081) (14,407)
Withdrawals (54,641) (16,693)
======== =======
Net cash used by financing activities (28,986) (14,741)
Increase (decrease) in cash 15,848 (127)
Cash, beginning of period 5,056 2,861
======== =======
Cash, end of period $ 20,904 $ 2,734
See accompanying notes.
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Life Re Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 30, 1996
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Life Re Corporation and Subsidiaries (the "Company") have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting solely of normal recurring
accruals considered necessary for a fair presentation of financial
results, have been included. Operating results for the nine month
period ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. For
further information, refer to the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
Primary earnings per share have been calculated based on the weighted
average common shares outstanding during the periods presented including
the effect of dilutive common stock options. Weighted average common
and common equivalent shares were 13,826,000 and 13,931,000 for the
three and nine months ended September 30, 1996, respectively, and
14,711,000 and 15,127,000 for the three and nine months ended September
30, 1995, respectively.
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.
All dollar amounts are reported in thousands unless otherwise specified.
2. ACQUISITIONS AND REINSURANCE TRANSACTIONS
On July 31, 1995, in a transaction accounted for as a purchase, the
Company acquired 100% of the common stock of Reassure America Life
Insurance Company ("REALIC"), formerly John Deere Life Insurance Company,
from two wholly owned subsidiaries of Deere & Company for an adjusted
purchase price of $33,335, including direct costs of the acquisition.
The following unaudited pro forma financial information has been
prepared assuming the acquisition of REALIC had occurred at the
beginning of 1995 and reflects certain purchase accounting adjustments,
including amortization of the value of business acquired, net of related
income tax effects. The pro forma results are not necessarily
indicative of the results that would have occurred had the acquisition
been consummated as of the assumed date nor are they necessarily
indicative of future operating results.
Nine Months Ended
September 30,
1995
Revenues $378,042
Net income $ 27,714
Earnings per share $ 1.83
As of June 30, 1996, REALIC acquired, for an adjusted purchase price
of approximately $12,000, 100% of the common stock of Modern American
Life Insurance Company ("MAL") from a subsidiary of I.C.H. Corporation
in a transaction accounted for as a purchase. The fair value of
assets acquired, consisting primarily of invested assets, was
approximately $130,000, and the liabilities assumed, principally
future policy benefits, aggregated approximately $118,000.
As of June 30, 1996, REALIC acquired, for an adjusted purchase price
of approximately $4,500, a block of insurance in force via the
purchase of a subsidiary of I.C.H. Corporation which was merged with
and into REALIC. The fair value of assets acquired, consisting
primarily of invested assets, was approximately $45,500, and the
liabilities assumed, principally future policy benefits, aggregated
approximately $41,000.
The following unaudited pro forma financial information has been
prepared assuming these two transactions had occurred at the
beginning of each of the periods presented and reflects certain
purchase accounting adjustments, including amortization of the value
of business acquired, net of related income tax effects. The pro
forma results are not necessarily indicative of the results that
would have occurred had these transactions been consummated as of the
assumed dates nor are they necessarily indicative of future operating
results. The pro forma results reflect realized investment gains and
other income of the acquired companies of $1,495 and $400 in 1996 and
1995, respectively, as well as a $4,000 litigation settlement charge
in 1995. Also included in 1995 are realized investment losses
totaling $4,703 resulting primarily from the writedown of a common
stock investment in I.C.H. Corporation, which filed for bankruptcy in
October 1995.
Nine Months Ended
September 30,
1996 1995
Revenues $443,213 $357,048
Net income $ 42,575 $ 14,950
Earnings per share $ 3.06 $ .99
Effective May 31, 1996, REALIC acquired a block of insurance in force
under an assumption reinsurance agreement whereby it assumed
liabilities for future policy benefits totaling approximately
$127,000. Assets, net of a purchase adjustment, totaling
approximately $107,000, principally cash, were transferred to REALIC
by the ceding company.
Effective July 1, 1996, the Company purchased 20% of the common stock
of Resource Financial Corporation ("RFC") and in addition, on
September 30, 1996, purchased $15,000 of preferred stock and $5,000
of long term debt of a wholly owned subsidiary of RFC. RFC and its
subsidiary, Resource Life Insurance Company, were organized for the
purpose of acquiring certain assets and operations from subsidiaries
of Aon Corporation ("Aon"). RFC provides insurance product
distribution and administrative and financial services for the retail
automotive industry throughout the United States.
Also effective July 1, 1996, the Company entered into reinsurance
agreements with affiliates of Aon and with Resource Life Insurance
Company which provide for the Company to reinsure credit life and
credit disability insurance produced through RFC or its predecessor,
a substantial portion of which is retroceded by the Company.
In connection with the foregoing transactions, the Company entered
into an agreement whereby it will pay contingent consideration to a
subsidiary of Aon based on premiums produced by RFC for a period of
five years subsequent to July 1, 1996.
On October 31, 1996, REALIC acquired, for a purchase price of
approximately $21,300, 100% of the common stock of New American Life
Insurance Company from a subsidiary of General Accident plc. The
acquired company was merged with and into REALIC. The business
acquired consists of traditional and universal life insurance and
deferred annuities.
3. NET UNREALIZED APPRECIATION OF SECURITIES
Net unrealized appreciation of securities is as follows:
September 30, December 31,
1996 1995
Net unrealized gains on securities $ 4,957 $ 82,510
Deferred income tax expense on
net unrealized gains 1,734 28,879
====== =======
Net unrealized gains 3,223 53,631
====== =======
Adjustment to deferred policy acquisition
costs and value of business acquired
on interest sensitive contracts 1,183 (6,505)
Deferred income tax expense (benefit) on
adjustment 414 (2,277)
====== =======
Net adjustment 769 (4,228)
====== =======
Net unrealized appreciation
of securities $ 3,992 $ 49,403
====== =======
4. REALIZED INVESTMENT GAIN
On March 18, 1996, Life Re Corporation sold its equity investment in
Nacolah Holding Corporation ("Nacolah"), the parent of North American
Company for Life and Health Insurance, in connection with the
acquisition of Nacolah by Sammons Enterprises, Inc. The Company
received proceeds of $25,057 and recorded a realized investment gain
of $13,540. The realized gain triggered the utilization of tax net
operating loss carryforwards available to Life Re Corporation and a
corresponding reversal of the previously established deferred tax
valuation allowance, resulting in a tax benefit of $4,739.
5. SHAREHOLDERS' EQUITY AND LOANS PAYABLE
Pursuant to the terms of a stock repurchase program approved by the
Company's Board of Directors, the Company purchased 576,200 shares of
its common stock for an aggregate purchase price of $16,004 during the
nine months ended September 30, 1996. Through September 30, 1996, 2.1
million shares out of a total authorization by the Company's Board of
Directors to repurchase 3.0 million shares have been acquired for a
total purchase price of $45,490.
On March 29, 1996, the Company repaid $15,000 of the revolving loan
borrowed under its bank credit agreement. In accordance with its bank
credit agreement, the Company received a one year extension of the
principal amortization schedule. As a result of the extension, the
initial principal payment is due January 1999 with a revised maturity
date of January 5, 2003. The bank credit agreement also provides
for one additional one year extension. Short-term borrowings of
$20,000, consisting of reverse repurchase agreements which were
outstanding at September 30, 1996 (included in other liabilities),
were repaid on October 4, 1996.
6. CONTINGENCIES
At December 31, 1991, the Company entered into an 80% coinsurance
agreement with Liberty Life Insurance Company ("Liberty") whereby it
assumed risks on a block of existing universal life insurance
business. In addition, effective January 1, 1992, the Company entered
into a related agreement with Liberty which provides for Liberty to
cede to the Company 50% of certain universal life policies written
subsequent to December 31, 1991. Effective July 1, 1995, the Company
increased from 50% to 80% its coinsurance share of the existing
business in force written subsequent to December 31, 1991. Together,
these agreements contributed policy revenues totaling $14,498,
primarily policy fees and charges, for the nine months ended September
30, 1996.
In February 1995, Liberty ceased sales of its products through its
general agency distribution system, which is the system that produced
the business coinsured by the Company. Generally the discontinuance
of a distribution system will cause increased lapsation of policies
previously produced by that system. As a result, expectations as to
future gross profits may have to be reduced, resulting in increased
amortization of policy acquisition costs. Actual lapsation to date
has increased, but currently not in an amount sufficiently material to
warrant an adjustment of current estimates of anticipated future
gross profits or an adjustment of the amortization of deferred policy
acquisition costs. The expected level of gross profits on this
business is being closely monitored and, if appropriate, amortization
of deferred policy acquisition costs will be adjusted. Such
adjustments could have a material adverse effect on results of operations.
In addition, the Company and a ceding company client are in
arbitration concerning the terms of a reinsurance agreement. The
Company does not believe that the outcome will have a material adverse
effect on results of operations or financial position.
Life Re Corporation and Subsidiaries
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RECENT TRANSACTIONS
During the second quarter of 1996, the Company, through its
subsidiary, Reassure America Life Insurance Company ("REALIC"), completed
several transactions in which it acquired in force insurance policies
(together the "Transactions") (see Note 2 of "Notes to Condensed
Consolidated Financial Statements"). The Transactions increased total
assets and liabilities by approximately $290 million. The assets received
consisted primarily of cash and high quality investments and the
liabilities assumed consisted primarily of future policy benefits on
traditional life insurance policies and account values on annuity and
interest sensitive life insurance policies. For the quarter ended
September 30, 1996, these transactions contributed policy revenues totaling
$5.1 million.
In October 1996, REALIC completed the acquisition of New American Life
Insurance Company (see Note 2 of "Notes to Condensed Consolidated
Financial Statements").
Results of Operations
Nine Months Ended September 30, 1996 Compared to Nine Months Ended
September 30, 1995
Net income totaled $41.0 million for the nine months ended September
30, 1996 compared to $23.1 million for the same period last year. Included
in these results were after-tax realized investment gains of $14.9 million
and $1.1 million, respectively. In March 1996, the Company realized a gain
of $13.5 million from the sale of its investment in warrants to purchase
common stock of Nacolah Holding Corporation ("Nacolah"), parent of North
American Company for Life and Health Insurance (see Note 4 of "Notes to
Condensed Consolidated Financial Statements"). This gain triggered the
utilization of tax net operating loss carryforwards and a corresponding
reversal of a previously established deferred tax valuation allowance,
resulting in a tax benefit of $4.7 million.
Income before federal income taxes and excluding realized investment
gains was $40.0 million in the current nine month period compared to $33.9
million in last year's comparable period. This increase is due largely to
earnings from REALIC which was acquired on July 31, 1995, including the
Transactions.
Policy Revenues. Policy revenues increased by $48.2 million, or 17%, to
$328.9 million in 1996 from $280.8 million in 1995. Of this increase, $9.3
million is attributable to REALIC. Policy fees and charges, one component
of policy revenues, increased by 45% to $20.1 million, principally from
annuity and interest sensitive business acquired in the Transactions.
Ordinary life insurance premiums and group insurance premiums, which
comprise the balance of policy revenues, each increased by 16% to $189.6
million and $119.2 million, respectively. The increase in ordinary life
insurance premiums was due primarily to new reinsurance agreements, the
Transactions and the effect in 1995 of a negative premium adjustment from a
ceding company client. The increase in group insurance premiums was due to
higher volumes from existing group agreements; group insurance premiums are
not expected to continue growing at the current rate.
Investment Income. Investment income increased by $19.7 million, or 28%,
to $89.9 million in the current nine month period from $70.1 million in the
nine month period of 1995. This increase was primarily the result of
investment earnings relating to the assets acquired in the Transactions.
The weighted average portfolio yield rate decreased to 7.74% in 1996 from
8.23% in 1995, principally due to lower yields existing at the time of the
REALIC acquisition and a general decline in interest rates.
Realized Investment Gains. Realized investment gains totaled $15.7 million
in the 1996 period compared to $1.7 million in the 1995 period principally
due to the $13.5 million Nacolah gain. The remaining gains were largely
the result of calls and the maturities of certain securities previously
written down.
Policy Claims and Benefits. Policy claims and benefits increased by $35.4
million, or 17%, to $245.6 million from $210.2 million last year.
Increases in both the ordinary and group lines were consistent with the
related policy revenue growth.
Commissions and Allowances. Commissions and allowances increased by $10.1
million, or 15%, to $77.7 million from $67.6 million. This increase was
largely due to higher revenue volumes, a reduction in premium tax
allowances of $1.4 million in the first quarter of 1995 and higher
allowances in the group lines in the current period. As a percentage of
policy revenues, commissions and allowances were 23.6% and 24.1% in the
respective periods. The lower rate in 1996 is largely attributable to
primary insurance business, as the commission rate in the primary insurance
business is generally lower than that in the reinsurance business.
Interest Credited on Annuity and Interest Sensitive Life Insurance
Contracts. Interest credited on annuity and interest sensitive life
insurance contracts increased to $24.1 million from $13.3 million last year
due to the Transactions, partially offset by a modest decrease in crediting
rates period to period.
Amortization of Value of Business Acquired. The amortization of value of
business acquired increased by $1.1 million to $3.9 million in 1996 from
$2.8 million in 1995, primarily due to the 1995 acquisition of REALIC.
Interest Expense. Interest expense on the Company's variable rate bank
loans totaled $6.5 million in the current nine month period compared to
$8.1 million in last year's period. This decrease was due to a loan
repayment of $15.0 million in the first quarter of 1996 coupled with a
decrease in the weighted average interest rate to 6.18% from 7.26% last
year.
Other Operating Expenses. Other operating expenses increased by $6.0
million to $21.0 million from $15.0 million last year. REALIC contributed
$2.8 million of this increase, primarily comprised of third party
administration fees. The remaining increase was due to acquisition-related
employee compensation and higher staffing levels as well as a reduction in
incentive compensation provisions in last year's third quarter totaling
$1.2 million.
Federal Income Taxes. Federal income tax expense in the period totaled
$14.8 million and represents an effective federal income tax rate of 27%.
The expense is net of a $4.7 million tax benefit resulting from the
reversal of a deferred tax valuation allowance in connection with the
realized investment gain on the Nacolah transaction.
Third Quarter of 1996 Compared to Third Quarter of 1995
Net income increased by $1.5 million to $10.5 million from $9.0 million in
the third quarter of 1995. Included in these results were after-tax
realized investment gains of $0.7 million and $1.0 million, respectively.
Income before federal income taxes and excluding realized investment gains
was $15.1 million in the current quarter compared to $12.4 million last
year. This increase is attributable largely to REALIC, which contributed
$2.7 million of earnings before taxes and realized investment gains compared
to $1.1 million in 1995.
Policy Revenues. Policy revenues increased by $29.5 million, or 31%, to
$123.8 million from $94.2 million. Of this increase, $5.7 million is
attributable to REALIC. Policy fees and charges, one component of policy
revenues, increased by 58% to $9.0 million as a result of the Transactions.
Ordinary life insurance premiums and group insurance premiums, which
comprise the balance of policy revenues, increased by 33% and 26%,
respectively, to $68.3 million and $46.4 million. The increase in ordinary
life insurance premiums was due primarily to new reinsurance agreements,
the Transactions and a negative premium adjustment of $3.1 million recorded
in last year's third quarter relating to revised premium data received from
a ceding company client. The increase in group premiums was due to higher
volume from existing group agreements; group insurance premiums are not
expected to continue growing at the current rate.
Investment Income. Investment income increased by $6.4 million, or 25%, to
$32.6 million from $26.1 million, primarily as a result of investment
earnings relating to the assets acquired in the Transactions. The weighted
average portfolio yield rate decreased to 7.82% in the current period from
8.20% in 1995.
Realized Investment Gains. Realized investment gains totaled $1.0 million
in the current quarter compared to $1.5 million last year. In the current
quarter, gains primarily resulted from calls and maturities of certain
securities previously written down. Gains in the third quarter of 1995
were largely the result of a portfolio restructuring at REALIC.
Policy Claims and Benefits. Policy claims and benefits increased by $24.4
million, or 36%, to $92.3 million from $67.9 million. The ratio of claims
and benefits to policy revenues also increased quarter to quarter because
of changes in the mix of business due to the Transactions as well as
reserves established for single premium structured settlement annuities
reinsured in 1996.
Commissions and Allowances. Commissions and allowances increased by $3.2
million, or 13%, to $28.3 million from $25.1 million. As a percentage of
policy revenues, these amounts were 22.9% and 26.7%, respectively. This
decrease in rate was due to lower commissions on REALIC's business
and higher net deferrals on ordinary reinsurance business.
Interest Credited on Annuity and Interest Sensitive Life Insurance
Contracts. Interest credited on annuity and interest sensitive life
insurance contracts increased to $9.5 million from $6.0 million in the
third quarter of 1995 principally due to the Transactions. Interest
crediting rates decreased slightly from period to period.
Amortization of Value of Business Acquired. The amortization of value of
business acquired decreased to $1.2 million this quarter from $1.4 million
last year. The 1996 lapsation of insurance inforce was less than that in
1995, which caused a decrease in amortization from period to period.
Partially offsetting this decrease was amortization relating to the
insurance in force acquired in the Transactions.
Interest Expense. Interest expense on the Company's variable rate bank
loans totaled $2.0 million in the quarter compared to $2.7 million last
year. The weighted average interest rate decreased to 6.02% from 7.04% in
last year's third quarter. In March 1996, the Company repaid $15.0 million
of its bank debt.
Other Operating Expenses. Other operating expenses increased by $2.8
million to $7.8 million in the third quarter of 1996. This increase is
primarily attributable to REALIC third party administration fees and
acquisition-related compensation costs, as well as a reduction in incentive
compensation provisions in last year's third quarter totaling $1.2 million.
Federal Income Taxes. Federal income tax expense in the current quarter
totaled $5.6 million and represents an effective federal income tax rate of
35.0%, which is the same effective rate as in the third quarter of 1995.
INVESTMENTS
Invested assets increased by $190.3 million, to $1,694.5 million at
September 30, 1996 from $1,504.2 million at December 31, 1995, primarily as
a result of the Transactions, partially offset by a decrease in unrealized
gains on fixed maturities. Higher interest rates prevailing in the general
fixed maturities markets at September 30, 1996 compared to those at
December 31, 1995 resulted in a reduction of $77.6 million in the fair
value of the portfolio.
The Company's fixed maturity portfolio (including the fixed maturity
securities which are included in assets held by ceding company under
reinsurance treaty) constituted 94% of invested assets at September 30,
1996, of which $67.6 million, or 4% of invested assets, consisted of below
investment grade securities. At September 30, 1996, the weighted average
quality rating of the fixed maturities portfolio was "A", and no fixed
maturities were in default.
LIQUIDITY AND CAPITAL RESOURCES
Sources of liquidity are available to the Company in the form of cash
and short-term investments and, if necessary, the sale of invested assets.
The Company can also borrow an additional $35.0 million under its revolving
credit agreement and may from time to time enter into reverse repurchase
agreements to fund short-term cash needs. In accordance with its bank
credit agreement, the Company received a one year extension of the
principal amortization schedule. As a result of the extension, the
initial principal payment is due January 1999 with a revised maturity date
of January 5, 2003. The bank credit agreement also provides for one
additional one year extension. As of September 30, 1996 and December 31,
1995, the weighted average interest rate on long-term debt was 6.10% and
6.33%, respectively. In addition to debt servicing and dividend
obligations, the Company's financial obligations consist of policy claim
and benefit payments, business acquisition costs, taxes and general
operating expenses. Currently, these obligations are adequately provided
for by operating cash flows.
The ability of the Company to make principal and interest payments as
well as to continue to pay common stock dividends is ultimately dependent
on the statutory earnings and surplus of the insurance subsidiaries. The
transfer of funds from the subsidiaries to Life Re Corporation is subject
to applicable insurance laws and regulations. The Nacolah transaction
provided $25.1 million of funds to Life Re Corporation of which $15.0
million was used to pay down the outstanding debt. The Company also
continues to buy shares of its common stock pursuant to a stock repurchase
program approved by the Company's Board of Directors under which a total
3.0 million shares have been authorized for purchase. As of September 30,
1996, the Company had repurchased over 2.1 million shares for an aggregate
purchase price of $45.5 million including $16.0 million in the nine months
ended September 30, 1996.
PART II - OTHER INFORMATION
ITEM 5
OTHER INFORMATION
On October 31, 1996, Life Re Corporation (the "Company"), through its
subsidiary Reassure America Life Insurance Company ("REALIC"), completed its
acquisition of all the outstanding common stock of New American Life
Insurance Company ("New American") from a subsidiary of General Accident plc,
Perth, Scotland. New American was merged with and into REALIC.
In accordance with the Amended and Restated Credit Amendment
dated as of November 2, 1995 among Life Re Corporation, as the Borrower,
Various Financial Institutions, as the Lenders, Shawmut Bank Connecticut,
N.A., Bank of America Illinois and The Bank of New York, as Co-Agents, and
Bank of America National Trust and Savings Association, as Administrative
Agent for the Lenders (the "Amended and Restated Credit Agreement"), the
Company received a one year extension of the principal amortization schedule.
As a result of the extension, the initial principal payment is due January
1999 with a revised maturity date of January 5, 2003. The Amended and
Restated Credit Agreement also provides for one additional one year extension.
The amount outstanding under the Amended and Restated Credit Agreement
will be amortized on January 5 of each indicated year in accordance with the
following schedule (assuming no further extensions):
Year Percent of Principal Amount Outstanding
1999 12.5%
2000 15.625%
2001 21.875%
2002 25.0%
2003 25.0%
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.01 Certificate of Incorporation of Life Re Corporation (the
"Company"), dated June 1, 1988, incorporated by reference to
Exhibit 3.1 of the Company's Registration Statement on Form
S-1 (File No. 33-50556).
3.02 Amendment to the Certificate of Incorporation of the
Company, dated November 10, 1988, incorporated by reference
to Exhibit 3.5 of the Company's Registration Statement on
Form S-1 (File No. 33-50556).
3.03 Amendment to the Certificate of Incorporation of the
Company, dated December 9, 1988, incorporated by reference
to Exhibit 3.6 of the Company's Registration Statement on
Form S-1 (File No. 33-50556).
3.04 Amendment to the Certificate of Incorporation of the
Company, dated December 27, 1988, incorporated by reference
to Exhibit 3.7 of the Company's Registration Statement on
Form S-1 (File No. 33-50556).
3.05 Amendment to the Certificate of Incorporation of the
Company, dated October 14, 1992, incorporated by reference
to Exhibit 3.07 of the Company's Form 10-K for the fiscal
year ended December 31, 1992, as filed with the Securities
and Exchange Commission on March 31, 1993.
3.06 Amendment to the Certificate of Incorporation of the
Company, dated October 30, 1992, incorporated by reference
to Exhibit 3.08 of the Company's Form 10-K for the fiscal
year ended December 31, 1992, as filed with the Securities
and Exchange Commission on March 31, 1993.
3.07 By-Laws of the Company, dated August 5, 1992, incorporated
by reference to Exhibit 3.09 of the Company's Form 10-K for
the year ended December 31, 1992, as filed with the
Securities and Exchange Commission on March 31, 1993.
4.01 Specimen Common Stock Certificate of the Company,
incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-1 (File No. 33-50556).
10.01 Amendment to Employment Agreement, dated as of November11,
1996, to the Employment Agreement, effective as of June 9,
1995, between the Company and Rodney A. Hawes, Jr.
10.02 Amendment to Employment Agreement, dated as of November 11,
1996, to the Employment Agreement, effective as of June 9,
1995, between the Company and Douglas M. Schair.
10.03 Amendment to Employment Agreement, dated as of November 11,
1996, to the Employment Agreement, effective as of June 9,
1995, between the Company and Jacques E. Dubois.
10.04 November 1994 Amendment to the Amended and Restated Advisory
Agreement between Life Reassurance Corporation of America
and Conseco Capital Management, Inc., effective as of
November 1, 1994.
10.05 May 1995 Amendment to the Amended and Restated Advisory
Agreement between Life Reassurance Corporation of America
and Conseco Capital Management, Inc., effective as of May
31, 1995.
10.06 September 1996 Amendment to the Amended and Restated
Advisory Agreement between Life Reassurance Corporation of
America and Conseco Capital Management, Inc., effective as
of September 15, 1996.
10.07 Amendment Number One to Advisory Agreement dated December
31, 1991 between Liberty Capital Advisors, Inc. and Life
Reassurance Corporation of America, effective as of July 1,
1996.
10.08 Consent to extension of Commitment Termination Date, dated
November 6, 1996, pursuant to the Amended and Restated
Credit Amendment dated as of November 2, 1995 among Life Re
Corporation, as the Borrower, Various Financial
Institutions, as the Lenders, Shawmut Bank Connecticut,
N.A., Bank of America Illinois and The Bank of New York, as
Co-Agents, and Bank of America National Trust and Savings
Association, as Administrative Agent for the Lenders.
27.01 Financial Data Schedule
(b) A Report on Form 8-K/A-1 was filed with the Securities and
Exchange Commission on September 12, 1996 regarding the
acquisition of Modern American Life Insurance Company and Western
Pioneer Life Insurance Company and certain financial information
related thereto. No other reports on Form 8-K were filed with the
Securities and Exchange Commission during the three months ended
September 30, 1996. A Report on Form 8-K was filed with the
Securities and Exchange Commission on October 21, 1996 regarding
the acquisition of New American Life Insurance Company.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Life Re Corporation
Dated: November 14, 1996 By:/s/Chris C. Stroup
Executive Vice President
and Chief Financial Officer
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment (this "Amendment") amends and modifies the Employment
Agreement (the "Agreement") between Life Re Corporation, a Delaware
corporation (the "Company"), and Rodney A. Hawes, Jr. (the "Executive"),
effective as of June 9, 1995.
WHEREAS, the Company and the Executive desire to amend the Agreement to
provide the Executive with additional security in the event of a change in
control of the Company;
NOW, THEREFORE, the Company and the Executive hereby agree as follows:
(1) A paragraph 9A, which reads in its entirety as follows,
shall be added to the Agreement:
9A. Change in Control. Within thirty days after the
occurrence of a Triggering Event, the Executive, in his sole
discretion, may elect to either (i) terminate his employment with
the Company following the occurrence of the Change in Control
relating to the Triggering Event (if such Change in Control
actually does occur), or (ii) continue his employment with the
Company, regardless of the occurrence of the Change in Control. If
the Executive does not inform the Company of his decision to
terminate his employment therewith following the related Change in
Control (should such Change in Control actually occur) within
thirty (30) days after the occurrence of the Triggering Event, the
Executive will be deemed to have elected to continue his
employment with the Company. If the Executive elects to terminate
his employment with the Company following the occurrence of the
Change in Control, upon such termination, pursuant to the last
paragraph of this paragraph 9A, the Company will cause the
Executive to be paid the amount the Executive would have been paid
under paragraph 9(a) had his employment with the Company been
terminated by the Company following the occurrence of a Change in
Control.
For purposes of this paragraph 9A, a "Triggering Event"
shall mean solely the earliest to occur of the following:
(i) for purposes of a Change in Control under paragraph
20(e)(i), the date as of which any person (as such term is used in
paragraphs 13(d) and 14(d)(2) of the Exchange Act, hereinafter in
this paragraph 20(e), "Person") files a Form A or similar
application with a regulatory authority in either case which
evidences an intent to effect a Change in Control; and
(ii) for purposes of a Change in Control under paragraph
20(e)(ii) or (iii), the date on which notice of the applicable
shareholder vote is sent to holders of common stock of the
Company.
Upon receiving timely notice from the Executive that he has
elected to terminate his employment with the Company should the
Change in Control actually occur pursuant to this paragraph 9A,
the Company shall fully and immediately fund the trust established
for the benefit of the Executive and other similarly-situated
executives of the Company ("Trust") for the payment of the amount
referred to in the last sentence of the first paragraph of this
paragraph 9A. If the Executive elects to terminate his employment
with the Company pursuant to this paragraph 9A and a Change in
Control does occur, pursuant to the terms of the trust agreement
establishing the Trust, the trustee of the Trust will be directed
by the Company to pay all of the funds in the Trust to the
Executive upon his termination of employment with the Company. If
the Change in Control does not occur within eighteen (18) months
of the date on which the trust is funded, the Trust corpus shall
be returned to the Company and all of the provisions of this
paragraph 9A shall again become newly effective as if never
triggered.
(2) This Amendment shall be effective as of September 1, 1996.
(3) No other provision of the Agreement shall be changed or
modified by this Amendment.
IN WITNESS WHEREOF, the Company has caused this Amendment to be signed
by its authorized representatives, and the Executive has hereunto set his
hand, as of November 11, 1996.
LIFE RE CORPORATION
By: /s/ W. Weldon Wilson,
Vice President,
General Counsel and Secretary
EXECUTIVE:
By: /s/Rodney A. Hawes, Jr.
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment (this "Amendment") amends and modifies the Employment
Agreement (the "Agreement") between Life Re Corporation, a Delaware
corporation (the "Company"), and Douglas M. Schair (the "Executive"),
effective as of June 9, 1995.
WHEREAS, the Company and the Executive desire to amend the Agreement to
provide the Executive with additional security in the event of a change in
control of the Company;
NOW, THEREFORE, the Company and the Executive hereby agree as follows:
(1) A paragraph 9A, which reads in its entirety as follows,
shall be added to the Agreement:
9A. Change in Control. Within thirty days after the
occurrence of a Triggering Event, the Executive, in his sole
discretion, may elect to either (i) terminate his employment with
the Company following the occurrence of the Change in Control
relating to the Triggering Event (if such Change in Control
actually does occur), or (ii) continue his employment with the
Company, regardless of the occurrence of the Change in Control. If
the Executive does not inform the Company of his decision to
terminate his employment therewith following the related Change in
Control (should such Change in Control actually occur) within
thirty (30) days after the occurrence of the Triggering Event, the
Executive will be deemed to have elected to continue his
employment with the Company. If the Executive elects to terminate
his employment with the Company following the occurrence of the
Change in Control, upon such termination, pursuant to the last
paragraph of this paragraph 9A, the Company will cause the
Executive to be paid the amount the Executive would have been paid
under paragraph 9(a) had his employment with the Company been
terminated by the Company following the occurrence of a Change in
Control.
For purposes of this paragraph 9A, a "Triggering Event"
shall mean solely the earliest to occur of the following:
(i) for purposes of a Change in Control under paragraph
20(e)(i), the date as of which any person (as such term is used in
paragraphs 13(d) and 14(d)(2) of the Exchange Act, hereinafter in
this paragraph 20(e), "Person") files a Form A or similar
application with a regulatory authority in either case which
evidences an intent to effect a Change in Control; and
(ii) for purposes of a Change in Control under paragraph
20(e)(ii) or (iii), the date on which notice of the applicable
shareholder vote is sent to holders of common stock of the
Company.
Upon receiving timely notice from the Executive that he has
elected to terminate his employment with the Company should the
Change in Control actually occur pursuant to this paragraph 9A,
the Company shall fully and immediately fund the trust established
for the benefit of the Executive and other similarly-situated
executives of the Company ("Trust") for the payment of the amount
referred to in the last sentence of the first paragraph of this
paragraph 9A. If the Executive elects to terminate his employment
with the Company pursuant to this paragraph 9A and a Change in
Control does occur, pursuant to the terms of the trust agreement
establishing the Trust, the trustee of the Trust will be directed
by the Company to pay all of the funds in the Trust to the
Executive upon his termination of employment with the Company. If
the Change in Control does not occur within eighteen (18) months
of the date on which the trust is funded, the Trust corpus shall
be returned to the Company and all of the provisions of this
paragraph 9A shall again become newly effective as if never
triggered.
(2) This Amendment shall be effective as of September 1, 1996.
(3) No other provision of the Agreement shall be changed or
modified by this Amendment.
IN WITNESS WHEREOF, the Company has caused this Amendment to be signed
by its authorized representatives, and the Executive has hereunto set his
hand, as of November 11, 1996.
LIFE RE CORPORATION
By: /s/ W. Weldon Wilson,
Vice President,
General Counsel and Secretary
EXECUTIVE:
By: /s/ Douglas M. Schair
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment (this "Amendment") amends and modifies the Employment
Agreement (the "Agreement") between Life Re Corporation, a Delaware
corporation (the "Company"), and Jacques E. Dubois (the "Executive"),
effective as of June 9, 1995.
WHEREAS, the Company and the Executive desire to amend the Agreement to
provide the Executive with additional security in the event of a change in
control of the Company;
NOW, THEREFORE, the Company and the Executive hereby agree as follows:
(1) A paragraph 9A, which reads in its entirety as follows,
shall be added to the Agreement:
9A. Change in Control. Within thirty days after the
occurrence of a Triggering Event, the Executive, in his sole
discretion, may elect to either (i) terminate his employment with
the Company following the occurrence of the Change in Control
relating to the Triggering Event (if such Change in Control
actually does occur), or (ii) continue his employment with the
Company, regardless of the occurrence of the Change in Control. If
the Executive does not inform the Company of his decision to
terminate his employment therewith following the related Change in
Control (should such Change in Control actually occur) within
thirty (30) days after the occurrence of the Triggering Event, the
Executive will be deemed to have elected to continue his
employment with the Company. If the Executive elects to terminate
his employment with the Company following the occurrence of the
Change in Control, upon such termination, pursuant to the last
paragraph of this paragraph 9A, the Company will cause the
Executive to be paid the amount the Executive would have been paid
under paragraph 9(a) had his employment with the Company been
terminated by the Company following the occurrence of a Change in
Control.
For purposes of this paragraph 9A, a "Triggering Event"
shall mean solely the earliest to occur of the following:
(i) for purposes of a Change in Control under paragraph
20(e)(i), the date as of which any person (as such term is used in
paragraphs 13(d) and 14(d)(2) of the Exchange Act, hereinafter in
this paragraph 20(e), "Person") files a Form A or similar
application with a regulatory authority in either case which
evidences an intent to effect a Change in Control; and
(ii) for purposes of a Change in Control under paragraph
20(e)(ii) or (iii), the date on which notice of the applicable
shareholder vote is sent to holders of common stock of the
Company.
Upon receiving timely notice from the Executive that he has
elected to terminate his employment with the Company should the
Change in Control actually occur pursuant to this paragraph 9A,
the Company shall fully and immediately fund the trust established
for the benefit of the Executive and other similarly-situated
executives of the Company ("Trust") for the payment of the amount
referred to in the last sentence of the first paragraph of this
paragraph 9A. If the Executive elects to terminate his employment
with the Company pursuant to this paragraph 9A and a Change in
Control does occur, pursuant to the terms of the trust agreement
establishing the Trust, the trustee of the Trust will be directed
by the Company to pay all of the funds in the Trust to the
Executive upon his termination of employment with the Company. If
the Change in Control does not occur within eighteen (18) months
of the date on which the trust is funded, the Trust corpus shall
be returned to the Company and all of the provisions of this
paragraph 9A shall again become newly effective as if never
triggered.
(2) This Amendment shall be effective as of September 1, 1996.
(3) No other provision of the Agreement shall be changed or
modified by this Amendment.
IN WITNESS WHEREOF, the Company has caused this Amendment to be signed
by its authorized representatives, and the Executive has hereunto set his
hand, as of November 11, 1996.
LIFE RE CORPORATION
By: /s/ W. Weldon Wilson,
Vice President,
General Counsel and Secretary
EXECUTIVE:
By: /s/ Jacques E. Dubois
NOVEMBER 1994 AMENDMENT TO
THE AMENDED AND RESTATED
ADVISORY AGREEMENT
THIS AMENDMENT ("Amendment") to the Amended and Restated Advisory
Agreement is entered into on the 15th day of December 1994, between LIFE
REASSURANCE CORPORATION OF AMERICA, a Connecticut stock insurance corporation
formerly known as General Reassurance Corporation (the "Company") and CONSECO
CAPITAL MANAGEMENT, INC., a Delaware corporation (the "Adviser").
WHEREAS, the Company and the Adviser are parties to the Amended and
Restated Advisory Agreement, originally dated November 16, 1998 and amended as
of October 1, 1993 (the "Agreement"); and
WHEREAS, the Company and the Adviser now desire to amend the
compensation provision of the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, the parties hereto agree as follows:
A. The Adviser and the Company agree to amend Section 7 of the Agreement
in its entirety to read as follows:
7. COMPENSATION. For the services to be rendered by the Adviser
as provided in this Agreement, the Company will pay to the Adviser a
quarterly fee equal to 0.02% of the total market value of the investable
assets in the Designated Portfolio as of the end of the most recent
fiscal quarter. If the combined quarterly fee payable to the Adviser by
the Company under this Agreement and under that Certain Agreement
between the Adviser and The Mutual Life Insurance Company of New York,
dated effective May 25, 1994 (the "MONY Agreement"), is less than
$100,000, then the Company agrees to pay the Adviser a combined
quarterly fee under this Agreement and the MONY Agreement of $100,000.
Such quarterly fee will be payable in advance within ten (10) business
days after the last day of each fiscal quarter.
B. This Amendment will become effective on November 1, 1994 and the
amended compensation provision will apply to payments of compensation made
after such date.
C. This Amendment may be executed simultaneously in any number of
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
date first written above.
LIFE REASSURANCE CORPORATION OF
AMERICA
/S/ W. WELDON WILSON
Title: Senior Vice President
CONSECO CAPITAL MANAGEMENT, INC.
/s/ Maxwell E. Bublitz
Title: President
MAY 1995 AMENDMENT TO
THE AMENDED AND RESTATED
ADVISORY AGREEMENT
THIS AMENDMENT ("Amendment") to the Amended and Restated
Advisory Agreement is entered into on the 31st day of May,
1995, between LIFE REASSURANCE CORPORATION OF AMERICA, a
Connecticut stock insurance corporation formerly known as
General Reassurance Corporation (the "Company") and CONSECO
CAPITAL MANAGEMENT, INC., a Delaware corporation (the
"Adviser").
WHEREAS, the Company and the Adviser are parties to the
Amended and Restated Advisory Agreement, originally dated
November 16, 1988 and amended as of October 1, 1993 and
December 15, 1994 (the "Agreement"); and
WHEREAS, the Company and the Adviser now desire to add a
confidentiality provision to the Agreement;
NOW, THEREFORE, in consideration of the premises and
mutual promises hereinafter set forth, the parties hereto agree
as follows:
A. The Company and the Adviser agree to add to the
Agreement Section 13 in its entirety to read as follows:
13. Confidentiality. Subject to the duty of
the Adviser or the Company to comply with applicable
law, each party hereto shall treat as confidential
all information with respect to the other party
received pursuant to this Agreement.
(a) DEFINITIONS
(i) "Investment Reports" include statements,
reports, analyses, data, summaries, calculations,
formulas and the like concerning portfolio holdings,
investment strategy, security selection and
performance results, whether in written, oral or
electronic form.
(ii) "Representatives" include the Company's
directors, officers, employees, accountants, and
legal and financial advisors (1) who are monitoring
and evaluating the portfolios or who otherwise need
such Investment Reports and (2) who have been
informed that the Investment Reports are subject to
the terms of this Agreement and agree to be bound by
these terms.
(b) Portfolio, actuarial, asset and liability
and other non-public information concerning the Company
provided by the Company to the Adviser will be kept
strictly confidential. The Adviser shall establish and
maintain reasonable procedures to keep Investments
Reports, the information supplied by the Company to
Adviser for the Investment Reports and other non-public
information provided hereunder confidential and to prevent
disclosure or distribution other than to the Company or
its Representatives. The Adviser will be responsible for
compliance with these terms of this Agreement by its
officers and employees.
(c) Investment Reports provided by the
Adviser to the Company are privileged, may include
proprietary information and will be kept strictly
confidential. Investment Reports will be used solely for
the purpose of monitoring and evaluating the performance
of the portfolio under the Adviser's management and for
the use by the Company in testing its portfolio assets for
regulatory compliance and similar purposes. The Company
shall establish and maintain reasonable procedures to keep
Investment Reports confidential and to prevent disclosure
or distribution other than to its Representatives. The
Company will be responsible for compliance with these
terms of this Agreement by its Representatives.
(d) Each party hereto will obtain the other
party's approval before sending or making available any
Investments Report to third parties.
B. This Amendment will become effective on May
31, 1995.
C. This Amendment may be executed
simultaneously in any number of counterparts, each of
which will be deemed an original, but all of which
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective officers
thereunto duly authorized as of the date first written above.
LIFE REASSURANCE
CORPORATION OF AMERICA
By:/s/ W. Weldon Wilson,
Senior Vice President
CONSECO CAPITAL MANAGEMENT, INC.
By:/S/Maxwell E. Bublitz
President/CEO
SEPTEMBER 1996 AMENDMENT TO
THE AMENDED AND RESTATED
ADVISORY AGREEMENT
THIS AMENDMENT ("Amendment") to the Amended and Restated Advisory
Agreement is entered into on the 15th day of September, 1996, between LIFE
REASSURANCE CORPORATION OF AMERICA, a Connecticut stock insurance corporation
formerly known as General Reassurance Corporation (the "Company") and CONSECO
CAPITAL MANAGEMENT, INC., a Delaware corporation (the "Adviser").
WHEREAS, the Company and the Adviser are parties to the Amended and
Restated Advisory Agreement, originally dated November 16, 1988 and amended as
of October 1, 1993, December 15, 1994, and May 31, 1995 (the "Agreement"); and
WHEREAS, the Company and the Adviser now desire to amend the
compensation provision of the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, the parties hereto agree as follows:
A. The Adviser and the Company agree to amend Section 7 of the
Agreement in its entirety to read as follows:
7. Compensation. For the services to be rendered by the
Adviser as provided in this Agreement, the Company will pay to the
Adviser a quarterly fee equal to: (i) 0.02% of the total market value of
the investable assets in the Designated Portfolio as of the end of the
most recent fiscal quarter for the first $1 billion in the Designated
Portfolio; and (ii) 0.0125% of the total market value of the investable
assets in the Designated Portfolio as of the end of the most recent
fiscal quarter for all amounts in excess of $1 billion in the Designated
Portfolio. If the combined quarterly fee payable to the Adviser by the
Company under this Agreement and under that Certain Agreement between
the Adviser and The Mutual Life Insurance Company of New York, dated
effective May 25, 1994 (the "MONY Agreement"), is less than $100,000,
then the Company agrees to pay the Adviser a combined quarterly fee
under this Agreement and the MONY Agreement of $100,000. Such quarterly
fee will be payable in advance within ten (10) business days after the
last day of each fiscal quarter.
B. This Amendment will become effective on September 15, 1996 and the
amended compensation provision will apply to payments of compensation made
after such date.
C. This Amendment may be executed simultaneously in any number of
counterparts, each of which will be deemed an original, but all of which will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
date first written above.
LIFE REASSURANCE CORPORATION OF AMERICA
By:/s/Douglas M. Schair,
Vice Chairman of the Board and
Chief Investment Officer
CONSECO CAPITAL MANAGEMENT, INC.
By:/s/Maxwell E. Bublitz
Name: Maxwell E. Bublitz
Title: President
AMENDMENT NUMBER ONE
TO ADVISORY AGREEMENT DATED DECEMBER 31, 1991
BETWEEN LIBERTY CAPITAL ADVISORS, INC.
AND
LIFE REASSURANCE CORPORATION OF AMERICA
This Amendment Number One ("Amendment 1") is entered into by and
between Liberty Capital Advisors, Inc., a South Carolina corporation with
an address at 2000 Wade Hampton Boulevard, Greenville, South Carolina 29615
(the "Adviser"), and Life Reassurance Corporation of America, a Connecticut
insurance corporation with an address at 969 High Ridge Road, Stamford,
Connecticut 06905 (the "Company"), to be effective as of July 1, 1996.
Whereas, the Adviser and the Company are parties to that certain
Advisory Agreement dated December 31, 1991 (the "Advisory Agreement"); and
Whereas, the Adviser and the Company desire to amend the provisions
of the Advisory Agreement with regard to the compensation to be paid by the
Company to the Adviser for services rendered under the Advisory Agreement.
Now, therefore, in exchange for mutual consideration, the receipt and
sufficiency of which are hereby acknowledged, the Adviser and the Company
hereby agree to amend the Advisory Agreement pursuant to the terms set
forth below:
A. Any terms used in this Amendment 1 that are not defined herein shall
have the meanings ascribed to such terms in the Advisory Agreement.
B. Exhibit B of the Advisory Agreement is hereby deleted in its entirety
and is replaced by the following:
Exhibit B
The Company will pay the Adviser a quarterly
fee, as set forth in Section 7 of the Advisory
Agreement, based on the market value of the assets
in the Designated Portfolio. The quarterly fee for
each category of asset in the Designated Portfolio
is 0.02%.
C. No other provisions of the Advisory Agreement are amended or modified
by this Amendment 1.
D. This Amendment 1 shall be effective as of July 1, 1996 and the
amended compensation provision will apply to all payments of compensation
made by the Company to the Adviser after such date.
IN WITNESS WHEREOF, the Adviser and the Company have executed this
Amendment 1 on the dates set forth below.
LIBERTY CAPITAL ADVISORS, INC.
/s/ Porter B. Rose
Date: August 16, 1996 Title: Chairman
LIFE REASSURANCE CORPORATION
OF AMERICA
/s/ Douglas M. Schair
Date: August 16, 1996 Title: Vice Chairman of the Board and
Chief Investment Officer
August 19, 1996
Bank of America National Trust and Savings
Association, as Administrative Agent, and the
Lenders under the Credit Agreement referred to
below
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Michael T. Ernst
Pursuant to the Amended and Restated Credit Agreement dated as of
November 2, 1995 (the "Credit Agreement") among Life Re Corporation (the
"Borrower"), various financial institutions and Bank of America National
Trust and Savings Association, as Administrative Agent, this represents
the Borrower's request to extend the Commitment Termination Date (as
defined in the Credit Agreement) to January 5, 1999.
Please indicate whether you consent to such extension of the
Commitment Termination Date by signing the attached copy of this Extension
Request in the space provided below and returning the same to the
undersigned by October 1, 1996.
Very truly yours,
LIFE RE CORPORATION
By: /s/ Chris C. Stroup
Executive Vice President and
Chief Financial Officer
Date: 11/6/96
ACCEPTS yes
REJECTS
By: /s/Michael T. Ernst
Title: Vice President
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0
0
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328,945
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