<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark
One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______ to ________
Commission file number 33-94226-A
THE WMA CORPORATION
(Name of small business issuer in its charter)
Delaware 58-2179041
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11315 Johns Creek Parkway, Duluth, Georgia 30097
------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number: (770) 248-3311
--------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date:
As of March 31, 1998, there were 2,495,710 shares of common stock (.001
par value) outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes No X
----- -----
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
PAGE NO.
--------
<S> <C> <C>
ITEM 1 Financial Statements
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II
ITEM 1 Legal Proceedings
ITEM 2 Changes in Securities
ITEM 3 Defaults Upon Senior Securities
ITEM 4 Submission of Matters to a Vote of Security Holders
ITEM 5 Other Information
ITEM 6 Exhibits and Reports on Form 8-K
</TABLE>
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<PAGE> 3
THE WMA CORPORATION
Consolidated Balance Sheets
MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended March 31, Ended March 31,
1998 1997
---- ----
<S> <C> <C>
Assets
------
Fixed maturity securities - available for sale (amortized cost of
$16,995,247 and $16,942,853 for 1998 and 1997, respectively) $ 17,121,692 $ 16,364,373
Equity securities - available for sale (cost of $487,733 for 1998 and 1997) 714,597 492,583
------------ ------------
Total investments 17,836,289 16,856,956
Cash and cash equivalents 1,991,275 2,174,115
Investment income due and accrued 259,414 244,955
Prepaid expenses 387,766 43,889
Deferred acquisition costs 6,558,706 1,033,939
Deferred organization costs (net of accumulated amortization of
$71,238 and $34,801 at March 31, 1998 and 1997 respectively) 115,632 152,068
Other assets 9,600 36,090
------------ ------------
Total assets $ 27,158,682 $ 20,542,012
============ ============
Liabilities and Stockholders' Equity
-----------------------------------
Liabilities:
Future policy benefits $ 1,498,899 $ 545,511
Reinsurance balances payable 1,396,536 80,307
Accrued expenses 228,501 224,679
Accounts payable 400,920 71,810
Deferred tax liability 1,184,242 147,421
------------ ------------
Total liabilities 4,709,098 1,069,728
Stockholders' equity:
Common stock, par value $.001, 10,000,000 authorized: 2,500,000 and
2,411,742 shares issued in 1998 and 1997, respectively 2,500 2,412
Additional paid-in capital 20,228,973 19,348,481
Accumulated other comprehensive income 238,212 (395,773)
Retained earnings 2,022,799 517,164
Treasury stock, at cost (4,290 shares) (42,900) --
------------ ------------
Total stockholders' equity 22,449,584 19,472,284
Total liabilities and stockholders'equity $ 27,158,682 $ 20,542,012
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
THE WMA CORPORATION
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Three Months Ended
March 31, March 31, March 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Premiums $ 1,728,837 $ 1,067,902 $ --
Deposits and other considerations 20,708,126 -- --
Modco and coinsurance reserve adjustment (20,549,169) -- --
Net investment income 250,201 256,714 54,941
------------ ------------ ------------
Total revenue 2,137,995 1,324,616 54,941
Benefits and expenses:
Benefits, claims and settlement expenses 875,417 393,588 --
Reinsurance premium allowances, net 472,505 303,442 --
Amortization of deferred acquisition costs 124,573 (1,657) --
Professional, management, and other expenses 189,595 101,259
------------ ------------
Total benefits and expenses 1,662,090 796,632 99,214
------------ ------------ ------------
Net income (loss) before income taxes 475,905 527,984 (44,273)
Income tax (expense) benefit (162,339) (205,152) 10,893
------------ ------------ ------------
Net income (loss) after income taxes $ 313,566 $ 322,832 $ (33,380)
============ ============ ============
Basic and diluted income per share $ 0.13 $ 0.14 $ (0.03)
============ ============ ============
Weighted-average common shares outstanding 2,497,452 2,385,558 1,065,068
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE> 5
THE WMA CORPORATION
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Three Months
Ended Ended Ended
March 31, March 31, March 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 313,566 $ 322,832 $ (33,380)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operations
Amortization 133,682 7,452 70,184
Deferred tax expense 162,339 205,152 (10,893)
Change in:
Investment income due and accrued (1,786) (63,691) --
Reinsurance receivables 183,524 30,396 --
Deferred acquisition costs (2,179,941) (299,953) --
Prepaid expenses (274,523) (17,523) (10,574)
Other assets (8,816) (35,306)
Future policy benefits 204,982 (68,966) --
Reinsurance balances payable 962,093 80,307 --
Accrued expenses 52,851 (16,054) --
Accrued interest -- -- (60)
Accounts payable 295,812 24,885 (65,913)
----------- ----------- -----------
Net cash provided by (used in) operating
activities (156,217) 169,242 50,636
----------- -----------
Cash flows from investing activities:
Proceeds from available-for-sale sales of securities 698,729 974,858 --
Purchase of available-for-sale securities -- (2,050,266) (7,263,005)
----------- ----------- -----------
Net cash provided by (used in) investing
Activities 698,729 (1,075,408) (7,263,005)
----------- ----------- -----------
Cash flows from financing activities:
Issuance of common stock -- 1,061,920 7,500,000
Purchase of treasury stock (20,900) -- --
Repayments of borrowings under note payable -- -- (1,350)
Offering costs and organization costs -- -- (136,544)
(Decrease) increase in due to stockholders -- 38,160 5,604,239
----------- ----------- -----------
Net cash provided by (used in) financing activities (20,900) 1,100,080 12,966,345
----------- ----------- -----------
Net increase in cash and
cash equivalents 521,612 193,914 5,652,704
Cash and cash equivalents at beginning of period 1,469,663 1,980,201 307,034
----------- ----------- -----------
Cash and cash equivalents at end of period $ 1,991,275 $ 2,174,115 $ 5,959,738
=========== =========== ===========
Supplemental disclosure of cash flow
Information - interest paid -- -- $ 16,377
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial
statements
<PAGE> 6
THE WMA CORPORATION
Notes to Consolidated Financial Statements
March 31, 1998
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-QSB of Regulation
S-B. 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 of normal
recurring accruals) considered necessary for a fair presentation have been
included.
(2) Stock Subscriptions
As of March 31, 1998, there were 2,495,710 shares of common stock
outstanding. The aggregate market value of the common stock held by
non-affiliates computed on the basis of the price at which the stock was sold
was $19,957,100. All warrants previously issued in 1995 have been exercised.
There is no established market for the shares of common stock.
(3) Deferred Tax
Deferred income tax liabilities and related expenses are determined in
accordance with Statement of Financial Accounting Standard No. 109 (SFAS No.
109) using an effective federal tax rate of 34%. SFAS No. 109 specifically
excludes recognition of the "small life insurance company deduction" available
under Section 806 of the Internal Revenue Code for qualifying life insurance
companies. This special deduction, for which management believes the Company
will qualify for a number of years, can reduce the effective federal income tax
rate from 34% to less than 20% depending upon the amount of taxable income.
Consequently, the effective tax rate on the Company's earnings may ultimately
prove to be less than the deferred income tax liabilities and related expenses
determined under SFAS No. 109, at March 31, 1998.
(4) Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (Statement 130). Statement 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set of
general-purpose financial statements. The Company adopted Statement 130
effective January 1, 1998. The primary component of the differences between net
income and comprehensive income for the Company is unrealized gains on
securities. Total comprehensive income for the three months ended March 31, 1998
was $394,108 compared to $52,700 for the three months ended March 31, 1997. In
June 1997, the FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (Statement
131). Statement 131 is effective for financial statements for years ending after
December 15, 1997. The Company does not have any separate segments that are
considered material.
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<PAGE> 7
Item 2. Management's Discussion and Analysis or Plan of Operation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
The WMA Corporation ("the Company") is a holding company, owning all of
the outstanding capital stock of WMA Life, a Bermuda life insurance corporation.
WMA Life commenced reinsurance operations at the end of these second quarter of
1996. WMA Life is presently engaged in providing reinsurance to certain life
insurance companies ("ceding companies") with respect to variable universal life
("VUL") and variable annuity policies sold through World Marketing Alliance
("WMA Agency").
Under a reinsurance agreement, the economic consequences of certain
insurance risks are transferred from the ceding company to the reinsurer.
Depending upon the type of reinsurance agreement, these risks may include
mortality, persistency, expense, and investment. Key considerations in
evaluating the risks include industry experience, the ceding company's pricing
and assumptions, the type of product, the ceding company's underwriting
practices and procedures, the type of distribution system, the ceding company's
recent experience, and the market for the product.
The ceding companies retain responsibility for the payment of all
claims, surrender values, commissions and expenses involved in issuing and
maintaining the policies. In addition, the ceding companies administer the
reinsurance contracts and, on a monthly basis, provide WMA Life with information
regarding premiums, reserves, benefits, claims and settlement expenses for
policies reinsured. Financial activity between the ceding companies and WMA Life
is settled on either a monthly or quarterly basis.
MRT Reinsurance
During 1998, WMA Life's reinsurance indemnity agreements included two
agreements relating to VUL policies. The reinsurance of the VUL policies
includes business previously and currently being sold through WMA Agency and
issued by Western Reserve Life Assurance Company of Ohio ("Western Reserve") and
Kemper Investors Life Insurance Company ("Kemper"). The Western Reserve and
Kemper reinsurance agreements provide for the reinsurance of a portion of all
individual VUL policies sold by WMA Agency on a Monthly Renewable Term basis
("MRT"), a variation of Yearly Renewable Term reinsurance. Under the MRT
reinsurance agreements with Western Reserve and Kemper, WMA Life assumes a
portion of the mortality risk related to the VUL policies written by the ceding
companies. At March 31, 1998, WMA Life's reinsurance inforce on life insurance
policies constituted 167,204 policies with an aggregate reinsured amount of
$4.66 billion.
Coinsurance Reinsurance
Under a coinsurance arrangement, WMA Life assumes a proportionate share
of the insurance risks and expenses and receives a proportionate share of the
premiums or revenues from the underlying policies. The insurance risks include
mortality, lapses, cash surrenders and investment risk. Additionally, WMA Life
must establish a proportionate share of the policy reserves. Under a modified
coinsurance arrangement, the reserves and assets related to the reserves are
retained by the ceding companies.
WMA Life commenced reinsurance on a modified coinsurance basis with
American Skandia Life Insurance Corporation ("American Skandia") providing for
the reinsurance of a portion of all Imperium
<PAGE> 8
variable annuity policies sold by WMA Agency commencing as of January 1, 1997.
The Imperium policies are products exclusively distributed and sold by WMA
Agency.
Effective January 1, 1998, WMA Life commenced reinsurance on a
coinsurance and modified coinsurance basis with Western Reserve of a portion of
all Freedom Wealth Creator variable annuity policies sold through WMA Agency.
This new agreement will enable the Company to participate in revenues arising
principally from mortality and expenses charges, sales charges associated with
surrenders, credited interest rate spreads, administrative charges, and asset
based allowances.
Commencing April 1, 1998, WMA Life will also reinsure on a coinsurance
and modified coinsurance basis with Western Reserve a portion of all Financial
Freedom Builder VUL policies sold through WMA Agency. This new agreement will
enable the Company to participate in revenues arising principally from mortality
and expenses charges, cost of insurance charges, sales charges associated with
surrenders, credited interest rate spreads, administrative charges, and asset
based allowances. Coincidental with this new agreement, WMA Life will cease
reinsuring the Financial Freedom Builder VUL product on a MRT reinsurance basis.
As of March 31, 1998, WMA Life had reinsurance inforce with respect to
variable annuities for 3,352 policies with reinsured annuity contract benefits
of $55.47 million.
Accounting
WMA Life recognizes premiums as earned on MRT reinsurance for the
mortality risk reinsured. WMA Life reflects premiums and deposits relating to
its proportionate share of the coinsured policies in Deposits and other
considerations on the Consolidated Financial Statements. Increases in
policyholder account balances on reinsured policies, plus incurred policy
benefits and claims, less investment gains and losses of the policy separate
accounts are reflected in the Modco and coinsurance reserve adjustment on the
Consolidated Financial Statements.
The netting of Deposits and other considerations and the reserve
adjustment equals revenues of $158,957. This netting equals the policy mortality
and expense charges, policy administration charges and deferred sales charges
that have been assessed against the reinsured policy account balances.
WMA Life also recognizes costs that are directly associated with the
acquisition of the reinsured policies. These expenses include actuarial, legal
and accounting fees and salaries and expenses incurred directly by WMA Life, and
reinsurance allowances paid to the ceding companies in accordance with the
reinsurance agreements. These expenses are deferred to the extent that such
costs are deemed to be recoverable from future revenues and are recorded as
deferred acquisition costs on the balance sheet. Deferred acquisition costs are
amortized over the lives of the underlying policies (with regard to the terms of
the reinsurance agreement), in proportion to the ratio of revenues collected
during the then current period to total anticipated revenues. Deferred
acquisition costs increased $2.06 million during the first three months of 1998
to $6.56 million at March 31, 1998.
Life insurance claims settled and the increase in the liability for
future policy benefits related to MRT reinsured VUL policies are recorded as
benefits, claims and settlement expenses in the Consolidated Financial
Statements. The liability for future policy benefits was $1.51 million at March
31, 1998 in comparison to $1.29 million at December 31, 1997.
THREE MONTH PERIOD ENDING MARCH 31, 1998 COMPARED TO THREE MONTH PERIOD ENDING
MARCH 31, 1997.
Revenues. The Company's revenues increased by $813,000, or 62%, to
$2,138,000 in 1998 from $1,325,000 in 1997. The increase was attributable
primarily to the growth in premiums associated with the
<PAGE> 9
Western Reserve MRT agreement. Additional revenue increase of $160,000 was
attributable to the coinsurance and modified coinsurance agreements WMA Life
entered into with American Skandia during 1997 and with Western Reserve in 1998.
Premiums. Premiums increased by $661,000, or 62%, to $1,729,000 in 1998
from $1,068,000 in 1997. The increase was attributable primarily to the growth
in premiums associated with a MRT reinsurance agreement WMA Life entered into
with Western Reserve during the second quarter of 1996, and to a much lesser
extent to a MRT agreement executed during the fourth quarter of 1996 with
Kemper. The increase in premiums was due to an increase in the number and
reinsured amount of VUL policies sold by WMA Agency.
Net Investment Income. Net investment income decreased by $7,000 to
$250,000 in 1998 from $257,000 in 1997. Investment income is earned from the
investment in securities (fixed income and equity) and cash equivalents. The
decrease was primarily the result of a decrease in the Company's invested asset
portfolio by approximately $82,000. Investment expenses of $17,000 and $8,000
for 1998 and 1997 respectively related to investment advisor fees and custodial
fees which were netted with gross investment income. Controlling interest in the
Company's outside investment advisor and manager recently changed and,
consequently, in May of 1998 the Company's engagement will cease to continue.
The Company expects to retain a new manager coincidental with the termination of
its current manager.
Benefits, Claims and Settlement Expenses. Benefits, claims and
settlement expenses increased by $482,000, or 122%, to $875,000 in 1998 from
$393,000 in 1997. This increase primarily resulted from an increase in volume of
in force business. The amount of business in force at March 31, 1998, was $4.66
billion as compared to $2.98 billion at March 31, 1997, which represented a
$1.68 billion, or 56% increase.
Reinsurance Premium Allowances, Net. Net reinsurance premium allowances
increased by $169,000, or 56%, to $472,000 in 1998 from $303,000 in 1997. Gross
reinsurance premium allowances represent a portion of reinsurance premiums paid
or allowed by WMA Life to the ceding companies for each policy reinsured. A
certain portion of the gross reinsurance allowances related to the production of
new business was primarily related to the Company's share of commissions,
certain development costs and other expenses related to the production of new
business. These amounts have been deferred to the extent that such costs are
deemed recoverable from future policy revenue in accordance with GAAP. The
balance of those amounts not deferred are reflected as net reinsurance premium
allowances and are often a level percentage of individual policy revenues (e.g.,
renewal reinsurance allowances). Similar to the increase in benefits, claims and
settlement expenses, the increase in net reinsurance premium allowances was due
to an increase in the volume of business in force and placement of the reinsured
variable annuity business.
Professional Fees, Management Fees and Other Expenses. Professional
fees, management fees and other expenses increased by $88,000, or 87%, to
$189,000 in 1998 from $101,000 in 1997. The increase in expenses was primarily
associated with an increase in the amount of reinsurance business activities and
expenses relating to the administration of the Company.
Amortization of Deferred Acquisition Costs. Amortization of deferred
acquisition costs increased by $126,000 to $125,000 in 1998. The increase in
amortization of deferred acquisition costs was attributable primarily to
increased revenues associated with business reinsured and with the assumption of
new business.
Income Taxes. Income taxes decreased by $47,000 to $158,000 in 1998
from $205,000 in 1997. The Company's effective tax rate was 34.1% in 1998 and
38.8% in 1997. The increase in effective tax rate in 1997 was due to the
reversal of a valuation allowance for deferred tax assets during 1997.
<PAGE> 10
Net Income. As a result of the foregoing, net income for the quarter
ended March 31, 1998, was $313,000 compared to $323,000 for the quarter ended
March 31, 1997.
Liquidity and Capital Resources
Historically, the principal sources of the Company's cash flow have
been premiums, investment income, maturing investments and proceeds from sales
of invested assets. In addition to the need for cash flow to meet operating
expenses, the liquidity requirements of the Company relate primarily to the
payment of gross reinsurance allowances, expenses and claims.
The Company's cash requirements will consist of salary and benefits;
management service fees; investment management and custodial account fees;
accounting and consulting services fees; expenses related to regulatory issues
and compliance with corporate and tax matters; and other incidental
administrative expenses. Prior to 1998 the Company incurred no expense for
salary and benefits because it had no employees.
The Company has no assets other than the stock of its subsidiaries and
investment assets. The Company will rely on income from its investment assets
and dividends from WMA Life to meet holding company cash requirements.
The Company's primary source of liquidity was $1.99 million in cash and
cash equivalents at March 31, 1998, a decrease of $183,000 from the prior
comparable period. The effective duration of the Company's fixed income
portfolio is just over four years, with over 95% of the fixed income securities
having a maturity of less than 10 years. The Company's fixed income portfolio
represents over 96% of the total invested assets, and has an average quality of
rating Aa2 by Moody's.
The Company believes that the sources of cash from the 1995 offering
will be sufficient to meet the Company's cash needs for the next twelve months
with respect to the administration of WMA Life's current MRT agreements with
Western Reserve and Kemper and its variable annuity coinsurance agreements with
American Skandia and Western Reserve. In consideration of the new VUL
reinsurance agreement with Western Reserve, the Company believes its sources of
cash will be sufficient to meet the Company's cash needs for the next six
months. In recognition of these liquidity requirements, the Company contributed
additional capital to WMA Life through a transfer of assets, and corresponding
due and accrued investment income, with an amortized cost of approximately
$10.16 million. This transfer leaves the Company with nearly $2.00 million of
remaining assets.
As a result of the new VUL coinsurance reinsurance agreement with
Western Reserve, the Company will require substantially greater amounts of cash
to make required payments to the ceding companies than it has been required to
make under its existing agreements. During the first year in which a policy is
reinsured on a coinsurance basis, the Company is required to reimburse the
ceding company for acquisition costs, including first year commissions and
issuance expenses. Payments made by the Company to the Western Reserve under the
new VUL reinsurance agreement is expected to materially exceed the amount of
premiums received by the Company during the first year a policy is in effect.
The Company intends to offer shares of common stock sometime in 1998 to
provide sufficient capital to fund payments of reinsurance allowances to Western
Reserve in relation to the new VUL agreement. If an offering is not consummated,
or if the Company's cash requirements are greater than anticipated, the Company
may have to resort to other methods of raising the necessary capital to finance
its growth, such as borrowing from financial institutions or the sale of
additional securities in other private or public offerings. There can be no
assurance that such alternatives would be available to the Company at an
acceptable cost, if at all.
The Company's reinsurance agreements provide security to the ceding
companies through a Letter of Credit ("LOC") for the benefit of the ceding
companies. WMA Life has previously secured a LOC of $2,000,000 in favor of
Western Reserve. WMA Life also has previously secured a LOC of $30,000 in favor
of Kemper. The LOCs were issued by IBJ Schroder, the Company's custodian and
collateralized by the Company's assets held with the
<PAGE> 11
custodian. If determined to be necessary, WMA Life will develop facilities for
future LOCs and trust arrangements in support of additional reinsurance
agreements.
As a result of the 1995 offering, the Company sold 2,000,000 shares of
Common Stock and 500,000 warrants for gross proceeds of $20.5 million (excluding
deferred organization costs of $517,000). The Company incurred no capital
expenditures during 1997.
The Company has reviewed its internal business systems and believes its
systems, primarily its computer systems, will process date information
accurately and without interruption when required to process dates in the year
1999 and beyond. The Company has discussed the year 2000 issue with the ceding
companies and the steps they have taken to address the situation. The Company
believes its operations will not be affected. The Company has not been required
to expend significant resources to address the year 2000 issue and does not
anticipate any significant expenditure.
The Company is dependent on the data processing systems of the ceding
companies and for the year 2000 and beyond. There can be no assurance that these
systems will be able to properly process information relating to the year 2000
and beyond. The failure of these systems to be year 2000 Complaint could have
material adverse effect upon the Company.
<PAGE> 12
PART II
Item 1. Legal Proceedings.
At March 31, 1998, neither the Company nor its subsidiaries were
involved in any legal proceedings.
Item 2. Changes in Securities.
There have been no changes or modifications to the rights of the
holders of any class of registered securities.
Item 3. Defaults Upon Senior Securities.
There have been no defaults in the payment of principal or interest of
any indebtedness of the issuer.
Item 4. Submission of Matters to a Vote of Security Holders.
On March 31, 1998, the Company's stockholders at a special meeting approved a
recommendation of the Company's Board of Directors to amend the Company's
Certificate of Incorporation to change the Company's name to "The WMA
Corporation" from WMA International Corporation. The vote was 1,777,079 shares
voting FOR the name change, 3,057 shares AGAINST and 68,829 share votes were
withheld.
No other business came before the meeting which required a
vote of the stockholders.
Item 5. Other Information.
The Company's major shareholder, S. Hubert Humphrey, Jr. in 1995
pledged all of his shares of the Company's common stock in connection with a
loan made to World Marketing Alliance, Inc. ("WMA Agency"), which loan is
hereinafter referred to as "the Agency Loan". Part of the Agency Loan proceeds
were allocated for use by WMA Agency to make loans to certain of its sales
associates (the "Agent Loans") to acquire 402,836 shares of common stock in the
1995 offering. As of March 31, 1998, the outstanding principal amount of the
Agent Loans was $1,260,000. The WMA Agency sales associates' shares of common
stock are pledged to WMA Agency as security for these Agent Loans. Proxies are
executed in favor of WMA Agency for voting such shares of common stock for so
long as the Agent Loans are outstanding.
The Agency Loan, which was in the initial principal amount of
$2,250,000 in 1995, was subsequently consolidated into a WMA Agency line of
credit facility and the maximum available amount was increased to $7,750,000. On
November 30, 1997, this line of credit facility was
<PAGE> 13
again increased to a maximum available amount of $14,750,000. Mr. Humphrey's
pledge of his shares of Common Stock is one of the various forms of collateral
for this line of credit, which as of March 31, 1998 had an outstanding balance
in excess of $12 million. Upon default on this credit line, the lender, Money
Services, Inc., a subsidiary of AEGON USA, Inc., would have the right to take
title to the pledged shares and to exercise voting control.
The Company reinsures VUL and variable annuity products marketed by an
affiliated company, World Marketing Alliance, Inc. ("WMA Agency"). These
products are treated as securities under federal and state securities laws. In
order to sell these products, the sales associates of WMA Agency must be
individually licensed by the National Association of Securities Dealers ("NASD")
and must become affiliated with a registered securities broker-dealer. WMA
Securities, Inc. ("WMAS") is a registered broker-dealer having common ownership
with WMA Agency. All of the sales associates of WMA Agency who are licensed to
sell VUL and variable annuity products are registered representatives of WMAS.
As a registered broker-dealer, WMAS's operations are subject to
periodic examination and review by both the NASD and the Securities and Exchange
Commission ("SEC"), a federal agency. In September, 1997, the Atlanta District
Office of the SEC examined the operations of WMAS. On February 3, 1998, WMAS
received a letter from the SEC setting forth certain alleged deficiencies and
violations of the Securities Exchange Act of 1934 pertaining to net capital
requirements, record keeping and other compliance matters. In response to this
letter, WMAS subsequently engaged a consultant to make recommendations to WMAS
on how to improve its compliance practice and has notified the SEC in it's
response that it plans to implement the consultant's recommendations.
Implementation of these recommendations will involve significant capital
expenditures by WMAS and could lead to a disruption of WMAS' business.
The Company understands that it is not the current policy of the SEC to
issue any written advice as to whether the steps taken by a recipient of a
deficiency letter to address alleged deficiencies are adequate or satisfactory;
therefore, it is unlikely that WMAS will receive any indication from the SEC
regarding the adequacy of the corrective action that it has taken or intends to
take, until the SEC conducts a subsequent examination of the operations of WMAS
and the alleged deficiencies contained in the current deficiency letter are no
longer found to exist. WMAS cannot determine when and if the SEC will conduct a
subsequent examination of its operations nor can it predict the outcome of such
examination should it occur.
The Company also understands that in situations where the SEC
determines that alleged deficiencies may rise to the level of a potential
violation of the federal securities laws, its policy is to refer the matter to
its Enforcement Division for further investigation. During the course of any
investigation, if initiated, the Enforcement Division may recommend the
imposition of sanctions. These sanctions, should they be imposed, could take
various forms, ranging from the imposition of monetary penalties to permanent
revocation of a broker-dealer's registration or of the licenses of sales
representatives, resulting in the broker-dealer's inability to continue
operations.
Any such sanctions, if imposed against WMAS, could impair the financial
and operating condition of WMAS. If sales associates of WMA Agency are no longer
able to maintain their
<PAGE> 14
licenses with WMAS, a significant disruption of the sale of new VUL and variable
annuity products to be reinsured by the Company could result until the sales
associates of WMA Agency could become registered with another broker-dealer.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 15
Item 6. Exhibits and Reports on Form 8-K.
No reports were required to be filed on Form 8-K.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C>
3.1 Articles of Incorporation(1)
3.2 Amendment to Articles of Incorporation changing name of
Company to "The WMA Corporation". (Attached)
3.3 By-laws(1)
4.1 Specimen Stock Certificate(2)
4.5 Loan Agreement between WMA Agency and Offering Subscribers(3)
10.1 Loan Agreement with Money Services, Inc. and WMA Agency(3)
10.2 Modification of Loan & Security agreement between Money
Services, Inc. and WMA Agency (Attached)
10.3 Management Agreement with WMA Management(3)
10.4 Reinsurance Agreement between WMA Life Insurance Company
Limited and Western Reserve Life Assurance Company of Ohio
dated July 9, 1996. (Attached)
16.1 Letter on change in Certifying Accountant(4)
27.1 Financial Data Schedule (Attached) (for SEC use only)
</TABLE>
[FOOTNOTES ON NEXT PAGE]
<PAGE> 16
FOOTNOTES TO PRECEDING PAGE:
(1) Filed on June 28, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-23
(2) Filed on September 22, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-23.
(3) Filed on November 17, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-23.
(4) Filed on December 21, 1995 as part of the Registration Statement and
incorporated herein by reference pursuant to Rule 12b-23.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 17
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) The WMA Corporation
By (Signature/Title) /s/ Edward F. McKernan (SEAL) Date: May 15, 1998.
----------------------------------
Edward F. McKernan,, Senior Vice
President, Chief Financial Officer,
Actuary, and Director
<PAGE> 1
EXHIBIT 3.2
State of Delaware
Office of the Secretary of State Page 1
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "WMA INTERNATIONAL CORPORATION", CHANGING ITS NAME FROM "WMA
INTERNATIONAL CORPORATION", TO "THE WMA CORPORATION", FILED IN THIS OFFICE ON
THE FOURTH DAY OF MARCH, A.D. 1998, AT 3 O'CLOCK P.M.
SEAL /s/ Edward J. Freel
-------------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 8953394
DATE: 03-04-98
<PAGE> 2
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
WMA INTERNATIONAL CORPORATION
----------------------------------------------------------
a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of WMA
International Corporation on December 9, 1997
----------------------------------------------------------
resolutions were duly adopted setting forth a proposed amendment of
the Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of
said corporation for consideration thereof. The resolution setting
forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "1" so that, as
amended, said Article shall be and read as follows:
The name of the corporation is The WMA Corporation.
----------------------------------------------------------
----------------------------------------------------------
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said corporation
was duly called and held upon notice in accordance with Section 222 of
the General Corporation Law of the State of Delaware at which meeting
the necessary number of shares as required by statute were voted in
favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State
of Delaware.
FOURTH: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said WMA International Corporation has caused this
certificate to be signed by
Thomas W. Montgomery, an Authorized Officer, this 4th day of March,
1998.
By /s/ Thomas W. Montgomery
-------------------------
TITLE OF OFFICER: Executive Vice President
-------------------------
<PAGE> 1
EXHIBIT 10.2
MODIFICATION OF LOAN AND SECURITY AGREEMENTS
PROMISSORY NOTES AND RELATED LOAN DOCUMENTS
THIS MODIFICATION AGREEMENT (this "Agreement") is made and entered into
this 30th day of November, 1997, by and among WORLD MARKETING ALLIANCE, INC., a
GEORGIA corporation (hereinafter referred to as "WMA"), S. HUBERT
HUMPHREY, JR., a resident of the State of Georgia (hereinafter referred to as
"Humphrey"), WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO, an Ohio corporation
(hereinafter referred to as "WRL"), and MONEY SERVICES, INC., a Delaware
corporation (hereinafter referred to as "MSI") (WMA and HUMPHREY are sometimes
hereinafter referred to collectively as the "Borrowers" and WRL and MSI are
sometimes hereinafter referred to collectively as the "Lenders").
WITNESSETH:
WHEREAS, WMA and/or Humphrey and WRL and/or MSI have heretofore entered
into those certain loan documents more particularly described on Exhibit "A"
attached hereto and by this reference made a part hereof (hereinafter referred
to collectively as the "Loan Documents") wherein Lenders agreed, from time to
time, to extend credit to the Borrowers as more particularly set forth in said
Loan Documents (such actual extensions of credit being hereinafter referred to
individually as a "Loan" and collectively as the "Loans"); and
WHEREAS, the Loans are each repayable on the terms and conditions set
forth in the Loan Documents pertaining to each particular Loan (hereinafter
referred to as the "Repayment Terms"); and
WHEREAS, Borrowers have requested and Lenders have agreed to certain
modifications to the Loan Documents to provide for, among other things, (i) the
adjustment of Loan balances to reflect the current outstanding principal balance
of each Loan as of the date hereof; (ii) a Four Million dollar increase in the
amount of credit available to WMA under the terms of the Loan Documents more
particularly described in paragraph (1) and (2) of Exhibit "A" attached
hereto; (iii) the termination of the practice of applying the Credits (as
defined in that certain Modification of Loan and Security Agreements by and
between Borrowers and Lenders dated December 23, 1996) (the "1996 Modification")
as a credit against the outstanding principal balance of the Loans; (iv) the
revision of the Repayment Terms of the Loans, (v) the extension of the maturity
dates of the Loans; (vi) the addition of all accrued but unpaid interest due on
each particular Loan as of November 30, 1997 to the outstanding principal
balance of such Loan; and (vi) the waiver of all July 1, August 1, September 1,
October 1, and November 1, 1997 principal payments due on said Loans.
NOW, THEREFORE, for and in consideration of TEN AND NO/100 ($10.00)
DOLLARS in hand by each party hereto to the others, the receipt and sufficiency
of which is hereby acknowledged, Borrowers and Lenders do hereby agree as
follows:
1. The Four Million Two Hundred Fifty Thousand and No/100
($4,250,000.00) Dollar outstanding principal balance presently due and payable
to WRL by WMA pursuant to the terms and conditions of that certain Commission
Loan Advance Agreement dated June 1, 1994 by
<PAGE> 2
and between WRL and WMA is and shall be reduced by the sum of Three Million
Seven Hundred Thirty Five Thousand and No/100 ($3,735,000.00) Dollars, said sum
being equal to the accrued but unused cumulative Credits due to WMA as of
September 30, 1997 under and pursuant to the terms of the 1996 Modification.
After the application of the aforesaid Credits, the outstanding principal
balance due to WRL under the terms of the Commission Advance Loan Agreement
shall be Five Hundred Fifteen Thousand and No/100 ($515,000.00) Dollars and
shall be repaid by WMA, without interest thereon, over a three year term in
equal monthly installment of principal, with the balance due on or before
October 1, 2000. WMA hereby agrees to execute and deliver to WRL, simultaneously
herewith, that certain Commission Advance Loan Agreement Promissory Note
attached hereto as Exhibit "B" and incorporated by reference as though fully set
forth herein.
2. From and after the date hereof, the credit available to WMA under
the Line of Credit Promissory Note described in paragraph 2 of Exhibit "A"
attached hereto and by this reference shall be increased to $14,750,000.00.
3. Except as otherwise provided in Paragraph 1 above, from and after
the date hereof, no further Credits shall be applied against the outstanding
principal balance of any Loan presently existing by and among Borrowers and
Lenders. In lieu thereof, WRL agrees that an amount equal to the Credits shall
hereafter be paid to WMA as additional first year commissions with respect to
WMA's sale of WRL's Freedom Equity Protector and Freedom Financial Builder
variable universal life insurance products.
4. Except as otherwise provided in Paragraph 1 above, the Repayment
Terms of all Promissory Notes set forth on Exhibit "A" attached hereto shall be
amended to provide for a one hundred and eighty (180) month amortization
schedule with the first monthly installment of principal and interest becoming
due and payable on the first (1st) day of December, 1997. Thereafter
installments of principal and interest shall be due and payable monthly on the
same day of each and every month thereafter through and including the first
(1st) day of October, 2012, and on the first (1st) day of November, 2012, the
entire outstanding principal balance of all of the aforesaid Promissory Notes,
together with accrued but unpaid interest thereon, shall become finally due and
payable. Interest on the foregoing Promissory Notes shall be based on the
"Contract Rate" (as hereinafter defined) which rate as of the date hereof is six
and fifty-eight/one-hundredths (6.58%) percent per annum (subject to adjustment
as set forth in said Promissory Notes). The Contract Rate is equal to the
"All-in Cost" (as defined below) on a fully negotiated basis for Aegon USA, Inc.
("Aegon"), an Iowa corporation, senior debt instruments having a five (5) year
maturity ("Aegon Debt Instruments"). For purposes of this Note, the "All-in
Cost" is that price quoted by an underwriter for the cost of issuance of Aegon
Debt Instruments based on: (a) the bid price for United States Treasury Notes
having a maturity date closest to five (5) years ("5 Year Treasuries"), plus (b)
the "All-in Spread" for the Aegon Debt Instruments. The "All-in Spread" is equal
to the credit spread (versus 5 Year Treasuries) of Aegon for Aegon Debt
Instruments, plus the amount of the amortized gross fees that would be
chargeable by such underwriter to Aegon for the issuance of Aegon Debt
Instruments. For example, the initial Contract Rate set forth in this Note is
equal to the All-in Cost of 6.58% which was quoted by the Union Bank of
Switzerland, as underwriter, and which was computed by adding (i) the current
bid price of 5 Year Treasuries of 6.04%, plus (ii) the .545% All-in Spread of
Aegon Debt Instruments, as set forth on the attached Schedule 1.
<PAGE> 3
All accrued but unpaid interest due on said Promissory Notes as of November 30,
1997 shall be added to the current outstanding principal balance of said
Promissory Notes. Borrowers hereby agree to execute and deliver to Lenders,
simultaneously herewith, replacement promissory notes incorporating the
modifications described herein.
5. Paragraph 1.5 of the Loan and Security Agreement described in
Paragraph No. 8 of Exhibit "A" attached hereto is deleted in its entirety and
the following new Paragraph 1.5 is substituted in lieu thereof.
"1.5 Intentionally Omitted."
6. Borrowers hereby agree that no action, inaction or agreement by
the Lenders, including without limitation, any indulgence, waiver or agreement
to extend time for the performance by Borrowers, which may have occurred with
respect to any matter relating to the Loans, as hereby amended, shall require or
imply any future indulgence or waiver by Lenders or any further agreement by
Lenders to extend any time for performance by the Borrowers.
7. Borrowers do hereby reaffirm and restate, as of the date hereof,
all covenants, representations and warranties set forth in the Loan Documents.
8. Except as expressly amended and modified herein, all terms,
covenants and provisions of the Loan Documents shall remain unaltered and in
full force and effect, and the parties hereto do hereby expressly ratify and
confirm the Loan Documents as modified herein.
9. Nothing herein contained shall affect or be construed to affect
the lien of the Loan Documents nor shall this Agreement constitute a novation of
the indebtedness evidenced by the Loans.
10. Any capitalized terms used herein and not otherwise defined
herein shall have the same meaning given them in the Loan Documents.
(Continued on next page)
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement under seal on the day and year first above written.
WMA:
WORLD MARKETING ALLIANCE, INC.,
a Georgia corporation
By: /s/ Thomas W. Montgomery
---------------------------------
Thomas W. Montgomery
Executive Vice President
(CORPORATE SEAL)
HUMPHREY:
/s/ S. Hubert Humphrey, Jr. (SEAL)
----------------------------
S. Hubert Humphrey, Jr.
WRL:
WESTERN RESERVE LIFE ASSURANCE CO.
OF OHIO, a Ohio corporation
By:_______________________________
Name:___________________________
Title:__________________________
(CORPORATE SEAL)
MSI:
MONEY SERVICES, INC.
a Delaware corporation
By:_______________________________
Patrick DePalma
President
(CORPORATE SEAL)
<PAGE> 5
EXHIBIT "A"
LOAN DOCUMENTS
1. Loan Consolidation and Line of Credit Agreement dated November 17, 1995 by
and between World Marketing Alliance, Inc. ("WMA"), as Borrower, S. Hubert
Humphrey, Jr. ("Humphrey"), as Guarantor, and Money Services, Inc. ("MSI"),
as Lender, evidencing a $7,750,000 loan from MSI to WMA, as the same has
been modified and amended by that certain (i) First Amendment to Loan
Consolidation and Line of Credit Agreement, Line of Credit Promissory Note,
Security Agreement, Unconditional Guaranty of Payment and Performance and
Pledge and Security Agreement dated September 5, 1996 by and between WMA,
Humphrey and MSI (the "First Amendment"); (ii) Second Amendment to Loan
Consolidation and Line of Credit Agreement, Line of Credit Promissory Note,
Security Agreement, Unconditional Guaranty of Payment and Performance and
Pledge and Security Agreement dated December 23, 1996 by and between WMA,
Humphrey and MSI (the "Second Amendment") and; (iii) Modification of Loan
and Security Agreements dated December 23, 1996 by and between WMA,
Humphrey and MSI (the "Modification Agreement").
2. Line of Credit Promissory Note dated November 17, 1995 from WMA payable to
the order of MSI in the original face principal amount of $7,750,000, as
the same has been modified and amended by the First Amendment, Second
Amendment and the Modification Agreement.
3. Commission Advance Loan Agreement dated June 1, 1994 by and between WRL and
WMA, as the same has been modified and amended by the Modification
Agreement.
4. Loan and Security Agreement dated August 2, 1994 by and between Humphrey,
as Borrower, WMA, as Guarantor, and MSI, as Lender, evidencing a $1,100,000
loan from MSI to Humphrey, as the same has been modified and amended by the
Modification Agreement.
5. Promissory Note dated August 2, 1994 from Humphrey payable to the order of
MSI in the original face principal amount of $1,100,000, as the same has
been modified and amended by (i) First Amendment of Promissory Note dated
April 26, 1996 by and between Humphrey and NISI, and (ii) the Modification
Agreement.
6. Loan and Security Agreement dated May 24, 1994 by and between WMA, as
Borrower, and WRL, as Lender, evidencing a $500,000 loan from WRL to WMA,
as the same has been modified and amended by the Modification Agreement.
7. Promissory Note dated May 24, 1994 from WMA payable to the order of WRL in
the original face principal amount of $500,000, as the same has been
modified and amended by the Modification Agreement.
8. Loan and Security Agreement dated December 23, 1993 by and between WMA and
Humphrey, as Borrower, and WRL, as Lender, evidencing a $5,000,000 loan
from WRL to
<PAGE> 6
WMA and Humphrey, as the same has been modified and amended by the
Modification Agreement.
9. Promissory Note dated December 23, 1993 from WMA and Humphrey payable to
the order of WRL in the original face principal amount of $2,800,000.00, as
the same has been modified and amended by the Modification Agreement.
10. Loan and Security Agreement dated May 10, 1995 by and between WMA, as
Borrower, Humphrey, as Guarantor, and WRL, as Lender, evidencing a
$1,500,000 loan from WRL to WMA, as the same has been modified and amended
by the Modification Agreement.
11. Promissory Note dated May 10, 1995 from WMA payable to the order of WRL in
the original face principal amount of $1,500,000, as the same has been
modified and amended by the Modification Agreement.
12. Loan and Security Agreement dated November 15, 1996 by and between Eagle
Consulting, Inc. ("Eagle") and MSI, evidencing a $2,100,000 loan from MSI
to Eagle, which has been assumed by WMA pursuant to that certain Loan
Assumption Agreement dated November 15, 1996 by and among Eagle, MSI and
WMA (the "Assumption Agreement"), as the same has been modified and
amended by the Modification Agreement.
13. Promissory Note dated November 15, 1996 from Eagle payable to the order of
MSI in the original face principal amount of $2,100,000, as assumed by WMA
pursuant to the Assumption Agreement, as the same has been modified and
amended by the Modification Agreement.
<PAGE> 7
FIRST AMENDMENT AND RESTATEMENT
OF PROMISSORY NOTE
THIS FIRST AMENDMENT AND RESTATEMENT OF PROMISSORY NOTE is made and entered
into this 30th day of November, 1997, by and between WORLD MARKETING ALLIANCE,
INC., a Georgia corporation (hereinafter referred to as "Borrower") and MONEY
SERVICES, INC., a Delaware corporation (hereinafter referred to as "Lender").
ARTICLE A - BACKGROUND AND CONSIDERATION
A-1. BACKGROUND. On November 17, 1995, Borrower incurred certain
indebtedness (the "Loan") owing to Lender, and to evidence the Loan executed and
delivered to Lender that certain Promissory Note dated November 17, 1995, in the
face principal amount of $7,750,000.00 (the "Note"). The Note and all other
documents to or of which Lender is a party or beneficiary evidencing, securing
or otherwise relating to the Loan are hereinafter referred to collectively as
the "Loan Documents". Lender and Borrower have previously modified and amended
the Loan pursuant to that certain (i) First Amendment to Loan Consolidation and
Line of Credit Agreement, Line of Credit Promissory Note, Security Agreement,
Unconditional Guaranty of Payment and Performance and Pledge and Security
Agreement dated September 5, 1996 by and between Borrower, S. Hubert Humphrey
("Humphrey") and Lender (the "First Amendment"); (ii) Second Amendment to Loan
Consolidation and Line of Credit Agreement, Line of Credit Promissory Note,
Security Agreement, Unconditional Guaranty of Payment and Performance and Pledge
and Security Agreement dated December 23, 1996 by and between Borrower, Humphrey
and Lender (the "Second Amendment"); (iii) Modification of Loan and Security
Agreements dated December 23, 1996 by and between Borrower, Humphrey and Lender
(the "First Modification Agreement"); and (iv) Modification of Loan and Security
Agreements, Promissory Notes and Related Loan Documents dated November 30, 1997,
by and among Borrower, Lender, Humphrey and Western Reserve Life Assurance Co.
Of Ohio, an Ohio corporation (the "Second Modification Agreement"). Borrower and
Lender have agreed to further modify and amend the Note, to increase the
principal balance thereof to $14,750,000, to revise the amortization schedule,
to change the interest rate and to extend the maturity date thereof Borrower and
Lender desire to amend and restate the Note to provide for said modifications.
A-2. CONSIDERATION. For and in consideration of the sum of $10.00 and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Lender do hereby agree as set forth
hereinbelow.
ARTICLE B - AGREEMENT
B-1. AMENDMENT AND RESTATEMENT. Borrower and Lender do hereby amend and
restate the Note by deleting therefrom all of the provisions of said Note in its
entirety and by inserting in lieu thereof all the provisions of the promissory
note now bearing the title "First Amended and Restated Promissory Note," which
is attached hereto as Exhibit "A" and incorporated by reference as though fully
set forth herein.
<PAGE> 8
B-2. ORIGINAL INSTRUMENT. Borrower and Lender agree that henceforth the
First Amended and Restated Promissory Note attached hereto shall serve as the
original instrument evidencing the $14,750,000.00 aggregate indebtedness
referred to herein, together with any and all charges accrued thereon.
B-3. OUTSTANDING BALANCE. Borrower and Lender acknowledge and agree that,
as of the date hereof, the aggregate outstanding principal balance, plus accrued
but unpaid interest, due on the Note is $10,490,380.42.
ARTICLE C - GENERAL CONDITIONS
C-1. NO WAIVER OR IMPLICATION. Borrower hereby agrees that nothing herein
shall constitute a waiver by Lender of any default, whether known or unknown,
which may exist under the Note or any other Loan Document. Borrower hereby
further agrees that no action, inaction or agreement by Lender, including,
without limitation, any indulgence, waiver, consent or agreement of modification
which may have occurred or been granted or entered into with respect to
nonpayment of the Loan or any portion thereof, or with respect to matters
involving security for the Loan, shall require or imply any future indulgence,
waiver, consent or agreement by Lender. Borrower hereby acknowledges and agrees
that Lender has made no agreement, and is in no way obligated, to grant any
future indulgence, waiver or consent or to enter into any further agreement of
modification with respect to the Loan or any matter relating to the Loan.
C-2. SUCCESSORS AND ASSIGNS. This First Amendment and Restatement of
Promissory Note shall be binding upon and shall insure to the benefit of the
parties hereto, their respective heirs, successors, successors-in-title and
assigns.
C-3. MISCELLANEOUS. All personal pronouns used herein whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural, and vice versa. Titles of articles and
sections as set forth herein are for convenience only and in no way define,
limit, amplify or describe the scope or intent of any provision hereof.
(Continued on Next Page)
<PAGE> 9
IN WITNESS WHEREOF, Borrower and Lender have hereunto set their hands and
affixed their seals as of the day and year first above written.
BORROWER:
WORLD MARKETING ALLIANCE, INC., a
Georgia corporation
By: /s/ Thomas W. Montgomery
---------------------------------
Thomas W. Montgomery
Executive Vice President
(CORPORATE SEAL)
LENDER:
MONEY SERVICES, INC., a Delaware
corporation
By:_________________________________
PATRICK DE PALMA
PRESIDENT
(CORPORATE SEAL)
<PAGE> 10
FIRST AMENDED AND RESTATED
LINE OF CREDIT PROMISSORY NOTE
$14,750,000.00 November 30, 1997
Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned, WORLD MARKETING ALLIANCE, INC., a
Georgia corporation (hereinafter referred to as "Maker"), promises to pay to the
order of MONEY SERVICES, INC., a Delaware corporation (hereinafter referred to
as "Payee"; Payee, and any subsequent holder(s) hereof, being hereinafter
referred to collectively as "Holder"), without grace except as otherwise
provided herein, at the office of Holder at 4333 Edgewood Road, N.E., Cedar
Rapids, Iowa 52499, or at such other place as Holder may designate to Maker in
writing from time to time, the principal sum of Fourteen Million Seven Hundred
Fifty Thousand and No/100 ($14,750,000.00) Dollars, or such other lesser
amounts as shall be noted on the attached Schedule of Loans and Payments of
Principal pursuant to the authority set forth in this Note, together with simple
interest on so much thereof as is from time to time outstanding and unpaid, from
the date hereof, at the six and fifty-eight/one-hundredths (6.58%) percent per
annum (the "Contract Rate") (subject to adjustment as hereinafter provided) in
lawful money of the United States of America, which shall at the time of payment
be legal tender in payment of all debts and dues, public and private.
The Contract Rate is equal to the "All-in Cost" (as defined below) on a
fully negotiated basis for Aegon USA, Inc. ("Aegon"), an Iowa corporation,
senior debt instruments having a five (5) year maturity ("Aegon Debt
Instruments"). For purposes of this Note, the "All-in Cost" is that price quoted
by an underwriter for the cost of issuance of Aegon Debt Instruments based on:
(a) the bid price for United States Treasury Notes having a maturity date
closest to five (5) years ("5 Year Treasuries"), plus (b) the "All-in Spread"
for the Aegon Debt Instruments. The "All-in Spread" is equal to the credit
spread (versus 5 Year Treasuries) of Aegon for Aegon Debt Instruments, plus the
amount of the amortized gross fees that would be chargeable by such underwriter
to Aegon for the issuance of Aegon Debt Instruments. For example, the initial
Contract Rate set forth in this Note is equal to the All-in Cost of 6.58% which
was quoted by the Union Bank of Switzerland, as underwriter, and which was
computed by adding (i) the current bid price of 5 Year Treasuries of 6.04%, plus
(ii) the .545% All-in Spread of Aegon Debt Instruments, as set forth on the
attached Schedule 1. During the term of this Note, the Contract Rate charged
herein shall be recalculated every fifth (5th) year on the anniversary date of
this Note to equal the then current "Average All-in Cost". The "Average All-in
Cost" shall be equal to the average of quotations of the All-in Cost obtained
from two underwriters, one of which shall be selected by the Maker and one of
which shall be selected by the Holder. In the event either Maker or Holder fail
to obtain a quotation as of the aforesaid recalculation date, then the quotation
obtained by one party shall, for purposes of this Note, be deemed to be the
Average All-in Cost. In the event both Maker and Holder fail to obtain bona fide
quotations of All-in Cost as of the recalculation date, then the Average All-in
Cost shall be deemed to be equal to that rate which is fifty basis points above
the bid price of 5 Year Treasuries as of such date.
<PAGE> 11
Said principal and interest shall be paid in the following manner, to wit:
Installments of principal plus accrued interest at the foregoing rate,
based on a fifteen (15) year amortization schedule, shall be due and payable
monthly, in arrears, commencing on the first (1st) day of December, 1997 and
continuing on the first (1st) day of each and every month thereafter through and
including the first (1st) day of October, 2012, and on the first (1st) day of
November, 2012, the entire outstanding principal balance hereof, together with
all accrued but unpaid interest thereon, shall be due and payable in full.
It is hereby expressly agreed that should any default be made in the payment
of principal or interest as stipulated above, or should any default be made in
the performance of any of the covenants or conditions contained in the "Loan
Documents" (as that term is hereinafter defined), or any of them, then after the
expiration of any applicable grace period, and in such event, the principal
indebtedness evidenced hereby, and any other sums advanced hereunder or under
the Loan Documents, or any of them, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without further notice to Maker, at
once become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. If the Maker shall fail to make timely payment of
principal or interest on this Note, or fail to comply with any of the terms of
said Loan Documents, such failure shall constitute a default hereunder. Maker
shall have five (5) business days following receipt of written notice thereof
from Holder arising out of the non-payment of money within which to cure such
default. In the event of a default arising under Sections 6.3, 6.4 and 6.13 of
the Loan Consolidation and Line of Credit Agreement (as hereinafter defined),
Maker shall have thirty (30) business days following receipt of written notice
thereof from Holder to cure such default, provided, however, that if such a
default occurs which may not reasonably be cured within said thirty (30)
business days after notice thereof, the occurrence of such a default will not
constitute a default hereunder so long as efforts are commenced within said
thirty (30) day period to cure such default and thereafter diligently pursued
until cure is accomplished; provided, however, if no event shall (i) such cure
period extend beyond ninety (90) days from the date on which Maker receives
written notice of such default from Holder; and (ii) said extended cure period
shall apply only if there exists a reasonable likelihood that such default can
be cured within said ninety (90) day period. The notice and cure rights herein
granted shall not apply to defaults arising under Sections 6.6, 6.7 and 6.11
of the Loan Consolidation and Line of Credit Agreement or to Sections 6.9 and
6.10 of the same if the agreements or contracts described in said Sections 6.9
and 6.10 already provide Maker rights of notice and cure. After the expiration
of such notice and cure periods, interest shall accrue on the outstanding
principal balance of this Note and for so long as such default continues,
regardless of whether or not there has been an acceleration of the indebtedness
evidenced hereby as set forth herein, at the rate equal to the maximum rate
allowed to be charged Maker under Iowa law, or, in the event no such maximum
rate is then established, at the rate of eighteen (18%) percent per annum. All
such interest shall be paid at the time of and as a condition precedent to the
curing of any such default. Time is of the essence of this Note. In the event
this Note, or any part hereof, is collected by or through an attorney-at-law,
Maker agrees to pay all costs of collection including, but not limited to,
reasonable attorneys' fees actually incurred by Holder.
Presentment for payment, demand, protest and notice of demand, protest and
non-payment and all other notices are hereby waived by Maker. No failure to
accelerate the debt evidenced hereby by
Line of Credit Promissory Note Page 2
<PAGE> 12
reason of default hereunder, acceptance of a past due installment, or
indulgences granted from time to time shall be construed (i) as a novation of
this Note or as a reinstatement of the indebtedness evidenced hereby or as a
waiver of such right of acceleration or of the right of Holder hereafter to
insist upon strict compliance with the terms of this Note, or (ii) to prevent
the exercise of such right of acceleration or any other right granted hereunder
or by the laws of the State of Iowa; and Maker hereby expressly waives the
benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing. No extension of the time for the payment of this Note or any
installment due hereunder, made by agreement with any person now or hereafter
liable for the payment of this Note shall operate to release, discharge, modify,
change, or affect the original liability of Maker under this Note, either in
whole or in part, unless Holder agrees otherwise in writing. This Note may not
be changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, or discharge is
sought.
This Note is entitled to the benefits and is subject to the provisions of
the Loan Consolidation and Line of Credit Agreement by and among Maker, Payee
and S. Hubert Humphrey, Jr. (as Guarantor therein) dated November 17, 1995, as
modified and amended pursuant to that certain (i) First Amendment to Loan
Consolidation and Line of Credit Agreement, Line of Credit Promissory Note,
Security Agreement, Unconditional Guaranty of Payment and Performance and Pledge
and Security Agreement dated September 5, 1996 by and between Maker, S. Hubert
Humphrey, Jr. ("Humphrey") and Payee (the "First Amendment"); (ii) Second
Amendment to Loan Consolidation and Line of Credit Agreement, Line of Credit
Promissory Note, Security Agreement, Unconditional Guaranty of Payment and
Performance and Pledge and Security Agreement dated December 23,1996 by and
between Maker, Humphrey and Payee (the "Second Amendment"); (iii) Modification
of Loan and Security Agreements dated December 23, 1996 by and between Maker,
Humphrey and Payee (the "Modification Agreement"), as amended; and (iv)
Modification of Loan and Security Agreements Promissory Notes and Related Loan
Documents dated November 30, 1997, by and among Maker, Humphrey, Western Reserve
Life Assurance Co. of Ohio and Payee (said Loan Consolidation and Line of Credit
Agreement, together with all other documents evidencing or securing or in any
way relating to the indebtedness evidenced hereby are hereinafter referred to
collectively as the "Loan Documents"); some of which Loan Documents were filed,
for record on or about November 17, 1995 with the appropriate governmental
authorities.
If from any circumstances whatsoever, fulfillment of any provision of this
Note or of any other instrument evidencing or securing the indebtedness
evidenced hereby, at the time performance of such provision shall be due, shall
involve transcending the limit of validity presently prescribed by any
applicable usury statute or any other applicable law, with regard to obligations
of like character and amount, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity, so that in no event shall any
exaction be possible under this Note or under any other instrument evidencing or
securing the indebtedness evidenced hereby, that is in excess of the current
limit of such validity, but such obligation shall be fulfilled to the limit of
such validity.
This Note may be prepaid in whole or in part at any time and from time to
time without penalty or charge of any kind.
Line of Credit Promissory Note Page 3
<PAGE> 13
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Iowa. Maker hereby
submits to personal jurisdiction in the County of Linn, State of Iowa for the
enforcement of this Note.
As used herein the terms "Maker" and "Holder" shall be deemed to include
their respective heirs, successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law. In the event that
more than one person, firm, or entity is a Maker hereunder, then all references
to "Maker" shall be deemed to refer equally to each of said persons, firms, or
entities, all of whom shall be jointly and severally liable for all of the
obligations of Maker hereunder.
All notices required to be given under the terms of this Note shall be
address:
To Maker at: World Marketing Alliance, Inc.
400 Perimeter Center Terrace
Suite 755
Atlanta, Georgia 30346
Attention: S. Hubert Humphrey, Jr.
To Holder at: Money Services, Inc.
4333 Edgewood Road, N.E.
Cedar Rapids, Iowa 52499
Attention: Patrick Baird
IN WITNESS WHEREOF, Maker has caused this Note to be executed under Seal on
the date first above written.
WORLD MARKETING ALLIANCE, INC.,
a Georgia corporation
By: /s/ Thomas W. Montgomery
---------------------------------
Thomas W. Montgomery
Executive Vice President
(CORPORATE SEAL)
Line of Credit Promissory Note Page 4
<PAGE> 1
EXHIBIT 10.4
AUTOMATIC REINSURANCE AGREEMENT NO. 1
Between
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
(hereinafter referred to as the "Company")
and
WMA LIFE INSURANCE COMPANY LIMITED
(hereinafter referred to as the "Reinsurer")
Page 1 of 43
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE TITLE
- ------- -----
<S> <C> <C>
I. BASIS OF REINSURANCE 3
II. DEFINITIONS 4
III. COMMENCEMENT AND TERMINATION OF LIABILITY 9
IV. THE AMOUNT REINSURED AND THE COMPANY AMOUNT AT RISK 10
V. REINSURANCE PREMIUMS 14
VI. REINSURANCE ALLOWANCES 15
VII. INITIAL CEDING ALLOWANCE FOR EACH BLOCK 16
VIII. REIMBURSEMENT FOR TAXES 16
IX. INITIAL SETTLEMENT AND SUBSEQUENT ACCOUNTING 16
X. REPORTING 18
XI. REDUCTIONS 20
XII. FUNDS HELD, LETTER OF CREDIT 20
XIII. REDUCTION OF REINSURANCE BY COMPANY (RECAPTURE) 23
XIV. REINSTATEMENTS 25
XV. POLICY CHANGES 25
XVI. SETTLEMENT OF CLAIMS 25
XVII. RECORDS 30
XVIII. DAC TAX (Section 1.848-2(g)(8) Election) 31
XIX. OVERSIGHTS - CLERICAL ERRORS 32
XX. INSOLVENCY 32
XXI. ARBITRATION 34
XXII. PARTIES TO AGREEMENT 35
XXIII. DURATION OF REINSURANCE AND TERMINATION OF AGREEMENT 36
XXIV. WRITTEN NOTICE 37
XXV. OFFSET 38
XXVI. ASSIGNMENT OF REINSURANCE 38
XXVII. ENTIRE AGREEMENT 39
XXVIII. COMPANY'S PRACTICES, FORMS 39
XXIX. HEADINGS 40
XXX. EXECUTION OF AGREEMENT 40
</TABLE>
Page 2 of 43
<PAGE> 3
This Agreement is entered into by the Company and the Reinsurer on the
Execution Date. The reinsurance under this Agreement is effective for each Block
as of the respective dates shown in Exhibit A, as described in Article III. In
consideration of the mutual covenants contained in this Agreement, the parties
agree as follows:
ARTICLE I. BASIS OF REINSURANCE
1. Reinsurance Coverage. On and after the respective Effective Dates set
forth for each Block in Exhibit A, the Company shall cede and the
Reinsurer shall reinsure certain individual life insurance coverages as
stated in Exhibit A which have been or are to be issued directly by the
Company on lives on the plans set forth in Exhibit A, including any
accelerated death benefit rider set forth in Exhibit A. Only plans sold
by and through agents of Producer registered with WMA Securities, Inc.
shall be reinsured under this Agreement.
2. Type of Reinsurance. The reinsurance under this Agreement shall be on
the monthly renewable term plan. The Reinsurance Premiums shall be
payable on a monthly renewable term basis as described in Article V.
3. Automatic Basis. All reinsurance under this Agreement shall be on an
automatic basis. The Reinsurer shall automatically accept such
Reinsurance on the terms provided in Exhibit A.
4. Reinsurance Outside This Agreement. The Company retains the right to
reinsure, with any reinsurer, any or all of its plans or coverages
automatically in excess of the Company's normal retention and
facultatively, where appropriate. The Company shall cede and the
Reinsurer shall reinsure lives as described in Paragraph 1 of this
Article, notwithstanding such Outside Reinsurance except as provided in
Paragraph 5(a) of this Article.
Page 3 of 43
<PAGE> 4
5. Exceptions to Reinsurance Coverage.
a) Below Normal Retention. Reinsurance shall not be ceded under
this Agreement on any insured person if as a result of Outside
Reinsurance the Company keeps less than its normal retention
on such life. For purposes of this Paragraph, the Company's
normal retention means the Company's retention amounts under
the Company's current practices as may be in effect from time
to time. The Company's normal retention amounts on the
Execution Date are set forth in Exhibit A.
b) Exchanges. A policy or rider shall not be reinsured under this
Agreement if it is issued as an Exchange of a policy or rider
which is not reinsured under this Agreement. A policy or rider
otherwise eligible for reinsurance under this Agreement and
issued as an Exchange of a policy or rider which is reinsured
under this Agreement may be reinsured under this Agreement
only with the written consent of the Reinsurer.
c) Minimum Cession Amount. No reinsurance shall be ceded under
this Agreement on a life if the Amount Reinsured to be ceded
is less than $3,500.
ARTICLE II. DEFINITIONS. Any defined term used in this Agreement shall have the
meaning ascribed to it in this Article. Any term not defined in this Agreement
which is in general usage in the life reinsurance industry shall be given the
same meaning as such general usage ascribes to that term, giving due
consideration to the context in which the term is used in this Agreement.
"AMOUNT REINSURED" OR "AMOUNT REINSURANCE" means the amount of
reinsurance ceded by the Company to the Reinsurer under this Agreement on the
life of an insured person. It is the amount of life insurance ceded for which
the Reinsurer is at
Page 4 of 43
<PAGE> 5
risk under this Agreement on the life of the insured person. The Amount
Reinsured per insured life is calculated as set forth in Paragraph 1 of Article
IV.
"ARTICLE" OR "PARAGRAPH" refers to an Article or Paragraph of this
Agreement.
"BLOCK" means a defined group of reinsured policies (including
reinsured riders, if applicable) having Policy Dates within a certain time
period, as set forth in Exhibit A.
"CLAIMS RATIO" is a ratio used to determine the Reinsurer's share of
liability for certain items in Article XVI relating to a claim under a reinsured
policy or rider. The numerator of the ratio is the Amount Reinsured on which
Reinsurance Premiums have been computed. The denominator is the amount of the
death benefit, as defined in the reinsured policy (and/or reinsured rider, if
applicable), minus the cash value of the reinsured policy.
"CLOSED BLOCK" means a Block which consists of in-force policies on
the Block's Effective Date. Closed Block refers to Block 1. If a Policy
otherwise eligible to be included in the Closed Block is not in force on the
Effective Date, it shall not be included in the Closed Block and shall not be
ceded under this Agreement, even if the Policy or Rider is subsequently
reinstated.
"COMPANY AMOUNT AT RISK" on any insured person means the amount for
which the Company is at risk on the life of the insured person, before giving
any effect to reinsurance under this Agreement. The Company Amount at Risk on an
insured person is calculated as set forth in Paragraph 2 of Article IV. The
Company Amount at Risk is the amount retained by the Company net of any risk
ceded by the Company on the life of the insured person under any Outside
Reinsurance.
"EFFECTIVE DATE" of the Closed Block means, with respect to Reinsured
Plans of the Closed Block, the date shown in
Page 5 of 43
<PAGE> 6
Exhibit A on which reinsurance under this Agreement becomes effective. The
Company is liable for Reinsurance Premiums, less applicable Reinsurance
Allowances, due on or after the Effective Date of a Reinsured Plan within the
Block; and the Reinsurer is liable for any reinsured deaths occurring on or
after the Effective Date.
"EXCHANGE" means a policy or rider issued by the Company in exchange
for, or as a conversion of, an in-force policy or rider on the same life under
an Exchange Program.
"EXCHANGE PROGRAM" means an offer by the Company to a class of
policyowners or insured persons to issue an Exchange policy or rider on terms or
conditions materially different from the terms and conditions on which the
Company would offer the same policy form or rider form under its normal
practices for new business such that the risk or benefits borne by the Company
under the Exchange policy or rider are materially different. The altered terms
or conditions under an Exchange Program may include, for example, but are not
limited to, an offer by the Company to the eligible class: to waive evidence of
insurability or certain policy contract provisions; to retain the original
policy date or original effective date of the rider; or to alter or waive
material underwriting or issuance practices or requirements.
"EXECUTION DATE" means the date as of which this Agreement has been
executed, as shown in Article XXX.
"EXHIBIT" AND "SCHEDULE" mean, respectively, an exhibit or schedule
attached to this Agreement and shall be considered part of this Agreement.
"INITIAL CEDING ALLOWANCE" means any one-time consideration the
Reinsurer shall pay the Company for each Reinsured Plan within a Block, in
consideration for the Reinsurer being allowed to reinsure the Block, as provided
in Article VII. The amount of the Initial Ceding Allowance, if any, for each
Block is set forth in Exhibit A.
Page 6 of 43
<PAGE> 7
"INITIAL SETTLEMENT DATE" of a Block coincides with the Execution Date
or the Effective Date of the applicable Block, if later. It is the date as of
which the initial settlement is made by the parties with regard to the Closed
Block, as described in Article IX, Paragraph 1.
"INSOLVENCY" of a party means the filing or involuntary filing of a
petition for bankruptcy of the party; the commencement of any legal action for
an assignment for the benefit of creditors of the party or similar legal action;
the entry of any preliminary or final order by any regulatory authority or
administrative agency placing the party under supervision, rehabilitation,
liquidation, conservatorship, guardianship or other administrative finding of,
or proceeding arising from, the party's financial impairment or financial
insolvency.
"MONTHIVERSARY" has the same meaning ascribed to it in a reinsured
policy. It is the day of each calendar month coinciding with a policy's Policy
Date.
"OPEN BLOCKS" refers collectively to Block 2 and 3. "OPEN BLOCK" refers
individually to Block 2 or Block 3.
"OUTSIDE REINSURANCE" means any other facultative or automatic
reinsurance the Company has ceded or may cede to other reinsurers on lives
insured by the Company under the plans set forth in Exhibit A. "OUTSIDE
REINSURER" means any other reinsurer providing outside Reinsurance to the
Company.
"PARTY" OR "PARTY" refers to either the Company or the Reinsurer as
appropriate, and "PARTIES"" refers to both collectively.
"POINT IN SCALE" means that the Reinsurance Premium Rates set forth in
Schedule I shall be applied at the Reinsurance Premium Rate appropriate for the
current duration of the policy or rider coverage, even though reinsurance of the
policy or
Page 7 of 43
<PAGE> 8
rider may commence later than the original Policy Date or the effective date of
the reinsured rider. For example, in the case of a unchanged policy dated June
1, 1993 which becomes reinsured under this Agreement as of June 1, 1996: because
that policy begins its fourth policy year on June 1, 1996, the Reinsurance
Premium Rate charged under this Agreement for June, 1996 will be at the
appropriate Reinsurance Premium Rate set forth in Table I for the fourth policy
year based on the insured's original issue age.
"POLICY DATE" means the Policy Date as set forth in the Policy Schedule
of a reinsured policy. It is the date coverage is effective under the Policy and
the date monthly deductions commence under the Policy. Policy months, years,
Monthiversaries and anniversaries are measured from the Policy Date.
"PRODUCER" means World Marketing Alliance, Inc. And WMA Securities,
Inc.
"RECORD DATE" means the Record Date as set forth on Page 3 of the
reinsured policy. It is the date the policy is recorded on the Company's books
as an in-force policy.
"REINSURANCE ALLOWANCE" is the percentage of each Reinsurance Premium
which is paid or allowed by the Reinsurer to the Company, as described in
Article VI and set forth in Exhibit A.
"REINSURANCE PREMIUM" means the reinsurance premiums due from the
Company to the Reinsurer, as described in Article V, for each life reinsured
under this Agreement.
"REINSURANCE PREMIUM RATES" means the monthly term reinsurance premiums
rates, used to calculate the Reinsurance Premiums due from the Company to the
Reinsurer for each reinsured life, equal to 1/12th of the applicable annual rate
as set forth in Schedule I.
Page 8 of 43
<PAGE> 9
"REINSURED PLAN" means any life insurance policy form or rider form
reinsured under this Agreement, as set forth in Exhibit A.
"SETTLEMENT PERIOD" means the period as described in Paragraph 1 of
Article IX.
"SPECIFIED AMOUNT" means the Specified Amount as set forth in the
Policy Schedule of a reinsured policy.
ARTICLE III. COMMENCEMENT AND TERMINATION OF LIABILITY
1. Closed Block; Commencement of Liability. For each policy within Block
1, the liability of the Reinsurer for reinsurance under this Agreement
shall begin on the Effective Date as set forth in Exhibit A, and no
reinsurance is provided under this Agreement for a death occurring
prior to the Effective Date applicable to that policy. For each policy
within Block 1, the liability of the Company for Reinsurance Premiums,
less applicable Reinsurance Allowances, shall begin on the Effective
Date as set forth in Exhibit A.
2. Open Blocks; Commencement of Liability. For a policy or rider reinsured
under Block 2 or 3: (i) the liability of the Reinsurer under this
Agreement for reinsurance shall commence simultaneously with the
beginning of the Company's liability under each corresponding Reinsured
Plan or any application or conditional receipt therefor; and (ii) the
liability of the Company for Reinsurance Premiums under this Agreement
shall begin as of the Policy Date of the reinsured policy or as of the
effective date of reinsured rider, if different. The Company represents
that its normal underwriting practice is to promptly return any premium
payment taken with an application which the Company has declined
without a counteroffer; however, failure of the Company to do so shall
not relieve the Reinsurer for its liability under this Paragraph.
Page 9 of 43
<PAGE> 10
3 Termination of Reinsurer's Liability. In no event shall the Reinsurer's
liability for reinsurance continue after termination of the Company's
liability for any claims relating to its corresponding reinsured policy
or rider.
ARTICLE IV. THE AMOUNT REINSURED AND THE COMPANY AMOUNT AT RISK
1. The Amount Reinsured.
a) The Amount Reinsured for Plans Without Outside Reinsurance.
For each Reinsured Plan without any Outside Reinsurance, the
initial Amount Reinsured per life under this Agreement shall
be equal to 50% of the first $60,000 of Specified Amount for a
base policy or 50% of the first $60,000 of the Face Amount of
any Other Insured Rider, subject to a maximum Amount Reinsured
of $30,000 per life. In the event that the Specified Amount
for any base policy without Outside Reinsurance is less than
$60,000 and the policy has a reinsured rider on the same
primary insured person, then 50% of the Specified Amount of
the base policy plus up to 50% of the Face Amount of the
reinsured rider shall be reinsured subject to the total Amount
Reinsured not exceeding $30,000 for the life reinsured.
b) The Amount Reinsured for Plans With Outside Reinsurance. For
each Reinsured Plan having Outside Reinsurance the Amount
Reinsured per life under this Agreement shall be equal to 50%
of the first $60,000 of the Company Amount at Risk under the
Reinsured Plans on that person's life. The maximum limit per
life to be reinsured under this Agreement shall be $30,000.
For example, the Amount of Reinsurance on a reinsured life
which has Outside Reinsurance is $30,000 if the Company Amount
at Risk on that life equals or exceeds $60,000.
Page 10 of 43
<PAGE> 11
c) The Amount Reinsured to Remain Level; Exceptions. Except as
provided in Paragraph 1.d) of this Article, the Amount of
Reinsurance once ceded on a Reinsured Plan on a life will
remain level until such time that the Company Amount at Risk
is less than the Amount Reinsured; in that case the Amount
Reinsured will be equal to the Company Amount at Risk.
d) The Amount Reinsured Affected by Policy Changes. A policy
change which affects the Company Amount at Risk, such as a
change in Death Benefit Option, a change in the policy's
Specified Amount, a change in the Face Amount of a rider, or
an addition or deletion of a rider, will result in a new
calculation of the Amount Reinsured, in the manner described
in the first two sentences of Paragraph 1.a) of this Article
if there is no Outside Reinsurance on the life reinsured. For
lives with Outside Reinsurance the recalculated Amount
Reinsured will be calculated in the manner described in the
first two sentences of Paragraph 1.b) of this Article. The new
Amount Reinsured, following any change, shall be applied under
this Agreement prospectively from the effective date of the
policy change.
e) The Amount for which Reinsurer is Liable under Conditional
Receipts or Applications. With regard to liability of the
Company under the terms of an application for a policy or
rider to be reinsured under this Agreement or under the terms
of a conditional receipt issued in connection with such
application, the liability of the Reinsurer under this
Agreement shall be equal to 50% of the first $60,000 per life
of the Company's liability, plus any amounts for which the
Reinsurer is responsible under Article XVI.
f) Reinsurance Terminates if Amount Reinsured Falls Below Minimum
Cession Amount. If for any reason the
Page 11 of 43
<PAGE> 12
Amount Reinsured on a life reinsured under this Agreement
falls below the Minimum Cession Amount described in Paragraph
5 c) of Article I, then the reinsurance on that life shall
terminate under this Agreement and shall be automatically and
permanently recaptured by the Company.
2. The Company Amount at Risk. The Company Amount at Risk per life under
each Reinsured Plan shall be calculated each period as follows:
a) Under a newly issued policy. For a newly issued policy, prior
to the third month of the calendar quarter in which the
reinsured policy's Record Date falls, the Company Amount at
Risk is equal to the following sum:
(i) the specified amount of the policy (including the
Face Amount of any reinsured rider on the same life,
if applicable); minus
(ii) any amount ceded by the Company on the life of the
insured person under any Outside Reinsurance; plus
(iii) any amounts retained by the Company under prior
policies or riders reinsured under this Agreement on
the same life.
For the newly issued policy, in the third month of the
calendar quarter in which its Record Date falls, and
thereafter, the Company Amount at Risk shall be calculated as
set forth in Paragraph 2.b) of this Article.
For example: for a policy issued on a Record Date of January
15th with a Policy Date of December 10th, the Company Amount
at Risk under that policy in December, January and February
will be calculated
Page 12 of 43
<PAGE> 13
under Paragraph 2.a) of this Article; in March, which is the
third month of the calendar quarter in which that policy's
Record Date falls, the Company Amount at Risk would be
calculated under Paragraph 2 b) of this Article.
b) Under an in-force policy. Except as provided in 2 a) of this
Article, in each calendar month, the Company Amount at Risk
per life is equal to the following sum:
(i) the death benefit, as defined in the reinsured policy
(including the Face Amount of any reinsured rider, if
applicable); minus
(ii) any amount ceded by the Company on the life of the
insured person under any Outside Reinsurance; plus
(iii) any amounts retained by the Company under prior
policies or riders reinsured under this Agreement on
the same life; minus
(iv) the cash value of the reinsured policy.
If the Company Amount at Risk under a reinsured policy is
being calculated for the third month of a calendar quarter
(e.g., March, June, September or December), then the cash
value of the policy for that month, for purposes of Paragraph
2.b) (iv), is equal to the cash value of the reinsured policy
as of the end of that month. Except as provided in Paragraph
2.c) of this Article, if the Company Amount at Risk under a
reinsured policy is being calculated for any other month, the
cash value of the policy, for purposes of Paragraph 2.b) (iv),
is measured by and equal to the cash value of the reinsured
policy as of the end of the preceding calendar quarter. Thus,
for example, for purposes of Paragraph 2.b) (iv), the
Page 13 of 43
<PAGE> 14
cash value of a policy for January or February would be equal
to the policy's cash value for the preceding December.
c) Policy Changes affecting Company Amount at Risk. For purposes
of Paragraph 2.b) of this Article, changes in a policy's
Company Amount at Risk which are due to normal cash value
fluctuation shall be calculated and reported quarterly, as
described in the last three sentences of Paragraph 2.b). Other
changes in the Company Amount at Risk of a policy or rider due
to a policy change shall be recalculated and reported under
this Agreement in or for the month in which the policy change
occurs. For this purpose, such policy changes may include, for
example, a change in Death Benefit Option, a change in the
policy's Specified Amount, a change in the Face Amount of a
rider, and an addition or deletion of a rider.
ARTICLE V. REINSURANCE PREMIUMS
1. Reinsurance Premium Rates. The monthly Reinsurance Premiums due from
the Company to the Reinsurer shall be calculated at the end of each
calendar month based on the Amount Reinsured under each Reinsured Plan
as of its Monthiversary falling in that calendar month. The Company
shall pay to the Reinsurer the Reinsurance Premiums on a monthly
renewable term basis at one twelfth of the applicable annual
Reinsurance Premium Rates set forth in Schedule I. The Reinsurance
Premium Rates are guaranteed by the Reinsurer except where a particular
rate is less than the applicable rate set forth in the Table of
Guaranteed Maximum Life Insurance Rates of the reinsured policies; in
that case, to the extent of such shortfall, such particular rate shall
only be guaranteed for one Policy Year, so that the Reinsurer need not
maintain deficiency reserves in connection with such Reinsurance
Premiums payable pursuant to this Agreement. Nevertheless, Reinsurer
shall anticipate continuing to
Page 14 of 43
<PAGE> 15
accept reinsurance on the basis of the Reinsurance Premium Rates for
all Reinsured Plans that were originally ceded pursuant to such rates.
2. Table Ratings. The Reinsurance Premium Rates in Schedule 1, when
applied to any Reinsured Plan which is issued by the Company with a
table rating, shall be multiplied by the appropriate table percentage
which is in effect for that policy or rider. The Company's current
table percentages are as set forth in Schedule I.
3. Risks Bearing Permanent Flat Extras (More Than Five Years). The total
reinsurance premium for risks bearing flat extra ratings of more than
five (5) years shall be at the Reinsurance Premium Rates provided in
Schedule I plus the following percentage of the flat extra mortality
charge under the Reinsured Plan for the Amount Reinsured.
First Year 25%
Renewal Years 90%
4. Risks Bearing Temporary Flat Extras (Five Years or Less). The total
reinsurance premium for risks bearing flat extra ratings of five (5)
years or less shall be at the Reinsurance Premium Rates provided in
Schedule I plus 90% of the temporary flat extra mortality charge under
the Reinsured Plan for the Amount Reinsured.
ARTICLE VI. REINSURANCE ALLOWANCES
1. Reinsurance Allowance. On each Reinsurance Premium due Reinsurer, the
Reinsurer shall pay or allow to the Company a Reinsurance Allowance
equal to a percentage of the Reinsurance Premium, as shown in Exhibit A.
The Reinsurer shall not be obligated to pay or reimburse the Company for
expenses incurred by the Company associated medical examinations,
inspection reports or other expenses associated with the issuance,
acquisition or administration a policy or rider.
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<PAGE> 16
2. Flat Extras. However, in the case of risks bearing permanent or
temporary flat extras, as described in Paragraphs 3 and 4 of Article
V, Reinsurance Allowances are payable on the Reinsurance Premium Rates
provided in Schedule I but are not payable on the additional flat extra
mortality charge.
ARTICLE VII. INITIAL CEDING ALLOWANCE FOR EACH BLOCK
* Material has been omitted pursuant to a request for confidential
treatment. Omitted material has been filed separately.
ARTICLE VIII. REIMBURSEMENT FOR TAXES
Reimbursement by Reinsurer. The Reinsurer shall reimburse the Company for any
U.S. Excise Tax the Company is required to pay under the U.S. Internal Revenue
Code for the reason that the Reinsurer fails to make an election or terminates
its election to file U.S. federal income tax returns or otherwise ceases or
fails to file such return. The Reinsurer shall not reimburse the Company for any
other federal or state taxes or state guaranty fund assessments the Company may
be required to pay with respect to the Reinsured Plans. This Paragraph does not
diminish in any way the provisions of Article XVIII.
ARTICLE IX. INITIAL SETTLEMENT AND SUBSEQUENT ACCOUNTING
1. Initial Settlement of the Closed Block. There shall be an initial
settlement for the Closed Block on or as of its Initial Settlement
Date. In the initial settlement, the Reinsurer shall pay the aggregate
Initial Ceding Allowance for each applicable Block and the parties
shall settle all other items due to or from each other, with respect to
the Block, for the period from the first Effective Date of that Block
through the calendar month-end on or prior to Initial Settlement Date
(Settlement Period) in the following manner. The Reinsurer shall pay to
the Company
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<PAGE> 17
on the Initial Settlement Date (or within five (5) days after the
Execution Date, if later) an amount equal to:
a) the Initial Ceding Allowance due to Company for the Closed
Block; less
b) the Reinsurance Premiums, net of applicable Reinsurance
Allowances, due to the Reinsurer for the Settlement Period;
plus
c) any reinsurance death claims due and payable to Company under
this Agreement for deaths occurring during the Settlement
Period; plus
d) the amount of Funds Held, if any, to be held by the Company
pursuant to Article XII.
2. Monthly Accounting. Except as provided under Initial Settlement of the
Closed Block pursuant to Paragraph 1 of this Article, on an ongoing
basis Reinsurance Premiums and adjustments and other items due to or
from each party shall be accounted for and settled monthly. In each
calendar month, the Company shall send to Reinsurer a Monthly Summary
Report showing totals of Reinsurance Premiums for all outstanding new
reinsurance which have been ceded and renewal Reinsurance Premiums for
all renewal reinsurance falling due within the previous month, as
further described in Article X. The statement shall also include
Reinsurance Allowances and any adjustments in Reinsurance Premiums due
in previous months, any reinsurance death claims due, and adjustments
for any Funds Held pursuant to Article XII (including interest due
Reinsurer thereon). The Company shall remit to the Reinsurer the
amount of any net balance due. If the net balance is in favor of the
Company the Reinsurer shall remit to the Company.
3. Reinsurance Premiums Past Due. The payment of Reinsurance Premiums by
the Company is a condition of the liability of
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<PAGE> 18
the Reinsurer under reinsurance covered by this Agreement. In the event
of non-payment of Reinsurance Premiums as provided in this Agreement,
the Reinsurer shall have the right to terminate the reinsurance under
all policies or riders having Reinsurance Premiums in arrears.
Reinsurance Premiums shall be considered in arrears if not paid within
the later of: (i) 30 days after the end of the month for which they are
due; or (ii) 10 days after the Monthly Accounting is sent by the
Company to the Reinsurer. For this purpose, where the actual amount of
Reinsurance Premiums cannot be reasonably determined because of
administrative or other reasons, Reinsurance Premiums shall not be
considered in arrears if the Company has made timely payment of a good
faith estimate of the amount of Reinsurance Premium due. In order for
Reinsurer to exercise its right to so terminate such reinsurance
because of Reinsurance Premiums being in arrears, the Reinsurer shall
first give the Company written notice thereof, and the Company shall
have the right to cure such non-payment within ten (10) days from its
receipt of the written notice. If the Company fails to cure such
non-payment within the ten day period, then the reinsurance under all
policies or riders having Reinsurance Premiums still in arrears shall
terminate and the Reinsurer shall have no liability thereafter with
respect to such policies and riders.
4. Currency. All amounts due either party under this Agreement shall be
payable in United States currency.
ARTICLE X. REPORTING
1. Reporting by the Company. The Company shall send to the Reinsurer the
following reports within the time periods as shown in each subparagraph
below. The Company shall make its best effort to send the reports
described in Paragraphs (a), (b) and (c) within twenty (20) days after
the end of each respective reporting period whenever administratively
practicable.
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<PAGE> 19
a) Monthly Bordereau Report: within 30 days after the end of each
month, a monthly in-force inventory of the amount of the
reinsurance in force, new reinsurance and reinsurance changing
or terminating (including reported death claims). The
information in the report will consist of sufficient detail
for each policy and rider to permit the Reinsurer to perform
its administrative functions and will be provided in an
electronic medium acceptable to both parties.
b) Monthly Summary Reports: within 30 days after the end of each
month, a copy of a Monthly Summary Report containing monthly
totals of: first year and renewal Reinsurance Premiums
payable; Reinsurance Allowances due the Company; death claims
incurred; any other claim-related amounts due Company under
Article XVI; any change in Funds Held which is due to or from
the Company (including interest due the Reinsurer on Funds
Held); and the net amount due to or from Reinsurer.
c) Monthly Exhibit of Reinsurance in Force: within 30 days after
the end of each month, a copy of an exhibit summarizing:
additions for the month, including counts and amount of new
issues, reinstatements and increases in ceded amount;
decreases for the month, including counts and amounts of
lapses, surrenders, death claims, maturities, and decreases in
ceded amount; and the total reinsurance in force as of the end
of the month.
d) Quarterly Financial Reports: within 30 days after the end of
each calendar quarter, a report for Reinsurer's financial
reporting purposes, containing additional quarterly and
year-to-date financial information, with respect to the
reinsurance, to permit the Reinsurer to complete its statutory
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<PAGE> 20
financial statements and other financial reporting
obligations. The information will be provided in an electronic
medium acceptable to both parties.
e) Annual Statutory Financial Statements: within 90 days after
the end of each calendar year, a copy of the statutory
financial statements of the Company as filed with the State of
Ohio.
2. Reporting by the Reinsurer. The Reinsurer shall send to the Company
within ninety (90) days after the end of each respective reporting
period, financial statements of the Reinsurer as of the end of each
calendar quarter and calendar year, including balance sheet and income
statement. The quarterly financial statements shall have been prepared
in accordance with or based on U.S. generally accepted accounting
practices applied on a consistent basis in the reasonable opinion of
the Reinsurer. The annual financial statements of the Reinsurer shall
have been prepared in accordance with or based on U.S. generally
accepted accounting practices applied on a consistent basis and shall
have been audited by an independent public accounting firm.
ARTICLE XI. REDUCTIONS
1. Reductions. If any of the original policies or riders reinsured under
this Agreement are reduced or terminated, the Amount Reinsured under
this Agreement on such a policy or rider will be recalculated in
accordance with Paragraph 1.d) of Article IV.
ARTICLE XII. FUNDS HELD, LETTER OF CREDIT.
1. Security Requirement. In the event Reinsurer is not licensed or
otherwise accredited or authorized as a reinsurer in the Company's
domiciliary state and in any other jurisdiction where the Company is
licensed to do
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<PAGE> 21
business, the Reinsurer shall, at all times while the reinsurance under
this Agreement is in effect, provide security, as described in this
Article, for its obligations under this Agreement or as otherwise
agreed to in writing by the parties. The type, standards, form,
provisions, conditions, terms, dates and financial institutions
relating to such security, and the conditions upon which Reinsurer
shall provide such security, shall at all times comply with the
insurance laws and regulations of the Company's domiciliary state, as
may be amended or superceded from time to time, relating to security
given in connection with allowing the Company, for statutory insurance
accounting purposes, to recognize admitted assets or reserve credits or
other credits associated with such reinsurance ceded to an unauthorized
or unaccredited reinsurer.
2. Initial Security; Funds Held. Until such time as the Reinsurer
provides a Letter of Credit as described in Paragraph 3 of this
Article, on the Initial Settlement Date of each of the Closed Blocks
described in Paragraph 1 of Article IX and with each monthly accounting
described in Paragraph 2 of Article IX, the Company shall withhold or
receive funds from the Reinsurer ("Funds Held") equal to a certain
amount as follows. On the Initial Settlement Date, the Company shall
withhold the required amount of Funds Held from the net amount, if any,
otherwise due from the Company to the Reinsurer on that date; to the
extent any net amount otherwise due Reinsurer on that date is
insufficient to cover the required amount of Funds Held, the Reinsurer
shall pay the Company in cash the balance of the required amount of
Funds Held on that date. Likewise, in connection with each monthly
accounting under Paragraph 2 of Article IX, the Company shall adjust
the total required amount of Funds Held; if the required amount of
Funds Held increases, the Company shall withhold or receive cash from
the Reinsurer equal to the increase in the required amount of Funds
Held, and, if the required amount of Funds Held decreases, the
Reinsurer shall
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<PAGE> 22
withhold or receive cash from the Company equal to the decrease in the
required amount of Funds Held. The required amount of Funds Held for
the period shall be equal to the reinsurance credits taken or
reasonably estimated to be taken by the Company in connection with this
Agreement under Exhibit 8 and under column 3, line 4.c. of Part 1 of
Exhibit 11 of the Company's statutory financial statements. The Company
shall adjust the required amount of Funds Held on a monthly basis. The
Company shall retain the gross investment income derived from the Funds
Held but shall pay the Reinsurer interest thereon each month at a rate
equal to the interest rate for (ninety) 90 day Commercial Paper as
published the first business day of that month in the Wall Street
Journal or successor publication agreed upon by the parties. The
Company shall hold the Funds Held in the United States as part of its
general account assets; and the Company shall have exclusive control
over the Funds Held and sole right to withdraw or disburse such funds.
3. Letter of Credit. Instead of providing Funds Held as described in
Paragraph 2 of this Article, the Reinsurer at its expense may provide
and maintain a Letter of Credit in favor of the Company in an amount
which at all times equals or exceeds the required amount of Funds Held
determined as described in Paragraph 2 of this Article. The form,
provisions, conditions, terms and dates, as well as the issuing
financial institution, of or relating to the Letter of Credit, and the
conditions upon which Reinsurer shall provide such Letter of Credit,
shall comply with the insurance laws and regulations of the Company's
domiciliary state, as may be amended or superceded from time to time,
relating to such Letters of Credit. The issuing institution shall be an
U.S. bank or trust company or a U.S. branch of a foreign bank appearing
on the list of approved letter of credit banks published from time to
time by the Securities Valuation Office of the National Association of
Insurance Commissioners. The Letter of Credit shall be substantially in
the form set
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<PAGE> 23
forth in Exhibit B or in such other form as the Ohio Insurance
Department or other applicable State Insurance Department may require
or permit. The terms of the Letter of Credit shall provide that: it is
not conditioned on the delivery of any other documents or materials; it
is irrevocable without the consent of the Company; it is automatically
renewable as provided in Exhibit B; and its initial term is for a
period of not less than one year. Such Letter of Credit may be drawn
upon at any time, notwithstanding any other provisions in this
Agreement, but shall be utilized by the Company or its successors only
for one or more of the following reasons:
(i) to fund an account with the Company in an amount at least
equal to the deduction, for reinsurance ceded, from the
Company's liabilities for Reinsured Plans (such amount shall
include, but not be limited to, amounts for policy reserves,
claims and losses incurred and unearned premium reserves); and
(ii) to pay any other amounts the Company claims are due under this
Agreement.
Such Letter of Credit shall be promptly issued and delivered to the
Company. But in no event shall the Letter of Credit be issued or
confirmed later than December 31 in respect of the year for which the
Company is taking credits for such reinsurance in its statutory
financial statements, and in no event shall the Letter of Credit be
delivered to the Company later than thirty days after such December 31.
ARTICLE XIII. REDUCTION OF REINSURANCE BY COMPANY (RECAPTURE)
1. Recapture. Except as provided in Paragraphs 2 and 3 of this Article,
the Company may not reduce (recapture) the reinsurance in-force on any
lives on which reinsurance has been ceded under this Agreement
(in-force reinsurance).
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<PAGE> 24
2. Events triggering right to recapture. The Company shall have the right
to recapture a portion or all of the in-force reinsurance on some or
all lives
(i) on thirty days written notice or later date specified in the
notice if:
a) the Reinsurer fails to cure a material default under
a loan or note from the Company or its affiliates; or
b) the Reinsurer increases the Reinsurance Premium Rates
under this Agreement on in-force business without the
Company's written agreement; and
(ii) immediately upon written notice, unless a later date is
specified in the notice, if:
c) the Company elects to recapture due to the insolvency
of the Reinsurer as provided in Paragraph 2 of
Article XX;
d) the Reinsurer dissolves, ceases to legally exist, or
otherwise ceases to be legally authorized to act as a
reinsurer in its domiciliary jurisdiction; or
e) the Reinsurer fails, within thirty (30) days after
written notice by Company of a material breach of
this Agreement by Reinsurer, to cure such material
breach; for this purpose, a material breach may
include but is not limited to: failure to pay any
agreed Reinsurance Allowances, failure to pay
reinsurance claims, or failure to comply with Article
XII;
(iii) when agreed if:
f) by the mutual written agreement of the parties.
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<PAGE> 25
3 Notice and Date of Recapture. The written notice of the Company's
exercise of right to recapture shall specify the applicable reason set
forth in Paragraph 2 which is triggering the recapture and the extent
of the recapture.
4. Effect of Recapture on Reinsurance. Recapture by the Company under this
Article shall be prospective from the effective date of recapture and
shall not diminish the amounts due under this Agreement (or other
rights or obligations of the parties under this Agreement) outstanding
prior to the effective date of recapture.
ARTICLE XIV. REINSTATEMENTS
1. Automatic Reinsurance of Reinstated Policies. Should a reinsured
policy (including any reinsured rider, if applicable) lapse and
subsequently be reinstated in accordance with its terms and the normal
rules of the Company, the reinsurance for such policy shall be
reinstated automatically. The Company shall pay Reinsurance Premium to
the Reinsurer for the same period of time cost of insurance charges are
received by the Company on such a reinstated policy.
ARTICLE XV. POLICY CHANGES
Duty to inform Reinsurer of Policy Changes. Should the Company make any material
changes (including but not limited to a change in Face Amount, Specified Amount,
Company Amount at Risk, or Rating Classification) in the provisions and
conditions of a policy issued to an insured and upon which reinsurance shall
have been granted hereunder, the Company shall reflect such policy changes, as
appropriate, in the monthly reports called for in Paragraph 1 of Article X.
ARTICLE XVI. SETTLEMENT OF CLAIMS
1. Notice. On a monthly basis, the Company shall account to the Reinsurer
for death claims due as provided in
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Paragraph 2 of Article IX and shall notify Reinsurer of reported death
claims as provided in Paragraph 1a) of Article X. Company agrees to
furnish Reinsurer with copies of the proof of loss or other written
materials relating to a specific claim upon request of Reinsurer or as
provided in Paragraph 5 of this Article.
2. Standard Claim Practices. Company agrees to act in accord with its
standard practices applicable to all claims in enforcing the terms and
conditions of the reinsured policies or reinsured riders and with
respect to the administration, negotiation, payment, denial, or
settlement of any claim or legal proceeding.
3. Payment and Settlement of Claim. Reinsurer agrees to accept the good
faith decision of the Company in payment or settlement of any claim for
which Reinsurer has received the required notice. Reinsurer agrees to
pay Company the Amount Reinsured on which Reinsurance Premiums have
been computed upon receiving proper evidence the Company has paid a
policy claim. Payment of the Amount Reinsured on account of death shall
be made in one lump sum. Reinsurer shall also refund to the Company,
without interest, any Reinsurance Premiums, net of any Reinsurance
Allowance, which had been paid to Reinsurer for policy months which
began after the date of death.
4. Reinsurer's Liability for Covered Claim Expenses. Except as provided
in Paragraph 5 of this Article, Reinsurer's liability shall include
indemnification of the Claims Ratio of any covered claim expenses
incurred by Company in defending or investigating a policy claim.
Covered claim expenses shall include, but not be limited to, cost of
investigation, legal fees, court costs and interest charges. Covered
claim expenses shall not include:
a) Compensation of salaried officers and employees;
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<PAGE> 27
b) routine investigative expenses of incontestable claims:
c) expenses incurred by the Company in connection with an
interpleader proceeding or other dispute or contest arising
out of conflicting claims of entitlement to proceeds or
benefits under a Reinsured Plan; and
d) any possible extra-contractual damages shall not be considered
covered claim expenses.
5. Contested, Litigated or Compromised Claims. The Company shall promptly
notify Reinsurer of its intention to contest, compromise or litigate
any claim on a Reinsured Plan or its intention to investigate or defend
any litigation initiated against the Company in response to the
Company's denial of a claim on a Reinsured Plan. With or immediately
following such notice, the Company shall furnish Reinsurer with copies
of written materials relating to such claim. Reinsurer shall promptly
notify Company of its decision whether or not to accept any such
action. If Reinsurer declines to accept any such action, it will pay
the full Amount Reinsured, as if there had been no such contest,
compromise or litigation, and will be fully discharged as of the date
of such payment from any further liability on that claim under
Paragraph 4 of this Article. If the Reinsurer accepts such action,
then: (i) Reinsurer shall continue to share in the covered claim
expenses as described in Paragraph 4; (ii) the Company shall keep the
Reinsurer informed of the status of any legal proceeding or settlement
negotiations in connection with such claim; and (iii) if the contest or
compromise reduces the amount of the Company's liability, the
Reinsurer's liability shall be reduced to its Claims Ratio of the
reduced amount.
6. Recovery from Third Party. The Company shall promptly notify Reinsurer
if the Company should assert or bring a
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<PAGE> 28
claim or action against a third party for contribution, indemnification
or similar grounds to recover from the third party any monies paid or
expenses incurred by the Company in connection with a policy claim
reinsured under this Agreement. Upon request, the Company shall furnish
Reinsurer with copies of written materials relating to such third party
claim or action. Reinsurer shall promptly notify Company of its
decision whether or not to share in the expenses and potential recovery
of any such proceeding. If Reinsurer declines to so accept any such
proceeding, Reinsurer shall not participate in any costs of such
proceeding and shall not share in any monies so recovered by the
Company. If the Reinsurer accepts such action, then: (i) Reinsurer
shall continue to share in the expenses of that proceeding as described
in Paragraph 4 as though they were covered claim expenses; and (ii) the
Company shall keep the Reinsurer informed of the status of such
proceeding or settlement negotiations in connection with such
proceeding. In that event, the parties agree that any monies so
recovered by the Company: (i) shall be applied first to reduce the
costs incurred by the Company in prosecuting such third party claim or
action and to that extent shall be shared with the Reinsurer in
accordance with its Claims Ratio; (ii) shall then be applied to any
punitive, exemplary, compensatory or other extra-contractual or
non-contractual damages or settlement paid or ordered or agreed to be
paid by the Company in excess of the limits of the policy, and shall
not be shared with the Reinsurer; (iii) shall then be applied to reduce
the covered claim expenses of the original claim and to that extent
shall be shared with the Reinsurer in accordance with its Claims Ratio;
and (iv) to the extent there is any remaining recovery, shall then be
applied to reduce the Company's liability under the policy and shall be
shared with Reinsurer in accordance with the Reinsurer's Claims Ratio.
For purposes of the preceding sentence, the numerator of the Claims
Ratio shall be recalculated by deducting Reinsurer's share of any
recovery under (iv) of the preceding sentence, and the
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<PAGE> 29
denominator of the Claims Ratio shall be recalculated by deducting the
total amount of any recovery under (iv) of the preceding sentence. The
parties understand and agree that this Paragraph shall not apply to and
the Reinsurer shall not share in: (i) commission chargebacks or
adjustments made by the Company in accordance with its contract with
the Producer or an agent; (ii) any first-party claim brought by the
Company under any liability, fidelity or indemnity coverages carried by
the Company or its affiliates; and (iii) any reinsurance claims paid to
the Company by an Outside Reinsurer.
7. Adjustments for Misstatements. If the amount claimed as death benefit
under a reinsured policy or reinsured rider is increased or reduced
because of a misstatement of age, sex or smoker status, the Company
Amount at Risk will be calculated based on the adjusted amount of death
benefit and the Amount Reinsured will, if applicable, be increased or
decreased proportionately.
8. Interest. If the Company pays interest on a claim, Reinsurer agrees to
pay the interest on the Amount Reinsured computed at the same rate and
for the same period as that paid by the Company, but in no event later
than the date the claim is finally adjudicated by the Company.
9. Penalties.
a) Statutory Penalties. If the Company is required to pay
penalties or interest imposed automatically by statute, other
than penalties or interest arising from Company's negligent or
intentional violation of such a statute, Reinsurer shall
indemnify the Company for the Claims Ratio of such penalties
and interest.
b) Extra-Contractual Damages. Except as provided in Paragraph 5
of this Article, Reinsurer shall not be liable for any
punitive, exemplary or other extra-
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<PAGE> 30
contractual damages awarded by a court against the Company
with respect to a policy or rider reinsured under this
Agreement, and the Reinsurer's liability therefor under this
Agreement shall be limited to the Reinsured Amount plus its
Claims Ratio of covered claims expenses and of statutory
penalties.
10. Accelerated Death Benefits. The Reinsurer shall participate in any
claim for any Accelerated Death Benefit in connection with the
Reinsured Plans. A claim for accelerated death benefits shall be
treated under this Agreement as though it were a death claim and as
though the death occurred on the date the claim was made. If the
claimant elects to take less than 100% of the benefit under the
Accelerated Death Benefit and the reinsured policy thereby remains in
force, then: the Reinsurer shall pay the Company for the Accelerated
Death Benefit an amount equal to the accelerated percentage elected by
the claimant multiplied by the present value, calculated in accordance
with the rider form, of the Amount Reinsured; and the reduced Amount
Reinsured for the policy shall be equal to the original Amount
Reinsured reduced by the same percentage used to calculate the
Accelerated Death Benefit paid.
ARTICLE XVII. RECORDS
Each party, its auditors and any regulators having authority over that party
shall have the right, at all reasonable times, and at their expense, to inspect
at the office of the other party all books, records, procedures and documents of
the other party relating to this reinsurance. A party or its auditor conducting
such inspection shall give the other party one week advance notice. The Company,
its auditors and regulators shall have the same right to inspect, verify and
value any assets held in a trust account or otherwise held for the benefit of
the Company under Article XII. The party being audited or inspected agrees to
cooperate in the audit, including providing any information requested by the
other party or its auditor in
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<PAGE> 31
advance of the audit or inspection. Upon request, the Company agrees to furnish
the Reinsurer with copies of any underwriting information in the Company's files
pertaining to a reinsured policy or reinsured rider.
ARTICLE XVIII. DAC TAX (Section 1.848-2(g)(8) Election)
1. Rights and Duties of Each Party. The Company and the Reinsurer hereby
agree to the following, pursuant to Section 1.848-2(g)(8) of the Income
Tax Regulations issued December 1992, under Section 848 of the Internal
Revenue Code of 1986, as amended. This election shall be effective for
all years for which this Agreement remains in effect.
a) The terms used in this Article are defined by reference to
Regulation Section 1.848-2 in effect December 1992.
b) 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).
c) Both parties agree to exchange information pertaining to the
amount of net consideration under this Agreement each year to
ensure consistency or as otherwise required by the Internal
Revenue Service.
d) The Company 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
Company stating that the Company will report such net
consideration in its tax return for the preceding calendar
year.
e) The Reinsurer may contest such calculation by providing an
alternative calculation to the Company in writing within 30
days of the Reinsurer's receipt of the Company's calculation.
If the Reinsurer does not so notify the Company, the Reinsurer
will report
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<PAGE> 32
the net consideration as determined by the Company in the
Reinsurer's tax return for the previous calendar year.
f) If the Reinsurer contests the Company'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 Company 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 XIX. OVERSIGHTS - CLERICAL ERRORS
Effect. Should the Company fail to cede reinsurance that otherwise would have
been ceded in accordance with the provisions of this Agreement, or should either
party fail to comply with any of the other terms of this Agreement, and if this
is shown to be unintentional or the result of a misunderstanding, oversight, or
clerical error on the part of either party, then this Agreement shall not be
deemed abrogated thereby, but the parties shall be restored to the position they
would have occupied had no such oversight or misunderstanding or clerical error
occurred.
ARTICLE XX. INSOLVENCY
1. Insolvency of the Company.
a) Written Notice of Insolvency. The Company shall immediately
give Reinsurer written notice of an event constituting
Insolvency of the Company. However, whether such notice is
timely given or not, in the event of the Insolvency of the
Company, all amounts relating to reinsurance made, ceded,
renewed or otherwise becoming effective under this Agreement
shall be payable by the Reinsurer directly to the Company or
to its liquidator, receiver or statutory
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<PAGE> 33
successor on the basis of the liability of the Company under
the Reinsured Plan without diminution because of the
insolvency of the Company or because the Company or Company's
legal representative has failed to pay all or a portion of
amounts owed to Reinsurer under this Agreement. It is
understood, however, that in the event of the Insolvency of
the Company, the liquidator or receiver or statutory successor
of the insolvent Company shall give written notice to the
Reinsurer of the pendency of a claim against the insolvent
Company on the policy reinsured within a reasonable time after
such claim is filed in the Insolvency proceeding and that
during the pendency of such claim that the Reinsurer may
investigate such claim and interpose in the name of the
Company (or its liquidator, receiver or statutory successor),
at the Reinsurer's own expense, in the proceeding where such
claims is to be adjudicated any defense or defenses which it
may deem available to the Company or its liquidator or
receiver or statutory successor.
b) Expenses Incurred. It is further understood that the expenses
thus incurred by the Reinsurer shall be chargeable, subject to
court approval, against the insolvent Company as part of the
expense of liquidation to the extent of a proportionate share
of the benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer. When two or
more reinsurers are participating in the same claim and a
majority in interest elect to interpose a defense or defenses
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 Company.
2. Insolvency of the Reinsurer. The Reinsurer shall immediately give
Company written notice of an event constituting Insolvency of the
Reinsurer. Upon the
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Insolvency of the Reinsurer, whether notice thereof was given by the
Reinsurer or not, the Company has the right to immediately, by written
notice, terminate this Agreement and recapture all reinsurance under
this Agreement. Notwithstanding such termination or recapture,
Reinsurer or its legal representative shall continue to be liable to
the Company for any obligations of the Reinsurer under this Agreement
still outstanding after giving effect to such recapture.
ARTICLE XXI. ARBITRATION
1. Conditions. Any controversy or claim between the Company and the
Reinsurer, arising out of or relating to this Agreement or the breach
thereof or the coverage of this arbitration provision, shall be settled
by arbitration.
2. Appointment of Arbitrators. There shall be three arbitrators who shall
be current or former officers of life insurance companies or life
reinsurers. However, unless otherwise consented to in writing by the
parties, such person shall not be a current or former employee of, or
current or former consultant to, the parties or any affiliate or
reinsurer of the parties; nor shall he or she have any current
employment or affiliation with, consulting or contractual engagement
with, or financial interest in: a party to this Agreement or persons or
companies affiliated or associated with a party to this Agreement,
including, with respect to the Reinsurer, the Producer or any persons
or companies associated with the Producer. The Company shall appoint
one of the arbitrators and the Reinsurer shall appoint a second
arbitrator and these two arbitrators shall select the third. If either
party shall fail to appoint an arbitrator within thirty days after the
other party has given notice of its appointment of an arbitrator, the
appointment of the arbitrator for the party which has so failed to
appoint an arbitrator shall be left to the other party. Should the two
arbitrators appointed by or for the
Page 34 of 43
<PAGE> 35
parties fail to agree on the choice of the third, within sixty (60)
days of their appointment then each of them shall name three (3)
individuals, of whom the other shall decline two (2), and the decision
shall be made by drawing lots.
3. Commercial Arbitration Rules. Arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association which shall be in effect on the date of
delivery of demand for arbitration; except, however, that arbitrators
shall be appointed in accordance with the provisions of Paragraph 2, of
this Article and that, to the extent any other terms or provisions of
this Article are inconsistent with or in conflict with the Commercial
Arbitration Rules, this Article shall control.
4. Place. The arbitration shall be conducted in a location to be
determined by a majority of the Arbitrators.
5. Expenses. Each company shall pay that part of the expense of
arbitration which shall be apportioned to it by the arbitrators.
6. Award. The award rendered by the arbitrators shall be final, and
judgment may be entered upon it in any court having jurisdiction
thereof.
7. Basis for Decision. The arbitrators shall base their decision on the
terms and conditions of this Agreement and, as necessary, on the
customs and practices of the life reinsurance and life insurance
industries rather than on a strict interpretation of applicable law.
ARTICLE XXII. PARTIES TO AGREEMENT
This is an Agreement solely between the Company and the Reinsurer. The
acceptance of reinsurance hereunder shall not create any right or legal relation
whatever between the
Page 35 of 43
<PAGE> 36
Reinsurer and the original insured, beneficiary or other party to or under any
policies or riders of the Company which may be reinsured hereunder.
ARTICLE XXIII. DURATION OF REINSURANCE AND TERM OF AGREEMENT
1. Duration of Reinsurance. Except as provided in Article XIII and in
Paragraph 2 of Article XX, in-force reinsurance which has been ceded
under this Agreement shall be unlimited as to its duration and shall be
maintained in force for so long as such policies shall remain in force
and the reinsurance premiums are paid when due.
2. Term of Agreement. The initial term of this Agreement shall be five (5)
years. During and after the initial term, this Agreement may be
canceled as it pertains to the reinsurance of new business thereafter:
(i) immediately upon written notice by a party if the other party
becomes insolvent, dissolves, ceases to legally exist, or
otherwise ceases to be legally authorized to act as a
reinsurer or insurer, respectively, in its domiciliary
jurisdiction;
(ii) upon thirty (30) days written notice by a party if the other
party has materially breached this Agreement and has failed to
cure such breach within such 30 days;
(iii) upon thirty (30) days written notice by the Reinsurer, if the
Company has made a material change in its underwriting
practices which the Reinsurer has not consented to in advance
and which has an adverse and material financial impact on the
Reinsurer;
(iv) upon thirty (30) days written notice by the Company, if the
Reinsurer increases the Reinsurance Premium
Page 36 of 43
<PAGE> 37
Rates under this Agreement on new business without the
Company's written agreement;
(v) upon one (1) year written notice by the Company, if the total
Amount of Reinsurance ceded on base policies sold in any
twelve (12) month period is less than 80% of the Amount of
Reinsurance ceded on base policies sold in the preceding
twelve (12) month period; or
(vi) when and as agreed upon by the parties in writing.
After the initial term of this Agreement, this Agreement may also be
canceled by either party, as it pertains to the reinsurance of new
business thereafter, by giving one (1) year advance notice of
cancellation in writing. In such case, the Company shall continue to
cede, and the Reinsurer shall continue to accept reinsurance, under
this Agreement on policies and riders issued during the one (1) year
period, and the interest of the Reinsurer in new business shall cease
at the end of the one (1) year period.
ARTICLE XXIV. WRITTEN NOTICE
Any notice given in connection with this Agreement shall be deemed to be
provided when it is sent by facsimile to the numbers shown below, or by first
class mail or by courier to the addresses set forth below, or to the last
address or facsimile number of record such party designates in writing:
If to Company: Western Reserve Life Assurance Co.
of Ohio
201 Highland Ave.
Largo, FL 34640
Facsimile: (813) 587-1834
Attn: President
With a copy to: Western Reserve Life Assurance Co.
of Ohio
201 Highland Ave.
Largo, FL 34640
Facsimile:(813) 587-1826
Attn: General Counsel
Page 37 of 43
<PAGE> 38
If to Reinsurer: WMA Life Insurance Company Limited
Third Floor 44 Church Street
Hamilton HM 12, Bermuda
Attn: Manager
Facsimile: (441) 296-1058
With a copy to: James F. Tenney, Esq.
Merritt & Tenney
200 Galleria Parkway
Suite 500
Atlanta, GA 30067
Facsimile: (770) 952-0028
With a copy to: WMA International
5555 Triangle Parkway, NW
Norcross, GA 30092
Attn: Executive Vice President
and Secretary
Facsimile: (770) 242-0896
ARTICLE XXV. OFFSET.
Any debts or credits, matured or unmatured, liquidated or unliquidated,
regardless of when they arose or were incurred, in favor of or against either
Company or Reinsurer with respect to this Agreement or any other reinsurance
agreement between the parties, shall be offset and only the balance allowed or
paid. If either Company or Reinsurer is then under formal insolvency
proceedings, this right of offset shall be subject to the laws of the state
exercising primary jurisdiction over such proceedings.
ARTICLE XXVI. ASSIGNMENT OF REINSURANCE
If the Company sells, assumption reinsures or otherwise transfers the Reinsured
Plans to another insurer, the Company agrees to require that the other insurer
assume all rights and obligations of the Company under this Agreement. Reinsurer
may object to any such transfer that would result in a material adverse economic
impact to Reinsurer. If Reinsurer so objects, Company and Reinsurer agree to
mutually calculate a termination
Page 38 of 43
<PAGE> 39
charge which shall be paid by Company to Reinsurer upon the transfer and this
Agreement shall be terminated with respect to all Reinsured Plans transferred by
Company.
ARTICLE XXVII. ENTIRE AGREEMENT
This Agreement represents the entire agreement between the parties regarding the
subject matter of this Agreement and supersedes any prior oral or written
agreements between the parties regarding that subject matter. No modification of
this Agreement shall be effective unless set forth in a written amendment
executed by both parties. A waiver of a right created by this Agreement shall
constitute a waiver only with respect to the particular circumstance for which
it is given and not a waiver in any future circumstance.
As of the Execution Date, this Agreement consists of this Agreement and its
Exhibits A and B and its Schedule I.
ARTICLE XXVIII. COMPANY'S PRACTICES, FORMS.
1. Underwriting and Administrative Practices. As a general business
practice, the Company shall follow its current normal underwriting
practices in issuing and administering Reinsured Plans, which have been
disclosed to the Reinsurer prior to the Execution Date.
2. Compliance with Laws and Charter. The Reinsured Plans shall be issued
and delivered by the Company in compliance with the laws of all
applicable jurisdictions and with the Company's Articles of
Incorporation.
3. Forms and Manuals. The Company agrees, to the extent requested in
writing by the Reinsurer, to file with the Reinsurer copies of all
appropriate policy and rider forms, rate manuals, retention schedules,
application forms, conditional receipts, temporary insurance
agreements, binders, underwriting questionnaires, and authorization
forms for release of medical information.
Page 39 of 43
<PAGE> 40
4. Notice of Changes. Should the Company make any change in its
underwriting rules, general underwriting practices or claims practices
which materially affects the risk borne by the Company and the
Reinsurer regarding Reinsured Plans, the Company shall promptly provide
written notice to the Reinsurer of such change. Should the Company make
a material change in any form or manual provided to Reinsurer pursuant
to Paragraph 3 above, the Company shall promptly provide Reinsurer with
a copy of the change or of the revised form or manual.
ARTICLE XXIX. HEADINGS.
The headings of the Articles, Paragraphs and any subparagraphs of this Agreement
are inserted for convenience of reference only and shall not constitute a part
of this Agreement.
ARTICLE XXX. EXECUTION OF AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized representatives in Largo FL this
9th day of July, 1996.
WMA LIFE INSURANCE COMPANY LIMITED
By: /s/ S. Hubert Humphrey Title: President
--------------------------------- ----------------------------
Authorized Officer
Attest:
By: /s/ T. Wood Montgomery Title: Vice President
--------------------------------- -----------------------------
Authorized Officer
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
By: /s/ Allen Yaeger Title: Executive V.P., Actuary & CFO
--------------------------------- -----------------------------
Authorized Officer
Attest:
By: /s/ Charles E. Boswell Title: Vice President
--------------------------------- -----------------------------
Authorized Officer
Page 40 of 43
<PAGE> 41
EXHIBIT A
REINSURANCE SCHEDULE
Amount of Reinsurance per life: 50% of the first $60,000, as described in Par
1. of Art. IV
Policies/Plans/Riders to be Reinsured: All of the following policies (including
applicable riders), if sold by and through agents of Producer registered with
WMA Securities, Inc., shall be eligible to be reinsured under this Agreement.
Subject to that condition, and subject to Par. 5 of Art. I, the following forms
(including State variations thereof) having the following Policy Dates shall be
reinsured:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
POLICY NAME OR
REINSURED DESCRIPTION REINSURED WRL PLAN CODE
BLOCKS AND FORM NO. PLANS CO. CODE WRL YRT CODE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Block 1: Policies WRL Freedom Equity Base Policy Only: (Co. 15)
with Policy Protector variable
Dates 6/30/96 universal life (FEP)*, -Standard FEP -F67001/F67002 -565506/565507
and prior Policy Form No. -LIPP FEP -F67501/F67509 -567503/567502
VLB.01.07.89 -Group or
Sponsored FEP -F67601/F67602 -565506/565507
-Prot. Plus FEP -F67801/F67802 -567503/567502
- ----------------------------------------------------------------------------------------------------------------------------
Block 2: Policies FEP* Policy Form No. Base Policy: (Co. 15)
with Policy VLB.01.0789, including
Dates on or Primary Insured Rider -Standard FEP -F67001/F67002 -565506/565507
after 7/1/96 up (PIR) and PIR Plus, -Group or
to start date of Form No. Sponsored FEP -F67601/F67602 -565506/565507
Block 3 ULR1.01.05.84, and -Prot. Plus FEP -F67801/F67802 -567503/567502
Other Insured Rider
(OIR), Form No. and, if applicable:
ULR2.01.5.84.
-PIR -560129/560612
-PIR PLUS -560610/560611
-OIR -560128/560613
- ----------------------------------------------------------------------------------------------------------------------------
Block 3: Start Successor to FEP*, PIR, Base Policy and, if To be determined To be determined
date of Policies PIR PLUS and OIR applicable: PIR,
to be PIR PLUS, and
determined OIR
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
EFFECTIVE DATE
REINSURED FOR EACH REINSURANCE PREMIUM
BLOCKS POLICY/RIDER RATES DUE REINSURER
- --------------------------------------------------------------------------------
<S> <C> <C>
Block 1: Policies The first Policy From Effective Date, at
with Policy Monthiversary on or Point in Scale Rates, per
Dates 6/30/96 after 6/1/96 Schedule I
and prior
- --------------------------------------------------------------------------------
Block 2: Policies Policy/Rider Date From the Policy/Rider
with Policy Date, at Point in Scale
Dates on or Rates, per Schedule I
after 7/1/96 up
to start date of
Block 3
- --------------------------------------------------------------------------------
Block 3: Start Policy/Rider Date From the Policy/Rider
date of Policies Date, at Point in Scale
to be Rates, per Schedule I
determined
- --------------------------------------------------------------------------------
</TABLE>
*Including any benefits payable under the Terminal Illness Accelerated Death
Benefit Rider form ACCDB-10/94.
Page 41 of 43
<PAGE> 42
EXHIBIT A (CONT'D.)
Reinsurance Allowances:
- -----------------------
Reinsurer shall pay Company, or Company shall offset against reinsurance
premiums due, the following allowances, stated as a percentage of the
applicable reinsurance premium:
<TABLE>
<CAPTION>
BLOCKS 1 AND 2 BLOCK 3
<S> <C> <C>
First Policy Year:
Renewal Policy Years - Ultimate Classes: * *
Renewal Policy Years - Non-Ultimate Classes:
</TABLE>
* Material has been omitted pursuant to a request for confidential
treatment. Omitted material has been filed separately.
Initial Ceding Allowance:
- -------------------------
* Material has been omitted pursuant to a request for confidential
treatment. Omitted material has been filed separately.
Current Retention Schedule of Western Reserve Life:
- ---------------------------------------------------
<TABLE>
<CAPTION>
Standard Thru
Status Age At Issue Table 4* Table 5-16**
------ ------------ ------------- ------------
<S> <C> <C> <C>
All business All issue ages $500,000 $250,000
</TABLE>
The above limits apply to the combination of the life plus ADB.
* Or Flat Extra ratings of up to and including $5.00 per thousand
annually
** Or Flat Extra ratings greater than $5.00 per thousand annually or on
any combination of Flat Extra and Substandard ratings
Page 42 of 43
<PAGE> 43
EXHIBIT B
FORM OF LETTER OF CREDIT
------------------------
Effective Date
Western Reserve Life Assurance Co. of Ohio
201 Highland Avenue
Largo, FL 34640
Dear Sirs:
By order of WMA Life Insurance Company Limited we are instructed to open a
clean irrevocable Letter of Credit in your favor for U.S. ____________(Amount).
We undertake that drawings under this Letter of Credit will be honored
upon presentation of your draft drawn on _________________(Issuer) at
____________(Address) prior to expiration date.
This Letter of Credit expires on _____________, but will automatically
extend for an additional two years if you have not received by registered mail,
notification of intention not to renew 30 days prior to the original expiry
date of each subsequent expiry date.
Page 43 Of 43
<PAGE> 44
SCHEDULE I TO REINSURANCE AGREEMENT
SCHEDULE OF REINSURANCE PREMIUM RATES
This Schedule is dated June 1, 1996 and sets forth the Reinsurance Premium
Rates per $1,000 of Amount Reinsured. The monthly Reinsurance Premium shall be
paid at 1/12th the annual rate.
The rates in this Schedule are subject to the Company's table rating
percentages, if applicable, as described in Paragraph 2 of Article V. The
Company's current table percentages are:
<TABLE>
<CAPTION>
Risk Table Percentage
---------- ----------
<S> <C>
2 150%
3 175%
-each table thereafter- -an additional 25%
</TABLE>
Schedule 1 - Page 1 of 5
<PAGE> 45
YRT Premium Rates - Male Nonsmoker
<TABLE>
<CAPTION>
Attained
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Ultimate Age
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 15
1 16
2 17
3 18
4 19
--------------------------------------------------------------------------------------------------------------------
5 20
6 21
7 22
8 23
9 24
--------------------------------------------------------------------------------------------------------------------
10 25
11 26
12 27
13 28
14 29
--------------------------------------------------------------------------------------------------------------------
15 0.97 1.21 1.33 1.35 1.35 1.34 1.34 1.33 1.31 1.30 1.28 1.30 1.28 1.29 1.31 1.54 30
16 1.20 1.26 1.34 1.36 1.34 1.34 1.34 1.32 1.30 1.28 1.26 1.27 1.26 1.29 1.30 1.48 31
17 1.24 1.27 1.35 1.35 1.34 1.34 1.33 1.30 1.27 1.25 1.23 1.25 1.25 1.27 1.26 1.44 32
18 1.24 1.28 1.33 1.34 1.33 1.31 1.30 1.27 1.24 1.22 1.21 1.24 1.24 1.24 1.23 1.41 33
19 1.25 1.26 1.32 1.32 1.30 1.28 1.26 1.23 1.21 1.20 1.20 1.22 1.20 1.20 1.21 1.39 34
--------------------------------------------------------------------------------------------------------------------
20 1.22 1.25 1.29 1.28 1.26 1.24 1.21 1.19 1.18 1.18 1.18 1.18 1.17 1.19 1.21 1.38 35
21 1.21 1.22 1.25 1.24 1.21 1.18 1.16 1.15 1.15 1.16 1.14 1.14 1.15 1.18 1.20 1.41 36
22 1.18 1.18 1.20 1.18 1.15 1.13 1.12 1.12 1.13 1.12 1.11 1.12 1.14 1.17 1.24 1.46 37
23 1.13 1.13 1.14 1.11 1.09 1.08 1.08 1.09 1.08 1.08 1.09 1.11 1.13 1.21 1.29 1.52 38
24 1.08 1.07 1.07 1.05 1.04 1.04 1.05 1.04 1.04 1.06 1.08 1.10 1.16 1.25 1.34 1.59 39
--------------------------------------------------------------------------------------------------------------------
25 1.02 1.01 1.00 0.99 0.99 0.99 0.99 0.99 1.02 1.04 1.07 1.13 1.20 1.30 1.41 1.67 40
26 1.00 0.99 1.00 1.00 1.00 0.99 0.99 1.00 1.03 1.06 1.11 1.18 1.26 1.37 1.49 1.79 41
27 0.97 0.98 1.00 1.01 1.00 0.99 1.00 1.01 1.04 1.10 1.16 1.24 1.33 1.45 1.59 1.92 42
28 0.95 0.97 1.00 0.99 0.99 0.99 1.01 1.03 1.09 1.15 1.23 1.30 1.41 1.55 1.72 2.08 43
29 0.93 0.96 0.98 0.99 1.00 1.00 1.02 1.07 1.14 1.21 1.30 1.39 1.51 1.68 1.87 2.27 44
--------------------------------------------------------------------------------------------------------------------
30 0.91 0.93 0.97 0.99 1.01 1.02 1.07 1.13 1.21 1.29 1.38 1.49 1.64 1.83 2.05 2.49 45
31 0.88 0.90 0.97 0.99 1.02 1.06 1.12 1.20 1.28 1.37 1.49 1.62 1.79 2.01 2.25 2.73 46
32 0.85 0.89 0.97 1.00 1.06 1.12 1.19 1.27 1.37 1.48 1.63 1.78 1.97 2.21 2.48 3.01 47
33 0.83 0.88 0.97 1.04 1.12 1.18 1.27 1.36 1.49 1.62 1.79 1.96 2.17 2.44 2.74 3.30 48
34 0.82 0.88 1.01 1.09 1.18 1.25 1.36 1.48 1.63 1.78 1.98 2.17 2.41 2.71 3.02 3.63 49
--------------------------------------------------------------------------------------------------------------------
35 0.81 0.89 1.05 1.15 1.25 1.34 1.47 1.62 1.80 1.97 2.19 2.41 2.67 2.99 3.33 3.96 50
36 0.82 0.92 1.09 1.20 1.32 1.43 1.58 1.74 1.94 2.13 2.38 2.63 2.91 3.26 3.61 4.43 51
37 0.84 0.96 1.14 1.27 1.41 1.54 1.70 1.88 2.09 2.31 2.59 2.85 3.17 3.53 4.01 4.97 52
38 0.87 1.00 1.20 1.36 1.51 1.66 1.84 2.04 2.27 2.51 2.80 3.09 3.43 3.92 4.45 5.56 53
39 0.90 1.06 1.28 1.46 1.64 1.81 2.00 2.22 2.46 2.71 3.03 3.34 3.81 4.35 4.94 6.21 54
--------------------------------------------------------------------------------------------------------------------
40 0.93 1.13 1.38 1.58 1.79 1.98 2.19 2.42 2.67 2.93 3.27 3.69 4.23 4.83 5.48 6.94 55
41 0.98 1.21 1.50 1.73 1.96 2.18 2.40 2.62 2.89 3.16 3.60 4.09 4.69 5.36 6.07 7.72 56
42 1.04 1.31 1.63 1.90 2.15 2.40 2.62 2.85 3.11 3.48 3.97 4.52 5.19 5.93 6.69 8.59 57
43 1.11 1.42 1.79 2.09 2.37 2.64 2.86 3.08 3.43 3.84 4.38 4.99 5.75 6.55 7.38 9.58 58
44 1.19 1.56 1.97 2.31 2.61 2.90 3.11 3.41 3.78 4.22 4.82 5.51 6.34 7.22 8.16 10.70 59
--------------------------------------------------------------------------------------------------------------------
45 1.29 1.71 2.18 2.54 2.87 3.17 3.46 3.78 4.17 4.65 5.30 6.06 7.00 7.99 9.03 11.97 60
46 1.38 1.85 2.34 2.74 3.08 3.49 3.84 4.22 4.67 5.23 5.99 6.83 7.90 9.04 10.25 13.25 61
47 1.49 1.99 2.51 2.93 3.39 3.86 4.26 4.70 5.23 5.86 6.77 7.73 8.94 10.24 11.51 14.65 62
48 1.61 2.14 2.68 3.21 3.73 4.25 4.73 5.24 5.83 6.57 7.66 8.75 10.13 11.49 12.92 16.15 63
49 1.73 2.29 2.93 3.53 4.10 4.68 5.24 5.82 6.51 7.38 8.69 9.93 11.36 12.87 14.45 17.80 64
--------------------------------------------------------------------------------------------------------------------
50 1.86 2.50 3.20 3.86 4.51 5.15 5.78 6.46 7.28 8.31 9.86 11.15 12.73 14.39 16.16 19.61 65
51 2.04 2.75 3.49 4.22 4.95 5.64 6.38 7.19 8.15 9.37 11.09 12.51 14.22 16.07 18.06 21.63 66
52 2.25 3.01 3.81 4.62 5.40 6.18 7.05 8.01 9.15 10.46 12.45 13.99 15.88 17.93 20.21 23.88 67
53 2.47 3.29 4.14 5.02 5.90 6.78 7.81 8.95 10.16 11.66 13.94 15.64 17.72 20.04 22.62 26.36 68
54 2.72 3.60 4.49 5.46 6.46 7.46 8.67 9.89 11.28 12.97 15.60 17.47 19.80 22.40 25.33 29.10 69
--------------------------------------------------------------------------------------------------------------------
55 2.99 3.93 4.86 5.95 7.08 8.21 9.52 10.93 12.49 14.42 17.44 19.55 22.14 25.05 28.35 32.10 70
56 3.15 4.16 5.21 6.39 7.61 8.72 10.12 11.57 13.23 15.25 18.41 20.60 23.37 26.50 29.98 35.27 71
57 3.30 4.40 5.57 6.86 8.08 9.24 10.72 12.23 13.99 16.11 19.42 21.67 24.61 27.94 31.50 38.64 72
58 3.45 4.65 5.96 7.28 8.55 9.75 11.32 12.89 14.78 17.00 20.43 22.73 25.84 29.29 32.95 42.31 73
59 3.60 4.91 6.30 7.71 9.02 10.25 11.92 13.58 15.60 17.90 21.43 23.76 26.95 30.54 34.36 46.33 74
--------------------------------------------------------------------------------------------------------------------
60 3.75 5.11 6.63 8.12 9.48 10.75 12.55 14.28 16.43 18.81 22.41 24.66 27.95 31.74 35.74 50.77 75
61 3.85 5.29 6.95 8.53 9.94 11.26 13.19 14.98 17.26 19.69 23.26 25.44 28.87 32.89 37.10 55.68 76
62 3.92 5.45 7.27 8.93 10.40 11.78 13.82 15.67 18.08 20.47 24.01 26.11 29.71 34.00 38.42 61.11 77
63 3.95 5.58 7.57 9.34 10.86 12.27 14.45 16.33 18.80 21.16 24.66 26.68 30.48 35.05 39.67 67.05 78
64 3.96 5.67 7.87 9.75 11.31 12.74 15.04 16.89 19.43 21.77 25.21 27.15 31.13 36.00 40.79 73.52 79
--------------------------------------------------------------------------------------------------------------------
65 3.92 5.74 8.15 10.14 11.74 13.17 15.54 17.36 20.00 22.31 25.67 27.48 31.66 36.80 41.73 80.51 80
66 4.29 6.32 8.96 11.20 13.04 14.57 17.12 19.11 21.91 24.43 28.05 30.18 34.76 40.38 45.60 88.09 81
67 4.71 6.97 9.86 12.37 14.43 16.09 18.85 21.04 24.03 26.77 30.67 33.13 38.13 44.27 49.80 96.11 82
68 5.17 7.69 10.84 13.60 15.93 17.75 20.75 23.19 26.38 29.36 33.53 36.35 41.79 48.48 54.23 104.63 83
69 5.68 8.48 11.87 14.93 17.57 19.58 22.87 25.57 28.97 32.20 36.64 39.84 45.76 52.95 58.92 114.01 84
--------------------------------------------------------------------------------------------------------------------
70 6.24 9.31 12.97 16.37 19.39 21.62 25.22 28.23 31.82 35.28 39.98 43.62 49.96 57.71 64.09 124.28 85
71 6.83 10.21 14.16 17.95 21.41 23.90 27.84 31.15 34.93 38.62 43.59 47.63 54.44 62.96 69.73 135.43 86
72 7.46 11.18 15.46 19.71 23.66 26.43 30.73 34.35 38.29 42.23 47.39 51.90 59.38 68.71 75.85 147.47 87
73 8.15 12.26 16.90 21.66 26.17 29.22 33.89 37.84 41.94 46.06 51.42 56.61 64.78 74.96 82.44 160.39 88
74 8.90 13.45 18.49 23.82 28.94 32.29 37.33 41.64 45.81 50.12 55.84 61.77 70.66 81.72 89.50 174.01 89
75 9.74 14.77 20.25 26.19 31.98 35.64 41.09 45.70 49.93 54.60 60.66 57.37 77.01 88.99 96.92 188.09 90
--------------------------------------------------------------------------------------------------------------------
76 10.65 16.18 22.19 28.69 35.00 38.97 44.81 49.73 54.39 59.50 66.08 73.34 83.74 96.53 104.75 205.68 91
77 11.65 17.72 24.31 31.40 38.27 42.50 48.76 54.18 59.27 64.82 71.94 79.75 90.84 104.33 114.53 224.20 92
78 12.76 19.40 26.59 34.33 41.73 46.24 53.12 59.04 64.57 70.56 78.22 86.50 98.17 114.07 124.82 243.68 93
79 13.95 21.22 29.07 37.43 45.41 50.37 57.88 64.31 70.28 76.72 84.85 93.49 107.33 124.32 135.65 264.14 94
80 15.25 23.18 31.69 40.73 49.46 54.89 63.05 70.01 76.43 83.22 91.70 102.21 116.97 135.10 147.03 285.62 95
--------------------------------------------------------------------------------------------------------------------
308.14 96
331.72 97
356.40 98
382.20 99
409.15 100
</TABLE>
Schedule 1 - Page 2 of 5
<PAGE> 46
YRT PREMIUM RATES - MALE JUVENILE AND SMOKER
<TABLE>
<CAPTION>
ATTAINED
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 ULTIMATE AGE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1.97 1.32 1.02 0.94 0.85 0.79 0.77 0.71 0.68 0.68 0.64 0.68 0.71 0.79 0.98 1.33 15
1 1.35 1.00 0.96 0.88 0.81 0.78 0.72 0.69 0.68 0.64 0.67 0.71 0.78 0.96 1.13 1.79 16
2 1.02 0.94 0.90 0.83 0.79 0.73 0.70 0.69 0.64 0.67 0.69 0.78 0.94 1.10 1.48 1.97 17
3 0.96 0.88 0.85 0.82 0.75 0.71 0.70 0.65 0.67 0.70 0.76 0.93 1.08 1.45 1.63 2.10 18
4 0.89 0.83 0.83 0.77 0.73 0.71 0.66 0.68 0.70 0.76 0.91 1.07 1.41 1.59 1.72 2.23 19
----------------------------------------------------------------------------------------------------------------------
5 0.84 0.82 0.78 0.74 0.73 0.67 0.69 0.71 0.77 0.91 1.04 1.40 1.54 1.68 1.83 2.33 20
6 0.83 0.77 0.76 0.74 0.68 0.70 0.72 0.78 0.92 1.05 1.35 1.53 1.63 1.78 1.90 2.46 21
7 0.78 0.75 0.76 0.70 0.71 0.74 0.80 0.94 1.05 1.36 1.48 1.62 1.73 1.86 2.00 2.56 22
8 0.76 0.75 0.71 0.73 0.75 0.81 0.96 1.08 1.37 1.49 1.57 1.72 1.80 1.95 2.08 2.64 23
9 0.76 0.70 0.75 0.77 0.83 0.98 1.11 1.41 1.50 1.57 1.66 1.79 1.89 2.03 2.14 2.69 24
----------------------------------------------------------------------------------------------------------------------
10 0.71 0.74 0.78 0.85 1.01 1.13 1.45 1.55 1.59 1.67 1.73 1.88 1.97 2.09 2.19 2.72 25
11 0.74 0.77 0.87 1.04 1.17 1.49 1.60 1.63 1.68 1.73 1.82 1.95 2.02 2.13 2.20 2.67 26
12 0.78 0.86 1.07 1.21 1.54 1.64 1.69 1.73 1.75 1.82 1.89 2.01 2.06 2.15 2.16 2.62 27
13 0.87 1.05 1.24 1.61 1.69 1.74 1.79 1.80 1.84 1.89 1.94 2.05 2.08 2.11 2.12 2.58 28
14 1.06 1.22 1.65 1.77 1.79 1.84 1.87 1.90 1.91 1.95 1.98 2.06 2.05 2.07 2.09 2.55 29
----------------------------------------------------------------------------------------------------------------------
15 1.24 1.62 1.82 1.88 1.91 1.92 1.97 1.97 1.97 1.98 1.99 2.03 2.01 2.04 2.08 2.53 30
16 1.59 1.72 1.86 1.93 1.92 1.97 2.00 1.99 1.98 1.99 1.96 1.99 1.99 2.03 2.07 2.43 31
17 1.69 1.75 1.91 1.94 1.96 1.99 2.00 1.99 1.98 1.95 1.92 1.96 1.97 2.02 2.01 2.35 32
18 1.71 1.79 1.91 1.96 1.97 1.98 1.99 1.97 1.92 1.90 1.89 1.94 1.96 1.96 1.96 2.31 33
19 1.74 1.79 1.92 1.96 1.95 1.96 1.96 1.90 1.87 1.87 1.88 1.92 1.90 1.91 1.94 2.29 34
----------------------------------------------------------------------------------------------------------------------
20 1.73 1.80 1.91 1.93 1.92 1.91 1.87 1.83 1.82 1.84 1.86 1.85 1.85 1.89 1.94 2.28 35
21 1.74 1.79 1.87 1.88 1.86 1.82 1.79 1.78 1.79 1.81 1.79 1.80 1.82 1.88 1.94 2.40 36
22 1.71 1.75 1.81 1.80 1.76 1.73 1.72 1.73 1.75 1.74 1.74 1.77 1.81 1.89 2.05 2.54 37
23 1.66 1.69 1.73 1.69 1.66 1.64 1.66 1.68 1.67 1.68 1.71 1.75 1.81 1.99 2.18 2.71 38
24 1.60 1.61 1.60 1.57 1.57 1.57 1.60 1.59 1.61 1.65 1.70 1.75 1.90 2.11 2.34 2.90 39
----------------------------------------------------------------------------------------------------------------------
25 1.51 1.50 1.49 1.47 1.49 1.50 1.50 1.51 1.56 1.63 1.69 1.83 2.01 2.26 2.52 3.13 40
26 1.48 1.47 1.49 1.50 1.52 1.50 1.50 1.53 1.59 1.66 1.80 1.96 2.17 2.43 2.73 3.42 41
27 1.44 1.45 1.50 1.52 1.51 1.50 1.53 1.56 1.63 1.77 1.94 2.12 2.34 2.64 3.00 3.78 42
28 1.40 1.44 1.52 1.51 1.51 1.52 1.56 1.60 1.75 1.91 2.10 2.30 2.55 2.91 3.33 4.20 43
29 1.38 1.43 1.49 1.50 1.53 1.55 1.59 1.73 1.89 2.07 2.28 2.51 2.82 3.24 3.71 4.70 44
----------------------------------------------------------------------------------------------------------------------
30 1.35 1.38 1.47 1.51 1.55 1.58 1.72 1.87 2.06 2.26 2.50 2.78 3.15 3.62 4.18 5.27 45
31 1.29 1.34 1.47 1.53 1.59 1.70 1.86 2.04 2.25 2.48 2.79 3.11 3.53 4.09 4.71 5.89 46
32 1.24 1.32 1.48 1.56 1.70 1.84 2.03 2.23 2.48 2.76 3.13 3.51 3.99 4.62 5.28 6.58 47
33 1.21 1.31 1.50 1.67 1.84 2.00 2.22 2.46 2.77 3.11 3.53 3.98 4.53 5.19 5.94 7.31 48
34 1.19 1.31 1.59 1.79 2.00 2.19 2.45 2.75 3.13 3.51 4.02 4.52 5.11 5.85 6.64 8.12 49
----------------------------------------------------------------------------------------------------------------------
35 1.17 1.36 1.70 1.94 2.18 2.41 2.74 3.11 3.55 4.01 4.59 5.12 5.78 6.56 7.42 8.97 50
36 1.22 1.45 1.82 2.08 2.36 2.64 3.01 3.43 3.93 4.43 5.05 5.66 6.37 7.23 8.13 10.16 51
37 1.28 1.55 1.95 2.26 2.59 2.92 3.33 3.80 4.34 4.88 5.57 6.22 7.02 7.93 9.13 11.51 52
38 1.36 1.66 2.11 2.48 2.86 3.25 3.71 4.22 4.79 5.38 6.11 6.84 7.69 8.91 10.26 13.01 53
39 1.44 1.80 2.32 2.75 3.19 3.64 4.14 4.67 5.28 5.89 6.69 7.47 8.64 10.01 11.50 14.68 54
----------------------------------------------------------------------------------------------------------------------
40 1.53 1.97 2.57 3.07 3.58 4.09 4.60 5.16 5.79 6.46 7.29 8.37 9.70 11.22 12.87 16.55 55
41 1.66 2.19 2.87 3.45 4.03 4.58 5.12 5.69 6.34 7.03 8.14 9.37 10.88 12.57 14.39 18.32 56
42 1.82 2.44 3.23 3.89 4.51 5.13 5.67 6.26 6.91 7.84 9.09 10.47 12.18 14.06 15.79 20.27 57
43 2.00 2.74 3.64 4.37 5.06 5.71 6.28 6.85 7.72 8.75 10.12 11.68 13.61 15.44 17.33 22.47 58
44 2.21 3.09 4.09 4.91 5.65 6.37 6.91 7.68 8.62 9.74 11.26 13.01 14.94 16.95 19.05 24.95 59
----------------------------------------------------------------------------------------------------------------------
45 2.46 3.47 4.60 5.49 6.30 7.06 7.80 8.62 9.61 10.83 12.50 14.24 16.40 18.64 20.96 27.73 60
46 2.70 3.81 5.01 5.99 6.85 7.88 8.77 9.73 10.89 12.31 14.08 16.00 18.43 20.99 23.66 30.48 61
47 2.97 4.16 5.44 6.49 7.63 8.80 9.84 10.97 12.32 13.76 15.84 18.02 20.75 23.65 26.41 33.47 62
48 3.26 4.54 5.88 7.20 8.50 9.81 11.02 12.35 13.69 15.36 17.85 20.31 23.39 26.37 29.45 36.65 63
49 3.57 4.93 6.51 8.00 9.45 10.91 12.33 13.65 15.21 17.18 20.15 22.92 26.07 29.35 32.73 40.09 64
----------------------------------------------------------------------------------------------------------------------
50 3.90 5.48 7.20 8.85 10.49 12.12 13.55 15.09 16.93 19.25 22.76 25.57 29.02 32.58 36.35 43.83 65
51 4.36 6.10 7.95 9.79 11.62 13.22 14.89 16.72 18.87 21.59 25.42 28.50 32.20 36.13 40.32 47.50 66
52 4.88 6.77 8.76 10.80 12.64 14.42 16.39 18.54 21.06 23.95 28.36 31.67 35.70 40.03 44.34 51.51 67
53 5.45 7.50 9.63 11.70 13.74 15.74 18.06 20.59 23.26 26.54 31.55 35.16 39.55 43.96 48.77 55.83 68
54 6.09 8.30 10.40 12.67 14.96 17.21 19.93 22.62 25.65 29.32 35.06 38.99 43.44 48.29 53.62 60.51 69
----------------------------------------------------------------------------------------------------------------------
55 6.79 9.03 11.22 13.74 16.32 18.84 21.75 24.83 28.21 32.37 38.91 42.87 47.71 53.03 58.93 65.51 70
56 7.11 9.51 11.95 14.67 17.42 19.88 22.96 26.10 29.66 33.97 40.36 44.37 49.44 55.05 61.14 70.60 71
57 7.41 10.01 12.71 15.66 18.37 20.91 24.13 27.37 31.11 35.29 41.79 45.81 51.11 56.97 63.02 75.88 72
58 7.72 10.52 13.52 16.51 19.32 21.90 25.29 28.63 32.30 36.59 43.16 47.17 52.65 58.56 64.65 81.47 73
59 8.02 11.04 14.20 17.35 20.22 22.86 26.44 29.63 33.48 37.86 44.45 48.38 53.85 59.89 66.09 87.45 74
----------------------------------------------------------------------------------------------------------------------
60 8.30 11.42 14.86 18.15 21.10 23.79 27.34 30.60 34.62 39.07 45.60 49.24 54.77 61.02 67.38 93.93 75
61 8.45 11.75 15.47 18.92 21.95 24.49 28.22 31.52 35.71 40.17 46.43 49.81 55.46 61.98 68.54 100.92 76
62 8.55 12.00 16.05 19.67 22.58 25.15 29.05 32.37 36.70 41.01 46.99 50.13 55.94 62.79 69.53 108.50 77
63 8.56 12.19 16.59 20.22 23.17 25.74 29.81 33.11 37.43 41.62 47.31 50.21 56.24 63.40 70.33 116.58 78
64 8.50 12.30 16.95 20.74 23.69 26.24 30.45 33.59 37.96 42.04 47.42 50.07 56.28 63.79 70.81 125.13 79
----------------------------------------------------------------------------------------------------------------------
65 8.33 12.23 17.26 21.19 24.13 26.62 30.87 33.86 38.31 42.28 47.32 49.64 56.05 63.84 70.89 134.11 80
66 9.02 13.28 18.67 23.01 26.35 28.93 33.39 36.58 41.17 45.36 50.67 53.42 60.28 68.60 75.85 143.56 81
67 9.76 14.42 20.20 24.97 28.64 31.36 36.07 39.51 44.28 48.68 54.29 57.45 64.77 73.62 81.04 153.20 82
68 10.57 15.65 21.82 26.98 31.04 33.95 38.96 42.70 47.63 52.28 58.15 61.73 69.48 78.90 86.33 163.07 83
69 11.44 16.97 23.48 29.06 33.61 36.75 42.11 46.17 51.27 56.11 62.21 66.22 74.45 84.30 91.73 173.69 84
----------------------------------------------------------------------------------------------------------------------
70 12.38 18.33 25.19 31.28 36.38 39.80 45.54 49.94 55.16 60.16 66.46 70.96 79.53 89.85 97.54 185.00 85
71 13.33 19.75 27.00 33.66 39.40 43.12 49.26 53.99 59.29 64.41 70.90 75.81 84.74 95.82 103.71 196.92 86
72 14.33 21.25 28.94 36.25 42.69 46.74 53.26 58.31 63.63 68.87 75.42 80.78 90.35 102.19 110.20 209.37 87
73 15.38 22.86 31.03 39.05 46.28 50.64 57.53 62.88 68.21 73.42 80.02 86.13 96.33 108.91 116.96 222.27 88
74 16.51 24.62 33.29 42.10 50.14 54.80 62.04 67.73 72.89 78.07 84.95 91.84 102.65 115.95 123.95 235.28 89
75 17.73 26.52 35.74 45.35 54.26 59.21 66.82 72.72 77.70 83.07 90.19 97.86 109.25 123.25 130.98 248.03 90
----------------------------------------------------------------------------------------------------------------------
76 19.03 28.48 38.38 48.66 58.14 63.37 71.29 77.39 82.74 88.46 95.99 104.04 115.97 130.45 138.07 264.41 91
77 20.43 30.58 41.17 52.13 62.22 67.60 75.87 82.42 88.12 94.15 102.04 110.43 122.75 137.52 147.18 280.85 92
78 21.93 32.80 44.11 55.79 66.38 71.95 80.80 87.77 93.78 100.09 108.32 116.88 129.39 146.58 156.32 297.32 93
79 23.51 35.14 47.20 59.52 70.64 76.62 86.05 93.41 99.69 106.24 114.65 123.21 137.92 155.69 165.48 313.77 94
80 25.17 37.59 50.35 63.33 75.23 81.59 91.58 99.30 105.82 112.44 120.85 131.33 146.48 164.81 174.62 330.15 95
----------------------------------------------------------------------------------------------------------------------
346.40 96
362.48 97
378.34 98
393.91 99
409.15 100
</TABLE>
Schedule 1 - Page 3 of 5
<PAGE> 47
YRT Premium Rates - Female Nonsmoker
<TABLE>
<CAPTION>
1 2 3 4 5 6 7 8 9 10 11 12 13 14
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0
1
2
3
4
------------------------------------------------------------------------------------------------------------------------------
5
6
7
8
9
------------------------------------------------------------------------------------------------------------------------------
10
11
12
13
14
------------------------------------------------------------------------------------------------------------------------------
15 0.62 0.66 0.68 0.68 0.68 0.68 0.69 0.69 0.72 0.71 0.71 0.73 0.74 0.76
16 0.63 0.67 0.69 0.68 0.68 0.69 0.69 0.70 0.72 0.71 0.72 0.74 0.76 0.78
17 0.64 0.68 0.68 0.68 0.69 0.69 0.69 0.70 0.72 0.72 0.73 0.75 0.78 0.81
18 0.65 0.67 0.68 0.68 0.69 0.69 0.69 0.70 0.72 0.73 0.75 0.77 0.80 0.82
19 0.64 0.67 0.68 0.69 0.69 0.69 0.69 0.70 0.73 0.74 0.77 0.79 0.82 0.84
------------------------------------------------------------------------------------------------------------------------------
20 0.64 0.67 0.68 0.68 0.68 0.68 0.69 0.71 0.74 0.75 0.79 0.81 0.83 0.86
21 0.64 0.66 0.68 0.68 0.68 0.68 0.70 0.72 0.75 0.76 0.80 0.82 0.85 0.89
22 0.63 0.66 0.67 0.67 0.68 0.69 0.70 0.73 0.76 0.77 0.82 0.84 0.88 0.93
23 0.62 0.65 0.66 0.67 0.68 0.69 0.71 0.74 0.77 0.78 0.84 0.87 0.92 0.98
24 0.62 0.64 0.66 0.67 0.68 0.69 0.72 0.75 0.77 0.79 0.86 0.91 0.97 1.04
------------------------------------------------------------------------------------------------------------------------------
25 0.61 0.63 0.66 0.67 0.69 0.70 0.73 0.76 0.78 0.81 0.90 0.96 1.03 1.12
26 0.61 0.63 0.66 0.68 0.70 0.71 0.74 0.77 0.80 0.84 0.93 1.00 1.08 1.18
27 0.61 0.64 0.67 0.69 0.71 0.73 0.76 0.79 0.83 0.87 0.98 1.06 1.14 1.25
28 0.61 0.64 0.68 0.70 0.72 0.75 0.78 0.82 0.87 0.92 1.03 1.11 1.21 1.36
29 0.62 0.65 0.68 0.71 0.74 0.77 0.81 0.86 0.92 0.97 1.09 1.18 1.32 1.49
------------------------------------------------------------------------------------------------------------------------------
30 0.62 0.65 0.68 0.72 0.76 0.80 0.85 0.91 0.97 1.03 1.16 1.30 1.45 1.62
31 0.62 0.65 0.69 0.73 0.78 0.84 0.90 0.96 1.03 1.10 1.27 1.42 1.57 1.75
32 0.62 0.65 0.70 0.76 0.82 0.89 0.95 1.03 1.10 1.21 1.40 1.55 1.70 1.90
33 0.63 0.66 0.71 0.79 0.86 0.94 1.02 1.10 1.21 1.34 1.53 1.68 1.84 2.05
34 0.63 0.67 0.74 0.82 0.91 1.01 1.09 1.21 1.34 1.47 1.66 1.82 1.99 2.20
------------------------------------------------------------------------------------------------------------------------------
35 0.64 0.69 0.76 0.86 0.97 1.08 1.21 1.34 1.47 1.60 1.81 1.97 2.14 2.36
36 0.66 0.72 0.80 0.91 1.03 1.19 1.34 1.48 1.61 1.76 1.98 2.15 2.33 2.57
37 0.69 0.76 0.85 0.97 1.14 1.31 1.47 1.62 1.77 1.93 2.15 2.34 2.53 2.81
38 0.71 0.80 0.90 1.07 1.25 1.44 1.60 1.77 1.94 2.11 2.35 2.55 2.76 3.11
39 0.74 0.85 0.99 1.18 1.37 1.58 1.76 1.94 2.11 2.31 2.55 2.78 3.05 3.44
------------------------------------------------------------------------------------------------------------------------------
40 0.78 0.92 1.09 1.29 1.50 1.73 1.92 2.12 2.31 2.52 2.79 3.07 3.37 3.84
41 0.84 1.01 1.19 1.41 1.64 1.89 2.09 2.31 2.52 2.76 3.09 3.40 3.75 4.28
42 0.91 1.10 1.30 1.55 1.80 2.06 2.28 2.52 2.77 3.07 3.42 3.78 4.17 4.79
43 0.98 1.20 1.43 1.69 1.96 2.24 2.49 2.76 3.07 3.40 3.81 4.22 4.66 5.27
44 1.05 1.31 1.57 1.85 2.14 2.44 2.72 3.06 3.40 3.80 4.25 4.71 5.11 5.80
------------------------------------------------------------------------------------------------------------------------------
45 1.14 1.44 1.71 2.02 2.33 2.67 3.01 3.39 3.80 4.26 4.75 5.17 5.61 6.39
46 1.22 1.55 1.86 2.19 2.55 2.96 3.36 3.82 4.29 4.82 5.29 5.77 6.29 7.17
47 1.32 1.68 2.01 2.39 2.83 3.29 3.77 4.31 4.84 5.36 5.89 6.45 7.04 8.03
48 1.41 1.81 2.20 2.64 3.13 3.68 4.24 4.87 5.38 5.96 6.57 7.21 7.86 8.93
49 1.52 1.97 2.42 2.91 3.49 4.12 4.77 5.41 5.99 6.65 7.32 8.03 8.73 9.92
------------------------------------------------------------------------------------------------------------------------------
50 1.64 2.16 2.67 3.24 3.90 4.62 5.29 6.02 6.67 7.40 8.14 8.89 9.67 10.99
51 1.80 2.37 2.96 3.61 4.36 5.09 5.86 6.70 7.42 8.22 8.99 9.83 10.70 12.19
52 1.97 2.63 3.29 4.03 4.80 5.62 6.51 7.46 8.23 9.08 9.93 10.86 11.84 13.52
53 2.17 2.91 3.67 4.42 5.29 6.22 7.22 8.28 9.08 10.01 10.94 11.99 13.10 15.01
54 2.39 3.23 4.03 4.86 5.83 6.87 7.99 9.14 10.01 11.02 12.05 13.25 14.52 16.68
------------------------------------------------------------------------------------------------------------------------------
55 2.65 3.54 4.43 5.35 6.43 7.58 8.79 10.07 11.01 12.14 13.29 14.65 16.11 18.55
56 2.80 3.76 4.72 5.71 6.84 8.01 9.28 10.62 11.65 12.89 14.25 15.72 17.30 19.94
57 2.96 4.00 5.03 6.07 7.23 8.44 9.77 11.19 12.33 13.70 15.30 16.89 18.60 21.51
58 3.14 4.24 5.34 6.42 7.62 8.87 10.27 11.78 13.06 14.56 16.43 18.15 20.05 22.90
59 3.31 4.49 5.63 6.76 8.01 9.32 10.80 12.41 13.83 15.49 17.66 19.57 21.34 24.48
------------------------------------------------------------------------------------------------------------------------------
60 3.49 4.71 5.92 7.11 8.41 9.78 11.35 13.08 14.65 16.47 19.05 20.82 22.81 26.31
61 3.65 4.94 6.21 7.47 8.83 10.26 11.93 13.77 15.52 17.57 20.27 22.26 24.51 28.41
62 3.80 5.16 6.51 7.85 9.27 10.77 12.54 14.50 16.48 18.49 21.67 23.91 26.45 30.79
63 3.95 5.39 6.82 8.24 9.73 11.30 13.17 15.29 17.26 19.53 23.28 25.80 28.66 33.49
64 4.10 5.62 7.14 8.66 10.21 11.84 13.86 15.90 18.14 20.72 25.13 27.95 31.16 36.52
------------------------------------------------------------------------------------------------------------------------------
65 4.26 5.86 7.48 9.09 10.70 12.43 14.37 16.59 19.15 22.07 27.24 30.39 33.97 39.88
66 4.58 6.32 8.08 9.83 11.61 13.33 15.49 17.99 20.90 24.24 29.95 33.51 37.53 44.05
67 4.94 6.82 8.73 10.67 12.45 14.36 16.78 19.61 22.91 26.72 33.01 37.01 41.47 48.58
68 5.34 7.37 9.48 11.43 13.41 15.55 18.27 21.46 25.20 29.54 36.45 40.88 45.75 54.03
69 5.77 8.00 10.15 12.31 14.51 16.92 19.99 23.58 27.81 32.71 40.25 45.09 50.90 59.92
------------------------------------------------------------------------------------------------------------------------------
70 6.26 8.57 10.93 13.33 15.78 18.50 21.94 25.98 30.73 36.23 44.38 50.14 56.46 66.22
71 6.71 9.23 11.84 14.49 17.25 20.29 24.15 28.67 33.97 40.06 49.34 55.60 62.43 72.94
72 7.23 9.98 12.87 15.83 18.91 22.33 26.63 31.65 37.49 44.68 54.69 61.45 68.79 80.06
73 7.83 10.86 14.06 17.36 20.79 24.61 29.36 34.88 41.72 49.68 60.43 67.68 75.53 87.57
74 8.52 11.86 15.42 19.09 22.91 27.12 32.33 38.76 46.29 55.06 66.54 74.29 82.64 95.46
75 9.32 13.00 16.96 21.03 25.23 29.84 35.89 42.95 51.20 60.83 73.01 81.25 90.12 103.71
------------------------------------------------------------------------------------------------------------------------------
76 10.28 14.40 18.82 23.35 27.99 33.38 40.04 47.76 56.76 67.20 80.39 89.16 98.57 113.08
77 11.38 15.98 20.90 25.90 31.31 37.24 44.53 52.95 62.70 73.99 88.22 97.52 107.47 122.92
78 12.61 17.74 23.18 28.97 34.92 41.41 49.36 58.49 69.03 81.19 96.49 106.33 116.83 134.67
79 13.99 19.66 25.91 32.31 38.83 45.90 54.52 64.39 75.75 88.80 105.21 115.59 127.99 147.12
80 15.50 21.98 28.90 35.92 43.04 50.69 60.02 70.65 82.85 96.81 114.36 126.63 139.82 160.29
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Attained
15 Ultimate Age
- -----------------------------------------
<S> <C> <C> <C>
0 15
1 16
2 17
3 18
4 19
------------------------
5 20
6 21
7 22
8 23
9 24
-----------------------
10 25
11 26
12 27
13 28
14 29
-----------------------
15 0.79 0.90 30
16 0.81 0.91 31
17 0.83 0.92 32
18 0.85 0.94 33
19 0.87 0.96 34
-----------------------
20 0.90 1.00 35
21 0.94 1.04 36
22 0.99 1.10 37
23 1.06 1.17 38
24 1.13 1.25 39
-----------------------
25 1.22 1.34 40
26 1.29 1.48 41
27 1.41 1.64 42
28 1.54 1.81 43
29 1.67 1.98 44
-----------------------
30 1.80 2.18 45
31 1.94 2.38 46
32 2.09 2.60 47
33 2.23 2.83 48
34 2.39 3.08 49
-----------------------
35 2.55 3.37 50
36 2.79 3.72 51
37 3.08 4.11 52
38 3.41 4.58 53
39 3.80 5.10 54
-----------------------
40 4.24 5.69 55
41 4.73 6.24 56
42 5.20 6.85 57
43 5.72 7.52 58
44 6.30 8.26 59
-----------------------
45 6.93 9.05 60
46 7.77 9.85 61
47 8.66 10.71 62
48 9.64 11.62 63
49 10.70 12.62 64
-----------------------
50 11.89 13.71 65
51 13.21 14.92 66
52 14.69 16.25 67
53 16.34 17.73 68
54 18.20 19.35 69
-----------------------
55 20.29 21.19 70
56 21.90 22.92 71
57 23.33 24.91 72
58 24.97 27.20 73
59 26.86 29.86 74
-----------------------
60 29.03 32.93 75
61 31.50 36.44 76
62 34.29 40.44 77
63 37.43 44.96 78
64 40.92 49.99 79
-----------------------
65 44.72 55.49 80
66 49.33 62.12 81
67 54.88 69.34 82
68 60.87 77.15 83
69 67.30 85.55 84
-----------------------
70 74.15 94.53 85
71 81.41 104.10 86
72 89.07 114.24 87
73 97.12 124.97 88
74 105.55 136.27 89
75 114.33 148.14 90
-----------------------
76 124.29 162.30 91
77 136.16 177.31 92
78 148.75 193.19 93
79 162.07 209.95 94
80 176.12 227.61 95
-----------------------
246.18 96
265.68 97
286.12 98
307.53 99
329.91 100
</TABLE>
Schedule 1 - Page 4 of 5
<PAGE> 48
YRT Premium Rates - Female Juvenile and Smoker
<TABLE>
<CAPTION>
Attained
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Ultimate Age
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1.16 0.71 0.67 0.64 0.61 0.59 0.57 0.56 0.57 0.56 0.57 0.59 0.62 0.65 0.70 0.82 15
1 0.69 0.68 0.65 0.61 0.59 0.58 0.56 0.56 0.57 0.57 0.58 0.61 0.64 0.69 0.74 0.86 l6
2 0.65 0.65 0.62 0.60 0.58 0.56 0.56 0.56 0.58 0.59 0.61 0.64 0.68 0.73 0.77 0.90 17
3 0.63 0.63 0.61 0.58 0.56 0.56 0.56 0.56 0.59 0.61 0.63 0.68 0.72 0.76 0.80 0.93 18
4 0.61 0.61 0.59 0.56 0.56 0.56 0.56 0.58 0.62 0.63 0.67 0.71 0.75 0.79 0.83 0.95 19
--------------------------------------------------------------------------------------------------------------------
5 0.59 0.59 0.57 0.56 0.56 0.57 0.58 0.60 0.64 0.67 0.70 0.74 0.78 0.81 0.84 0.96 20
6 0.57 0.57 0.57 0.56 0.57 0.58 0.60 0.62 0.68 0.70 0.73 0.77 0.80 0.83 0.86 0.98 21
7 0.56 0.57 0.57 0.57 0.59 0.60 0.62 0.66 0.71 0.73 0.76 0.79 0.81 0.84 0.87 1.01 22
8 0.56 0.57 0.58 0.59 0.61 0.63 0.66 0.69 0.74 0.76 0.78 0.80 0.83 0.86 0.89 1.02 23
9 0.56 0.58 0.60 0.61 0.63 0.66 0.69 0.72 0.77 0.78 0.79 0.81 0.84 0.87 0.90 1.03 24
--------------------------------------------------------------------------------------------------------------------
10 0.57 0.60 0.62 0.63 0.67 0.69 0.72 0.74 0.79 0.80 0.80 0.83 0.86 0.88 0.91 1.04 25
11 0.58 0.62 0.64 0.67 0.70 0.72 0.74 0.76 0.81 0.81 0.82 0.85 0.87 0.89 0.91 1.07 26
12 0.60 0.65 0.68 0.70 0.73 0.75 0.76 0.78 0.82 0.83 0.83 0.85 0.88 0.90 0.94 1.10 27
13 0.63 0.69 0.72 0.73 0.76 0.77 0.78 0.79 0.83 0.84 0.84 0.86 0.88 0.92 0.96 1.13 28
14 0.66 0.72 0.75 0.76 0.78 0.78 0.79 0.80 0.85 0.85 0.85 0.87 0.91 0.95 0.99 1.17 29
--------------------------------------------------------------------------------------------------------------------
15 0.69 0.75 0.78 0.78 0.79 0.80 0.80 0.82 0.86 0.86 0.85 0.89 0.93 0.97 1.02 1.22 30
16 0.71 0.77 0.79 0.79 0.80 0.81 0.81 0.83 0.86 0.86 0.88 0.92 0.96 1.02 1.08 1.26 31
17 0.73 0.78 0.79 0.79 0.80 0.81 0.82 0.83 0.87 0.89 0.91 0.95 1.01 1.07 1.12 1.29 32
18 0.73 0.78 0.79 0.80 0.81 0.81 0.82 0.84 0.89 0.91 0.95 1.00 1.06 1.11 1.16 1.34 33
19 0.73 0.78 0.80 0.81 0.81 0.82 0.83 0.86 0.91 0.93 0.99 1.05 1.10 1.15 1.22 1.40 34
--------------------------------------------------------------------------------------------------------------------
20 0.73 0.78 0.80 0.80 0.81 0.82 0.84 0.88 0.93 0.96 1.04 1.09 1.14 1.20 1.28 1.48 35
21 0.73 0.78 0.80 0.80 0.81 0.83 0.86 0.90 0.96 1.00 1.07 1.12 1.19 1.27 1.37 1.58 36
22 0.73 0.77 0.79 0.80 0.82 0.84 0.87 0.93 0.99 1.02 1.11 1.17 1.25 1.35 1.48 1.70 37
23 0.72 0.76 0.78 0.81 0.83 0.85 0.90 0.96 1.01 1.05 1.16 1.23 1.34 1.46 1.61 1.83 38
24 0.71 0.75 0.79 0.81 0.84 0.87 0.93 0.99 1.04 1.08 1.22 1.32 1.44 1.58 1.75 1.98 39
--------------------------------------------------------------------------------------------------------------------
25 0.70 0.75 0.79 0.82 0.86 0.89 0.94 1.01 1.07 1.12 1.30 1.41 1.56 1.72 1.92 2.15 40
26 0.71 0.76 0.81 0.85 0.90 0.92 0.98 1.05 1.11 1.19 1.37 1.51 1.66 1.85 2.06 2.44 41
27 0.72 0.77 0.83 0.88 0.92 0.96 1.02 1.10 1.18 1.26 1.47 1.61 1.78 1.99 2.30 2.75 42
28 0.73 0.78 0.85 0.90 0.95 1.00 1.07 1.16 1.25 1.35 1.57 1.73 1.92 2.22 2.56 3.09 43
29 0.74 0.80 0.87 0.92 0.99 1.05 1.13 1.24 1.34 1.45 1.69 1.87 2.14 2.47 2.82 3.44 44
--------------------------------------------------------------------------------------------------------------------
30 0.76 0.81 0.88 0.95 1.03 1.12 1.21 1.33 1.45 1.57 1.83 2.09 2.39 2.73 3.08 3.82 45
31 0.77 0.82 0.90 0.99 1.09 1.20 1.31 1.44 1.57 1.71 2.05 2.33 2.64 2.99 3.36 4.30 46
32 0.77 0.84 0.93 1.04 1.16 1.29 1.42 1.56 1.70 1.93 2.29 2.59 2.90 3.28 3.72 4.81 47
33 0.79 0.86 0.96 1.10 1.25 1.40 1.55 1.70 1.92 2.17 2.55 2.85 3.18 3.63 4.08 5.37 48
34 0.80 0.89 1.01 1.17 1.34 1.53 1.69 1.93 2.17 2.43 2.81 3.14 3.53 4.00 4.47 5.98 49
--------------------------------------------------------------------------------------------------------------------
35 0.83 0.92 1.06 1.25 1.45 1.68 1.93 2.19 2.43 2.70 3.10 3.49 3.89 4.40 4.87 6.68 50
36 0.87 0.98 1.14 1.35 1.58 1.89 2.17 2.45 2.71 3.02 3.50 3.91 4.34 4.91 5.46 7.55 51
37 0.92 1.05 1.23 1.47 1.78 2.13 2.43 2.73 3.03 3.41 3.92 4.37 4.84 5.50 6.17 8.51 52
38 0.97 1.14 1.34 1.66 2.01 2.39 2.70 3.04 3.42 3.83 4.38 4.87 5.40 6.23 6.97 9.66 53
39 1.04 1.23 1.51 1.87 2.25 2.65 3.01 3.43 3.84 4.30 4.88 5.44 6.10 7.04 7.93 10.95 54
--------------------------------------------------------------------------------------------------------------------
40 1.11 1.38 1.70 2.09 2.51 2.95 3.39 3.85 4.30 4.81 5.47 6.15 6.89 8.02 9.01 12.44 55
41 1.23 1.55 1.91 2.33 2.79 3.32 3.80 4.31 4.81 5.40 6.19 6.95 7.82 9.12 10.26 13.68 56
42 1.36 1.73 2.13 2.60 3.15 3.72 4.25 4.81 5.41 6.13 6.99 7.89 8.87 10.39 11.32 15.06 57
43 1.50 1.93 2.38 2.94 3.53 4.16 4.74 5.40 6.13 6.96 7.95 8.97 10.08 11.47 12.50 16.60 58
44 1.65 2.15 2.69 3.30 3.95 4.65 5.31 6.12 6.96 7.94 9.04 10.20 11.11 12.67 13.81 18.28 59
--------------------------------------------------------------------------------------------------------------------
45 1.81 2.43 3.03 3.70 4.42 5.20 6.01 6.93 7.93 9.06 10.29 11.25 12.25 14.02 15.25 20.06 60
46 2.01 2.70 3.37 4.12 4.96 5.91 6.85 7.97 9.13 10.45 11.51 12.61 13.79 15.80 17.17 21.88 61
47 2.23 3.00 3.75 4.61 5.61 6.71 7.86 9.17 10.51 11.67 12.88 14.16 15.50 17.74 19.19 23.83 62
48 2.47 3.33 4.20 5.21 6.36 7.66 9.01 10.56 11.73 13.05 14.42 15.88 17.37 19.79 21.40 25.91 63
49 2.73 3.71 4.74 5.89 7.24 8.74 10.34 11.80 13.10 14.60 16.14 17.75 19.33 22.03 23.82 28.17 64
--------------------------------------------------------------------------------------------------------------------
50 3.03 4.18 5.35 6.69 8.25 9.99 11.51 13.18 14.65 16.32 18.00 19.71 21.47 24.48 26.51 30.65 65
51 3.40 4.70 6.07 7.60 9.41 11.08 12.82 14.73 16.36 18.19 19.94 21.85 23.81 27.19 29.50 32.89 66
52 3.81 5.32 6.90 8.65 10.40 12.28 14.29 16.45 18.21 20.14 22.05 24.17 26.39 30.21 32.36 35.31 67
53 4.30 6.03 7.84 9.54 11.51 13.63 15.91 18.32 20.14 22.25 24.35 26.74 29.27 33.08 35.51 37.94 68
54 4.86 6.84 8.65 10.54 12.75 15.12 17.66 20.27 22.24 24.55 26.88 29.59 31.99 36.24 38.97 40.79 69
--------------------------------------------------------------------------------------------------------------------
55 5.50 7.53 9.55 11.65 14.11 16.72 19.48 22.38 24.51 27.08 29.69 32.28 34.99 39.72 42.78 43.98 70
56 5.85 8.03 10.22 12.47 15.05 17.69 20.58 23.62 25.97 28.79 31.39 34.14 37.02 42.05 45.46 46.79 71
57 6.22 8.57 10.92 13.30 15.92 18.67 21.69 24.91 27.51 30.15 33.20 36.12 39.19 44.64 47.64 50.02 72
58 6.61 9.13 11.62 14.07 16.80 19.65 22.83 26.26 28.72 31.58 35.13 38.23 41.59 46.75 50.15 53.71 73
59 7.01 9.68 12.28 14.86 17.68 20.66 24.03 27.27 29.97 33.08 37.19 40.57 43.54 49.16 53.03 57.95 74
--------------------------------------------------------------------------------------------------------------------
60 7.41 10.20 12.94 15.65 18.60 21.70 24.90 28.31 31.27 34.65 39.48 42.47 45.78 51.94 56.32 62.77 75
61 7.77 10.71 13.59 16.47 19.55 22.46 25.79 29.36 32.62 36.38 41.34 44.65 48.35 55.10 60.03 68.21 76
62 8.12 11.21 14.27 17.32 20.23 23.23 26.70 30.44 34.10 37.66 43.47 47.15 51.28 58.68 64.17 74.30 77
63 8.46 11.72 14.97 17.94 20.93 24.00 27.61 31.61 35.13 39.12 45.92 50.01 54.59 62.67 68.75 81.04 78
64 8.80 12.25 15.47 18.57 21.64 24.77 28.59 32.33 36.32 40.81 48.71 53.23 58.28 67.06 73.73 88.35 79
--------------------------------------------------------------------------------------------------------------------
65 9.15 12.60 15.97 19.22 22.35 25.60 29.17 33.17 37.69 42.72 51.86 56.83 62.35 71.84 79.00 96.12 80
66 9.74 13.42 17.02 20.49 23.89 27.03 30.94 35.38 40.44 46.11 55.99 61.50 67.60 77.81 85.41 105.40 81
67 10.39 14.30 18.15 21.91 25.21 28.66 32.98 37.91 43.56 49.92 60.58 66.65 73.24 84.11 93.08 ll5.18 82
68 11.08 15.25 19.41 23.12 26.72 30.53 35.31 40.78 47.07 54.17 65.64 72.19 79.20 91.63 101.08 125.39 83
69 11.83 16.32 20.49 24.51 28.46 32.67 37.95 44.01 50.98 58.87 71.07 78.03 86.31 99.48 109.35 135.97 84
--------------------------------------------------------------------------------------------------------------------
70 12.67 17.22 21.72 26.10 30.44 35.10 40.92 47.60 55.29 63.94 76.80 85.01 93.74 107.59 117.82 146.83 85
71 13.39 18.26 23.14 27.92 32.69 37.83 44.22 51.56 59.93 69.31 83.65 92.29 101.41 115.90 126.42 157.92 86
72 14.22 19.45 24.75 29.99 35.22 40.86 47.86 55.81 64.83 75.72 90.79 99.81 109.28 124.32 135.10 169.16 87
73 15.17 20.82 26.59 32.31 38.03 44.20 51.76 60.30 70.68 82.44 98.16 107.52 117.27 132.82 143.78 180.49 88
74 16.26 22.37 28.65 34.89 41.12 47.78 55.86 65.65 76.80 89.42 105.70 115.33 125.33 141.31 152.41 191.83 89
75 17.49 24.11 30.95 37.72 44.43 51.54 60.77 71.23 83.13 96.60 113.35 123.21 133.40 149.75 160.92 203.11 90
--------------------------------------------------------------------------------------------------------------------
76 18.98 26.23 33.74 41.10 48.32 56.50 66.39 77.53 90.12 104.31 121.91 131.98 142.32 159.15 170.38 216.57 91
77 20.65 28.59 36.75 44.70 52.97 61.72 72.26 84.06 97.32 112.18 130.58 140.81 151.26 168.51 181.67 230.07 92
78 22.49 31.14 39.96 48.99 57.87 67.18 78.34 90.76 104.65 120.16 139.31 149.65 160.15 179.67 192.99 243.54 93
79 24.49 33.85 43.80 53.52 62.98 72.83 84.59 97.60 112.09 128.19 148.06 158.44 170.75 190.87 204.29 256.90 94
80 26.62 37.10 47.84 58.24 68.27 78.63 90.96 104.54 119.59 136.24 156.76 168.94 181.40 202.04 215.49 270.07 95
--------------------------------------------------------------------------------------------------------------------
282.96 96
295.48 97
307.54 98
319.05 99
329.91 100
</TABLE>
Schedule 1 - Page 5 of 5
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WMA CORPORATION FOR THE THREE MONTHS ENDED MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<DEBT-HELD-FOR-SALE> 17,121,692
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 714,597
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 17,836,289
<CASH> 1,991,275
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 6,558,706
<TOTAL-ASSETS> 27,158,682
<POLICY-LOSSES> 1,498,899
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 2,500
<OTHER-SE> 22,447,084
<TOTAL-LIABILITY-AND-EQUITY> 27,158,682
1,728,837
<INVESTMENT-INCOME> 250,201
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 158,957
<BENEFITS> 875,417
<UNDERWRITING-AMORTIZATION> 124,573
<UNDERWRITING-OTHER> 475,505
<INCOME-PRETAX> 475,905
<INCOME-TAX> 162,339
<INCOME-CONTINUING> 313,566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 313,566
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>