UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended December 31, 2004
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Commission file number: 333-114338
ReliaStar Life Insurance Company of New York
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(Exact name of registrant as specified in its charter)
New York 53-0242530
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(State or other jurisdiction of (IRS employer
incorporation or organization) identification no.)
1000 Woodbury Road, Suite 208, Woodbury, NY 11797
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (516) 682-8700
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Former name, former address and former fiscal year, if changed since last report
Securities registered pursuant to Section 12(b) of Act: None
Securities registered pursuant to Section 12(g) of Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K. Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 1,377,863 shares of Common
Stock as of March 29, 2005 all of which were directly owned by ReliaStar Life
Insurance Company.
NOTE: WHEREAS RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK MEETS THE CONDITIONS
SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K, THIS FORM IS
BEING FILED WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION
I(2).
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Annual Report on Form 10-K
For the year ended December 31, 2004
TABLE OF CONTENTS
Form 10-K
Item No. Page
PART I
Item 1. Business* 3
Item 2. Properties* 12
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders** 13
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 14
Item 6. Selected Financial Data*** 15
Item 7. Management's Narrative Analysis of the Results of
Operations and Financial Condition* 16
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 37
Item 8. Financial Statements and Supplementary Data 39
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 83
Item 9A. Controls and Procedures 83
Item 9B Other Information 83
PART III
Item 10. Directors and Executive Officers of the Registrant** 84
Item 11. Executive Compensation** 84
Item 12. Security Ownership of Certain Beneficial Owners
and Management** 84
Item 13. Certain Relationships and Related Transactions** 84
Item 14. Principal Accountant Fees and Services 85
PART IV
Item 15. Exhibits and Financial Statement Schedules 87
Index to Financial Statement Schedules 90
Signatures 94
* Item prepared in accordance with General Instruction I(2) of Form 10-K
** Item omitted pursuant to General Instruction I(2) of Form 10-K,
except as to Part III, Item 10 with respect to compliance with
Sections 406 and 407 of the Sarbanes Oxley Act of 2002
*** Although item may be omitted pursuant to General Instruction I(2) of
Form 10-K, the Company has provided certain disclosure under this Item.
2
PART I
Item 1. Business
(Dollar amounts in millions, unless otherwise stated)
Organization of Business
ReliaStar Life Insurance Company of New York ("RLNY" or the
"Company"), a direct, wholly-owned subsidiary of ReliaStar Life
Insurance Company ("ReliaStar Life"), is a stock life insurance
company organized under the laws of the State of New York.
ReliaStar Life is a wholly-owned subsidiary of Lion Connecticut
Holdings Inc. ("Lion"), a Connecticut holding and management
company. Lion is an indirect, wholly-owned subsidiary of ING
Groep N.V. ("ING"), a global financial services holding company
based in The Netherlands, with American Depository Shares listed
on the New York Stock Exchange under the symbol "ING".
Until October 1, 2003, the Company was a wholly-owned subsidiary
of Security-Connecticut Life Insurance Company
("Security-Connecticut Life"), a Minnesota domiciled insurance
company, which provided financial products and services in the
United States. Effective October 1, 2003, Security-Connecticut
merged with and into ReliaStar Life.
On April 1, 2002, ReliaStar Life acquired First Golden American
Life Insurance Company of New York ("First Golden"), an
affiliated entity, for a purchase price of $27.7 in cash and $0.2
in receivables. The purchase price was based on First Golden's
statutory-basis book value per generally accepted accounting
principles in the United States ("GAAP"). ReliaStar Life
contributed First Golden to Security-Connecticut at GAAP book
value. Security-Connecticut contributed First Golden to RLNY, and
First Golden was dissolved into RLNY at GAAP book value. The
contribution of First Golden to RLNY was recorded as an increase
to stockholder's equity of $31.4 which equaled First Golden's
April 1, 2002 GAAP book value. Approval for the merger was
obtained from the Insurance Departments of the States of New York
and Delaware.
The Company has one operating segment, ING U.S. Financial
Services ("USFS").
Description of Business
The Company is principally engaged in the business of providing
life insurance and related financial services products. The
Company provides and distributes individual life insurance and
annuities, employee benefits products and services and qualified
group annuity contracts that include a variety of funding and
payout options for employer sponsored retirement plans qualified
under Internal Revenue Code Section 401. The Company's strategy
is to offer, principally in the education market, a wide variety
of products and services designed to address customers' needs for
financial security, especially tax-advantaged savings for
retirement and protection in the event of death.
3
Individual Life Insurance and Annuities: Products, Principal
Markets, and Methods of Distribution
The Company offers a wide range of individual life insurance
products, including term, universal life, second-to-die universal
life, variable universal life, as well as fixed and variable
annuities through a network of independent agents and financial
professionals. These products are marketed to individual
customers who prefer to purchase insurance and investment
products from a personal financial adviser. These products target
middle and upper-income families and niche markets, including
U.S. military personnel and small-business owners.
Variable universal life and fixed universal life insurance
products represent a significant portion of the individual life
insurance premium volume. Variable universal life insurance
policies contain alternative investment options (generally mutual
funds) and policy values which will vary based upon the
investment returns of the fund(s) selected by the policyholder,
while providing certain benefits associated with traditional life
insurance, such as death benefits and cash values. Fixed
universal life policies provide for guaranteed levels of
insurance protection and minimum interest rate guarantees.
Interest-sensitive products provide for interest crediting rates
which may be adjusted periodically, subject to minimum guaranteed
rates as set forth in policyholder contracts. Adjustments are
made to the crediting rates on interest-sensitive products based
upon a variety of factors, including investment performance,
market interest rates, and competitive factors. Profits
recognized on interest-sensitive products are affected by
mortality experience, the margin between interest rates earned on
investments and interest credited to policyholders, as well as
capital gains and losses on investments, persistency, and
expenses.
The variable annuity products offered contain alternative
investment options (generally mutual funds) and policy values
which will vary based upon the investment returns of the fund(s)
selected by the contractowner.
Variable annuities are long-term savings vehicles in which
contract owner premiums (purchase payments) are recorded and
maintained in sub-accounts within separate accounts established
and registered with the Securities and Exchange Commission
("SEC") as a unit investment trust. Variable annuities issued by
the Company are a combination of variable and fixed deferred
annuity contracts under which some or all of the premiums may be
allocated by the contractowner to a fixed account available under
the contract.
The Company discourages premature surrenders of
interest-sensitive products through contractual surrender charges
and the adjustment of interest crediting rates. The policies and
annuities sold contain provisions which allow the contractowner
or policyholder to withdraw or surrender their contracts under
defined circumstances. These contracts generally contain
provisions which apply penalties or otherwise limit the ability
of contractowners and policyholders to make such withdrawals or
surrenders. The interest rates that the Company might be required
to credit under their interest-sensitive insurance products to
forestall surrenders, particularly in a time of rapidly rising
market interest rates, could have an adverse effect on operating
income.
4
Individual life insurance business is subject to risks in the
event that the Company's mortality experience deviates from the
assumptions used in establishing its premium rates.
Employee Benefit: Products, Principal Markets, and Methods of
Distribution
The Company targets the sale of employee benefits and financial
services to medium and large corporate employers and affinity
groups. Additionally, the Company sells individual and
payroll-deduction products to employees of its corporate clients.
Principal products include group and individual life insurance
and non-medical group insurance products.
Group life and disability insurance and employee benefit related
services are offered by the Company. Employee benefits products
are marketed through major brokerage operations and through
direct sales to employers.
Group term life insurance is marketed to employer groups in the
Company's target market. Premiums for these policies are based
largely upon the experience of the Company, and in some
instances, on the experience of the particular group
policyholder. The primary risks related to this line of business
include deviations from expected mortality, expenses, and
investment income. The Company seeks to control the mortality
risk through reinsurance treaties.
The Company also markets group disability income insurance. This
coverage compensates employees for loss of income due to sickness
or injury. The profitability of this business is affected by
morbidity experience and the investment return on assets
supporting the policy reserves.
The Company markets individual life insurance policies to
employees at the worksite and to members of affinity groups. The
products delivered to these markets include universal life
insurance policies, whole life insurance policies, and individual
term life policies.
The Company also markets medical stop loss coverage to employer
sponsors of self-funded employee health benefit plans. Prior to
2003, the Company marketed individual cancer policies to
employees at the worksite as well.
Group Annuities: Products, Principal Markets and Methods of
Distribution
Group annuity contracts may be deferred or immediate (payout
annuities). These products include programs offered to qualified
plans that package administrative and record-keeping services
along with a variety of investment options, including affiliated
and nonaffiliated mutual funds and variable and fixed investment
options.
Group annuity contracts offered by the Company contain variable
and/or fixed investment options. Variable options generally
provide for full assumption by the customer of investment risks.
Assets supporting variable annuity options are held in Separate
5
Accounts that invest in mutual funds managed and/or distributed
by RLNY or its affiliates, or managed and/or distributed by
unaffiliated entities. Variable Separate Account investment
income and realized capital gains and losses are not reflected in
the Company's consolidated statements of income. Fixed options
are "fully guaranteed". Fully-guaranteed fixed options provide
guarantees on investment return, maturity values and, if
applicable, benefit payments.
Although the Company has offered group annuity contracts
primarily to small businesses, it is not actively marketing these
products. The Company's group annuity products generally were
sold through pension professionals, independent agents and
brokers, third party administrators, banks, dedicated career
agents and financial planners.
Geographic Distribution
The Company operates primarily in the United States and is
authorized to conduct business in all 50 states and the District
of Columbia.
Competition
The businesses in which the Company engages are each highly
competitive. The products compete in marketplaces characterized
by a large number of competitors with similar products.
Competition is based largely upon the crediting rates under the
policies, the credit and claims paying ratings of competing
insurers, name recognition, the commission structures of
competing insurers, and the levels of service afforded
distributors. Competing investment opportunities are also made
available by mutual funds, banks, and other financial
intermediaries, many of which have greater resources than the
Company. The products are not generally eligible for legal
protection from being copied by others, and capital is the most
significant barrier to entry by new competitors.
Group life insurance is a homogeneous product sold in a highly
competitive market. The Company's competitors include all of the
largest insurers doing business in the United States.
Investment Overview and Strategy
The Company's investment strategy involves diversification by
asset class, and seeks to add economic diversification and to
reduce the risks of credit, liquidity, and embedded options
within certain investment products, such as convexity risk on
collateralized mortgage obligations and call options. The
investment management function is centralized under ING
Investment Management LLC ("IIM"), an affiliate of the Company,
pursuant to an investment advisory agreement. Separate portfolios
are established for each general type of product within the
Company.
6
The Company's general account invests primarily in fixed maturity
investments, including publicly issued bonds (including
government bonds), privately placed notes and bonds,
mortgage-backed securities, and asset-backed securities. The
primary investment strategy is to optimize the risk-adjusted
return on capital through superior asset selection predicated on
a developed relative value approach, credit research and
monitoring, superior management of interest rate risk, and active
exploration into new investment product opportunities.
Investments are purchased when market returns, adjusted for risk,
capital and expenses, are sufficient to profitably support growth
of the liability block of business. In addition, assets and
liabilities are analyzed and reported for internal management
purposes on an option-adjusted basis. The level of required
capital of given transactions is a primary factor in determining
relative value among different investment and liability
alternatives, within the scope of each product type's objective.
An active review of existing holdings identifies specific assets
that could be effectively traded in order to enhance the
risk-adjusted returns of the portfolio, while minimizing adverse
tax and accounting impacts. The Company strives to maintain a
portfolio average asset quality rating of A, excluding mortgage
loans, but including mortgage-backed securities, which are
reported with bonds, based on Standard & Poor's ratings
classifications.
Ratings
On December 15, 2004, Standard & Poor's reaffirmed its AA (Very
Strong) counterparty credit and financial strength rating of
ING's primary U.S. insurance operating companies ("ING U.S."),
including the Company. Standard & Poor's also, on this date,
revised the outlook on the core insurance operating companies
from negative to stable, reflecting ING's commercial position and
diversification, financial flexibility, reduced capital leverage,
and improved profitability. The outlook revisions recognize ING's
progress in setting a more focused and decisive strategic
direction and implementing more integrated financial management
across banking and insurance.
On December 17, 2004, Moody's Investor's Service, Inc.
("Moody's") issued a credit opinion affirming the financial
strength rating of ING U.S., including the Company, of Aa3
(Excellent) with a stable outlook. The rating is based on the
strong implicit support and financial strength of the parent
company, ING. Furthermore, Moody's noted that ING U.S. has built
a leading market share in the domestic individual life insurance,
annuity, and retirement plan businesses. ING U.S. enjoys product
diversity, further enhancing its credit profile through the use
of these multiple distribution channels.
7
On December 22, 2004, A.M. Best Company, Inc. ("A.M. Best")
reaffirmed the financial strength rating of A+ (Superior) of ING
U.S., including the Company, while maintaining its negative
outlook for ING U.S. These rating actions follow ING's
announcement of its intention to sell Life Insurance Company of
Georgia ("LOG"), as well as the conclusion of A.M. Best's review
of ING's plan to exit the U.S. individual reinsurance business.
ING closed the transaction to exit the U.S. individual life
reinsurance business on December 31, 2004 and the sale of LOG is
expected to be completed during the second quarter of 2005,
subject to regulatory approval. Neither of these transactions
directly impact the Company.
Regulation
The Company's operations are subject to comprehensive regulation
throughout the United States. The laws of the various
jurisdictions establish supervisory agencies, including the state
insurance departments, with broad authority to grant licenses to
transact business and regulate many aspects of the products and
services offered by the Company, as well as solvency and reserve
adequacy. Many agencies also regulate the investment activities
of insurance companies on the basis of quality, diversification,
and other quantitative criteria. The Company's operations and
accounts are subject to examination at regular intervals by
certain of these regulators.
Operations conducted by the Company are subject to regulation by
various state insurance departments in the states where the
Company conducts business, in particular the insurance department
of its state of domicile, New York. Among other matters, these
agencies may regulate premium rates, trade practices, agent
licensing, policy forms, underwriting and claims practices, and
the maximum interest rates that can be charged on policy loans.
The SEC, the National Association of Securities Dealers ("NASD")
and, to a lesser extent, the states regulate investment
management activities and operations of the Company. Generally,
the Company's variable life and variable annuity products and
certain of its fixed annuities are registered as securities with
the SEC. Regulations of the SEC, Department of Labor ("DOL") and
Internal Revenue Service also impact certain of the Company's
annuity, life insurance, and other investment and retirement
products. These products involve separate accounts and mutual
funds registered under the Investment Company Act of 1940. The
Company also provides a variety of products and services to
employee benefit plans that are covered by the Employee
Retirement Income Security Act of 1974 ("ERISA").
8
Insurance Holding Company Laws
A number of states regulate affiliated groups of insurers such as
the Company under holding company statutes. These laws, among
other things, place certain restrictions on transactions between
affiliates such as dividends and other distributions that may be
paid to the Company's parent corporation.
Insurance Company Guaranty Fund Assessments
Insurance companies are assessed the costs of funding the
insolvencies of other insurance companies by the various state
guaranty associations, generally based on the amount of premiums
companies collect in that state. The Company accrues the cost of
future guaranty fund assessments based on estimates of insurance
company insolvencies provided by the National Organization of
Life and Health Insurance Guaranty Association ("NOLHGA") and the
amount of premiums written in each state. The Company has
recorded $0.3 and $0.2 for this liability as of December 31, 2004
and 2003, respectively. The Company has also recorded an asset of
$0.2 as of December 31, 2004 and a minimal asset as of December
31, 2003, for future credits to premium taxes for assessments
already paid.
For information regarding certain other potential regulatory
changes related to the Company's business see "Risk Factors"
relating to the Company in Item 1, "Business".
Employees
The Company had 93 employees as of December 31, 2004, primarily
focused on managing the product distribution, marketing, customer
service, and product and financial management of the Company. The
Company also utilizes services provided by ING North America
Insurance Corporation, Inc. and other affiliates. These services
include underwriting and new business processing, actuarial, risk
management, human resources, investment management, finance,
information technology, and legal and compliance services. The
affiliated companies are reimbursed for the Company's use of
various services and facilities under a variety of intercompany
agreements.
Risk Factors
In addition to the normal risks of business, the Company is
subject to significant risks and uncertainties, including those
which are discussed below.
9
The Company's efforts to reduce the impact of interest rate
changes on its profitability and financial condition may not be
effective
The Company attempts to reduce the impact of changes in interest
rates on the profitability and financial condition of its
interest-sensitive life and annuity operations. The Company
accomplishes this reduction primarily by managing the duration of
its assets relative to the duration of its liabilities. During a
period of rising interest rates, surrenders of life insurance
policies and withdrawal of annuity contracts may increase as
customers seek to achieve higher returns. Despite its efforts to
reduce the impact of rising interest rates, the Company may be
required to sell assets to raise the cash necessary to respond to
such surrenders and withdrawals, thereby realizing capital losses
on the assets sold. An increase in policy surrenders and
withdrawals may also require the Company to accelerate
amortization of policy acquisition costs relating to these
contracts, which would further reduce its net income.
During periods of declining interest rates, borrowers may prepay
or redeem mortgages and bonds that the Company owns, which would
force it to reinvest the proceeds at lower interest rates. The
Company may have the ability to lower the rates it credits to
contractowners and policyholders but may be forced to maintain
crediting rates for products containing minimum interest rate
guarantees or for competitive reasons. Therefore, it may be more
difficult for the Company to maintain its desired spread between
the investment income it earns and the interest it credits to its
customers, thereby reducing its profitability.
A downgrade in any of the Company's ratings may, among other
things, increase case/policy lapses, surrenders, and withdrawals
reduce new sales, and terminate relationships with distributors,
any of which could adversely affect its profitability and
financial condition
Ratings are important factors in establishing the competitive
position of insurance companies. A downgrade, or the potential
for such a downgrade, of any of the Company's ratings could,
among other things:
o Materially increase the number of interest-sensitive life
and annuity contract surrenders and withdrawals and
case/policy lapses;
o Result in the termination of relationships with
broker-dealers, banks, agents, wholesalers and other
distributors of our products and services; and
o Reduce new product sales.
Any of these consequences could adversely affect the Company's
profitability and financial condition.
10
Rating organizations assign ratings based upon several factors.
While most of the factors relate to the rated company, some of
the factors relate to the views of the rating organization,
general economic conditions and circumstances outside the rated
company's control. In addition, rating organizations may employ
different models and formulas to assess financial strength of the
rated company, and from time to time rating organizations have,
in their discretion, altered the models. Changes to the models,
general economic conditions, or circumstances outside the
Company's control could impact a rating organization's judgment
of its rating and the subsequent rating it assigns to the
Company. The Company cannot predict what actions rating
organizations may take, or what actions we may be required to
take in response to the actions of rating organizations, which
could adversely affect the Company.
The Company's ability to grow may depend in large part upon the
continued availability of capital
The Company believes it has sufficient capital to fund its
immediate growth and capital needs. The amount of capital
required and the amount of capital available can vary from period
to period due to a variety of circumstances, some of which are
neither predictable nor foreseeable, nor necessarily within its
control. A lack of sufficient capital could hinder the Company's
ability to grow.
The Company's investment portfolio is subject to several risks
that may diminish the value of its invested assets and adversely
affect its sales, profitability and the investment returns
credited to certain of its customers
The Company's investment portfolio is subject to several risks,
including default, liquidity, environmental and economic, among
other things:
o The Company may experience an increase in defaults or
delinquency in the investment portfolios, including the
commercial mortgage loan portfolio.
o The Company may have greater difficulty selling privately
placed fixed maturity securities, commercial mortgage loans,
and real estate investments at attractive prices, in a
timely manner, or both, because they are less liquid than
its publicly traded fixed maturity securities.
o Environmental liability exposure may result from the
Company's commercial mortgage loan portfolio and real estate
investments.
o The Company may experience losses in its commercial mortgage
loan portfolio as a result of economic downturns or losses
attributable to natural disasters in certain regions.
Any of these consequences may diminish the value of the Company's
invested assets and adversely affect its sales, profitability or
the investment returns credited to its customers.
11
Changes in regulation in the United States may reduce the
Company's profitability
The Company's insurance business is subject to comprehensive
regulation and supervision throughout the United States by both
state and federal regulators. The primary purpose of state
regulation of the insurance business is to protect policyholders
and contractowners and not necessarily to protect other
constituencies such as creditors or investors. State insurance
regulators, state attorneys general, the National Association of
Insurance Commissioners, the SEC, and the NASD continually
reexamine existing laws and regulations and may impose changes in
the future. Changes in federal legislation and administrative
policies in areas such as employee benefit plan regulation,
financial services regulation, and federal taxation could lessen
the advantages of certain of the Company's products as compared
to competing products, or possibly result in the surrender of
some existing contracts and policies or reduced sales of new
products and, therefore, could reduce the Company's
profitability.
The insurance industry has recently become the focus of greater
regulatory scrutiny due to questionable business practices
relating to trading and pricing within the mutual fund and
variable annuity industries, allegations related to improper
special payments, price-fixing, conflicts of interest and
improper accounting practices, and other misconduct alleged by
and initiatives of the New York Attorney General, state insurance
departments, and in related litigation. As a result, a large
number of insurance companies, including certain ING affiliates,
have been requested to provide information to regulatory
authorities. In some cases, this regulatory scrutiny has led to
new proposed legislation regulating insurance companies,
regulatory penalties, and related litigation. At this time, the
Company does not believe that any such regulatory scrutiny will
materially adversely impact it; however, the Company cannot
guarantee that new laws, regulations or other regulatory action
aimed at the business practices under scrutiny would not
adversely affect its business. The adoption of new laws or
regulations, enforcement actions or litigation, whether or not
involving the Company, could influence the manner in which it
distributes its insurance products, which could adversely impact
the Company.
Item 2. Properties
The Company's home office is located at 1000 Woodbury Road, Suite
208, Woodbury, NY 11797. All Company office space is leased or
subleased by the Company or its other affiliates. The Company
pays substantially all expenses associated with its leased and
subleased office properties. Affiliates within ING's U.S.
operations provide the Company with various management, finance,
investment management and other administrative services, from
facilities located at 5780 Powers Ferry Road, N.W., Atlanta,
Georgia 30327-4390. Affiliates also provide the Company with
product development, sales, marketing, customer service and other
administrative services from facilities located in Minneapolis,
Minnesota, West Chester, Pennsylvania and Minot, North Dakota.
The affiliated companies are reimbursed for the Company's use of
these services and facilities under a variety of intercompany
agreements.
12
Item 3. Legal Proceedings
The Company is a party to threatened or pending
lawsuits/arbitrations, arising from the normal conduct of
business. Due to the climate in insurance and business
litigation/arbitration, suits against the Company sometimes
include claims for substantial compensatory, consequential, or
punitive damages and other types of relief. Moreover, certain
claims are asserted as class actions, purporting to represent a
group of similarly situated individuals. While it is not possible
to forecast the outcome of such lawsuits/arbitrations, in light
of existing insurance, reinsurance and established reserves, it
is the opinion of management that the disposition of such
lawsuits/arbitrations, will not have a materially adverse effect
on the Company's operations or financial position.
Item 4. Submission of Matters to a Vote of Security Holders
Omitted pursuant to General Instruction I (2)(c) of Form 10-K.
13
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
(Dollar amounts in millions, unless otherwise stated).
There is no public trading market for the Company's common stock.
As of October 1, 2003, all of the Company's outstanding common
stock is owned by ReliaStar Life, which is a wholly-owned
subsidiary of Lion, whose ultimate parent is ING. Prior to that
date, the Company's outstanding shares were owned by
Security-Connecticut Life.
The Company's ability to pay dividends to its parent is subject
to the prior approval of the insurance regulatory authorities of
the State of New York for payment of dividends, which exceed an
annual limit of the lesser of (1) ten percent (10%) of the
Company's statutory surplus at prior year end or (2) the
Company's prior year statutory net gain from operations, not
including realized capital gains. The Company paid $27.2, $25.5
and $14.4 in cash dividends to ReliaStar Life in 2004, 2003 and
2002, respectively.
The Company did not receive capital contributions in 2004 and
2003. The Company received capital contributions of $31.4 in 2002
from Security-Connecticut Life, related to the First Golden
merger with and into the Company.
14
Item 6. Selected Financial Data
(Dollar amounts in millions, unless otherwise stated).
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
3-YEAR SUMMARY OF SELECTED FINANCIAL DATA
2004 2003 2002
-----------------------------------------
OPERATING RESULTS
Net investment income $ 122.2 $ 124.4 $ 133.1
Fee income 95.9 94.7 98.2
Premiums 64.7 61.8 55.0
Net realized capital gains and (losses) 9.2 10.6 (3.2)
Total revenue 296.9 295.5 288.6
Interest credited and other benefits
to contractowners and policyholders 189.0 147.5 176.3
Amortization of deferred policy acquisition
costs and value of business acquired 9.4 30.9 32.6
Income before cumulative effect
of change in accounting principles 30.8 53.9 32.6
Cumulative effect of change in accounting
principles, after-tax 0.8 - (865.0)
Net income (loss) 31.6 53.9 (832.4)
FINANCIAL POSITION
Total investments $ 2,090.1 $ 2,035.8 $ 1,951.1
Assets held in separate accounts 537.7 513.8 426.8
Total assets 2,972.2 2,824.1 2,656.5
Policy liabilities and accruals 1,772.5 1,677.2 1,645.8
Liabilities related to separate accounts 537.7 513.8 426.8
Shareholder's equity 451.6 454.6 425.8
15
Item 7. Management's Narrative Analysis of the Results of Operations and
Financial Condition
(Dollar amounts in millions, unless otherwise stated).
Overview
The following narrative analysis presents a review of the results
of operations of ReliaStar Life Insurance Company of New York
("RLNY" or the "Company") for the periods ended December 31, 2004
versus 2003 and of the financial condition as of December 31,
2004 and 2003. This review should be read in its entirety and in
conjunction with the selected financial data, financial
statements, related notes and other supplemental data which can
be found under Part II, Item 6 and Item 8 contained herein.
Forward-Looking Information/Risk Factors
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company cautions
readers regarding certain forward-looking statements contained in
this report and in any other statements made by, or on behalf of,
the Company, whether or not in future filings with the Securities
and Exchange Commission ("SEC"). Forward-looking statements are
statements not based on historical information and which relate
to future operations, strategies, financial results, or other
developments. Statements using verbs such as "expect,"
"anticipate," "believe", or words of similar import generally
involve forward-looking statements. Without limiting the
foregoing, forward-looking statements include statements which
represent the Company's beliefs concerning future levels of sales
and redemptions of the Company's products, investment spreads and
yields, or the earnings and profitability of the Company's
activities.
Forward-looking statements are necessarily based on estimates and
assumptions that are inherently subject to significant business,
economic, and competitive uncertainties and contingencies, many
of which are beyond the Company's control and many of which are
subject to change. These uncertainties and contingencies could
cause actual results to differ materially from those expressed in
any forward-looking statements made by, or on behalf of, the
Company. Whether or not actual results differ materially from
forward-looking statements may depend on numerous foreseeable and
unforeseeable developments. Some may be national in scope, such
as general economic conditions, changes in tax law, and changes
in interest rates. Some may be related to the insurance industry
generally, such as pricing competition, regulatory developments,
and industry consolidation. Others may relate to the Company
specifically, such as litigation, regulatory action, and risks
associated with the Company's investment portfolio, such as
change in credit quality, price volatility and liquidity.
Investors are also directed to consider other risks and
uncertainties discussed in "Risk Factors" in Item 1 contained
herein and in other documents filed by the Company with the SEC.
Except as may be required by the federal securities laws, the
Company disclaims any obligation to update forward-looking
information.
16
Critical Accounting Policies
General
The preparation of financial statements in conformity with
generally accepted accounting principles in the United States
requires the use of estimates and assumptions in certain
circumstances that affect amounts reported in the accompanying
financial statements and related footnotes. These estimates and
assumptions are evaluated on an on-going basis based on
historical developments, market conditions, industry trends, and
other information that is reasonable under the circumstances.
There can be no assurance that actual results will conform to
estimates and assumptions, and that reported results of
operations will not be materially adversely affected by the need
to make future accounting adjustments to reflect changes in these
estimates and assumptions from time to time.
The Company has identified the following estimates as critical in
that they involve a higher degree of judgment and are subject to
a significant degree of variability: reserves,
other-than-temporary impairment testing and amortization of
deferred acquisition costs and value of business acquired. In
developing these estimates, management makes subjective and
complex judgments that are inherently uncertain and subject to
material change as facts and circumstances develop. Although
variability is inherent in these estimates, management believes
the amounts provided are appropriate based upon the facts
available upon compilation of the financial statements.
Reserves
The Company establishes and carries actuarially determined
reserves which are calculated to meet its future obligations.
Reserves are calculated using mortality and withdrawal rate
assumptions that are based on relevant Company experience and are
periodically reviewed against both industry standards and
experience. Changes in or deviations from the assumptions used
can significantly affect the Company's reserve levels and related
future operations.
Future policy benefits include reserves for universal life,
immediate annuities with life contingent payouts, and traditional
life insurance contracts. Reserves for universal life products
are equal to cumulative deposits less withdrawals and charges
plus credited interest thereon. In addition, the Company holds
reserves as required by SOP 03-1 for certain products with
anticipated losses in later policy durations. Reserves for
traditional life insurance contracts represent the present value
of future benefits to be paid to or on behalf of policyholders
and related expenses less the present value of future net
premiums.
17
Reserves for immediate annuities with life contingent payout
benefits are computed on the basis of interest discount rates,
mortality, and expenses, including a margin for adverse
deviations. Such assumptions generally vary by plan, year of
issue and policy duration. Reserve interest rates range from
3.95% to 13.19% for all years presented. Changes in or deviations
from the assumptions used can significantly affect the Company's
reserve level and related future operations.
Reserves for deferred annuity investment contracts and immediate
annuities without life contingent benefits are equal to
cumulative deposits less charges and withdrawals plus credited
interest thereon (reserve interest rates vary by product up to
7.1% for 2004, 2003, and 2002).
Other-Than-Temporary Impairment Testing
The Company's accounting policy requires that a decline in the
value of an investment below its amortized cost basis be assessed
to determine if the decline is other-than-temporary. If so, the
investment is deemed to be other-than-temporary impaired, and a
charge is recorded in net realized capital losses equal to the
difference between fair value and the amortized cost basis of the
investment. The fair value of the other-than-temporarily impaired
investment becomes its new cost basis.
In addition, the Company invests in structured securities that
meet the criteria of EITF Issue No. 99-20, "Recognition of
Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets." Under EITF
Issue No. 99-20, a determination of the required impairment is
based on credit risk and the possibility of significant
prepayment risk that restricts the Company's ability to recover
the investment. An impairment is recognized if the fair value of
the security is less than book value and there has been an
adverse change in cash flow since the last remeasurement date.
When a decline in fair value is determined to be
other-than-temporary, the individual security is written down to
fair value and the loss accounted for as a realized loss.
The evaluation of other-than-temporary impairments, included in
the Company's general account, is a quantitative and qualitative
process, which is subject to risks and uncertainties and is
intended to determine whether declines in the fair value of
investments should be recognized in current period earnings. The
risks and uncertainties include the length of time and extent to
which the fair value has been less than amortized cost, changes
in general economic conditions, the issuer's financial condition
or near-term recovery prospects and the effects of changes in
interest rates.
Amortization of Deferred Acquisition Costs and Value of Business
Acquired
Deferred policy acquisition costs ("DAC") represent policy
acquisition costs that have been capitalized and are subject to
amortization. Such costs consist principally of certain
commissions, underwriting, contract issuance, and agency
expenses, related to the production of new and renewal business.
18
Value of business acquired ("VOBA") represents the outstanding
value of in force business capitalized and is subject to
amortization in purchase accounting when the Company was
acquired. The value is based on the present value of estimated
net cash flows embedded in the Company's contracts.
The amortization methodology used for DAC and VOBA varies by
product type. Statement of Financial Accounting Standards ("FAS")
No. 60, "Accounting and Reporting by Insurance Enterprises,"
applies to traditional life insurance products, primarily whole
life and term life insurance contracts. Under FAS No. 60, DAC and
VOBA are amortized over the premium payment period, in proportion
to the premium revenue recognized.
FAS No. 97 "Accounting and Reporting by Insurance Enterprises for
Certain Long Duration Contracts and for Realized Gains and Losses
from the Sale of Investments," applies to universal life and
investment-type products, such as fixed and variable deferred
annuities. Under FAS No. 97, DAC and VOBA are amortized, with
interest, over the life of the related contracts (usually 25
years) in relation to the present value of estimated future gross
profits from investment, mortality, and expense margins;
asset-based fees, policy administration, and surrender charges;
less policy maintenance fees and non-capitalized commissions, as
well as realized gains and losses on investments.
Changes in assumptions can have a significant impact on DAC and
VOBA balances and amortization rates. Several assumptions are
considered significant in the estimation of future gross profits
associated with variable universal life and variable deferred
annuity products. One of the most significant assumptions
involved in the estimation of future gross profits is the assumed
return associated with the variable account performance. To
reflect the volatility in the equity markets, this assumption
involves a combination of near-term expectations and long-term
assumptions regarding market performance. The overall return on
the variable account is dependent on multiple factors, including
the relative mix of the underlying sub-accounts among bond funds
and equity funds, as well as equity sector weightings. Other
significant assumptions include surrender and lapse rates,
estimated interest spread, and estimated mortality.
Due to the relative size and sensitivity to minor changes in
underlying assumptions of DAC and VOBA balances, the Company
performs a quarterly and annual analysis of DAC and VOBA for the
annuity and life businesses, respectively. The DAC and VOBA
balances are evaluated for recoverability and are reduced to the
extent that estimated future gross profits are inadequate to
recover the asset.
At each evaluation date, actual historical gross profits are
reflected, and estimated future gross profits and related
assumptions are evaluated for continued reasonableness. Any
adjustment in estimated profit requires that the amortization
rate be revised ("unlocking") retroactively to the date of the
policy or contract issuance. The cumulative prior period
adjustment is recognized as a component of current period
19
amortization. In general, increases in investment, mortality, and
expense margins, and thus estimated future profits, lower the
rate of amortization. However, decreases in investment,
mortality, and expense margins, and thus estimated future
profits, increase the rate of amortization.
Analysis of DAC/VOBA - Annuity
The actual separate account return exhibited by the variable
funds associated with the Company's liabilities in 2004 exceeded
the long-term assumption, thereby producing for the year ended
December 31, 2004 deceleration of DAC/VOBA amortization of $0.1
before tax, or $0.07, net of $0.03 of federal income tax expense.
During 2003, the Company reset long-term assumptions for the
separate account returns from 9.0% to 8.5% (gross before fund
management fees, mortality, expense, and other policy charges),
reflecting a blended return of equity and other sub-accounts. The
2003 unlocking adjustment was driven by this change in the
separate account returns assumption along with other prospective
assumption changes. For the year ended December 31, 2003, the
Company recorded an acceleration of DAC/VOBA amortization
totaling $5.4 before tax, or $3.5, net of $1.9 of federal income
tax benefit.
As part of the regular analysis of DAC/VOBA, at the end of third
quarter of 2002, the Company unlocked its long-term rate of
return assumptions. The Company reset long-term assumptions for
the separate account returns to 9.0% (gross before fund
management fees, mortality, expense, and other policy charges) as
of December 31, 2002, reflecting a blended return of equity and
other sub-accounts. The unlocking adjustment was primarily driven
by the sustained downturn in the equity markets and revised
expectations for future returns. During 2002, the Company
recorded an acceleration of DAC/VOBA amortization totaling $1.5
before tax, or $1.0, net of $0.5 of federal income tax benefit.
Analysis of DAC/VOBA - Life
As part of the regular analysis of DAC/VOBA, at the end of each
of the years ended December 31, 2004, 2003, and 2002, the Company
unlocked its long-term rate of return assumptions due to
assumption changes related to mortality, lapse, expense and
interest amounts, portfolio return, as well as modeling
improvements. The impact of unlocking on the amortization of
DAC/VOBA was a decrease of $9.8 in 2004, an increase of $5.5 in
2003, and a decrease of $4.4 in 2002.
20
Results of Operations
Year ended December 31, 2004 compared to year ended December 31,
2003
Income: Income before cumulative effect of change in accounting
principles decreased by $23.1 to $30.8 for 2004 from $53.9 for
2003. The decrease in net income was primarily related to higher
mortality cost and operating expenses, partially offset by a
decrease in the amortization of DAC/VOBA.
Net Investment Income: Net investment income decreased by $2.2 to
$122.2 for 2004 from $124.4 for 2003. The decrease is primarily
due to lower investment yields in 2004.
Fee Income: Fee income is primarily generated through cost of
insurance charges assessed to universal life policyholders. Fee
income for 2004 was essentially the same as in 2003. Although
universal life deposits increased during 2004, the net amount at
risk stayed relatively flat in 2004 since the insurance in force
amount was not significantly increased.
Premiums: Premiums increased by $2.9 to $64.7 for 2004 from $61.8
for 2003. The increase was primarily due to higher sales of group
products.
Net Realized Capital Gains (Losses): Net realized capital gains
(losses) decreased by $1.4 to $9.2 for 2004 from $10.6 for 2003.
The reduction in net realized gains was primarily due to the
increasing interest rate environment in 2004 that negatively
affected the market value of fixed maturities and led to lower
realized gains upon sales.
Interest Credited and Other Benefits to Contractowners and
Policyholders: Interest credited and other benefits to
contractowners and policyholders increased by $41.5 to $189.0 for
2004 from $147.5 for 2003. The increase is primarily related to
higher life claims experienced in 2004 in comparison with 2003.
Operating Expenses: Operating expenses increased by $14.2 to
$51.1 for 2004 from $36.9 for 2003. The increase in operating
expenses is primarily related to the general growth of the
business, higher reinsurance-related expenses, and a decrease in
deferred expenses.
Amortization of DAC and VOBA: Amortization of DAC and VOBA
decreased by $21.5 to $9.4 for 2004 from $30.9 for 2003. The
reduction in DAC and VOBA amortization primarily resulted from
the change of the Company's amortization rate due to assumption
changes related to mortality, lapse, expense, interest amounts,
portfolio return, as well as modeling improvements. The
assumption changes resulted in an increase in amortization in
2003 and a decrease in amortization in 2004. In addition, there
was no amortization recognized for the defined contribution
annuity business in 2004 due to the write-off of DAC and VOBA for
this part of the business in 2003.
The Cumulative Effect of the Change in Accounting Principle: The
cumulative effect of the change in accounting principle for 2004,
was $0.8 after tax, related to the adoption of Statement of
Position ("SOP") 03-1, "Accounting and Reporting by Insurance
21
Enterprises for Certain Nontraditional Long-Duration Contracts
and for Separate Accounts", and Technical Practice Aid 6300.05 -
6300.08, "Q&As Related to the Implementation of SOP 03-1,
"Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate
Accounting" (the "TPA"). (See "Recently Adopted Accounting
Standards" for further information.)
Financial Condition
Investments
Investment Strategy
The Company's investment strategy for its general account
investments involves diversification by asset class, and seeks to
add economic diversification and to reduce the risks of credit,
liquidity, and embedded options within certain investment
products, such as convexity risk on collateralized mortgage
obligations and call options. The investment management function
is centralized under ING Investment Management, LLC ("IIM")
pursuant to an investment advisory agreement. Separate portfolios
are established for each general type of product within RLNY.
The Company invests its general account primarily in fixed
maturity investments, including publicly issued bonds (including
government bonds), privately placed notes and bonds,
mortgage-backed securities, and asset-backed securities. The
primary investment strategy is to optimize the risk-adjusted
return through superior asset selection predicated on a developed
relative value approach, credit research and monitoring, superior
management of interest rate risk, and active exploration into new
investment product opportunities. Investments are purchased when
market returns, adjusted for risk and expenses, are sufficient to
profitably support growth of the liability block of business. In
addition, assets and liabilities are analyzed and reported for
internal management purposes on an option-adjusted basis. The
level of required capital of given transactions is a primary
factor in determining relative value among different investment
and liability alternatives, within the scope of each product
type's objective. An active review of existing holdings
identifies specific assets that could be effectively traded in
order to enhance the risk-adjusted returns of the portfolio,
while minimizing adverse tax and accounting impacts. The Company
strives to maintain a portfolio average asset quality rating of
A, excluding mortgage loans, but including mortgage-backed
securities that are reported with bonds, based on Standard &
Poor's ratings classifications.
22
Portfolio Composition
The following table presents the investment portfolio at December
31, 2004 and 2003:
2004 2003
---------------------------- ----------------------------
Carrying Value % Carrying Value %
----------------- --------- ----------------- ---------
Fixed maturities, including
securities pledged $ 1,761.6 84.3% $ 1,719.8 84.5%
Equity securities 7.6 0.4% 6.7 0.3%
Mortgage loans on real estate 213.0 10.2% 209.7 10.3%
Policy loans 90.9 4.3% 86.6 4.3%
Short-term investments - 0.0% 0.1 0.0%
Other investments 17.0 0.8% 12.9 0.6%
----------------- --------- ----------------- ---------
$ 2,090.1 100.0% $ 2,035.8 100.0%
================= ========= ================= =========
Fixed Maturities
Fixed maturities available-for-sale as of December 31, 2004, were
as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- ---------------- ---------------- ----------------
Fixed maturities:
U.S. government and government
agencies and authorities $ 56.2 $ 0.4 $ 0.2 $ 56.4
States, municipalities and political
subdivisions 1.6 0.1 - 1.7
U.S. corporate securities:
Public utilities 154.3 7.9 0.8 161.4
Other corporate securities 695.2 35.9 3.0 728.1
---------------- ---------------- ---------------- ----------------
Total U.S. corporate securities 849.5 43.8 3.8 889.5
---------------- ---------------- ---------------- ----------------
Foreign securities:
Government 28.0 0.6 0.2 28.4
Other 168.0 6.6 1.9 172.7
---------------- ---------------- ---------------- ----------------
Total foreign securities 196.0 7.2 2.1 201.1
---------------- ---------------- ---------------- ----------------
Residential mortgage-backed securities 373.5 2.5 2.1 373.9
Commercial mortgage-backed securities 119.0 8.2 0.3 126.9
Other asset-backed securities 107.1 6.1 1.1 112.1
---------------- ---------------- ---------------- ----------------
Total fixed maturities, including
fixed maturities pledged 1,702.9 68.3 9.6 1,761.6
Less: fixed maturities pledged 149.7 0.3 1.5 148.5
---------------- ---------------- ---------------- ----------------
Total fixed maturities $ 1,553.2 $ 68.0 $ 8.1 $ 1,613.1
================ ================ ================ ================
23
Fixed maturities available-for-sale as of December 31, 2003, were
as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------- ------------- -------------
Fixed maturities:
U.S. government and government
agencies and authorities $ 7.4 $ 0.3 $ - $ 7.7
States, municipalities and political
subdivisions 1.8 0.1 - 1.9
U.S. corporate securities:
Public utilities 127.6 9.3 0.5 136.4
Other corporate securities 732.5 48.3 5.9 774.9
------------- ------------- ------------- -------------
Total U.S. corporate securities 860.1 57.6 6.4 911.3
------------- ------------- ------------- -------------
Foreign securities:
Government 28.0 0.4 0.2 28.2
Other 141.2 6.9 2.8 145.3
------------- ------------- ------------- -------------
Total foreign securities 169.2 7.3 3.0 173.5
------------- ------------- ------------- -------------
Residential mortgage-backed securities 399.7 4.0 1.3 402.4
Commercial mortgage-backed securities 106.1 9.6 0.3 115.4
Other asset-backed securities 100.3 8.6 1.3 107.6
------------- ------------- ------------- -------------
Total fixed maturities, including
fixed maturities pledged 1,644.6 87.5 12.3 1,719.8
Less: Fixed maturities pledged 106.2 0.5 1.1 105.6
------------- ------------- ------------- -------------
Total fixed maturities $ 1,538.4 $ 87.0 $ 11.2 $ 1,614.2
============= ============= ============= =============
At December 31, 2004 and 2003, net unrealized appreciation was
$58.7 and $75.2, respectively, on total fixed maturities,
including fixed maturities pledged to creditors.
It is management's objective that the portfolio of fixed
maturities be of high quality and be well diversified by market
sector. The fixed maturities in the Company's portfolio are
generally rated by external rating agencies and, if not
externally rated, are rated by the Company on a basis believed to
be similar to that used by the rating agencies. The average
quality rating of the Company's fixed maturities portfolio was an
A+ at December 31, 2004 and 2003. Ratings are calculated using a
rating hierarchy that considers S&P, Moody's and internal
ratings.
24
Total fixed maturities by quality rating category including fixed
maturities pledged to creditors were as follows as of:
December 31,
2004 2003
---------------------------- ---------------------------
Fair % of Fair % of
Value Total Value Total
------------- ------------- ------------- -------------
AAA $ 670.6 38.1% $ 674.2 39.2%
AA 94.3 5.4% 97.9 5.7%
A 408.7 23.2% 383.5 22.3%
BBB 513.4 29.1% 462.7 26.9%
BB 59.9 3.4% 84.5 4.9%
B and below 14.7 0.8% 17.0 1.0%
------------- ------------- ------------- -------------
Total $ 1,761.6 100.0% $ 1,719.8 100.0%
============= ============= ============= =============
95.8% and 94.1% of the fixed maturities were invested in
securities rated BBB and above (Investment Grade) at December 31,
2004 and 2003, respectively.
Fixed maturities rated BB and below (Below Investment Grade) may
have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity of the issuer to make principal and interest
payments than is the case with higher rated fixed maturities.
Total fixed maturities by market sector, including fixed
maturities pledged to creditors were as follows as of:
December 31,
2004 2003
---------------------------- ---------------------------
Fair % of Fair % of
Value Total Value Total
------------- ------------- ------------- -------------
U.S. Corporate $ 891.2 50.6% $ 913.2 53.1%
Residential Mortgage-backed 373.9 21.2% 402.4 23.4%
Commercial/Multifamily
Mortgage-backed 126.9 7.2% 115.4 6.7%
Foreign (1) 201.1 11.4% 173.5 10.1%
U.S. Treasuries/Agencies 56.4 3.2% 7.7 0.4%
Asset-backed 112.1 6.4% 107.6 6.3%
------------- ------------- ------------- -------------
Total $ 1,761.6 100.0% $ 1,719.8 100.0%
============= ============= ============= =============
(1) Primarily U.S. dollar denominated.
25
The amortized cost and fair value of total fixed maturities for
the year-ended December 31, 2004 are shown below by contractual
maturity. Actual maturities may differ from contractual
maturities because securities may be restructured, called, or
prepaid.
Amortized Fair
Cost Value
---------------- ----------------
Due to mature:
One year or less $ 41.0 $ 41.8
After one year through five years 456.7 474.4
After five years through ten years 285.1 297.9
After ten years 320.5 334.6
Mortgage-backed securities 492.5 500.8
Other asset-backed securities 107.1 112.1
Less: fixed maturities pledged 149.7 148.5
---------------- ----------------
Fixed maturities, excluding fixed
maturities pledged $ 1,553.2 $ 1,613.1
================ ================
The Company did not have any investments in a single issuer,
other than obligations of the U.S. government, with a carrying
value in excess of 10% of the Company's shareholder's equity at
December 31, 2004.
At December 31, 2004 and 2003, fixed maturities with fair values
of $6.0 and $6.1, respectively, were on deposit as required by
regulatory authorities.
Mortgage Loans
Mortgage loans, primarily commercial mortgage loans, totaled
$213.0 at December 31, 2004 and $209.7 at December 31, 2003.
These loans are reported at amortized cost less impairment
writedowns. If the value of any mortgage loan is determined to be
impaired (i.e., when it is probable that the Company will be
unable to collect on all amounts due according to the contractual
terms of the loan agreement), the carrying value of the mortgage
loan is reduced to either the present value of expected cash
flows, cash flows from the loan (discounted at the loan's
effective interest rate), or fair value of the collateral. If the
loan is in foreclosure, the carrying value is reduced to the fair
value of the underlying collateral, net of estimated costs to
obtain and sell. The carrying value of the impaired loans is
reduced by establishing a permanent write down charged to
realized loss. At December 31, 2004 and 2003, the Company had no
allowance for mortgage loan credit losses.
Other-Than-Temporary-Impairments
The Company analyzes the general account investments to determine
whether there has been an other-than-temporary decline in fair
value below the amortized cost basis. Management considers the
length of the time and the extent to which the market value has
been less than cost; the financial condition and near-term
prospects of the issuer; future economic conditions and market
forecasts; and the Company's intent and ability to retain the
26
investment in the issuer for a period of time sufficient to allow
for recovery in market value. If it is probable that all amounts
due according to the contractual terms of an investment will not
be collected, an other-than-temporary impairment is considered to
have occurred.
In addition, the Company invests in structured securities that
meet the criteria of Emerging Issues Task Force ("EITF") Issue
No. 99-20, "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized
Financial Assets." Under EITF Issue No. 99-20, a determination of
the required impairment is based on credit risk and the
possibility of significant prepayment risk that restricts the
Company's ability to recover the investment. An impairment is
recognized if the market value of the security is less than book
value and there has been an adverse change in cash flow since the
last remeasurement date.
When a decline in fair value is determined to be
other-than-temporary, the individual security is written down to
fair value and the loss is accounted for as a realized loss.
The following table identifies the Company's other-than-temporary
impairments by type as of December 31:
2004 2003 2002
--------------------------- -------------------------- --------------------------
No. of No. of No. of
Impairment Securities Impairment Securities Impairment Securities
------------- ------------ ------------- ------------ ------------- ------------
U.S. Corporate $ 0.8 1 $ 2.7 2 $ 0.7 1
Asset-backed - - 2.0 6 2.3 7
Equity - - 0.1 1 0.1 1
Limited Partnerships 0.1 2 - - - -
------------- ------------ ------------- ------------ ------------- ------------
Total $ 0.9 3 $ 4.8 9 $ 3.1 9
============= ============ ============= ============ ============= ============
The remaining fair value of impaired fixed maturities at December
2004, 2003, and 2002 was $4.0, $7.5 and $25.9, respectively.
Net Realized Capital Gains and Losses
Net realized capital gains (losses) are comprised of the
difference between the carrying value of investments and proceeds
from sale, maturity, and redemption, as well as losses incurred
due to the other-than-temporary impairment of investments. Net
realized capital gains (losses) on investments were as follows:
Year ended December 31,
2004 2003 2002
----------------- ----------------- -----------------
Fixed maturities $ 9.3 $ 10.2 $ (2.5)
Equity securities - (0.1) 0.2
Other (0.1) 0.5 (0.9)
----------------- ----------------- -----------------
Pretax net realized capital gains (losses) $ 9.2 $ 10.6 $ (3.2)
================= ================= =================
After-tax net realized capital gains (losses) $ 6.0 $ 6.9 $ (2.1)
================= ================= =================
27
Liquidity and Capital Resources
Liquidity is the ability of the Company to generate sufficient
cash flows to meet the cash requirements of operating, investing,
and financing activities.
Sources and Uses of Liquidity
The Company's principal sources of liquidity are premiums,
product charges, investment income, proceeds from the maturing
and sale of investments, proceeds from debt issuance, and capital
contributions. Primary uses of these funds are payments of
commissions and operating expenses, interest and premium credits,
investment purchases and repayment of debt, as well as contract
maturities, withdrawals and surrenders.
The Company's liquidity position is managed by maintaining
adequate levels of liquid assets, such as cash or cash
equivalents and short-term investments. For a description of the
Company's asset/liability management, see Item 7A, "Quantitative
and Qualitative Disclosures About Market Risk."
Additional sources of liquidity include borrowing facilities to
meet short-term cash requirements. The Company maintains a
reciprocal loan agreement with ING America Insurance Holdings,
Inc. ("ING AIH"), a Delaware corporation and affiliate. Under
this agreement, during the period from February 1, 2003 to
January 31, 2004 and during the period from February 1, 2004 to
January 31, 2005, the Company and ING AIH could borrow from one
another up to 5% of RLNY's statutory admitted assets as of the
preceding December 31. The Company also maintains a perpetual
$30.0 revolving note facility with Bank of New York and a $30.0
revolving note facility with SunTrust Bank. At December 31, 2004,
the Company had a $2.3 balance payable to SunTrust Bank.
Management believes that these sources of liquidity are adequate
to meet the Company's short-term cash obligations.
Capital Contributions and Dividends
The Company paid $27.2, $25.5 and $14.4 in cash dividends to
ReliaStar Life Insurance Company ("ReliaStar Life") in 2004, 2003
and 2002, respectively.
The Company did not receive capital contributions in 2004 and
2003. The Company received capital contributions of $31.4 in 2002
from Security-Connecticut Life Insurance Company
("Security-Connecticut"), related to the First Golden American
Life Insurance Company of New York ("First Golden") merger with
and into the Company.
28
Separate Accounts
Separate account assets and liabilities generally represent funds
maintained to meet specific investment objectives of
contractowners and policyholders who bear the investment risk,
subject, in limited cases, to minimum guaranteed rates.
Investment income and investment gains and losses generally
accrue directly to such contractowners and policyholders. The
assets of each account are legally segregated and are not subject
to claims that arise out of any other business of the Company.
Separate Account assets supporting variable options under
universal life and annuity contracts are invested, as designated
by the contractowner/policyholder or participant (who bears the
investment risk subject, in limited cases, to minimum guaranteed
rates) under a contract in shares of mutual funds which are
managed by the Company or its affiliates, or in other selected
mutual funds not managed by the Company or its affiliates.
Variable universal life and annuity premiums are allocated to
various subaccounts established within the separate account. Each
subaccount represents a different investment option in which the
contractowner may allocate premiums. The account value of a
variable universal life or annuity contract is equal to the
aggregate value of the subaccounts selected by the contractowner
(including the value allocated to any fixed account) less fees
and expenses. The Company offers investment options for its
variable universal life and annuities covering a wide range of
investment styles, including large, mid and small cap equity
funds, as well as fixed income alternatives. Therefore, unlike
fixed annuities, under variable universal life and annuities the
contractowners bear the risk of investment gains and losses
associated with the selected investment allocation.
Off-Balance Sheet Arrangements and Aggregate Contractual
Obligations
Through the normal course of investment operations, the Company
commits to either purchase or sell securities, commercial
mortgage loans, or money market instruments at a specified future
date and at a specified price or yield. The inability of
counterparties to honor these commitments may result in either a
higher or lower replacement cost. Also, there is likely to be a
change in the value of the securities underlying the commitments.
At December 31, 2004 and 2003, the Company had off-balance sheet
commitments to purchase investments equal to their fair value of
$15.4 and $28.9, respectively.
29
As of December 31, 2004, the Company had certain contractual
obligations due over a period of time as summarized in the
following table:
Payments due by Period
--------------------------------------------------------------------
Less than More than
Contractual Obligations Total 1 Year 1-3 Years 3-5 Years 5 Years
--------------------------- ------------ ------------ ------------ ------------ ------------
Operating Lease Obligations $ 0.4 $ 0.1 $ 0.2 $ 0.1 $ -
Purchase Obligations 15.4 15.4 - - -
Reserves for Insurance Obligations 1,623.5 93.3 163.1 166.9 1,200.2
------------ ------------ ------------ ------------ ------------
Total $ 1,639.3 $ 108.8 $ 163.3 $ 167.0 $ 1,200.2
============ ============ ============ ============ ============
Operating lease obligations relate to the rental of office space
under various non-cancelable operating lease agreements that
expire through January 2009.
Purchase obligations consist primarily of commitments to purchase
investments during 2005.
Reserves for insurance obligations consist of actuarially
determined amounts required for the Company to meet its future
obligations under its universal life policies, variable universal
life policies, traditional life policies, fixed and variable
annuity contracts, accident and health policies, supplemental
contracts and miscellaneous supplemental benefits and riders.
Reinsurance
The Company utilizes reinsurance agreements to reduce its
exposure to large losses in all aspects of its insurance
business. Such reinsurance permits recovery of a portion of
losses from reinsurers, although it does not discharge the
primary liability of the Company as direct insurer of the risks
reinsured. The Company evaluates the financial strength of
potential reinsurers and continually monitors the financial
condition of reinsurers. Only those reinsurance recoverable
balances deemed probable of recovery are reflected as assets on
the Company's Balance Sheets.
Repurchase Agreements
The Company engages in dollar repurchase agreements ("dollar
rolls") and repurchase agreements to increase its return on
investments and improve liquidity. These transactions involve a
sale of securities and an agreement to repurchase substantially
the same securities as those sold. Company policies require a
minimum of 95% of the fair value of securities pledged under
dollar rolls and repurchase agreement transactions to be
maintained as collateral. Cash collateral received is invested in
fixed maturities and the offsetting collateral liability is
included in borrowed money on the Balance Sheets. At December 31,
2004 and 2003, the carrying value of the securities pledged in
dollar rolls and repurchase agreement transactions was $100.7 and
$103.8, respectively. The carrying value of the securities
pledged in dollar rolls and repurchase agreement transactions is
30
included in pledged securities on the Balance Sheets. The
repurchase obligation related to dollar rolls and repurchase
agreements totaled $100.4 and $101.5 at December 31, 2004 and
2003, respectively.
The Company also enters into reverse repurchase agreements. These
transactions involve a purchase of securities and an agreement to
sell substantially the same securities as those purchased.
Company policies require a minimum of 102% of the fair value of
securities pledged under reverse repurchase agreements to be
pledged as collateral. At December 31, 2004 and 2003, the
carrying value of the securities in reverse repurchase agreements
was $32.0 and $8.0, respectively.
The primary risk associated with short-term collateralized
borrowings is that the counterparty will be unable to perform
under the terms of the contract. The Company's exposure is
limited to the excess of the net replacement cost of the
securities over the value of the short-term investments, an
amount that was not material at December 31, 2004. The Company
believes the counterparties to the dollar roll, repurchase and
reverse repurchase agreements are financially responsible and
that the counterparty risk is immaterial.
Securities Lending
The Company engages in securities lending whereby certain
securities from its portfolio are loaned to other institutions
for short periods of time. Initial collateral, primarily cash, is
required at a rate of 102% of the market value of the loaned
domestic securities. The collateral is deposited by the borrower
with a lending agent, and retained and invested by the lending
agent according to the Company's guidelines to generate
additional income. The market value of the loaned securities is
monitored on a daily basis with additional collateral obtained or
refunded as the fair value of the loaned securities fluctuates.
Risk-based Capital
The National Association of Insurance Commissioners ("NAIC")
risk-based capital requirements require insurance companies to
calculate and report information under a risk-based capital
formula. These requirements are intended to allow insurance
regulators to monitor the capitalization of insurance companies
based upon the type and mixture of risks inherent in a Company's
operations. The formula includes components for asset risk,
liability risk, interest rate exposure, and other factors. The
Company has complied with the NAIC's risk-based capital reporting
requirements. Amounts reported indicate that as of December 31,
2004 the Company has total adjusted capital above all required
capital levels.
31
Recently Adopted Accounting Standards
(See Si1gnificant Accounting Policies Footnote to the Financial
Statements for further information.)
Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate Accounts
The Company adopted SOP 03-1 on January 1, 2004. SOP 03-1
establishes several new accounting and disclosure requirements
for certain nontraditional long-duration contracts and for
separate accounts including, among other things, a requirement
that assets and liabilities of separate account arrangements that
do not meet certain criteria be accounted for as general account
assets and liabilities, and the revenues and expenses related to
such arrangements be consolidated with the respective line items
in the Statements of Operations. In addition, the SOP requires
additional liabilities be established for certain guaranteed
death benefits and for products with certain patterns of cost of
insurance charges. Sales inducements provided to contractowners
and policyholders must also be recognized on the balance sheet
separately from deferred acquisition costs and amortized as a
component of benefits expense using methodology and assumptions
consistent with those used for amortization of deferred policy
acquisition costs.
The Company evaluated all requirements of SOP 03-1 and determined
that it is affected by the SOP's requirements to account for
certain separate account arrangements as general account
arrangements, to establish additional liabilities for certain
guaranteed benefits and for products with patterns of cost of
insurance charges that result in gains followed by losses in
later policy durations from the insurance benefit function, and
to defer and amortize sales inducements to contractowners and
policyholders. Upon adoption of the SOP, the Company recognized a
cumulative effect of a change in accounting principle of $(10.8),
before tax or $(7.0), net of $3.8 of income taxes, as of January
1, 2004.
In the fourth quarter of 2004, the cumulative effect of a change
in accounting principle was revised due to the implementation of
the TPA.
The TPA, which was approved in September 2004, provides
additional guidance regarding certain implicit assessments that
may be used in testing of the base mortality function on
contracts, which is performed to determine whether additional
liabilities are required in conjunction with SOP 03-1. In
addition, the TPA provides additional guidance surrounding the
allowed level of aggregation of additional liabilities determined
under the SOP. While the TPA was implemented during the fourth
quarter of 2004, the TPA was retroactive to the original
implementation date of SOP 03-1, January 1, 2004 and was reported
as an adjustment to SOP 03-1's cumulative effect of a change in
accounting principle. The adoption of the TPA increased the
Company's cumulative effect change in accounting principle by
$7.8, net of $4.2 of income tax.
The implementation of SOP 03-1 raised questions regarding the
interpretation of the requirements of FAS No. 97, concerning when
it is appropriate to record an unearned revenue liability related
to the insurance benefit function. To clarify its position, the
Financial Accounting Standards Board ("FASB") issued FASB Staff
Position No. FAS 97-1 ("FSP FAS 97-1"), "Situations in Which
32
Paragraphs 17(b) and 20 of FASB Statement No. 97, `Accounting and
Reporting by Insurance Enterprises for Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of
Investments,' Permit or Require Accrual of an Unearned Revenue
Liability," effective for fiscal periods beginning subsequent to
the date the guidance was issued, June 18, 2004. The Company
adopted FSP FAS 97-1 on July 1, 2004. The adoption of FSP FAS
97-1 did not have an impact on the Company's financial position,
results of operations, or cash flows.
New Accounting Pronouncements
In December 2004, the FASB issued FAS No. 123 (revised 2004),
"Share-Based Payment" ("FAS 123R"), which requires all
share-based payments to employees be recognized in the financial
statements based upon the fair value. FAS 123R is effective at
the beginning of the first interim or annual period beginning
after June 15, 2005. Earlier adoption is encouraged. FAS 123R
provides two transition methods, modified-prospective and
modified-retrospective.
The modified-prospective method recognizes the grant-date fair
value of compensation for new awards granted after the effective
date and unvested awards beginning in the fiscal period in which
the recognition provisions are first applied. Prior periods are
not restated. The modified-retrospective method permits entities
to restate prior periods by recognizing the compensation cost
based on the amount previously reported in the pro forma footnote
disclosures as required under FAS No. 123, "Accounting for
Stock-Based Compensation".
The Company intends to early adopt the provisions of FAS 123R on
January 1, 2005, using the modified-prospective method. Due to
the Company's few number of employees, the adoption of FAS 123R
is not expected to have a material impact on the Company's
financial position, results of operations, or cash flows. Prior
to January 2005, the Company applied the intrinsic value-based
provisions set forth in Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees". Under
the intrinsic value method, compensation expense is determined on
the measurement date, which is the first date on which both the
number of shares the employee is entitled to receive and the
exercise price are known. Compensation expense, if any, is
measured based on the award's intrinsic value, which is the
excess of the market price of the stock over the exercise price
on the measurement date.
Legislative Initiatives
Certain elements of the Jobs and Growth Tax Relief Reconciliation
Act of 2003, in particular the reduction in the tax rates on
long-term capital gains and corporate dividends could impact the
relative competitiveness of the Company's products especially
variable annuities. While sales of the products do not appear to
have been reduced to date, the long term effect of the Jobs and
Growth Tax Relief Reconciliation Act of 2003 on the Company's
financial condition or results of operation can not be reasonably
estimated at this time.
33
The American Jobs Creation Act of 2004 allows tax-free
distributions to be made from the Company's Policyholders'
Surplus Account in 2005 and 2006. Under prior law, the Company
was allowed to defer from taxation a portion of statutory income
under certain circumstances. The deferred income was accumulated
in the Policyholders' Surplus Account and is taxable only under
conditions that management considers to be remote. Therefore, no
federal income taxes have been provided on the accumulated
balance of $11.3 as of December 31, 2004. Based on currently
available information, the Company anticipates that the new law
will permanently eliminate any potential tax on the accumulated
balance of $11.3.
Other legislative proposals under consideration include repealing
the estate tax, reducing the taxation of annuity benefits,
changing the taxation of products, and changing life insurance
company taxation. Some of these proposals, if enacted, could have
a material effect on life insurance, annuity, and other
retirement savings product sales. The impact on the Company's
products cannot be predicted.
Legislation to restructure the Social Security System and expand
private pension plan incentives also may be considered. Prospects
for enactment and the ultimate effect of these proposals are
uncertain.
Regulatory Matters
As with many financial services companies, the Company and its
affiliates have received informal and formal requests for
information from various state and federal governmental agencies
and self-regulatory organizations in connection with inquiries
and investigations of the products and practices of the financial
services industry. In each case, the Company and its affiliates
have been and are providing full cooperation.
Fund Regulatory Issues
Since 2002, there has been increased governmental and regulatory
activity relating to mutual funds and variable insurance
products. This activity has primarily focused on inappropriate
trading of fund shares, revenue sharing and directed brokerage,
compensation, sales practices and suitability, arrangements with
service providers, pricing, compliance and controls, and adequacy
of disclosure.
In addition to responding to governmental and regulatory requests
on fund regulatory issues, ING management, on its own initiative,
conducted, through special counsel and a national accounting
firm, an extensive internal review of mutual fund trading in ING
insurance, retirement, and mutual fund products. The goal of this
review was to identify any instances of inappropriate trading in
those products by third parties or by ING investment
professionals and other ING personnel.
34
The internal review identified several isolated arrangements
allowing third parties to engage in frequent trading of mutual
funds within the variable insurance and mutual fund products of
certain affiliates of the Company, and identified other
circumstances where frequent trading occurred despite measures
taken by ING intended to combat market timing. Each of the
arrangements has been terminated and disclosed to regulators, to
the independent trustees of ING Funds (U.S.) and in Company
reports previously filed with the Securities and Exchange
Commission ("SEC") pursuant to the Securities Exchange Act of
1934, as amended.
An affiliate of the Company, ING Funds Distributors, LLC ("IFD")
has received notice from the staff of the National Association of
Securities Dealers ("NASD") that the staff has made a preliminary
determination to recommend that disciplinary action be brought
against IFD and one of its registered persons for violations of
the NASD Conduct Rules and federal securities laws in connection
with frequent trading arrangements.
Other regulators, including the SEC and the New York Attorney
General, are also likely to take some action with respect to
certain ING affiliates before concluding their investigation of
ING relating to fund trading. The potential outcome of such
action is difficult to predict but could subject certain
affiliates to adverse consequences, including, but not limited
to, settlement payments, penalties, and other financial
liability. It is not currently anticipated, however, that the
actual outcome of such action will have a material adverse effect
on ING or ING's U.S.-based operations, including the Company.
ING has agreed to indemnify and hold harmless the ING Funds from
all damages resulting from wrongful conduct by ING or its
employees or from ING's internal investigation, any
investigations conducted by any governmental or self-regulatory
agencies, litigation or other formal proceedings, including any
proceedings by the SEC. Management reported to the ING Funds
Board that ING management believes that the total amount of any
indemnification obligations will not be material to ING or ING's
U.S.-based operations, including the Company.
Other Regulatory Matters
The New York Attorney General and other regulators are also
conducting broad inquiries and investigations involving the
insurance industry. These initiatives currently focus on, among
other things, compensation and other sales incentives, potential
conflicts of interest, potential anti-competitive activity,
marketing practices, certain financial reinsurance arrangements,
and disclosure. It is likely that the scope of these
investigations will further broaden before the investigations are
concluded. U.S. affiliates of ING have received formal and
informal requests in connection with such investigations, and are
cooperating fully with each request for information.
35
These initiatives may result in new legislation and regulation
that could significantly affect the financial services industry,
including businesses in which the Company is engaged.
In light of these and other developments, U.S. affiliates of ING,
including the Company, periodically review whether modifications
to their business practices are appropriate.
For further discussion of the Company's regulatory matters, see
"Risk Factors" in Part I, Item 1 "Business."
36
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Asset/liability management is integrated into many aspects of the
Company's operations, including investment decisions, product
development, and determination of crediting rates. As part of the
risk management process, different economic scenarios are
modeled, including cash flow testing required for insurance
regulatory purposes, to determine that existing assets are
adequate to meet projected liability cash flows. Key variables in
the modeling process include interest rates, anticipated
contractowner or policyholder behavior, and variable separate
account performance. Contractowners and policyholders bear the
majority of the investment risk related to variable insurance
products.
The fixed account liabilities are supported by a general account
portfolio principally composed of fixed rate investments with
matching duration characteristics that can generate predictable,
steady rates of return. The portfolio management strategy for the
fixed account considers the assets available-for-sale. This
enables the Company to respond to changes in market interest
rates, changes in prepayment risk, changes in relative values of
asset sectors and individual securities and loans, changes in
credit quality outlook, and other relevant factors. The objective
of portfolio management is to maximize returns, taking into
account interest rate and credit risk, as well as other risks.
The Company's asset/liability management discipline includes
strategies to minimize exposure to loss as interest rates and
economic and market conditions change.
Term life products for employee benefits are short term in
nature, with some longer term claim reserves. Cash flow testing
and additional sensitivity testing (with varying mortality,
morbidity, and expense levels) provide assurance that the
existing assets are adequate to meet projected liability cash
flows.
For universal life products, cash flow testing of higher
mortality, surrender, and expense levels than expected indicate
that solvency is not impaired by reasonable variations in these
risks. The current difference between the charges to the policies
for cost of insurance and expenses and the guaranteed maximums
allows some margin for adverse experience. Crediting rates are
also changed regularly to reflect changes in the portfolio.
On the basis of these analyses, management believes there is
currently no material solvency risk to the Company.
Interest Rate Risk
The Company defines interest rate risk as the risk of an economic
loss due to adverse changes in interest rates. This risk arises
from the Company's primary activity of investing premiums from
interest-sensitive life insurance and fixed annuity business in
interest-sensitive fixed income assets and carrying these funds
as interest-sensitive liabilities. The Company manages the
interest rate risk in its assets relative to the interest rate
risk in its liabilities. A key measure used to quantify this
37
exposure is duration. Duration measures the sensitivity of the
market or "fair" value of assets and liabilities to changes in
interest rates.
To calculate duration of interest-sensitive life insurance and
fixed annuity liabilities, the Company projects liability cash
flows under stochastic, arbitrage-free interest rate scenarios
and calculates their net present value using LIBOR or swap based
interest rates. Duration is calculated by revaluing these cash
flows given a small change in interest rates and determining the
percentage change in the net present value. The cash flows used
in this calculation include all premiums, benefits, and
policy-related expenses on the interest-sensitive liabilities.
The projections include assumptions that reflect the effect of
changing interest rates on the Company's declared credited rates
and policyholder lapses, where applicable.
For further discussion of the Company's interest rate risks, see
"Risk Factors" in Part 1, Item 1 "Business".
38
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page
Report of Independent Registered Public Accounting Firm 40
Financial Statements:
Statements of Operations for the years ended December 31,
2004, 2003 and 2002 41
Balance Sheets as of December 31, 2004 and 2003 42
Statements of Changes in Shareholder's Equity for the years
ended December 31, 2004, 2003 and 2002 44
Statements of Cash Flows for the years ended December 31, 2004,
2003 (restated) and 2002 (restated) 45
Notes to Financial Statements 47
Report of Independent Registered Public Accounting Firm
The Board of Directors
ReliaStar Life Insurance Company of New York
We have audited the accompanying balance sheets of ReliaStar Life Insurance
Company of New York as of December 31, 2004 and 2003, and the related statements
of operations, changes in shareholder's equity, cash flows for each of the three
years in the period ended December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ReliaStar Life
Insurance Company of New York as of December 31, 2004 and 2003, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, the Company changed the
accounting principle for goodwill and other intangible assets effective January
1, 2002 and changed the accounting principle for certain non-traditional long
duration contracts and for separate accounts effective January 1, 2004. As
discussed in Note 15 to the financial statements, the Company restated certain
amounts presented in the statements of cash flows related to its short-term
investments and interest credited to contractholders for investment type
contracts for the years ended December 31, 2003 and 2002.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 31, 2005
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Statements of Operations
(In millions)
Year ended December 31,
2004 2003 2002
----------------- ------------------ -----------------
Revenues:
Net investment income $ 122.2 $ 124.4 $ 133.1
Fee income 95.9 94.7 98.2
Premiums 64.7 61.8 55.0
Net realized capital gains (losses) 9.2 10.6 (3.2)
Other income 4.9 4.0 5.5
----------------- ------------------ -----------------
Total revenue 296.9 295.5 288.6
----------------- ------------------ -----------------
Benefits and expenses:
Interest credited and other benefits
to contractowners and policyholders 189.0 147.5 176.3
Operating expenses 51.1 36.9 29.3
Amortization of deferred policy acquisition costs
and value of business acquired 9.4 30.9 32.6
----------------- ------------------ -----------------
Total benefits and expenses 249.5 215.3 238.2
----------------- ------------------ -----------------
Income before income taxes and cumulative effect
of change in accounting principle 47.4 80.2 50.4
Income tax expense 16.6 26.3 17.8
----------------- ------------------ -----------------
Income before cumulative effect of change
in accounting principles 30.8 53.9 32.6
Cumulative effect of change in accounting principles,
net of tax 0.8 - (865.0)
----------------- ------------------ -----------------
Net income (loss) $ 31.6 $ 53.9 $ (832.4)
================= ================== =================
The accompanying notes are an integral part of these financial statements.
41
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Balance Sheets
(In millions, except share data)
As of December 31,
2004 2003
--------------- ---------------
Assets
Investments:
Fixed maturities, available-for-sale, at fair value
(amortized cost of $1,553.2 at 2004 and $1,538.4 at 2003) $ 1,613.1 $ 1,614.2
Equity securities, available-for-sale, at fair value (cost of
$6.9 at 2004 and 2003) 7.6 6.7
Mortgage loans on real estate 213.0 209.7
Policy loans 90.9 86.6
Other investments 17.0 13.0
Securities pledged (amortized cost of $149.7 at 2004 and $106.2 at 2003) 148.5 105.6
--------------- ---------------
Total investments 2,090.1 2,035.8
Cash and cash equivalents 33.5 10.5
Short-term investments under securities loan agreement 49.0 1.9
Accrued investment income 19.2 18.9
Reinsurance recoverable 84.2 65.1
Deferred policy acquisition costs 77.4 74.6
Value of business acquired 34.0 36.5
Due from affiliates 1.4 26.8
Deferred income taxes 32.5 20.2
Other assets 13.2 20.0
Assets held in separate accounts 537.7 513.8
--------------- ---------------
Total assets $ 2,972.2 $ 2,824.1
=============== ===============
The accompanying notes are an integral part of these financial statements.
42
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Balance Sheets
(In millions, except share data)
As of December 31,
2004 2003
--------------- ---------------
Liabilities and Shareholder's Equity
Policy liabilities and accruals $ 1,772.5 $ 1,677.2
Due to affiliates 5.1 13.7
Borrowed money 100.4 101.5
Payables under securities loan agreement 49.0 1.9
Current income taxes 16.2 3.7
Other liabilities 39.7 57.7
Liabilities related to separate accounts 537.7 513.8
--------------- ---------------
Total liabilities 2,520.6 2,369.5
--------------- ---------------
Shareholder's equity:
Common stock (1,377,863 shares authorized, issued and outstanding,
$2.00 per share value) 2.8 2.8
Additional paid-in capital 1,172.7 1,200.1
Accumulated other comprehensive income 29.6 35.8
Retained earnings (deficit) (753.5) (784.1)
--------------- ---------------
Total shareholder's equity 451.6 454.6
--------------- ---------------
Total liabilities and shareholder's equity $ 2,972.2 $ 2,824.1
=============== ===============
The accompanying notes are an integral part of these financial statements.
43
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Statements of Changes in Shareholder's Equity
(In millions)
Accumulated
Additional Other Retained Total
Common Paid-In Comprehensive Earnings Shareholder's
Stock Capital Income (Deficit) Equity
------------- ------------- ------------------ -------------- ----------------
Balance at December 31, 2001 $ 2.8 $ 1,194.6 $ 6.5 $ 8.8 $ 1,212.7
Capital contribution - 31.4 - - 31.4
Dividends to Shareholder - - - (14.4) (14.4)
Comprehensive income:
Net loss - - - (832.4) (832.4)
Other comprehensive income,
net of tax:
Unrealized gain on securities
($45.0 pretax) - - 28.9 - 28.9
----------------
Comprehensive loss (803.5)
----------------
Other - (0.4) - - (0.4)
------------- ------------- ------------------ -------------- ----------------
Balance at December 31, 2002 2.8 1,225.6 35.4 (838.0) 425.8
Dividends to Shareholder - (25.5) - - (25.5)
Comprehensive income:
Net income - - - 53.9 53.9
Other comprehensive income,
net of tax:
Unrealized gain on securities
($0.8 pretax) - - 0.4 - 0.4
----------------
Comprehensive income 54.3
------------- ------------- ------------------ -------------- ----------------
Balance at December 31, 2003 2.8 1,200.1 35.8 (784.1) 454.6
Dividends to Shareholder (27.2) (27.2)
Comprehensive income:
Net income 31.6 31.6
Other comprehensive income,
net of tax:
Unrealized loss on securities
($(11.7) pretax) (7.4) (7.4)
----------------
Comprehensive income 24.2
----------------
Other (0.2) 1.2 (1.0) -
------------- ------------- ------------------ -------------- ----------------
Balance at December 31, 2004 $ 2.8 $ 1,172.7 $ 29.6 $ (753.5) $ 451.6
============= ============= ================== ============== ================
The accompanying notes are an integral part of these financial statements.
44
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Statements of Cash Flows
(In millions)
Year ended December 31,
2004 2003 2002
Restated Restated
-------------- -------------- --------------
Cash Flows from Operating Activities:
Net income (loss) $ 31.6 $ 53.9 $ (832.4)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Capitalization of deferred policy acquisition costs and
value of business acquired (18.5) (26.9) (32.7)
Amortization of deferred policy acquisition costs and
value of business acquired 19.6 29.5 29.7
Future policy benefits, claims reserves, and interest credited 58.6 7.0 22.1
Net realized capital (gains) losses (9.4) (10.4) 5.6
Impairment of goodwill - - 865.0
Change in:
Reinsurance recoverable (19.1) (18.6) (1.5)
Accounts receivable 8.1 (6.7) 4.5
Accounts payable (7.8) (22.5) (4.0)
Due from affiliates 16.8 (6.2) 40.2
Other (7.0) 6.8 1.2
-------------- -------------- --------------
Net cash provided by operating activities 72.9 5.9 97.7
-------------- -------------- --------------
Cash Flows from Investing Activities:
Proceeds from the sale, maturity or redemption of:
Fixed maturities, available-for-sale 2,488.1 2,767.9 2,238.6
Mortgage loans on real estate 24.5 44.3 29.7
Acquisition of:
Fixed maturities, available-for-sale (2,531.1) (2,879.3) (2,284.4)
Mortgage loans on real estate (27.3) (10.0) (7.5)
Short-term investments, net 0.1 0.9 (1.0)
Other, net (8.4) (2.4) (4.6)
-------------- -------------- --------------
Net cash used for investing activities (54.1) (78.6) (29.2)
-------------- -------------- --------------
The accompanying notes are an integral part of these financial statements.
45
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Statements of Cash Flows
(In millions)
Year ended December 31,
2004 2003 2002
Restated Restated
-------------- -------------- --------------
Cash Flows from Financing Activities:
Deposits received for investment contracts $ 193.2 $ 175.5 $ 183.5
Maturities and withdrawals from investment contracts (163.1) (151.1) (173.0)
Short-term borrowings, net 1.2 28.3 (2.3)
Dividends to shareholder (27.2) (25.5) (14.4)
Other 0.1 - 5.8
-------------- -------------- --------------
Net cash provided by financing activities 4.2 27.2 (0.4)
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents 23.0 (45.5) 68.1
Cash and cash equivalents, beginning of year 10.5 56.0 (12.1)
-------------- -------------- --------------
Cash and cash equivalents, end of year $ 33.5 $ 10.5 $ 56.0
============== ============== ==============
Supplemental cash flow information:
Income taxes paid, net $ 9.5 $ 29.5 $ 2.7
============== ============== ==============
Interest paid $ 1.5 $ 1.9 $ 1.7
============== ============== ==============
The accompanying notes are an integral part of these financial statements.
46
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies
Basis of Presentation
ReliaStar Life Insurance Company of New York ("RLNY" or the "Company"), a
direct, wholly-owned subsidiary of ReliaStar Life Insurance Company
("ReliaStar Life"), is a stock life insurance company organized under the
laws of the State of New York. ReliaStar Life is a wholly-owned subsidiary
of Lion Connecticut Holdings Inc. ("Lion"), a Connecticut holding and
management company. Lion is an indirect, wholly-owned subsidiary of ING
Groep N.V. ("ING"), a global financial services holding company based in
The Netherlands, with American Depository Shares listed on the New York
Stock Exchange under the symbol "ING."
Until October 1, 2003, the Company was a wholly-owned subsidiary of
Security-Connecticut Life Insurance Company ("Security-Connecticut Life"),
a Minnesota domiciled insurance company, which provided financial products
and services in the United States. Effective October 1, 2003,
Security-Connecticut merged with and into ReliaStar Life.
On April 1, 2002, ReliaStar Life acquired First Golden American Life
Insurance Company of New York ("First Golden"), an affiliated entity, for a
purchase price of $27.7 in cash and $0.2 in receivables. The purchase price
was based on First Golden's statutory-basis book value. ReliaStar Life
contributed First Golden to Security-Connecticut at book value per
generally accepted accounting principles in the Untied States ("GAAP").
Security-Connecticut contributed First Golden to RLNY, and First Golden was
dissolved into RLNY at GAAP book value. The contribution of First Golden to
RLNY was recorded as an increase to stockholder's equity of $31.4 which
equaled First Golden's April 1, 2002 GAAP book value. Approval for the
merger was obtained from the insurance departments of the states of New
York and Delaware.
Statement of Financial Accounting Standards ("FAS") No. 141, "Business
Combinations", excludes transfers of net assets or exchanges of shares
between entities under common control, and notes that certain provisions
under Accounting Principles Board ("APB") Opinion No. 16, "Business
Combinations", provide a source of guidance for such transactions. In
accordance with APB Opinion No. 16, financial information of the combined
entity is presented as if the entities had been combined for the full year,
and all comparative financial statements are restated and presented as if
the entities had previously been combined, in a manner similar to a
pooling-of-interests. The balance sheets and statements of operations give
effect to the consolidation transactions as if they had occurred on January
1, 2002.
The financial statements and notes have been prepared in accordance with
generally accepted accounting principles in the United States.
47
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Description of Business
The Company is principally engaged in the business of providing life
insurance and related financial services products. The Company provides and
distributes individual life insurance and annuities; employee benefit
products and services; and retirement plans. The Company operates primarily
in the United States and is authorized to conduct business in all 50 states
and the District of Columbia.
Recently Adopted Accounting Standards
Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate Accounts
The Company adopted Statement of Position ("SOP") 03-1, "Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
Contracts and for Separate Accounts," on January 1, 2004. SOP 03-1
established several new accounting and disclosure requirements for certain
nontraditional long-duration contracts and for separate accounts including,
among other things, a requirement that assets and liabilities of separate
account arrangements that do not meet certain criteria be accounted for as
general account assets and liabilities, and the revenues and expenses
related to such arrangements be consolidated with the respective line items
in the Statements of Operations. In addition, the SOP requires additional
liabilities be established for certain guaranteed death benefits and for
products with certain patterns of cost of insurance charges. Sales
inducements provided to contractowners and policyholders must also be
recognized on the balance sheet separately from deferred acquisition costs
and amortized as a component of benefits expense using methodology and
assumptions consistent with those used for amortization of deferred policy
acquisition costs.
The Company evaluated all requirements of SOP 03-1 and determined that it
is affected by the SOP's requirements to account for certain separate
account arrangements as general account arrangements, to establish
additional liabilities for certain guaranteed benefits and for products
with patterns of cost of insurance charges that result in gains followed by
losses in later policy durations from the insurance benefit function, and
to defer and amortize sales inducements to contractowners and
policyholders. Upon adoption of the SOP on January 1, 2004, the Company
recognized a cumulative effect of a change in accounting principle of
$(10.8), before tax or $(7.0), net of $3.8 of income taxes. In addition,
requirements for certain separate account arrangements that do not meet the
established criteria for separate asset and liability recognition are
applicable to the Company, however, the Company's policies on separate
account assets and liabilities have historically been, and continue to be,
in conformity with the requirements newly established.
In the fourth quarter of 2004, the cumulative effect of a change in
accounting principle was revised due to the implementation of Technical
48
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Practice Aid 6300.05 - 6300.08, "Q&As Related to the Implementation of SOP
03-1, "Accounting and Reporting by Insurance Enterprises, for Certain
Nontraditional Long-Duration Contracts and for Separate Accounting" (the
"TPA").
The TPA, which was approved in September 2004, provides additional guidance
regarding certain implicit assessments that may be used in testing of the
base mortality function on contracts, which is performed to determine
whether additional liabilities are required in conjunction with SOP 03-1.
In addition, the TPA provides additional guidance surrounding the allowed
level of aggregation of additional liabilities determined under the SOP.
While the TPA was implemented during the fourth quarter of 2004, the TPA
was retroactive to the original implementation date of SOP 03-1, January 1,
2004 and was reported as an adjustment to the SOP 03-1 cumulative effect
change in accounting principle. The adoption of the TPA resulted in an
adjustment of the Company's cumulative effect change in accounting
principle by $7.8, net of $4.2 of income tax.
The implementation of SOP 03-1 raised questions regarding the
interpretation of the requirements of FAS No. 97 "Accounting and Reporting
by Insurance Enterprises for Certain Long-Duration Contracts and for
Realized Gains and Losses from the Sale of Investments," concerning when it
is appropriate to record an unearned revenue liability related to the
insurance benefit function. To clarify its position, the Financial
Accounting Standards Board ("FASB") issued FASB Staff Position No. FAS 97-1
("FSP FAS 97-1"), "Situations in Which Paragraphs 17(b) and 20 of FASB
Statement No. 97, `Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts and for Realized Gains and Losses from the
Sale of Investments,' Permit or Require Accrual of an Unearned Revenue
Liability," effective for fiscal periods beginning subsequent to the date
the guidance was issued, June 18, 2004. The Company adopted FSP FAS 97-1 on
July 1, 2004. The adoption of FSP FAS 97-1 did not have an impact on the
Company's financial position, results of operations or cash flows.
The Meaning of Other-than-temporary Impairment and its Application to
Certain Investments
In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus
on EITF Issue No. 03-1 ("EITF 03-1"), "The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments," requiring that a
three-step impairment model be applied to securities within its scope. The
three-step model is to be applied on a security-by-security basis as
follows:
Step 1: Determine whether an investment is impaired. An
investment is impaired if the fair value of the
investment is less than its cost basis.
Step 2: Evaluate whether an impairment is other-than-temporary.
Step 3: If the impairment is other-than-temporary, recognize an
impairment loss equal to the difference between the
investment's cost and its fair value.
49
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
On September 30, 2004, the FASB issued FASB Staff Position No. EITF Issue
03-1-1 ("FSP EITF 03-1-1"), "Effective Date of Paragraphs 10-20 of EITF
Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments," which delayed the EITF Issue No. 03-1
original effective date of July 1, 2004 for steps two and three of the
impairment model introduced. The delay is in effect until a final consensus
can be reached on such guidance. Despite the delay of the implementation of
steps two and three, other-than-temporary impairments are still to be
recognized as required by existing guidance.
Earlier consensus reached by the EITF on this issue required that certain
quantitative and qualitative disclosures be made for unrealized losses on
debt and equity securities that have not been recognized as
other-than-temporary impairments. These disclosures were adopted by the
Company, effective December 31, 2003, and are included in the Investments
footnote.
Accounting for Derivative Instruments and Hedging Activities
In 2003, the Derivative Implementation Group ("DIG") who was responsible
for issuing guidance on behalf of the FASB for implementation of FAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," issued
Implementation Issue No. B36, "Embedded Derivatives: Modified Coinsurance
Arrangements and Debt Instruments That Incorporate Credit Risk Exposures
That Are Unrelated or Only Partially Related to the Credit Worthiness of
the Obligor Under Those Instruments" ("DIG B36"). Under this
interpretation, modified coinsurance and coinsurance with funds withheld
reinsurance agreements, as well as other types of receivables and payables
where interest is determined by reference to a pool of fixed maturity
assets or a total return debt index, may be determined to contain embedded
derivatives that are required to be bifurcated. The Company adopted DIG B36
on October 1, 2003, and the adoption had no impact on the Company's
financial position, results of operations or cash flows.
Variable Interest Entities
In January 2003, the FASB issued FASB Interpretation 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"). In
December 2003, the FASB modified FIN 46 to make certain technical
corrections and address certain implementation issues that had arisen. FIN
46 provides a new framework for identifying Variable Interest Entities
("VIEs") and determining when a company should include the assets,
liabilities, noncontrolling interests and results of activities of a VIE in
its consolidated financial statements.
In general, a VIE is a corporation, partnership, limited-liability
corporation, trust, or any other legal structure used to conduct activities
or hold assets that either (1) has an insufficient amount of equity to
carry out its principal activities without additional subordinated
financial support, (2) has a group of equity owners that are unable to make
50
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
significant decisions about its activities, or (3) has a group of equity
owners that do not have the obligation to absorb losses or the right to
receive returns generated by its operations.
FIN 46 requires a VIE to be consolidated if a party with an ownership,
contractual or other financial interest in the VIE (a variable interest
holder) is obligated to absorb a majority of the risk of loss from the
VIE's activities, is entitled to receive a majority of the VIE's residual
returns (if no party absorbs a majority of the VIE's losses), or both. A
variable interest holder that consolidates the VIE is called the primary
beneficiary. Upon consolidation, the primary beneficiary generally must
initially record all of the VIE's assets, liabilities and noncontrolling
interests at fair value and subsequently account for the VIE as if it were
consolidated based on majority voting interest. FIN 46 also requires
disclosures about VIEs that the variable interest holder is not required to
consolidate but in which it has a significant variable interest.
The Company holds investments in VIEs in the form of private placement
securities, structured securities, securitization transactions, and limited
partnerships with an aggregate fair value of $643.6 as of December 31,
2004. These VIEs are held by the Company for investment purposes.
Consolidation of these investments in the Company's financial statements is
not required as the Company is not the primary beneficiary for any of these
VIEs. Book value as of December 31, 2004, of $628.8 represents the maximum
exposure to loss except for those structures for which the Company also
receives asset management fees.
Goodwill Impairment
During 2002, the Company adopted FAS No. 142, "Goodwill and Other
Intangible Assets" ("FAS No. 142"). The adoption of this standard resulted
in an impairment loss of $865.0, net of $465.8 of income tax, related to
prior acquisitions, recorded retroactive to the first quarter of 2002;
prior quarters of 2002 were restated accordingly. This impairment loss
represented the entire carrying amount of goodwill, net of accumulated
amortization. This impairment charge was shown as a change in accounting
principle on the 2002 Statement of Operations.
Guarantees
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others," to clarify
accounting and disclosure requirements relating to a guarantor's issuance
of certain types of guarantees. FIN 45 requires entities to disclose
additional information about certain guarantees, or groups of similar
guarantees, even if the likelihood of the guarantor's having to make any
payments under the guarantee is remote. The disclosure provisions are
effective for financial statements for fiscal years ended after December
15, 2002. For certain guarantees, the interpretation also requires that
51
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
guarantors recognize a liability equal to the fair value of the guarantee
upon its issuance. This initial recognition and measurement provisions are
to be applied only on a prospective basis to guarantees issued or modified
after December 31, 2002. The Company has performed an assessment of its
guarantees and believes that all of its significant guarantees are excluded
from the scope of this interpretation.
New Accounting Pronouncements
In December 2004, the FASB issued FAS No. 123 (revised 2004), "Share-Based
Payment", which requires all share-based payments to employees be
recognized in the financial statements based upon the fair value. FAS 123R
is effective at the beginning of the first interim or annual period
beginning after June 15, 2005. Earlier adoption is encouraged. FAS 123R
provides two transition methods, modified-prospective and
modified-retrospective.
The modified-prospective method recognizes the grant-date fair value of
compensation for new awards granted after the effective date and unvested
awards beginning in the fiscal period in which the recognition provisions
are first applied. Prior periods are not restated. The
modified-retrospective method permits entities to restate prior periods by
recognizing the compensation cost based on the amount previously reported
in the pro forma footnote disclosures as required under FAS No. 123,
"Accounting for Stock-Based Compensation".
The Company intends to early adopt the provisions of FAS 123R on January 1,
2005, using the modified-prospective method. Due to the Company's few
number of employees, the adoption of FAS 123R is not expected to have a
material impact on the Company's financial position, results of operations,
or cash flows. Prior to January 2005, the Company applied the intrinsic
value-based provisions set forth in APB Opinion No. 25, "Accounting for
Stock Issued to Employees". Under the intrinsic value method, compensation
expense is determined on the measurement date, which is the first date on
which both the number of shares the employee is entitled to receive and the
exercise price are known. Compensation expense, if any, is measured based
on the award's intrinsic value, which is the excess of the market price of
the stock over the exercise price on the measurement date.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from reported results using those estimates.
52
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Reclassifications
Certain reclassifications have been made to prior year financial
information to conform to the current year classifications (see footnote
15).
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments
and other debt issues with a maturity of 90 days or less when purchased.
Investments
All of the Company's fixed maturity and equity securities are currently
designated as available-for-sale. Available-for-sale securities are
reported at fair value and unrealized gains and losses on these securities
are included directly in shareholder's equity, after adjustment for related
changes in deferred acquisition costs ("DAC"), value of business acquired
("VOBA") and deferred income taxes.
Other-Than-Temporary Impairments
The Company analyzes the general account investments to determine whether
there has been an other-than-temporary decline in fair value below the
amortized cost basis. Management considers the length of the time and the
extent to which the fair value has been less than cost; the financial
condition and near-term prospects of the issuer; future economic conditions
and market forecasts; and the Company's intent and ability to retain the
investment in the issuer for a period of time sufficient to allow for
recovery in fair value. If it is probable that all amounts due according to
the contractual terms of a debt security will not be collected, an
other-than-temporary impairment is considered to have occurred.
In addition, the Company invests in structured securities that meet the
criteria of EITF Issue No. 99-20, "Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets." Under EITF Issue No. 99-20, a determination of the
required impairment is based on credit risk and the possibility of
significant prepayment risk that restricts the Company's ability to recover
the investment. An impairment is recognized if the fair value of the
security is less than book value and there has been an adverse change in
cash flow since the last remeasurement date.
When a decline in fair value is determined to be other-than-temporary, the
individual security is written down to fair value and the loss accounted
for as a realized loss.
53
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Purchases and Sales
Purchases and sales of fixed maturities and equity securities (excluding
private placements) are recorded on the trade date. Purchases and sales of
private placements and mortgage loans are recorded on the closing date.
Valuation
Fair values for fixed maturities are obtained from independent pricing
services or broker-dealer quotations. Fair values for privately placed
bonds are determined using a matrix-based model. The matrix-based model
considers the level of risk-free interest rates, current corporate spreads,
the credit quality of the issuer, and cash flow characteristics of the
security. The fair values for equity securities are based on quoted market
prices. For equity securities not actively traded, estimated fair values
are based upon values of issues of comparable yield and quality or
conversion value, where applicable.
Mortgage loans on real estate are reported at amortized cost less
impairment writedowns. If the value of any mortgage loan is determined to
be impaired (i.e., when it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement), the carrying value of the mortgage loan is reduced to either
the present value of expected cash flows from the loan (discounted at the
loan's effective interest rate), or fair value of the collateral. If the
loan is in foreclosure, the carrying value is reduced to the fair value of
the underlying collateral, net of estimated costs to obtain and sell. The
carrying value of the impaired loans is reduced by establishing a permanent
writedown charged to realized loss.
Policy loans are carried at unpaid principal balances.
Short-term investments, consisting primarily of money market instruments
and other fixed maturity issues purchased with an original maturity of 91
days to one year, are considered available-for-sale and are carried at fair
value, which approximates amortized cost.
Securities Lending
The Company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Initial collateral, primarily cash, is required at a rate of 102% of the
market value of the loaned domestic securities. The collateral is deposited
by the borrower with a lending agent and retained and invested by the
lending agent according to the Company's guidelines to generate additional
income. The market value of the loaned securities is monitored on a daily
basis with additional collateral obtained or refunded as the fair value of
the loaned securities fluctuates.
54
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Repurchase Agreements
The Company engages in dollar repurchase agreements ("dollar rolls") and
repurchase agreements. These transactions involve a sale of securities and
an agreement to repurchase substantially the same securities as those sold.
Company policies require a minimum of 95% of the fair value of securities
pledged under dollar rolls and repurchase agreement transactions to be
maintained as collateral. Cash collateral received is invested in fixed
maturities, and the offsetting collateral liability is included in borrowed
money on the Balance Sheets.
The Company also enters into reverse repurchase agreements. These
transactions involve a purchase of securities and an agreement to sell
substantially the same securities as those purchased. Company policies
require a minimum of 102% of the fair value of securities pledged under
reverse repurchase agreements to be pledged as collateral. Reverse
repurchase agreements are included in cash equivalents on the Balance
Sheets.
Derivatives
The Company's use of derivatives is limited primarily to hedging purposes.
However, these derivatives are not accounted for using hedge accounting
treatment under FAS No. 133 as the Company does not seek hedge accounting
treatment. The Company enters into interest rate, and currency contracts,
including swaps, caps, floors, options and futures, to reduce and manage
risks associated with changes in value, yield, price, cash flow or exchange
rates of assets or liabilities held or intended to be held. Changes in the
fair value of open derivative contracts are recorded in net realized
capital gains and losses. Derivatives are included in other investments on
the Balance Sheets.
Deferred Policy Acquisition Costs and Value of Business Acquired
DAC represent policy acquisition costs that have been capitalized and are
subject to amortization. Such costs consist principally of certain
commissions, underwriting, contract issuance, and agency expenses, related
to the production of new and renewal business.
VOBA represents the outstanding value of in force business capitalized and
is subject to amortization in purchase accounting when the Company was
acquired. The value is based on the present value of estimated net cash
flows embedded in the Company's contracts.
The amortization methodology used for DAC and VOBA varies by product type.
Statement of Financial Accounting Standards ("FAS") No. 60, "Accounting and
Reporting by Insurance Enterprises," applies to traditional life insurance
products, primarily traditional whole life and term life insurance
contracts. Under FAS No. 60, DAC and VOBA are amortized over the premium
payment period, in proportion to the premium revenue recognized.
55
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
FAS No. 97 applies to universal life and investment-type products, such as
fixed and variable deferred annuities. Under FAS No. 97, DAC and VOBA are
amortized, with interest, over the life of the related contracts (usually
25 years) in relation to the present value of estimated future gross
profits from investment, mortality, and expense margins; asset-based fees,
policy administration, and surrender charges; less policy maintenance fees
and non-capitalized commissions, as well as realized gains and losses on
investments.
Changes in assumptions can have a significant impact on DAC and VOBA
balances and amortization rates. Several assumptions are considered
significant in the estimation of future gross profits associated with
variable universal life and variable deterred annuity products. One of the
most significant assumptions involved in the estimation of future gross
profits is the assumed return associated with the variable account
performance. To reflect the volatility in the equity markets, this
assumption involves a combination of near-term expectations and long-term
assumptions regarding market performance. The overall return on the
variable account is dependent on multiple factors, including the relative
mix of the underlying sub-accounts among bond funds and equity funds, as
well as equity sector weightings. Other significant assumptions include
surrender and lapse rates, estimated interest spread, and estimated
mortality.
Due to the relative size and sensitivity to minor changes in underlying
assumptions of DAC and VOBA balances, the Company performs a quarterly and
annual analysis of DAC and VOBA for the annuity and life businesses,
respectively. The DAC and VOBA balances are evaluated for recoverability
and are reduced to the extent that estimated future gross profits are
inadequate to recover the asset.
At each evaluation date, actual historical gross profits are reflected, and
estimated future gross profits and related assumptions are evaluated for
continued reasonableness. Any adjustment in estimated profit requires that
the amortization rate be revised ("unlocking") retroactively to the date of
the policy or contract issuance. The cumulative prior period adjustment is
recognized as a component of current period amortization. In general,
increases in investment, mortality, and expense margins, and thus estimated
future profits, lower the rate of amortization. However, decreases in
investment, mortality, and expense margins, and thus estimated future
profits, increase the rate of amortization.
Reserves
The Company establishes and carries actuarially determined reserves which
are calculated to meet its future obligations. Reserves are calculated
using mortality and withdrawal rate assumptions are based on relevant
Company experience and are periodically reviewed against both industry
standards and experience.
56
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Future policy benefits include reserves for universal life, immediate
annuities with life contingent payouts, and traditional life insurance
contracts. Reserves for universal life products are equal to cumulative
deposits less withdrawals and charges plus credited interest thereon. In
addition, the Company holds reserves as required by SOP 03-1 for certain
products with anticipated losses in later policy durations. Reserves for
traditional life insurance contracts represent the present value of future
benefits to be paid to or on behalf of policyholders and related expenses
less the present value of future net premiums.
Reserves for immediate annuities with life contingent payout benefits are
computed on the basis of interest discount rates, mortality, and expenses,
including a margin for adverse deviations. Such assumptions generally vary
by plan, year of issue and policy duration. Reserve interest rates range
from 3.95% to 13.19% for all years presented. Changes in or deviations from
the assumptions used can significantly affect the Company's reserve level
and related future operations.
Reserves for deferred annuity investment contracts and immediate annuities
without life contingent benefits are equal to cumulative deposits less
charges and withdrawals plus credited interest thereon (reserve interest
rates vary by product up to 7.1% for 2004, 2003 and 2002).
Sales Inducements
Sales inducements represent benefits paid to contractowners and
policyholders that are incremental to the amounts the Company credits on
similar contracts and are higher than the contracts expected ongoing
crediting rates for periods after the inducement. As of January 1, 2004,
such amounts are reported separately on the Balance Sheets in accordance
with SOP 03-1. Prior to 2004, sales inducements were recorded as a
component of DAC on the Balance Sheets. Beginning in 2004, sales
inducements are amortized as a component of benefit expense using
methodology and assumptions consistent with those used for amortization of
DAC. Sales inducements are recorded in other assets on the Balance Sheets.
Revenue Recognition
For universal life and certain annuity contracts, charges assessed against
contractowners'and policyholders' funds for the cost of insurance,
surrender, expenses and other fees are recorded as revenue. Other amounts
received for these contracts are reflected as deposits and are not recorded
as revenue. Related policy benefits are recorded in relation to the
associated premiums or gross profit so that profits are recognized over the
expected lives of the contracts. When annuity payments with life
contingencies begin under contracts that were initially investment
contracts, the accumulated balance in the account is treated as a single
premium for the purchase of an annuity and reflected as an offsetting
57
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
amount in both premiums and current and future benefits in the Statements
of Operations.
Separate Accounts
Separate account assets and liabilities generally represent funds
maintained to meet specific investment objectives of contractowners and
policyholders who bear the investment risk, subject, in limited cases, to
minimum guaranteed rates. Investment income and investment gains and losses
generally accrue directly to such contractowners and policyholders. The
assets of each account are legally segregated and are not subject to claims
that arise out of any other business of the Company.
Separate account assets supporting variable options under universal life
and annuity contracts are invested, as designated by the
contractowner/policyholder or participant (who bears the investment risk
subject, in limited cases, to minimum guaranteed rates) under a contract in
shares of mutual funds which are managed by the Company or its affiliates,
or in other selected mutual funds not managed by the Company or its
affiliates.
Separate account assets and liabilities are carried at fair value and shown
as separate captions in the Balance Sheets. Deposits, investment income,
and net realized and unrealized capital gains and losses of the Separate
accounts are not reflected in the Statements of Operations. The Statements
of Cash Flows do not reflect investment activity of the separate accounts.
Assets and liabilities of separate account arrangements that do not meet
the criteria in SOP 03-1 for separate presentation in the Balance Sheets
(those arrangements supporting the guaranteed interest option) were
reclassified to the general account on January 1, 2004, in accordance with
the SOP 03-1 requirements.
Reinsurance
The Company utilizes reinsurance agreements to reduce its exposure to large
losses in all aspects of its insurance business. Such reinsurance permits
recovery of a portion of losses from reinsurers, although it does not
discharge the primary liability of the Company as direct insurer of the
risks reinsured. The Company evaluates the financial strength of potential
reinsurers and continually monitors the financial condition of reinsurers.
Only those reinsurance recoverable balances deemed probable of recovery are
reflected as assets on the Company's Balance Sheets.
58
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Income Taxes
The Company is taxed at regular corporate rates after adjusting income
reported for financial statement purposes for certain items. Deferred
income tax expenses/benefits result from changes during the year in
cumulative temporary differences between the tax basis and book basis of
assets and liabilities.
2. Investments
Fixed maturities and equity securities available-for-sale as of December
31, 2004, were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- ---------------- ---------------- ----------------
Fixed maturities:
U.S. government and government
agencies and authorities $ 56.2 $ 0.4 $ 0.2 $ 56.4
States, municipalities and political
subdivisions 1.6 0.1 - 1.7
U.S. corporate securities:
Public utilities 154.3 7.9 0.8 161.4
Other corporate securities 695.2 35.9 3.0 728.1
---------------- ---------------- ---------------- ----------------
Total U.S. corporate securities 849.5 43.8 3.8 889.5
---------------- ---------------- ---------------- ----------------
Foreign securities:
Government 28.0 0.6 0.2 28.4
Other 168.0 6.6 1.9 172.7
---------------- ---------------- ---------------- ----------------
Total foreign securities 196.0 7.2 2.1 201.1
---------------- ---------------- ---------------- ----------------
Residential mortgage-backed securities 373.5 2.5 2.1 373.9
Commercial mortgage-backed securities 119.0 8.2 0.3 126.9
Other asset-backed securities 107.1 6.1 1.1 112.1
---------------- ---------------- ---------------- ----------------
Total fixed maturities, including
fixed maturities pledged 1,702.9 68.3 9.6 1,761.6
Less: fixed maturities pledged 149.7 0.3 1.5 148.5
---------------- ---------------- ---------------- ----------------
Fixed maturities 1,553.2 68.0 8.1 1,613.1
Equity securities 6.9 0.7 - 7.6
---------------- ---------------- ---------------- ----------------
Total investments available-for-sale $ 1,560.1 $ 68.7 $ 8.1 $ 1,620.7
================ ================ ================ ================
59
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Fixed maturities and equity securities available-for-sale as of December
31, 2003, were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------- ------------- -------------
Fixed maturities:
U.S. government and government
agencies and authorities $ 7.4 $ 0.3 $ - $ 7.7
States, municipalities and political
subdivisions 1.8 0.1 - 1.9
U.S. corporate securities:
Public utilities 127.6 9.3 0.5 136.4
Other corporate securities 732.5 48.3 5.9 774.9
------------- ------------- ------------- -------------
Total U.S. corporate securities 860.1 57.6 6.4 911.3
------------- ------------- ------------- -------------
Foreign securities:
Government 28.0 0.4 0.2 28.2
Other 141.2 6.9 2.8 145.3
------------- ------------- ------------- -------------
Total foreign securities 169.2 7.3 3.0 173.5
------------- ------------- ------------- -------------
Residential mortgage-backed securities 399.7 4.0 1.3 402.4
Commercial mortgage-backed securities 106.1 9.6 0.3 115.4
Other asset-backed securities 100.3 8.6 1.3 107.6
------------- ------------- ------------- -------------
Total fixed maturities, including
fixed maturities pledged 1,644.6 87.5 12.3 1,719.8
Less: Fixed maturities pledged 106.2 0.5 1.1 105.6
------------- ------------- ------------- -------------
Fixed maturities 1,538.4 87.0 11.2 1,614.2
Equity securities 6.9 0.1 0.3 6.7
------------- ------------- ------------- -------------
Total investments available-for-sale $ 1,545.3 $ 87.1 $ 11.5 $ 1,620.9
============= ============= ============= =============
At December 31, 2004 and 2003, net unrealized appreciation was $59.4 and
$75.0, respectively, on total fixed maturities, including fixed maturities
pledged to creditors and equity securities.
60
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
The aggregate unrealized losses and related fair value of total fixed
maturities, including fixed maturities pledged to creditors, and equity
securities with unrealized losses as of December 31, 2004, are shown below
by duration:
Unrealized Fair
Loss Value
---------------- ---------------
Duration category:
Less than six months below cost $ 2.7 $ 335.4
More than six months and less
than twelve months below cost 2.5 131.8
More than twelve months below cost 4.4 78.6
---------------- ---------------
Total investments available-for-sale $ 9.6 $ 545.8
================ ===============
Of the unrealized losses less than 6 months in duration of $2.7, there were
$1.0 in unrealized losses that are primarily related to interest rate
movement or spread widening for other than credit-related reasons. The
remaining losses of $1.7, as of December 31, 2004, related to securities
reviewed for impairment under the guidance proscribed by EITF Issue No.
99-20. This category includes U.S. government-backed securities, principal
protected securities, and structured securities, that did not have an
adverse change in cash flows for which the carrying amount was $145.6.
Of the unrealized losses more than 6 months and less than 12 months in
duration of $2.5, there were $2.0 in unrealized losses that are primarily
related to interest rate movement or spread widening for other than
credit-related reasons. The remaining losses of $0.5, as of December 31,
2004, related to securities reviewed for impairment under the guidance
proscribed by EITF Issue No. 99-20. This category includes U.S.
government-backed securities, principal protected securities, and
structured securities, that did not have an adverse change in cash flows
for which the carrying amount was $46.8.
Of the unrealized losses more than 12 months in duration of $4.4, there
were $3.1 in unrealized losses that are primarily related to interest rate
movement or spread widening for other than credit-related reasons. The
remaining losses of $1.3, as of December 31, 2004, related to securities
reviewed for impairment under the guidance proscribed by EITF Issue No.
99-20. This category includes U.S. government-backed securities, principal
protected securities, and structured securities, that did not have an
adverse change in cash flows for which the carrying amount was $13.6.
61
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
The amortized cost and fair value of total fixed maturities as of December
31, 2004 are shown below by contractual maturity. Actual maturities may
differ from contractual maturities because securities may be restructured,
called, or prepaid.
Amortized Fair
Cost Value
-------------- --------------
Due to mature:
One year or less $ 41.0 $ 41.8
After one year through five years 456.7 474.4
After five years through ten years 285.1 297.9
After ten years 320.5 334.6
Mortgage-backed securities 492.5 500.8
Other asset-backed securities 107.1 112.1
Less: fixed maturities pledged to
creditors 149.7 148.5
-------------- --------------
Fixed maturities, exluding fixed
maturities pledged $ 1,553.2 $ 1,613.1
============== ==============
The Company did not have any investments in a single issuer, other than
obligations of the U.S. government, with a carrying value in excess of 10%
of the Company's shareholder's equity at December 31, 2004.
At December 31, 2004 and 2003, fixed maturities with carrying values of
$6.0 and $6.1, respectively, were on deposit as required by regulatory
authorities.
The Company enters into dollar repurchase agreements ("dollar rolls") and
repurchase agreements to increase its return on investments and improve
liquidity. At December 31, 2004 and 2003, the carrying value of the
securities pledged in dollar rolls and repurchase agreements was $100.7 and
$103.8, respectively. The carrying value of the securities pledged in
dollar rolls and repurchase agreements is included in pledged securities on
the Balance Sheets. The repurchase obligation related to dollar rolls and
repurchase agreements totaled $100.4 and $101.5 at December 31, 2004 and
2003, respectively. The repurchase obligation related to dollar rolls and
repurchase agreements is included in borrowed money on the Balance Sheets.
The Company also enters into reverse repurchase agreements. These
transactions involve a purchase of securities and an agreement to sell
substantially the same securities as those purchased. Company policies
require a minimum of 102% of the fair value of securities pledged under
reverse repurchase agreements to be pledged as collateral. Reverse
repurchase agreements are included in Cash Equivalents on the Balance
Sheets. At December 31, 2004 and 2003, the carrying value of the securities
in reverse repurchase agreements was $32.0 and $8.0, respectively.
62
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
The Company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Initial collateral, primarily cash, is required at a rate of 102% of the
market value of the loaned domestic securities. The collateral is deposited
by the borrower with a lending agent, and retained and invested by the
lending agent according to the Company's guidelines to generate additional
income. The market value of the loaned securities is monitored on a daily
basis with additional collateral obtained or refunded as the fair value of
the loaned securities fluctuates.
The primary risk associated with short-term collateralized borrowings is
that the counterparty will be unable to perform under the terms of the
contract. The Company's exposure is limited to the excess of the net
replacement cost of the securities over the value of the short-term
investments, an amount that was not material at December 31, 2004. The
Company believes the counterparties to the dollar roll, repurchase and
reverse repurchase agreements are financially responsible and that the
counterparty risk is immaterial.
Impairments
The following table identifies the Company's other-than-temporary
impairments by type:
2004 2003 2002
--------------------------- -------------------------- --------------------------
No. of No. of No. of
Impairment Securities Impairment Securities Impairment Securities
------------- ------------ ------------- ------------ ------------- ------------
U.S. Corporate $ 0.8 1 $ 2.7 2 $ 0.7 1
Asset-backed - - 2.0 6 2.3 7
Equity - - 0.1 1 0.1 1
Limited Partnerships 0.1 2 - - - -
------------- ------------ ------------- ------------ ------------- ------------
Total $ 0.9 3 $ 4.8 9 $ 3.1 9
============= ============ ============= ============ ============= ============
The remaining fair value of impaired fixed maturities at December 31, 2004,
2003 and 2002 is $4.0, $7.5 and $25.9, respectively.
63
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Net Investment Income
Sources of net investment income were as follows:
Year ended December 31,
2004 2003 2002
----------------- ------------------ -----------------
Fixed maturities $ 98.7 $ 102.2 $ 108.7
Equity securities - - 0.5
Mortgage loans on real estate 16.5 18.7 20.7
Policy loans 7.0 5.8 5.9
Short-term investments and cash equivalents 0.3 0.2 0.3
Other 1.0 (0.9) (0.7)
----------------- ------------------ -----------------
Gross investment income 123.5 126.0 135.4
Less: investment expense (1.3) (1.6) (2.3)
----------------- ------------------ -----------------
Net investment income $ 122.2 $ 124.4 $ 133.1
================= ================== =================
Net Realized Capital Gains and Losses
Net realized capital gains (losses) are comprised of the difference between
the carrying value of investments and sale proceeds from sale, maturity,
and redemption, as well as losses incurred due to the other-than-temporary
impairment of investments. Net realized capital gains (losses) on
investments were as follows:
Year ended December 31,
2004 2003 2002
----------------- ----------------- -----------------
Fixed maturities $ 9.3 $ 10.2 $ (2.5)
Equity securities - (0.1) 0.2
Other (0.1) 0.5 (0.9)
----------------- ----------------- -----------------
Pretax realized capital gains (losses) $ 9.2 $ 10.6 $ (3.2)
================= ================= =================
After-tax realized capital gains (losses) $ 6.0 $ 6.9 $ (2.1)
================= ================= =================
Proceeds from the sale of total fixed maturities and equity securities and
the related gross gains and losses were as follows:
Year ended December 31,
2004 2003 2002
----------------- ----------------- -----------------
Proceeds on sales $ 1,300.8 $ 1,677.2 $ 1,425.1
Gross gains 14.7 23.7 40.0
Gross losses 4.7 13.5 42.2
64
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Changes in shareholder's equity related to changes in accumulated other
comprehensive income (unrealized capital gains and losses on securities
including securities pledged) were as follows:
Year ended December 31,
2004 2003 2002
----------------- ----------------- -----------------
Fixed maturities $ (16.5) $ (3.3) $ 33.8
Equity securities 0.9 (0.2) 0.1
DAC/VOBA 3.8 4.4 11.5
Other 0.1 (0.1) (0.4)
----------------- ----------------- -----------------
Subtotal (11.7) 0.8 45.0
Less: (Decrease) increase in deferred
income taxes (4.3) 0.4 16.1
----------------- ----------------- -----------------
Net (decrease) increase in accumulated other
comprehensive (loss) income $ (7.4) $ 0.4 $ 28.9
================= ================= =================
Shareholder's equity included the following accumulated other comprehensive
income (loss):
As of December 31,
2004 2003 2002
----------------- ----------------- ------------------
Net unrealized capital gains (losses):
Fixed maturities $ 58.7 $ 75.2 $ 78.5
Equity securities 0.7 (0.2) -
DAC/VOBA (14.1) (17.9) (22.3)
Other (1.2) (1.3) (1.2)
----------------- ----------------- ------------------
Subtotal 44.1 55.8 55.0
Less: Deferred income taxes 15.7 20.0 19.6
----------------- ----------------- ------------------
Net unrealized capital gains 28.4 35.8 35.4
Other 1.2 - -
----------------- ----------------- ------------------
Net accumulated other comprehensive
income $ 29.6 $ 35.8 $ 35.4
================= ================= ==================
65
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Changes in accumulated other comprehensive income related to changes in
unrealized gains (losses) on securities, including securities pledged, were
as follows:
Year ended December 31,
2004 2003 2002
----------------- ----------------- -----------------
Unrealized holding gains (losses) arising
the year (1) $ (2.7) $ 4.9 $ 30.1
Less: reclassification adjustment for gains
(losses) and other items included in
net income (2) 4.7 4.5 1.2
----------------- ----------------- -----------------
Net unrealized gains (losses) on securities $ (7.4) $ 0.4 $ 28.9
================= ================= =================
(1) Pretax unrealized holding gains (losses) were $(3.5), $7.5 and $46.3,
for the years ended December 31, 2004, 2003 and 2002, respectively.
(2) Pretax reclassification adjustments for gains (losses) and other items
included in net income were $7.3, $6.9 and $1.8, for the years ended
December 31, 2004, 2003 and 2002, respectively.
3. Financial Instruments
Estimated Fair Value
The following disclosures are made in accordance with the requirements of
FAS No. 107, "Disclosures about Fair Value of Financial Instruments." FAS
No. 107 requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it
is practicable to estimate that value. In cases where quoted market prices
are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected
by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates, in
many cases, could not be realized in immediate settlement of the
instrument.
FAS No. 107 excludes certain financial instruments, including insurance
contracts and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do
not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Fixed maturities: The fair values for the actively traded marketable bonds
are determined based upon the quoted market prices. The fair values for
marketable bonds without an active market are obtained through several
commercial pricing services which provide the estimated fair values. Fair
values of privately placed bonds are determined using a matrix-based
pricing model. The model considers the current level of risk-free interest
rates, current corporate spreads, the credit quality of the issuer, and
66
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
cash flow characteristics of the security. Using this data, the model
generates estimated market values which the Company considers reflective of
the fair value of each privately placed bonds. Fair values for privately
placed bonds are determined through consideration of factors such as the
net worth of the borrower, the value of collateral, the capital structure
of the borrower, the presence of guarantee and the Company's evaluation of
the borrower's ability to compete in their relevant market. Using this
data, the model generates estimated market values which the Company
considers reflective of the fair value of each privately placed bond.
Equity securities: Fair values of these securities are based upon quoted
market value. For equity securities not actively traded, estimated fair
values are based upon values of issues of comparable yield and quality or
conversion price where applicable.
Mortgage loans on real estate: The fair values for mortgage loans on real
estate are estimated using discounted cash flow analyses and rates
currently being offered in the marketplace for similar loans to borrowers
with similar credit ratings. Loans with similar characteristics are
aggregated for purposes of the calculations.
Cash, cash equivalents, short-term investments and policy loans: The
carrying amounts for these assets approximate the assets' fair values.
Assets held in separate accounts: Assets held in separate accounts are
reported at the quoted fair values of the individual securities in the
separate accounts.
Other financial instruments reported as assets: The carrying amounts for
these financial instruments (primarily limited partnerships) approximate
those assets' fair values.
Investment contract liabilities: The fair values for deferred annuities are
estimated to be the amount payable on demand at the reporting date, as
those investment contracts have no defined maturity and are similar to a
deposit liability. The amount payable at the reporting date was calculated
as the account balance less applicable surrender charges.
The fair values for supplementary contracts without life contingencies and
immediate annuities were estimated using discounted cash flow analyses. The
discount rate was based upon Treasury rates plus a pricing margin.
The carrying amounts reported for other investment contracts, which
includes retirement plan deposits, approximate those liabilities' fair
value.
Liabilities related to separate accounts: Liabilities related to separate
accounts are reported at full account value in the Company's historical
balance sheet. Estimated fair values of separate account liabilities are
equal to their carrying amount.
67
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 2004 and 2003 were as follows:
2004 2003
---------------------------- ----------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------- -------------- ------------- -------------
Assets:
Fixed maturity, including securities pledged $ 1,761.6 $ 1,761.6 $ 1,719.8 $ 1,719.8
Equity securities 7.6 7.6 6.7 6.7
Mortgage loans on real estate 213.0 231.5 209.7 235.1
Policy loans 90.9 90.9 86.6 86.6
Cash, cash equivalents and
short-term investments under securities
loan agreement 82.5 82.5 12.4 12.4
Other investments 17.0 17.0 13.0 13.0
Assets held in separate accounts 537.7 537.7 513.8 513.8
Liabilities:
Investment contract liabilities:
Deferred annuities 379.5 377.6 382.9 307.6
Supplementary contracts and
immediate annuities 31.5 31.5 13.3 13.3
Liabilities related to separate accounts 537.7 537.7 513.8 513.8
Fair value estimates are made at a specific point in time, based on
available market information and judgments about various financial
instruments, such as estimates of timing and amounts of future cash flows.
Such estimates do not reflect any premium or discount that could result
from offering for sale at one time the Company's entire holdings of a
particular financial instrument, nor do they consider the tax impact of the
realization of unrealized gains or losses. In many cases, the fair value
estimates cannot be substantiated by comparison to independent markets, nor
can the disclosed value be realized in immediate settlement of the
instruments. In evaluating the Company's management of interest rate,
price, and liquidity risks, the fair values of all assets and liabilities
should be taken into consideration, not only those presented above.
Derivative Financial Instruments
Standard & Poor's ("S&P") Options are used to hedge against an increase in
the S&P Index. Such increase results in increased reserve liabilities, and
the options offset this increased expense. The options are accounted for in
a consistent manner with the underlying reserve liabilities, both of which
are carried at fair value with the change in value recorded in the
Statements of Operations. If the options mature in the money, the amount
received is recorded in income to offset the increased expense for the
reserve liabilities. The notional amount, carrying value, and estimated
fair value of the Company's open options as of December 31, 2004 were $8.0,
$0.3, and $0.3, respectively. There were no S&P Options outstanding as of
December 31, 2003.
68
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
4. Deferred Policy Acquisition Cost and Value of Business Acquired
Activity for the years ended December 31, 2004, 2003 and 2002, within VOBA
was as follows:
Balance at December 31, 2001 $ 64.7
Adjustment for unrealized gains and losses (4.0)
Additions 4.5
Interest accrued at 5% - 7% 1.1
Amortization (18.1)
----------------
Balance at December 31, 2002 48.2
Adjustment for unrealized gains and losses 6.8
Additions 3.5
Interest accrued at 5% - 7% 0.5
Amortization (22.5)
----------------
Balance at December 31, 2003 36.5
Adjustment for unrealized gains and losses 3.7
Additions 3.3
Interest accrued at 5% - 7% 2.8
Amortization (12.3)
----------------
Balance at December 31, 2004 $ 34.0
================
The estimated amount of VOBA to be amortized, net of interest, over the
next five years is $5.0, $4.3, $4.0, $3.7, and $3.5 for the years 2005,
2006, 2007, 2008 and 2009, respectively. Actual amortization incurred
during these years may vary as assumptions are modified to incorporate
actual results.
Analysis of DAC/VOBA - Annuity
The actual separate account return exhibited by the variable funds
associated with the Company's liabilities in 2004 exceeded the long-term
assumption, thereby producing deceleration of DAC/VOBA amortization of $0.1
before tax, or $0.07, net of $0.03 of federal income tax expense for the
year ended December 31, 2004.
During 2003, the Company reset long-term assumptions for the separate
account returns from 9.0% to 8.5% (gross before fund management fees,
mortality, expense, and other policy charges) reflecting a blended return
of equity and other sub-accounts. The 2003 unlocking adjustment was driven
by this change in the separate account returns assumption along with other
prospective assumption changes. For the year ended December 31, 2003, the
Company recorded an acceleration of DAC/VOBA amortization totaling $5.4
before tax, or $3.5, net of $1.9 of federal income tax benefit.
69
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
As part of the regular analysis of DAC/VOBA, at the end of 2002, the
Company unlocked its long-term rate of return assumptions. The Company
reset long-term assumptions for the separate account returns to 9.0% (gross
before fund management fees, mortality, expense, and other policy charges)
as of December 31, 2002, reflecting a blended return of equity and other
sub-accounts. The unlocking adjustment was primarily driven by the
sustained downturn in the equity markets and revised expectations for
future returns. During 2002, the Company recorded an acceleration of
DAC\VOBA amortization totaling $1.5 before tax, or $1.0, net of $0.5 of
federal income tax benefit.
Analysis of DAC/VOBA - Life
As part of the regular analysis of DAC/VOBA, at the end of each of the
years ended December 31, 2004, 2003, and 2002, the Company unlocked its
long-term rate of return assumptions due to assumption changes related to
mortality, lapse, expense and interest amounts, portfolio return, as well
as modeling improvements. The impact of unlocking on the amortization of
DAC/VOBA was a decrease of $9.8 in 2004, an increase of $5.5 in 2003, and a
decrease of $4.4 in 2002.
5. Dividend Restrictions and Shareholder's Equity
The Company paid $27.2, $25.5 and $14.4 in cash dividends to ReliaStar Life
in 2004, 2003 and 2002, respectively.
The Company did not receive capital contributions in 2004 and 2003. The
Company received capital contributions of $31.4 in 2002 from
Security-Connecticut, related to the First Golden merger with and into the
Company.
The Company's ability to pay cash dividends to its parent is restricted by
law or subject to approval of the insurance regulatory authorities of the
State of New York. This authority recognizes only statutory accounting
practices for determining the ability of an insurer to pay dividends to its
shareholders. Without approval of the Superintendent of the State of New
York, the Company may not pay in any calendar year any dividend which, when
combined with other dividends paid within that calendar year exceeds the
lesser of (i) 10% of the Company's statutory surplus at the prior year end
or (ii) 100% of the Company's statutory net gain from operations for the
prior calendar year, not including realized capital gains.
The Insurance Department of the State of New York (the "Department"),
recognizes as net income, capital and surplus those amounts determined in
conformity with statutory accounting practices prescribed or permitted by
the Department, which differ in certain respects from generally accepted
70
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
accounting principles in the United States. Statutory capital and surplus
of the Company was $260.9, $278.7 and $267.0 at December 31, 2004, 2003 and
2002, respectively. Statutory net gain from operations excluding realized
capital gains (losses) was $21.0, $42.8, and $28.8 for the years ended
December 31, 2004, 2003, and 2002, respectively.
As of December 31, 2004, the Company does not utilize any statutory
accounting practices, which are not prescribed by state regulatory
authorities that, individually or in the aggregate, materially affect
statutory capital and surplus.
6. Additional Insurance Benefits and Minimum Guarantees
Under SOP 03-1, the Company calculates additional liabilities ("SOP
reserves") for certain guaranteed benefits and for universal life products
with certain patterns of cost of insurance charges. The SOP reserve
recognized for such products was in addition to the liability previously
held (the "Account Value") and was to recognize the portion of contract
assessments received in early years used to compensate the insurer for
services provided in later years.
In accordance with the methodology outlined in the SOP, the SOP reserve for
life insurance products is calculated using the same assumptions used in
the determination of estimated gross profits, according to which, deferred
acquisition costs are amortized. RLNY calculates a benefit ratio for each
block of business subject to the SOP, and calculates an SOP reserve by
accumulating amounts equal to the benefit ratio multiplied by the
assessments for each period, reduced by excess death benefits during the
period. The SOP reserve is accumulated at interest rates using the
contract-credited rate for the period. The calculated reserve includes a
provision for universal life contracts with patterns of cost of insurance
charges and certain other fees that produce expected gains from the
insurance benefit function followed by losses from that function in later
years.
The SOP reserve for variable annuity guaranteed minimum death benefits
("GMDB") is determined each period by estimating the expected value of
death benefits in excess of the projected account balance and recognizing
the excess ratably over the accumulation period based on total expected
assessments. The Company regularly evaluates estimates used to adjust the
additional liability balance, with a related charge or credit to benefit
expense, if actual experience or other evidence suggests that earlier
assumptions should be revised.
As of December 31, 2004, the separate account liability for annuities
subject to SOP 03-1 due to minimum guaranteed benefits was $0.2.
71
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
The aggregate fair value of assets is $213.9 of equity securities
(including mutual funds) supporting separate accounts with additional
insurance benefits and minimum investment return guarantees as of December
31, 2004.
7. Sales Inducements
Sales inducements represent benefits paid to contractowners and
policyholders that are incremental to the amounts the Company credits on
similar contracts and are higher than the contracts expected ongoing
crediting rates for periods after the inducement. As of January 1, 2004,
such amounts are reported separately on the Balance Sheets in accordance
with SOP 03-1. Prior to 2004, sales inducements were recorded as a
component of DAC on the Balance Sheets. Sales inducements are amortized as
a component of benefit expense using methodology and assumptions consistent
with those used for amortization of DAC. Beginning in 2004, the Company
capitalized $1.1 and amortized $0.4 of sales inducements. The unamortized
balance of capitalized sales inducements as of December 31, 2004 is $1.3,
recorded in other assets on the Balance Sheets.
8. Unpaid Accident and Health Claims
The change in the liability for unpaid accident and health claims and claim
adjustment expenses is summarized as follows:
2004 2003 2002
----------------- ----------------- -----------------
Balance at January 1 $ 17.0 $ 17.5 $ 14.5
Less: Reinsurance recoverable 11.0 14.2 13.4
----------------- ----------------- -----------------
Net balance at January 1 6.0 3.3 1.1
Incurred related to:
Current year 3.8 4.0 1.1
Prior years 1.8 1.3 1.2
----------------- ----------------- -----------------
Total incurred 5.6 5.3 2.3
Paid related to:
Current year 4.1 - (0.2)
Prior years 1.6 2.6 0.3
----------------- ----------------- -----------------
Total paid 5.7 2.6 0.1
----------------- ----------------- -----------------
Net balance at December 31 5.9 6.0 3.3
Plus: Reinsurance recoverables 3.7 11.0 14.2
----------------- ----------------- -----------------
Balance at December 31 $ 9.6 $ 17.0 $ 17.5
================= ================= =================
The liability for unpaid accident and health claims is included in policy
liabilities and accruals on the Balance Sheets.
72
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
9. Income Taxes
The Company files a consolidated federal income tax return with its parent,
ReliaStar Life. The Company has a federal tax allocation agreement with its
parent whereby the Company is charged for taxes it would have incurred were
it not a member of a consolidated group and is credited for losses at the
statutory federal tax rate.
Income taxes from continuing operations consist of the following:
Year ended December 31,
2004 2003 2002
----------------- ----------------- ------------------
Current tax expense:
Federal $ 25.0 $ 20.9 $ 14.3
----------------- ----------------- ------------------
Total current tax expense 25.0 20.9 14.3
----------------- ----------------- ------------------
Deferred tax expense:
Federal (8.4) 5.4 3.5
----------------- ----------------- ------------------
Total deferred tax (benefit) expense (8.4) 5.4 3.5
----------------- ----------------- ------------------
Total income tax expense $ 16.6 $ 26.3 $ 17.8
================= ================= ==================
Income taxes were different from the amount computed by applying the
federal income tax rate to income from continuing operations before income
taxes for the following reasons:
Year ended December 31,
2004 2003 2002
----------------- ----------------- ------------------
Income from continuing operations
before income taxes $ 47.4 $ 80.2 $ 50.4
Tax rate 35% 35% 35%
----------------- ----------------- ------------------
Income tax at federal statutory rate 16.6 28.1 17.6
Tax effect of:
Refinement of deferred tax balances - (1.5) -
Other - (0.3) 0.2
----------------- ----------------- ------------------
Income tax expense $ 16.6 $ 26.3 $ 17.8
================= ================= ==================
73
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31 are presented below:
2004 2003
-------------- ---------------
Deferred tax assets:
Deferred policy acquisition costs $ - $ 4.7
Insurance reserves 48.2 47.9
Investment losses 5.8 10.2
Legal reserve 4.9 5.1
Premiums 5.5 -
Other 3.9 1.3
-------------- ---------------
Total gross assets 68.3 69.2
-------------- ---------------
Deferred tax liabilities:
Present value of future profits (12.3) (17.1)
Deferred policy acquisition costs (1.3) -
Net unrealized capital gains (20.6) (26.2)
Other (1.6) (5.7)
-------------- ---------------
Total gross liabilities (35.8) (49.0)
-------------- ---------------
Net deferred income tax asset $ 32.5 $ 20.2
============== ===============
Net unrealized capital gains and losses are presented as a component of
other comprehensive income in shareholder's equity, net of deferred taxes.
Under prior law, the Company was allowed to defer from taxation a portion
of income. The deferred income was accumulated in the Policyholders'
Surplus Account and only becomes taxable under certain conditions, which
management believes to be remote. Furthermore, the American Job Creation
Act of 2004 allows certain tax-free distributions from the Policyholders'
Surplus Account during 2005 and 2006. Therefore, based on currently
available information, no federal income taxes have been provided on the
Policyholders' Surplus Account accumulated balance of $11.3 million.
The Company establishes reserves for probable proposed adjustments by
various taxing authorities. The Internal Revenue Service (the "Service")
has completed examinations of the federal income tax returns of the Company
for all years through 1999. There were no material adjustments made as a
result of the examinations. The Service has commenced its examinations for
the years 2000 through 2001. Management believes there are sufficient
reserves provided for, or adequate defenses against any such adjustments.
Valuation allowances are provided when it is considered more likely than
not that deferred tax assets will not be realized. No valuation allowance
has been established at this time as management believes the above
conditions presently do not exist.
74
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
10. Benefit Plans
The Company utilizes the employees of ING and its affiliates, primarily
ReliaStar Life. Benefit charges to the Company for the years ended December
31, 2004 and 2003 were not significant. There were no pension benefit
charges allocated to the Company from the ING Americas Retirement Plan for
2004. During 2004 and 2003, the Company was not allocated charges related
to the ING America Supplemental Executive Retirement Plan that covers
certain employees of the Company.
ING North America Insurance Corporation ("ING North America") sponsors the
ING Savings Plan and ESOP (the "Savings Plan"). Substantially all employees
of ING North America and its subsidiaries and affiliates are eligible to
participate, including the Company's employees. During 2004, 2003 and 2002,
the Company matching contribution charges associated with the Savings Plan
were not significant.
In addition to providing retirement plan benefits, the Company, in
conjunction with ING North America, provides certain health care insurance
benefits for retired employees and their eligible dependents. The
post-retirement health care plan is contributory, with retiree contribution
levels adjusted annually. The life insurance plan provides a flat amount of
noncontributory coverage and optional contributory coverage. No
post-retirement health care benefit charges were allocated to the Company
for the years ended December 31, 2004, 2003 and 2002.
11. Related Party Transactions
Operating Agreements
The Company has certain agreements whereby it incurs expenses with
affiliated entities. The agreements are as follows:
|X| Underwriting agreement with Directed Services, Inc. ("DSI"), for the
variable insurance products issued by the Company. DSI is authorized
to enter into agreements with broker-dealers to distribute the
Company's variable products and appoint representatives of the
broker-dealers as agents. For the years ended December 31, 2004, 2003
and 2002, expenses were incurred in the amounts of $2.2, $1.3, and
$0.1, respectively.
|X| Investment advisory agreement with ING Investment Management, LLC
("IIM"), an affiliate, effective January 1, 2001 and amended September
1, 2004, under which IIM provides asset management and accounting
services. Under the agreement, the Company records a fee based on the
value of the assets under management. The fee is payable quarterly.
For the years ended December 31, 2004, 2003, and 2002 the Company
incurred fees of $1.3, $1.5 and $2.2, respectively, under this
agreement.
|X| Services agreement between the Company and its affiliates effective
March 1, 2003, and amended effective August 1, 2004. For the years
ended December 31, 2004, 2003, and 2002, net expenses related to the
agreement were incurred in the amount of $34.5, $18.5, and $21.3,
respectively.
75
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Management and service contracts and all cost sharing arrangements with
other affiliated companies are allocated in accordance with the Company's
expense and cost allocation methods.
Reinsurance Agreements
RLNY cedes life business to its parent, ReliaStar Life under two
reinsurance agreements. Both agreements were put in place to reinsure
amounts in excess of RLNY's stated retention and continue to accept new
business on an ongoing basis. The first reinsurance agreement, effective
April 1, 1984 transfers the mortality risk on a YRT basis on Individual
Ordinary Life, Waiver of Premium Disability and Accidental Death insurance
directly issued by RLNY (or its predecessor). Under the second reinsurance
agreement, effective January 15, 1996, ReliaStar Life coinsures all risk on
level term life insurance products directly issued by RLNY (or its
predecessor). Under both reinsurance agreements, reinsurance premiums are
paid annually in advance and are accounted for and settled on a quarterly
or more frequent basis. Payment in settlement of the reinsurance under a
claim approved and paid by RLNY for a life reinsured under these agreements
is made by the reinsurer upon receipt of the claim papers. The reinsurance
recoverable for unpaid losses under these agreements was $0.8 and $1.2, as
of December 31, 2004 and 2003, respectively.
Reciprocal Loan Agreement
RLNY maintains a reciprocal loan agreement with ING AIH, a Delaware
corporation and affiliate, to facilitate the handling of unusual and/or
unanticipated short-term cash requirements. Under this agreement during the
period from February 1, 2003 to January 31, 2004 and during the period from
February 1, 2004 to January 31, 2005, the Company and ING AIH could borrow
from one another up to 5% of RLNY's statutory admitted assets as of the
preceding December 31.
Interest on any RLNY borrowing or on any ING AIH borrowing is charged at a
rate based on the prevailing rate of U.S. commercial paper available for
purchase with similar duration. Under this agreement, the Company did not
incur significant interest income or interest expense for the years ended
December 31, 2004, 2003 and 2002. At December 31, 2004, the Company did not
have any balances receivable/payable from/to ING AIH.
76
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
Tax Allocation Agreement
The Company files a consolidated federal income tax return with its parent,
ReliaStar Life Insurance Company. The Company has a federal tax allocation
agreement with its parent whereby the Company is charged for taxes it would
have incurred were it not a member of a consolidated group and is credited
for losses at the statutory tax rate.
12. Financing Agreements
The Company maintains a revolving loan agreement with SunTrust Bank,
Atlanta (the "Bank"). Under this agreement, which is due on demand, the
Company can borrow up to $30.0 from the Bank. Interest on any borrowing
accrues at an annual rate equal to a rate quoted by the Bank to the Company
for the borrowing. Under the agreement, the Company did not incur
significant interest expense for the years ended December 31, 2004, 2003
and 2002, respectively. At December 31, 2004, the Company had a $2.3
balance payable to the Bank. At December 31, 2003, the Company did not have
any balances payable to the Bank. The balance payable to the Bank is
include in other liabilities on the Balance Sheets.
The Company also maintains a revolving loan agreement with Bank of New York
("BONY"). Under this agreement, the Company can borrow up to $30.0 from
BONY. Interest on any of the Company borrowing accrues at an annual rate
equal to a rate quoted by BONY to the Company for the borrowing. Under this
agreement, the Company did not incur significant interest expense for the
years ended December 31, 2004, 2003 and 2002. At December 31, 2004 and
2003, the Company did not have any balances payable to BONY.
13. Reinsurance
The Company utilizes excess or quota share treaties to reduce its exposure
to large losses. The Company will only retain amounts not exceeding the
Company's retention limits as stated below.
At December 31, 2004, RLNY had reinsurance treaties with 39 authorized
unaffiliated reinsurers and 4 affiliated reinsurers covering a significant
portion of the mortality risks and guaranteed death benefits under its
contracts. The Company remains liable to the extent its reinsurers do not
meet their obligations under the reinsurance agreements.
The Company's retention limit is $300,000 per insurable life for individual
retail coverage. For group coverage and individual payroll deduction
coverage, the retention is $500,000 per life with per occurrence
limitations, subject to certain maximums. Reinsurance premiums, commissions
and expense reimbursements related to reinsured business are accounted for
on bases consistent with those used in accounting for the original policies
77
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
issued and the terms of the reinsurance contracts. Reserves are based on
the terms of the reinsurance contracts and are consistent with the risk
assumed. RLNY obtained letters of credit for reinsurers that are not
registered in the State of New York. Letters of credit totaling $11.9 were
obtained from various banks, including Fleet Bank, JPMorgan/Chase Bank,
Chase Manhattan Bank, US Bank, Bank One, and Mellon Bank, as well as a line
of credit pool of 17 banks that provides coverage to RLNY and its
affiliates.
At December 31, 2004 and 2003, net recoverables were comprised of the
following:
2004 2003
------------------ -----------------
Claims recoverable from reinsurers $ 23.8 $ 14.7
Payable for reinsurance premiums (27.7) (15.4)
Reinsurance ceded 77.5 58.1
Other 10.6 7.7
------------------ -----------------
Total $ 84.2 $ 65.1
================== =================
Premiums, interest credited and other benefits to contractowners and
policyholders included the following premiums ceded and reinsurance
recoveries:
Year ended December 31,
2004 2003 2002
----------- ----------- -----------
Premiums ceded under reinsurance $ 41.4 $ 36.0 $ 36.5
Reinsurance recoveries 20.8 11.8 7.9
14. Commitments and Contingent Liabilities
Leases
For the years ended December 31, 2004, 2003, and 2002, rent expense for
leases was $0.2, $0.4 and $0.3. The future net minimum payments under
noncancelable leases for the years ended December 31, 2005 through 2007 are
estimated to be $0.1, $0.1, and $0.1, respectively. Minimal payments are
estimated for years ended December 31, 2008 and 2009, and no future net
minimum payment is estimated thereafter. The Company pays substantially all
expenses associated with its leased and subleased office properties.
Expenses not paid directly by the Company are paid for by an affiliate and
allocated back to the Company.
Commitments
Through the normal course of investment operations, the Company commits to
either purchase or sell securities, commercial mortgage loans, or money
market instruments at a specified future date and at a specified price or
yield. The inability of counterparties to honor these commitments may
78
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
result in either a higher or lower replacement cost. Also, there is likely
to be a change in the value of the securities underlying the commitments.
At December 31, 2004 and 2003, the Company had off-balance sheet
commitments to purchase investments equal to their fair value of $15.4 and
$28.9, respectively.
Litigation
The Company is a party to threatened or pending lawsuits/arbitrations
arising from the normal conduct of business. Due to the climate in
insurance and business litigation/arbitration, suits against the Company
sometimes include claims for substantial compensatory, consequential, or
punitive damages and other types of relief. Moreover, certain claims are
asserted as class actions, purporting to represent a group of similarly
situated individuals. While it is not possible to forecast the outcome of
such lawsuits/arbitrations, in light of existing insurance, reinsurance and
established reserves, it is the opinion of management that the disposition
of such lawsuits/arbitrations will not have a materially adverse effect on
the Company's operations or financial position.
Regulatory Matters
As with many financial services companies, the Company and its affiliates
have received informal and formal requests for information from various
state and federal governmental agencies and self-regulatory organizations
in connection with inquiries and investigations of the products and
practices of the financial services industry. In each case, the Company and
its affiliates have been and are providing full cooperation.
Fund Regulatory Issues
Since 2002, there has been increased governmental and regulatory activity
relating to mutual funds and variable insurance products. This activity has
primarily focused on inappropriate trading of fund shares, revenue sharing
and directed brokerage, compensation, sales practices and suitability,
arrangements with service providers, pricing, compliance and controls, and
adequacy of disclosure.
In addition to responding to governmental and regulatory requests on fund
regulatory issues, ING management, on its own initiative, conducted,
through special counsel and a national accounting firm, an extensive
internal review of mutual fund trading in ING insurance, retirement, and
mutual fund products. The goal of this review was to identify any instances
of inappropriate trading in those products by third parties or by ING
investment professionals and other ING personnel.
The internal review identified several isolated arrangements allowing third
parties to engage in frequent trading of mutual funds within the variable
insurance and mutual fund products of certain affiliates of the Company,
and identified other circumstances where frequent trading occurred despite
measures taken by ING intended to combat market timing. Each of the
arrangements has been terminated and disclosed to regulators, to the
79
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Notes to Financial Statements
(Dollar amounts in millions, unless otherwise stated)
- --------------------------------------------------------------------------------
independent trustees of ING Funds (U.S.) and in Company reports previously
filed with the Securities and Exchange Commission ("SEC") pursuant to the
Securities Exchange Act of 1934, as amended.
An affiliate of the Company, ING Funds Distributors, LLC ("IFD") has
received notice from the staff of the National Association of Securities
Dealers ("NASD") that the staff has made a preliminary determination to
recommend that disciplinary action be brought against IFD and one of its
registered persons for violations of the NASD Conduct Rules and federal
securities laws in connection with frequent trading arrangements.
Other regulators, including the SEC and the New York Attorney General, are
also likely to take some action with respect to certain ING affiliates
before concluding their investigation of ING relating to fund trading. The
potential outcome of such action is difficult to predict but could subject
certain affiliates to adverse consequences, including, but not limited to,
settlement payments, penalties, and other financial liability. It is not
currently anticipated, however, that the actual outcome of such action will
have a material adverse effect on ING or ING's U.S.-based operations,
including the Company.
ING has agreed to indemnify and hold harmless the ING Funds from all
damages resulting from wrongful conduct by ING or its employees or from
ING's internal investigation, any investigations conducted by any
governmental or self-regulatory agencies, litigation or other formal
proceedings, including any proceedings by the SEC. Management reported to
the ING Funds Board that ING management believes that the total amount of
any indemnification obligations will not be material to ING or ING's
U.S.-based operations, including the Company.
Other Regulatory Matters
The New York Attorney General and other regulators are also conducting
broad inquiries and investigations involving the insurance industry. These
initiatives currently focus on, among other things, compensation and other
sales incentives, potential conflicts of interest, potential
anti-competitive activity, marketing practices, certain financial
reinsurance arrangements, and disclosure. It is likely that the scope of
these investigations will further broaden before the investigations are
concluded. U.S. affiliates of ING have received formal and informal
requests in connection with such investigations, and are cooperating fully
with each request for information.
These initiatives may result in new legislation and regulation that could
significantly affect the financial services industry, including businesses
in which the Company is engaged.
In light of these and other developments, U.S. affiliates of ING, including
the Company, periodically review whether modifications to their business
practices are appropriate.
80
15. Reclassifications and Changes to prior Year Presentation
During 2004, certain changes were made to the 2003 and 2002 Statements of
Cash Flows to reflect the correct balances primarily related to short-term
investments and interest credited to contractholders for investment type
contracts. As a result of these adjustments, the Company has labeled the
Statements of Cash Flows for 2003 and 2002 as restated. The following
summarizes the adjustments:
Previously
Reported Adjustment Restated
------------- ------------- -------------
Year ended December 31, 2003
Net cash provided by (used for) operating activities $ (11.9) $ 17.8 $ 5.9
Net cash used for investing activities (37.8) (40.8) (78.6)
Net cash provided by (used for) financing activities 57.7 (30.5) 27.2
Year ended December 31, 2002
Net cash provided by (used for) operating activities $ 25.2 $ 72.5 $ 97.7
Net cash used for investing (61.3) 32.1 (29.2)
Net cash provided by (used for) financing activities 50.2 (50.6) (0.4)
81
2004 (In millions) First Second Third Fourth
- ---- ------------- ------------- ------------- -------------
Total revenue $ 77.9 $ 69.0 $ 75.6 $ 74.4
------------- ------------- ------------- -------------
Income before income taxes and
cumulative effect of change in accounting principle 18.5* 1.9* 17.9* 9.1
Income tax expense 6.4* 0.6* 6.3* 3.3
------------- ------------- ------------- -------------
Net income before cumulative effect of
change in accounting principle 12.1* 1.3* 11.6* 5.8
Cumulative effect of change in accounting principle 0.8* - - -
------------- ------------- ------------- -------------
Net income $ 12.9* $ 1.3* $ 11.6* $ 5.8
============= ============= ============= =============
2003 (In millions)
- ----
Total revenue $ 74.7 $ 82.1 $ 75.5 $ 63.2
Income before income taxes 17.0 24.8 15.4 23.0
Income tax expense 5.9 8.7 5.3 6.4
------------- ------------- ------------- -------------
Net income $ 11.1 $ 16.1 $ 10.1 $ 16.6
============= ============= ============= =============
* Income before cumulative effect of change in accounting principle for the
first, second, and third quarters of 2004, has been restated to include the
impact of the implementation of the TPA, effective January 1, 2004. The
quarterly adjustment was approximately $1.0, resulting in a total 2004
increase of income before tax of $4.0. Also the cumulative effect of change
in accounting principle was increased by $7.8, net of tax effect of $4.2,
due to the implementation of the TPA. See "Recently Adopted Accounting
Standards" in the "Significant Accounting Policies" footnote for further
information.
82
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
9A. Controls and Procedures
(a) The Company carried out an evaluation, under the supervision and
with the participation of its management, including its Chief
Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures (as defined in Rule 13a-15(e)
and 15d-15e of the Securities Exchange Act of 1934) as of the end
of the period covered by this report. Based on that evaluation,
the Chief Executive Officer and the Chief Financial Officer have
concluded that the Company's current disclosure controls and
procedures are effective in ensuring that material information
relating to the Company required to be disclosed in the Company's
periodic SEC filings is made known to them in a timely manner.
(b) There has not been any change in the internal controls over
financial reporting of the Company that occurred during the
period covered by this report that has materially affected or is
reasonably likely to materially affect these internal controls.
9B. Other Information
None.
83
PART III
Item 10. Directors and Executive Officers of the Registrant
Omitted pursuant to General Instruction I(2) of Form 10-K, except with
respect to compliance with Sections 406 and 407 of the Sarbanes-Oxley
Act of 2002.
(a) Code of Ethics for Financial Professionals
------------------------------------------
The Company has approved and adopted a Code of Ethics for Financial
Professionals (which was filed as Exhibit 14 to the Company's Form
10-K, as filed with the SEC on March 29, 2004, File No. 333-75938),
pursuant to the requirements of Section 406 of the Sarbanes-Oxley Act
of 2002. Any waiver of the Code of Ethics will be disclosed by the
Company by way of a Form 8K filing.
(b) Designation of Board Financial Expert
-------------------------------------
The Company has designated Ross M. Weale, as its Board Financial
Expert, pursuant to the requirements of Section 407 of the
Sarbanes-Oxley Act of 2002. Mr. Weale is an independent director.
Item 11. Executive Compensation
Omitted pursuant to General Instruction I(2) of Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Omitted pursuant to General Instruction I(2) of Form 10-K.
Item 13. Certain Relationships and Related Transactions
Omitted pursuant to General Instruction I(2) of Form 10-K.
84
Item 14. Principal Accountant Fees and Services
(Dollar amounts in millions, unless otherwise stated)
In 2004 and 2003, Ernst & Young LLP ("Ernst & Young") served as the
principal external auditing firm for ING including RLNY. ING
subsidiaries, including RLNY, are allocated Ernst & Young fees
attributable to services rendered by Ernst & Young to each subsidiary.
Ernst & Young fees allocated to the Company for the years ended
December 31, 2004 and 2003 are detailed below along with a description
of the services rendered by Ernst & Young to the Company:
2004 2003
------------------ -------------------
Audit fees $ 0.5 $ 0.2
Audit-related fees -* -*
Tax fees -* -*
All other fees -* -
------------------ -------------------
$ 0.5 $ 0.2
================== ===================
* Less than $0.1
Audit fees
Fees for audit services include fees associated with professional
services rendered by the auditors for the audit of the annual
financial statements of the Company and review of the Company's
interim financial statements.
Audit-related fees
There were minimal audit-related fees allocated to RLNY in 2004 and
2003. This category typically includes assurance and related services
that are reasonably related to the performance of the audit or review
of the financial statements and are not reported under the audit fee
item above. These services typically consist primarily of an audit of
SEC product filings, advice on accounting matters and progress review
on International Financial Reporting Standards and Sarbanes-Oxley
projects.
Tax Fees
There were minimal tax fees allocated to RLNY in 2004 and 2003. This
category typically includes tax compliance, tax advice and tax
planning professional services. These services typically consist of:
tax compliance including the review of original and amended tax
returns, assistance with questions regarding tax audits, and tax
planning and advisory services relating to common forms of domestic
taxation (i.e. income tax and capital tax).
All other fees
There were minimal fees allocated to RLNY under the category "all
other fees" in 2004 and no fees under this category in 2003. This
category typically includes fees paid for products and services other
85
than the audit fees, audit-related fees and tax fees described above,
and consists primarily of non-recurring support and advisory services.
Pre-approval policies and procedures
RLNY has adopted the pre-approval policies and procedures of ING.
Audit, audit-related and non-audit services provided to the Company by
ING's independent auditors are pre-approved by ING's audit committee.
Pursuant to ING's pre-approval policies and procedures, the ING audit
committee is required to pre-approve all services provided by ING's
independent auditors to ING and its majority owned legal entities,
including the Company. The ING pre-approval policies and procedures
distinguish four types of services: (1) audit services, (2)
audit-related services, (3) non-audit services, and (4) prohibited
services (as described in the Sarbanes-Oxley Act).
The ING pre-approval procedures consist of a general pre-approval
procedure and a specific pre-approval procedure.
General pre-approval procedure
ING's audit committee pre-approves audit, audit-related and non-audit
services to be provided by ING's external audit firms on an annual
basis, provided that the amount for such pre-approved service may not
be exceeded. ING's audit committee receives an overview of all
services provided, including related fees and supported by
sufficiently detailed information. ING's audit committee evaluates
this overview retrospectively on a semi-annual basis.
Specific pre-approval procedure
In addition to audit committee pre-approval, all audit-related and
non-audit engagements that are expected to generate fees in excess of
EUR 100,000 need specific approval of ING's Chief Financial Officer
("CFO"). These engagements are submitted in advance to the General
Manager of ING Corporate Audit Services, who will advise ING's CFO on
the compatibility of such services with the independence policy.
Further, in addition to audit committee pre-approval under the general
pre-approval procedures, the audit committee must approve on a
case-by-case basis:
(i) Each individual audit-related and non-audit engagement which is
expected to generate fees in excess of EUR 250,000;
(ii) All further audit-related and non-audit engagements over and
above the pre-approved amounts.
In 2004, 100% of each of the audit-related services, tax services and
all other services were pre-approved by ING's audit committee.
86
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
1. Financial statements. See Item 8 on Page 39
2. Financial statement schedules. See Index to Financial
Statement Schedules on Page 90
Exhibits
3.(i)Articles of Incorporation of ReliaStar Life Insurance Company of
New York ("RLNY" or "Registrant"), incorporated by reference from
Exhibit 3 (a) to a Pre-Effective Amendment No. 1 of Registrant's
Registration Statement on Form S-1 filed with the Security and
Exchange Commission ("SEC") on or about April 1, 2002 (File No.
333-75938).
(ii) By-laws of RLNY, incorporated by reference from Exhibit 3(b) to a
Pre-Effective Amendment No. 1 of Registrant's Registration
Statement on Form S-1 filed with the SEC on or about April 1,
2002 (File No. 333-75938).
4.(a)Instruments Defining the Rights of Security Holders, Including
Indentures (Annuity Contracts).
Interests in Fixed Account I under Variable Annuity Contracts,
incorporated herein by reference to the initial Registration
Statement for RLNY as filed with the SEC on April 16, 2002 (File
No. 333-86352).
10. Material Contracts
(a) Form of Services Agreement between Directed Services, Inc. and
ReliaStar Life Insurance Company of New York Fund, incorporated
by reference from Exhibit 10.(a) to a Pre-Effective Amendment No.
1 of Registrant's Registration Statement on Form S-1 filed with
the SEC on or about April 1, 2002 (File No. 333-75938).
(b) Federal Tax Sharing Agreement by and between RLNY, ReliaStar Life
Insurance Company and ReliaStar Financial Corp., effective May 1,
2002, incorporated by reference from Exhibit 10.(e) to
Registrant's Form 10-K filed with the SEC on or about March 29,
2004 (File No. 333-75938).
(c) Investment Advisory Agreement between RLNY and ING Investment
Management, LLC, effective January 1, 2001, incorporated by
reference from Exhibit 10.(f) to Registrant's Form 10-K filed
with the SEC on or about March 29, 2004 (File No. 333-75938).
(d) Reciprocal Loan Agreement between RLNY and ING America Insurance
Holdings, Inc., effective February 1, 2003, incorporated by
reference from Exhibit 10.(g) to Registrant's Form 10-K filed
with the SEC on or about March 29, 2004 (File No. 333-75938).
87
(e) Reciprocal Loan Agreement between RLNY and ING America Insurance
Holdings, Inc., effective February 1, 2004.
(f) Administrative Services Agreement between RLNY and its
affiliates, effective March 1, 2003, incorporated by reference
from Exhibit 10.(h) to Registrant's Form 10-K filed with the SEC
on or about March 29, 2004 (File No. 333-75938).
(g) First Amendment to the Administrative Services Agreement between
RLNY and its affiliates, effective as of August 1, 2004.
(h) Amendment to Investment Advisory Agreement between RLNY and ING
Investment Management LLC, effective September 1, 2004,
incorporated by reference from Exhibit 10.(i) to Registrant's
Form 10-K filed with the SEC on or about March 29, 2004 (File No.
333-75938).
(i) Agreement of Lease, dated August 11, 1995, between The Tilles
Investment Company and The North Atlantic Life Insurance Company
of America, incorporated by reference from Exhibit 10.(k) to
Registrant's Form 10-K filed with the SEC on or about March 29,
2004 (File No. 333-75938).
(j) First Amendment to Lease between The Tilles Investment Company
and RLNY, effective June 1, 2001, incorporated by reference from
Exhibit 10.(l) to Registrant's Form 10-K filed with the SEC on or
about March 29, 2004 (File No. 333-75938).
(k) Second Amendment to Lease dated August 28, 2002, between The
Tilles Investment Company and ING North America Insurance
Corporation.
(l) Underwriting Agreement between RLNY and Directed Services, Inc.,
incorporated by reference from Exhibit 1 to a Pre-Effective
Amendment No. 1 of Registrant's Registration Statement on Form
S-1 filed with the Securities and Exchange Commission ("SEC") on
or about April 1, 2002 (File No. 333-75938).
(m) Automatic Reinsurance Agreement, effective as of January 15,
1996, between Lincoln Security Life Insurance Company (now RLNY)
and Security-Connecticut Life Insurance Company (now ReliaStar
Life Insurance Company), as amended by Amendments I through XIII
dated May 1, 1996; November 20, 1996; June 15, 1997; April 1,
1998; September 1, 1998; April 1, 2000; November 1, 2001;
September 9, 2002; June 30, 2003; September 30, 2003; November 1,
2003; May 1, 2004 and June 14, 2004, respectively.
(n) Reinsurance Agreement, effective as of April 1, 1984, between
Lincoln Security Life Insurance Company (now RLNY) and
Security-Connecticut Life Insurance Company (now ReliaStar Life
Insurance Company), as amended by Amendments I through XXIII
dated April 1, 1986; January 1, 1987; January 1, 1987; July 1,
1989; No date; No date; January 1, 1994; November 28, 1995;
January 1, 1992; November 1, 1992; January 1, 1994; November 20,
1996; May 1, 1996; July 7, 1997; April 1, 2000; September 1,
1998; November 1, 2001; March 1, 2001; September 30, 2003;
February 1, 2002; May 1, 2004; June 30, 2004 and October 1, 2004,
respectively.
88
14. ING Code of Ethics for Financial Professionals, incorporated by
reference from Exhibit 14 to Registrant's Form 10-K filed with
the SEC on March 29, 2004 (File No. 333-75938).
31.1 Certificate of David A. Wheat pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certificate of James R. Gelder pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certificate of David A. Wheat pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certificate of James R. Gelder pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
89
Index to Financial Statement Schedules
Page
Report of Independent Registered Public Accounting Firm 91
I. Summary of Investments - Other than Investments in Affiliates
as of December 31, 2004 92
IV. Reinsurance Information as of and
for the years ended December 31, 2004, 2003, and 2002 93
Schedules other than those listed above are omitted because they are not
required or not applicable.
Report of Independent Registered Public Accounting Firm
The Board of Directors
ReliaStar Life Insurance Company of New York
We have audited the financial statements of ReliaStar Life Insurance Company of
New York as of December 31, 2004 and 2003 and for the each of the three years in
the period ended December 31, 2004, and have issued our report thereon dated
March 31, 2005. Our audits also included the financial statement schedules
listed in Item 15. These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 31, 2005
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Schedule I
Summary of Investments - Other than Investments in Affiliates
As of December 31, 2004
(In millions)
Amount
Shown on
Type of Investments Cost Value* Balance Sheet
---------------- ---------------- ----------------
Fixed maturities:
U.S. government and government agencies and authorities $ 56.2 $ 56.4 $ 56.4
States, municipalities and political subdivisions 1.6 1.7 1.7
U.S. corporate securities 849.5 889.5 889.5
Foreign securities (1) 196.0 201.1 201.1
Residential mortgage-backed securities 373.5 373.9 373.9
Commercial mortgage-backed securities 119.0 126.9 126.9
Other asset-backed securities 107.1 112.1 112.1
---------------- ---------------- ----------------
Total fixed maturities, including fixed maturities pledged $ 1,702.9 $ 1,761.6 $ 1,761.6
================ ================ ================
Equity securities 6.9 7.6 7.6
Mortgage loans 213.0 231.5 213.0
Policy loans 90.9 90.9 90.9
Other investments 17.7 17.0 17.0
---------------- ---------------- ----------------
Total investments $ 2,031.4 $ 2,108.6 $ 2,090.1
================ ================ ================
* See Notes 2 and 3 of Notes to Financial Statements.
(1) The term "foreign" includes foreign governments, foreign political
subdivisions, foreign public utilities and all other bonds of foreign
issuers. Substantially all of the Company's foreign securities are
denominated in U.S. dollars.
92
ReliaStar Life Insurance Company of New York
(A wholly-owned subsidiary of ReliaStar Life Insurance Company)
Schedule IV
Reinsurance Information
As of and for the year ended December 31, 2004, 2003, and 2002
(In millions)
Percentage of
Gross Ceded Assumed Net assumed to net
-------------- -------------- --------------- -------------- ----------------
Year ended December 31, 2004
Life insurance in force $ 39,057.9 $ 13,659.2 $ 4,706.2 $ 30,104.9 15.6%
Premiums: -
Life insurance 75.3 24.8 5.4 55.9
Accident and health insurance 25.4 16.6 - 8.8
-------------- -------------- --------------- --------------
Total premiums $ 100.7 $ 41.4 $ 5.4 $ 64.7
============== ============== =============== ==============
Year ended December 31, 2003
Life insurance in force $ 38,643.4 $ 13,149.6 $ 3,715.3 $ 29,209.1 12.7%
Premiums:
Life insurance 70.8 21.2 4.0 53.6
Accident and health insurance 23.0 14.8 - 8.2
-------------- -------------- --------------- --------------
Total premiums $ 93.8 $ 36.0 $ 4.0 $ 61.8
============== ============== =============== ==============
Year ended December 31, 2002
Life insurance in force $ 36,310.2 $ 12,669.1 $ 4,301.9 $ 27,943.0 15.4%
Premiums:
Life insurance 67.1 21.5 4.0 49.6
Accident and health insurance 20.4 15.0 - 5.4
-------------- -------------- --------------- --------------
Total premiums $ 87.5 $ 36.5 $ 4.0 $ 55.0
============== ============== =============== ==============
93
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ReliaStar Life Insurance Company of New York
(Registrant)
March 29, 2005 By /s/ David A. Wheat
- -------------- ------------------------------------------
(Date) David A. Wheat
Director, Senior Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on or before March 29, 2005.
Signatures Title
/s/ Brian D. Comer
- -------------------------------------- Director and Senior Vice President
Brian D. Comer
/s/ R. Michael Conley
- -------------------------------------- Director
R. Michael Conley
/s/ James R. Gelder
- -------------------------------------- Director and Chairman, President and
James R. Gelder Chief Executive Officer
/s/ Catherine H. Smith
- -------------------------------------- Director
Catherine H. Smith
/s/ Ulric Haynes, Jr.
- -------------------------------------- Director
Ulric Haynes, Jr.
/s/ Audrey R. Kavanagh
- -------------------------------------- Director and Vice President
Audrey R. Kavanagh
94
Signatures Title
/s/ Jamees F. Lille Director
- --------------------------------------
James F. Lille
/s/ Gregory G. McGreevey Director and Vice President,
- -------------------------------------- Investments
Gregory G. McGreevey
/s/ Stephen J. Preston Director and Senior Vice President
- --------------------------------------
Stephen J. Preston
/s/ Mark A. Tullis Director
- --------------------------------------
Mark A. Tullis
/s/ Charles B. Updike Director
- --------------------------------------
Charles B. Updike
/s/ Ross M. Weale Director
- --------------------------------------
Ross M. Weale
/s/ David A. Wheat Director, Senior Vice President
- -------------------------------------- and Chief Financial Officer
David A. Wheat
/s/ Roger W. Fisher Vice President and Chief Accounting
- -------------------------------------- Officer
Roger W. Fisher
95
Exhibit 10.(e)
RECIPROCAL LOAN AGREEMENT
This RECIPROCAL LOAN AGREEMENT (this "Agreement"), dated as of February 1, 2004,
between ReliaStar Life Insurance Company of New York, a New York life insurance
company ("RLNY" or "Company"), and ING America Insurance Holdings, Inc., a
Delaware corporation ("INGAIH" or "Company") located at 1105 North Market
Street, Wilmington, Delaware 19809 (collectively referred to as the
"Companies").
WITNESSETH:
WHEREAS, each of the Companies may have, from time to time, a need to
borrow funds on a revolving basis; and
WHEREAS, each of the Companies may have, from time to time, excess cash
available to lend to the other on a revolving basis; and
WHEREAS, the Companies are affiliated entities and as such are willing to
extend financing to, and borrow from each other as provided herein; and
WHEREAS, each of the Companies desires to enter into this Agreement
providing for, among other things, the making of such Loans by and among each
other.
NOW, THEREFORE, for and in consideration of the foregoing and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Companies agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Defined Terms. For purposes of this Agreement:
"Agreement" shall have the meaning set forth in the preamble hereto.
"Authorized Person" shall mean the CFO, Treasurer, Assistant Treasurer,
Treasury Officer, or Treasury Manager of the Borrowing Company, or a person so
designated.
"Borrowing Company" shall mean each of the Companies to which a Loan is
outstanding or is to be made pursuant to a Request for Borrowing.
"Business Day" shall mean a day on which U.S. financial markets are open
for the transaction of business required for this Agreement.
"Companies" shall have the meaning set forth in the preamble hereto.
1
"Default" shall mean any of the events specified in Section 6.1, regardless
of whether there shall have occurred any passage of time or giving of notice, or
both, that would be necessary in order to constitute such an Event of Default.
"Event of Default" shall mean any of the events specified in Section 6.1.
"INGAIH" shall have the meaning set forth in the preamble hereto.
"Interest Period" shall mean the number of days or months that a
particular interest rate applies to a particular Loan advanced hereunder.
"Lending Company" shall mean each of the Companies that has made, or is
obligated to make, in accordance with a Request for Borrowing one or more Loans
hereunder.
"Loans" shall mean the amounts advanced by a Lending Company to a
Borrowing Company under this Agreement.
"Notice of Borrowing" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"Obligations" shall mean all payment and performance obligations of every
kind, nature and description of each Borrowing Company to the Lending Company,
or either of them, under this Agreement (including any interest, fees and other
charges on the Loans or otherwise), whether such obligations are direct or
indirect, absolute or contingent, due or not due, contractual or tortuous,
liquidated or unliquidated, arising by operation of law or otherwise, now
existing or hereafter arising.
"Regional Treasury Office" ("RTO") shall mean the Treasurer's office of ING
America Insurance Holdings, Inc.
"Request for Borrowing" shall have the meaning set forth in Section 2.2(a)
of this Agreement.
"Revolving Loan Commitment" shall mean the maximum outstanding amount to be
funded by the Lending Company to the Borrowing Company. The aggregate sum, which
shall include both principal and accrued interest, that the Lending Company may
loan to the Borrowing Company under this Agreement shall not exceed 5% of the
admitted assets of RLNY as of December 31 of the applicable preceding year and
as determined by New York Insurance Law Sections 107(a)(3) and 1301.
"RLNY" shall have the meaning set forth in the preamble hereto.
"Termination Date" shall mean January 31, 2005, or such earlier date as
payment of the Obligations shall be due (whether by acceleration or otherwise).
2
"U.S. Commercial Paper" shall mean an unsecured promissory note, which has
a maturity of 270 days or less, that a company issues to finance short-term
capital needs of the company and is usually issued at a discount.
Section 1.2. Terminology. Each definition of a document in this Article 1
shall include such document as amended, modified, or supplemented from time to
time, and, except where the context otherwise requires, definitions imparting
the singular shall include the plural and visa versa. Except where specifically
restricted, reference to a party shall include that party and its successors and
assigns. All personal pronouns used in this Agreement, whether used in the
masculine, feminine, or neuter gender, shall include all other genders. Titles
of articles and sections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement, and all references in this
Agreement to articles, sections, subsections, paragraphs, clauses, subclauses or
exhibits shall refer to the corresponding article, section, subsection,
paragraph, clause, subclause of, or exhibit attached to, this Agreement, unless
otherwise provided.
Section 1.3. Accounting Terms. Except as otherwise expressly provided
herein, all accounting terms used herein shall be interpreted in accordance with
generally accepted accounting principles consistently applied.
ARTICLE 2
TERMS OF THE LOANS
Section 2.1. Revolving Credit.
(a) Subject to and upon the terms and conditions set forth in this
Agreement, each Lending Company agrees to advance to the Borrowing Company, from
time to time prior to the Termination Date, Loans. Loans advanced under the
Revolving Loan Commitment shall be repaid in accordance with Section 2.4 and may
be reborrowed from time to time on a revolving basis. In no event shall RLNY
borrow from a Company that owes money to RLNY.
(b) Each Borrowing Company's obligation to pay to the Lending Company the
principal of and interest on the Loans shall be evidenced by the records of the
RTO in lieu of a promissory note or notes.
Section 2.2. Notice and Manner of Borrowing.
(a) Whenever the Borrowing Company desires to borrow money hereunder, it
shall give the RTO prior written or facsimile request (or verbal request
promptly confirmed in writing or by facsimile) of such borrowing or reborrowing
(a "Request for Borrowing"). Such Request for Borrowing shall be given by an
Authorized Person, to the RTO prior to 10:00 a.m. (Wilmington, Delaware time).
Any Request for Borrowing received after 10:00 a.m. shall be deemed received on
the next Business Day.
3
(b) The RTO, upon its receipt of a Request for Borrowing, shall determine
if the requested funds are available and the interest rates in accordance with
Section 2.3(a) of this Agreement (and related Interest Periods, if any) at which
the Borrowing Company can borrow money in a principal amount equal to, and on
the date of, the proposed borrowing or reborrowing described in each such
Request for Borrowing, and shall notify the Lending Company of such interest
rates and the related Interest Periods, if any, and the principal amount of the
proposed borrowing or reborrowing (a "Notice of Borrowing") by telephone
(confirmed in writing) or by facsimile no later than 12:00 p.m. (Wilmington,
Delaware time) on the Business Day of the requested borrowing or reborrowing.
The RTO shall promptly convey to the Borrowing Company the information contained
in the Notice of Borrowing by telephone (confirmed in writing) or by facsimile.
(c) On the date of each borrowing, the Lending Company will make available
the amount of such borrowing or reborrowing in immediately available funds to
the Borrowing Company by depositing such amount in the account of the Borrowing
Company by wire transfer via electronic funds transfer (EFT).
(d) The RTO shall maintain on its books a control account for each Company
in which shall be recorded (i) the amount of each Loan made hereunder to each
such Company, (ii) the interest rate applicable with respect to each Loan, (iii)
the amount of any principal, interest or fees due or to become due from each
Borrowing Company with respect to the Loans, and (iv) the amount of any sum
received by each Lending Company hereunder in respect of any such principal,
interest or fees due on such Loans. The entries made in the RTO's control
accounts shall be prima facie evidence, in the absence of manifest error, of the
existence and amounts of Obligations therein recorded and any payments thereon.
(e) The RTO shall account to each Company on a quarterly basis with a
statement of borrowings, interest rates, charges and payments made pursuant to
this Agreement with respect to the Loans and Revolving Loan Commitment. An
Authorized Person of the Companies shall review each quarterly accounting for
accuracy within thirty days of receipt thereof from the RTO. Each such account
rendered by the RTO shall be deemed final, binding and conclusive unless the RTO
is notified by the Lending Company or the Borrowing Company within thirty days
after the date the account is so rendered that either the Lending Company or the
Borrowing Company disputes any item thereof.
(f) The RTO shall be justified in assuming, for purposes of carrying out
its duties and obligations under this Agreement, including, without limitation,
its obligation to maintain accounts and provide accountings of the Loans
pursuant to Section 2.2(d) and (e) above, that (1) Loans are disbursed by the
Lending Company to the Borrowing Company in accordance with the terms of the
Notice of Borrowing, (2) payments on the Loans are made to the Lending Company
when due, and (3) no prepayments of any Loans prior to the date that they are
due and payable under Section 2.4(a) have occurred, unless the RTO is otherwise
notified by either Company within seven Business Days of any such delayed
disbursement, overdue payment, or receipt of a prepayment.
4
Section 2.3. Interest.
(a) The Borrowing Company agrees to pay interest in respect of all unpaid
principal amounts of the Loans from the respective dates such principal amounts
were advanced until the respective dates such principal amounts are repaid at a
per annum rate determined by the RTO in accordance with its usual and customary
practices of obtaining quotes of the prevailing U.S. commercial paper rates for
INGAIH from recognized dealers of U.S. commercial paper (e.g. ING Barings,
BancOne Capital Markets and CS First Boston) and determining the lowest rate
among the quotes for the applicable term of the Loan. The actual interest rate
charged to the Borrowing Company shall be the lowest quoted effective rate of
U.S. commercial paper for the applicable term of the Loan. Documentation of such
quotes and the rate so determined shall be maintained by INGAIH in accordance
with Section 2.5.
(b) Overdue principal and, to the extent not prohibited by applicable law,
overdue interest in respect of any of the Loans and all other overdue amounts
owing hereunder shall bear interest from each date that such amounts are overdue
at the rate otherwise applicable to such underlying Loans plus an additional 2%
per annum. Interest on each Loan shall accrue from and including the date of
such Loan to, but excluding, the date of any repayment thereof; provided,
however, that if a Loan is repaid on the same day it is made, one day's interest
shall be paid on such Loan. Interest shall be computed on the basis of a year of
360 days for the actual number of days elapsed.
(c) The Companies hereby agree that the only charges imposed or to be
imposed by the Lending Company hereunder for the use of money in connection with
the Loans is and will be the interest required to be paid under the provisions
of Sections 2.2(b). In no event shall the amount of interest due and payable
under this Agreement or any other documents executed in connection herewith
exceed the maximum rate of interest allowed by applicable law and, in the event
any such payment is made by the Borrowing Company or received by the Lending
Company, such excess sum shall be credited as a payment of principal. It is the
express intent hereof that the Borrowing Company not pay and the Lending Company
not receive, directly or indirectly in any manner, interest in excess of that
which may be lawfully paid under applicable law.
Section 2.4. Repayment of Principal and Interest.
(a) The entire outstanding principal balance of the Loans shall be due and
payable by no later than 5:00 p.m. (Wilmington, Delaware time) on the Business
Day on which the Loan is due, together with all remaining accrued and unpaid
interest thereon, unless an extension of no more than three additional days is
authorized by the Lending Company.
5
(b) Any of the Loans may be prepaid in whole or in part at any time without
premium or penalty. Any such prepayment made on any Loan shall be applied,
first, to interest accrued thereon through the date thereof and then to the
principal balance thereof.
(c) Each payment and prepayment of principal of any Loan and each payment
of interest on any Loan shall be made to the Lending Company and applied to
outstanding Loan balances in the following order; first, toward any Loan or
Loans then due and payable; and, second, towards the Loan or Loans which are
next due and payable at the time of such prepayment.
Section 2.5. Documentation
(a) The obligations of any Company to repay all principal of and interest
on Loans made pursuant to this Agreement are set forth in this Agreement and
shall be fully binding and enforceable without the execution of any promissory
note or other evidence of indebtedness. Expenses incurred and payment received
shall be allocated to each Company in comformity with customary insurance
accounting practices consistently applied and the books, accounts and records of
each Company shall be so maintained as to clearly and accurately disclose the
precise nature and details of the transactions, including such accounting
information as is necessary to support the reasonableness of the charges or fees
to the respective parties.
(b) Records of all Loans that are made under this Agreement and all monies
paid back shall be kept by INGAIH on behalf of the parties.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties. In order to induce the Lending
Company to enter into this Agreement, the Borrowing Company hereby represents
and warrants as set forth below:
(a) Organization; Power; Qualification. The Borrowing Company is a
corporation or life insurance company, as the case may be, duly organized,
validly existing and in good standing under the laws of the state of its
organization, has the power and authority to own or lease and operate its
properties and to carry on its business as now being conducted, and is duly
qualified and in good standing, and authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business require such qualification or authorization.
(b) Authorization; Enforceability. The Borrowing Company has the power and
has taken all necessary action, including the approval of RLNY's Board of
Directors, to authorize it to execute, deliver and perform this Agreement in
accordance with the terms hereof and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Borrowing
Company and is a legal, valid and binding obligation of the Borrowing Company,
enforceable in accordance with its respective terms, (i) subject to limitations
imposed by general principles of equity and (ii) subject to applicable
6
bankruptcy, reorganization, insolvency and other similar laws affecting
creditors' rights generally and to moratorium laws from time to time in effect.
(c) No Conflict. The execution, delivery and performance of this Agreement
in accordance with its terms and the consummation of the transactions
contemplated hereby do not and will not (i) violate any applicable law or
regulation, (ii) conflict with, result in a breach of, or constitute a default
under the charter or by-laws of the Borrowing Company or under any indenture,
agreement or other instrument to which the Borrowing Company is a party or by
which it or any of its properties may be bound, or (iii) result in or require
the creation or imposition of any lien upon or with respect to any property now
owned or hereafter acquired by the Borrowing Company.
(d) Compliance with Law; Absence of Default. The Borrowing Company is in
compliance with all applicable laws the failure to comply with which has or
could reasonably be expected to have a materially adverse effect on the
business, assets, liabilities, financial condition or results of operations of
the Borrowing Company, and no event has occurred or has failed to occur which
has not been remedied or waived, the occurrence or non-occurrence of which
constitutes a Default.
Section 3.2. Survival of Representations and Warranties. All
representations and warranties made under this Agreement shall be deemed to be
made, and shall be true and correct, as of the date hereof and as of the date of
each Loan.
ARTICLE 4
AFFIRMATIVE COVENANTS
So long as this Agreement is in effect:
Section 4.1. Preservation of Existence. The Borrowing Company will (a)
preserve and maintain its existence, rights, franchises, licenses and privileges
in its jurisdiction of organization and (b) qualify and remain qualified and
authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification or
authorization.
Section 4.2. Compliance with Applicable Laws and Regulations. The Borrowing
Company will comply with the requirements of all applicable laws and regulations
the failure with which to comply could have a materially adverse effect on the
business, assets, liabilities, financial condition or results of operations of
the Borrowing Company.
Section 4.3. Visits and Inspections.
(a) Upon reasonable advance notice from the Lending Company, the Borrowing
Company will permit representatives of the Lending Company to (a) visit and
inspect the properties of the Borrowing Company during normal business hours,
7
(b) inspect and make extracts from and copies of its books and records, and (c)
discuss with its principal officers its businesses, assets, liabilities,
financial positions and results of operations.
(b) Each Company agrees that upon reasonable advance notice from an auditor
of either Company or any regulatory official employed by the Department of
Insurance of any state in which either Company is engaged in business, each
Company will prepare and deliver to such auditor or regulatory official, within
a reasonable time following such request, a written verification of all Loans
made to and by the relevant Company. Upon reasonable advance notice to each
Company, the books and records of the RTO and each Company relating to the
subject matter of this Agreement shall be available for inspection by any
auditor of either Company or any regulatory official during normal business
hours, and the RTO and each Company will cooperate with said auditor or
regulatory official in making any audit which requires inspection of said books
and records.
ARTICLE 5
NEGATIVE COVENANTS
So long as this Agreement is in effect:
Section 5.1. Liquidation; Merger; Sale of Assets; Change of Business. The
Borrowing Company shall not at any time, without proper notice to the Lending
Company:
(a) Liquidate or dissolve itself (or suffer any liquidation or dissolution)
or otherwise wind up;
(b) Merge or consolidate with any other person or entity;
(c) Sell, lease, abandon or otherwise dispose of or transfer all or
substantially all of its assets other than in the ordinary course of business;
or
(d) Make any substantial change in the type of business conducted by the
Borrowing Company as of the date hereof without the prior written consent of the
Lending Company if such action would have a material adverse effect on the
business, assets, liabilities, financial condition or results of operations of
the Borrowing Company.
Any corporation into which either Company may be merged, converted or with
which either Company may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which either Company shall be a party,
shall succeed to all either Company's rights, obligations and immunities
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding.
8
ARTICLE 6
DEFAULT
Section 6.1. Events of Default. Each of the following shall constitute an
Event of Default:
(a) Any representation or warranty made by the Borrowing Company under this
Agreement shall prove incorrect or misleading in any material respect when made;
(b) The Borrowing Company shall default in the payment of (i) any interest
payable under this Agreement within five days of when due, or (ii) any principal
payable under this Agreement within three days of when due;
(c) The Borrowing Company shall default in the performance or observance of
any agreement or covenant contained in this Agreement, and such Default shall
not be cured within a period of 30 days from the occurrence of such Default;
(d) The Borrowing Company shall default under any other agreement or
instrument evidencing or relating to any indebtedness which Default shall not
have been cured within any applicable grace period set forth therein;
(e) There shall be entered a decree or order by a court having jurisdiction
in the premises constituting an order for relief in respect of the Borrowing
Company under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy law or
similar law, or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or similar official of the Borrowing Company or of any substantial
part of its properties, or ordering the winding-up or liquidation of the affairs
of the Borrowing Company and any such decree or order shall continue in effect
for a period of 60 consecutive days;
(f) The Borrowing Company shall file a petition, answer or consent seeking
relief under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal or state bankruptcy law or other
similar law, or the Borrowing Company shall consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment or taking of possession of a receiver, liquidator, assignee,
trustee, custodian, sequestrator, or other similar official of the Borrowing
Company or of any substantial part of its properties, or the Borrowing Company
shall fail generally to pay its debts as such debts become due, or the Borrowing
Company shall take any corporate action in furtherance of any such action; or
(g) This Agreement or any provision hereof shall at any time and for any
reason be declared by a court of competent jurisdiction to be null and void, or
a proceeding shall be commenced by the Borrowing Company or any other person or
entity seeking to establish the invalidity or unenforceability thereof, or the
9
Borrowing Company shall deny that it has any liability or any obligation for the
payment of principal or interest purported to be created under this Agreement.
Section 6.2. Remedies. If an Event of Default shall have occurred and shall
be continuing,
(a) The obligation of the Lending Company to make Loans hereunder shall
immediately cease;
(b) With the exception of an Event of Default specified in Section
6.1(e) or (f), the Lending Company, shall declare the principal of and interest
on the Loans and all other amounts owed under this Agreement to be forthwith due
and payable, whereupon all such amounts shall immediately become absolute and
due and payable, without presentment, demand, protest, or notice of any kind,
all of which are hereby expressly waived, anything in this Agreement to the
contrary notwithstanding, and whereupon all such amounts shall be immediately
due and payable;
(c) Upon the occurrence and continuance of an Event of Default
specified in Section 6.1(e) or (f), such principal, interest and other amounts
shall thereupon and concurrently therewith become absolute and due and payable,
all without any action by the Lending Company, all of which are hereby expressly
waived, anything in this Agreement to the contrary notwithstanding;
(d) The Lending Company shall have the right and option to exercise all
of the post-default rights granted to them hereunder; and
(e) The Lending Company shall have the right and option to exercise all
rights and remedies available to them at law or in equity.
ARTICLE 7
MISCELLANEOUS
Section 8.1. Notices. Except as otherwise provided herein, all notices and
other communications required or permitted under this Agreement shall be in
writing and, if mailed, shall be deemed to have been received on the earlier of
the date shown on the receipt or three Business Days after the postmarked date
thereof and, if sent by facsimile, shall be followed forthwith by letter and
shall be deemed to have been received on the next Business Day following
dispatch and acknowledgment of receipt by the recipient's facsimile machine. In
addition, notices hereunder may be delivered by hand or overnight courier, in
which event the notice shall be deemed effective when delivered. All notices and
other communications under this Agreement shall be given to the parties at the
address or facsimile number listed below such party's signature line hereto, or
such other address or facsimile number as may be specified by any party in a
writing addressed to the other parties hereto.
10
Section 8.2. Waivers. The rights and remedies of the Lending Company under
this Agreement shall be cumulative and not exclusive of any rights or remedies
which they would otherwise have. No failure or delay by the Lending Company in
exercising any right shall operate as a waiver of it. The Lending Company
expressly reserves the right to require strict compliance with the terms of this
Agreement. In the event the Lending Company decides to fund a request for a Loan
at a time when the Borrowing Company is not in strict compliance with the terms
of this Agreement, such decision by the Lending Company shall not be deemed to
constitute an undertaking by the Lending Company to fund any further requests
for Loans or precluding the Lending Company from exercising any rights available
to it under the Agreement or at law or equity with respect to the Borrowing
Company. Any waiver or indulgence granted by the Lending Company shall not
constitute a modification of this Agreement, except to the extent expressly
provided in such waiver or indulgence, or constitute a course of dealing by the
Lending Company at variance with the terms of this Agreement such as to require
further notice by the Lending Company of its intent to require strict adherence
to the terms of this Agreement in the future. Any such actions shall not in any
way affect the ability of the Lending Company, in their respective sole
discretion, to exercise any of their respective rights under this Agreement or
under any other agreement.
Section 8.3. Assignment; Successors.
(a) The Borrowing Company may not assign or transfer any of its rights or
obligations hereunder without notice to the Lending Company.
(b) The Lending Company may not at any time assign or participate its
interest under this Agreement without notice to the Borrowing Company. Any
holder of a participation in, and any assignee or transferee of, all or any
portion of any amount owed by the Borrowing Company under this Agreement may
exercise any and all rights provided in this Agreement with respect to any and
all amounts owed by the Borrowing Company to such assignee, transferee or holder
as fully as if such assignee, transferee or holder had made the Loans in the
amount of the obligation in which its holds a participation or which is assigned
or transferred to it.
(c) This Agreement shall be binding upon, and inure to the benefit of, the
Borrowing Company, the Lending Company, and the permitted successors and assigns
of each party hereto.
Section 8.4. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 8.5. Severability. Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof in that jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
11
Section 8.6. Entire Agreement; Amendments. This Agreement represents the
entire agreement among the parties hereto with respect to the subject matter of
this transaction. No amendment or modification of the terms and provisions of
this Agreement shall be effective unless in writing and signed by both
Companies.
Section 8.7. Payment on Non-Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a non-Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest hereunder.
Section 8.8. Termination. Unless earlier terminated, this Agreement will
expire one year from its date unless sooner extended by written agreement of
both parties for an additional annual term. The renewal of this Agreement for
any additional one year terms shall be approved by the Board of Directors of
RLNY. Any such annual extension must have the prior review and approval of the
New York Insurance Department. Each annual submission to the New York Insurance
Department shall include a history of RLNY's borrowings under this Agreement for
the previous year. This Agreement may be terminated with respect to any party
hereto by such party upon its giving the other parties 30 days notice of its
intent to terminate. In the event of termination as provided in this paragraph,
the Lending Company's obligation to make Loans to the Borrowing Company shall
cease; provided, however, that the Borrowing Company shall continue to be
obligated to make all repayments of Loans and all other amounts due and payable
by it as provided under this Agreement.
Section 8.9. Prior Agreements. This Agreement replaces and supercedes all
other intercompany credit agreements, and is effective as of the day and year
first above written, subject to any required regulatory notifications and
approvals.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused it to be executed by their duly authorized officers, all as of the day
and year first above written.
RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By:/s/ William D. Bonneville
-----------------------------------------------------
William D. Bonneville
Title: Executive Vice President and Chief
Administrative Officer
Address for notices:
1000 Woodbury Road, Suite 208
Woodbury, New York 11797
Phone:516-682-8780
Fax: 516-682-8852
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ING AMERICA INSURANCE HOLDINGS, INC.
By:/s/ David S. Pendergrass
-----------------------------------------------------
David S. Pendergrass
Title: Treasurer
Address for notices:
1105 N. Market Street
Wilmington, DE 19809
Phone: 770/980-3300
Fax: 770/980-3301
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Exhibit 10.(g)
FIRST AMENDMENT
TO THE
ADMINISTRATIVE SERVICES AGREEMENT
This First Amendment, effective as of August 1, 2004, is made to the
Administrative Services Agreement (the "Agreement"), dated as of March 1, 2003,
entered into by and between ReliaStar Life Insurance Company of New York, a New
York insurance company and the affiliated companies specified in Exhibit A to
the Agreement.
IN CONSIDERATION, of the mutual promises set forth herein, and intending to be
legally bound hereby, the parties agree to amend the Agreement as follows:
1. The Agreement shall be amended to add the following new section: TERM.
This Agreement shall be effective on the first day of March 2003, and shall end
of the 31st day of March, 2005. This Agreement shall be automatically renewed on
the first day of each calendar year thereafter for a twelve-month period under
the same terms and conditions, subject to the provisions for termination set
forth therein.
2. Except as specifically amended by this First Amendment, the Agreement
remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly
executed as of the date first written above.
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
By:/s/ Paula Cludray-Engelke
-----------------------------------------
Name: Paula Cludray-Engelke
Title: Secretary
ING USA ANNUITY AND LIFE INSURANCE COMPANY
By:/s/ Paula Cludray-Engelke
-----------------------------------------
Name: Paula Cludray-Engelke
Title: Secretary
ING FINANCIAL ADVISERS, LLC
By:/s/ John F. Todd
-----------------------------------------
Name: John F. Todd
Title: Assistant Secretary
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ING LIFE INSURANCE AND ANNUITY COMPANY
By:/s/ Paula Cludray-Engelke
------------------------------------------
Name: Paula Cludray-Engelke
Title: Secretary
ING NORTH AMERICA INSURANCE CORPORATION
By:/s/ John F. Todd
------------------------------------------
Name: John F. Todd
Title: Assistant Secretary
RELIASTAR LIFE INSURANCE COMPANY
By:/s/ Paula Cludray-Engelke
------------------------------------------
Name: Paula Cludray-Engelke
Title: Secretary
SECURITY LIFE OF DENVER INSURANCE COMPANY
By:/s/ Paula Cludray-Engelke
-----------------------------------------
Name: Paula Cludray-Engelke
Title: Secretary
SOUTHLAND LIFE INSURANCE COMPANY
By:/s/ Paula Cludray-Engelke
-----------------------------------------
Name: Paula Cludray-Engelke
Title: Secretary
2
Exhibit 10.(k)
SECOND AMENDMENT TO LEASE
This Amendment made the 28th day of August, 2002, by and between THE TILLES
INVESTMENT COMPANY, having offices at 7600 Jericho Turnpike, Woodbury, New York
11797, hereinafter referred to as the "Landlord" and ING, NORTH AMERICA
INSURANCE COMPANY, successor in interest to RELIASTAR LIFE INSURANCE COMPANY OF
NEW YORK, successor in interest to RELIASTAR BANKERS SECURITY LIFE INSURANCE
COMPANY a/k/a THE NORTH ATLANTIC LIFE INSURANCE COMPANY OF AMERICA, having
offices at 151 Farmington Avenue, Hartford, Connecticut 06156, hereinafter
referred to as the "Tenant",
RECITALS
WHEREAS, Landlord and Tenant are parties to a written rental agreement
dated August 11, 1995 which was amended by written agreement dated May 31, 2001,
(as amended, the "Lease") for certain space consisting of 23,440 square feet in
the building and premises (the "Original Premises") located at 1000 Woodbury
Road, Woodbury, New York; and
WHEREAS, the parties are desirous of entering into an agreement which would
provide for, among other things a relinquishment and surrender of the Original
Premises and occupancy of additional and different space in the same building.
NOW THEREFORE, in consideration of TEN ($10.00) DOLLARS, the receipt of
which is hereby acknowledged, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, it is agreed as
follows:
FIRST: Effective as of the 31st day of October, 2002, the Tenant hereby
vacates, surrenders, and releases to the Landlord, all of the Original Premises,
subject further to the terms and conditions of this agreement. Landlord agrees
to accept the surrender of the original premises in their present "as-is"
condition, reasonable wear and tear and casualty damage excepted. Tenant shall
have no obligation to remove any of its improvements, furniture, fixtures or
equipment including, without limitation its phone system or any wiring or cable.
Other than those items specifically and expressly set forth in the previous
sentence, the premises will be delivered vacant and free of debris.
1
SECOND: Landlord shall enter into and execute a Lease for all of the
demised property with MortgageIt, Inc. no later than the 27th day of August,
2002, upon such terms and conditions as may be satisfactory and acceptable to
Landlord. In the event that the aforesaid Lease is not executed by the close of
business on August 27, 2002, this agreement shall be null and void.
THIRD: Simultaneously upon execution of the Lease with MortgageIt, Inc.,
and receipt of payment set forth in paragraph 4 below, Landlord hereby releases
Tenant, its predecessors, successors and assigns and their respective officers,
directors, shareholders, employees and agents from all liability with respect to
the Original Premises accruing subsequent to August 31, 2002. The foregoing
Release shall be effective notwithstanding any delay by Landlord in delivering
the new premises to Tenant, unless said delay is occasioned either in whole, or
in part, by Tenant.
FOURTH: Tenant shall pay to the Landlord, within three (3) business days
from the date upon which Landlord notifies Tenant of the execution of the Lease
with MortgageIt, Inc., as consideration for its release of the released space,
the sum of THREE HUNDRED TWENTY-TWO THOUSAND SEVEN HUNDRED FIFTY-NINE
($322,759.00) DOLLARS; the additional sum of ONE HUNDRED FIFTEEN THOUSAND
($115,000.00) DOLLARS as contribution by the Tenant to construction costs for
the released space; and the additional sum of ONE HUNDRED EIGHT THOUSAND, TWO
HUNDRED TWENTY-FIVE ($108,225.00) DOLLARS, which sum shall represent payment of
monthly basic rent due from MortgageIt, Inc. to Landlord for the first three (3)
months of the demised term.
FIFTH: Effective the 1st day of November, 2002 the space designated on
Exhibit "A" in the Lease and First Amendment shall be further amended to reflect
a relocation by Tenant to space located on the second floor, Suite 208
consisting of 4,943 rentable square feet, in the building and premises located
at 1000 Woodbury Road, Woodbury, New York, and more particularly described in
Exhibit "A" attached to the Second Amendment (the "new premises").
SIXTH: The basic term of this Lease (hereinafter referred to as the "term")
shall commence upon the date the Landlord gives notice to the Tenant that the
Landlord has substantially completed the work set forth on the work letter
attached hereto as Exhibit "B" (the "commencement date"). In the event that the
commencement date occurs prior to November 1, 2002, Tenant shall not be required
to pay rent on the new space until November 1, 2002. The term substantially
completed as used herein shall be deemed to mean so complete as to allow the
2
Tenant to enter the new premises and conduct its normal business operations
therein even though there may be minor items of decoration or construction to be
completed. Any incomplete items preventing Tenant from commencing occupancy
shall not be an objection if said items are to be installed or furnished by
Tenant, or if Tenant has contributed to said delay. All work set forth on
Exhibit "B" shall be performed at the Landlord's sole expense in a good and
workmanlike manner and in accordance with all applicable laws, At the time of
the commencement of the Lease the Landlord shall have received a temporary or
permanent Certificate of Occupancy for the new premises (unless any work to be
done therein, by the Tenant, shall prevent the issuance of either such
Certificate of Occupancy) and the air-conditioning, heating, plumbing and '
electrical systems in the new premises and the elevator in the building shall be
in working order and the said new premises shall be free of debris.
SEVENTH: The parties expect that the term of this Lease will commence on
the first day of November, 2002 and end on the 31st day of October, 2007. In the
event, however, that the Landlord is unable to substantially complete the work
set forth on Exhibit "B" by reason of strikes, inability to obtain materials,
governmental regulation, acts of God or other matters beyond Landlord's control
then, and in that event, Tenant shall continue to occupy the original premises
until the commencement date but the Release set forth in Article 3 shall remain
in full force and effect.
EIGHTH: This Lease, as amended shall be extended for a period of five (5)
years, commencing as of the commencement date and terminating on midnight of the
day prior to the fifth anniversary date based upon the following rent schedule:
Basic Annual Rent Monthly Basic Rent
----------------- ------------------
November 1, 2002 - October 31, 2003 $112,453.25 $9,371.10
November 1, 2003 - October 31, 2004 $116,108.04 $9,675.67
November 1, 2004 - October 31, 2005 $119,881.44 $9,990.12
November 1, 2005 - October 31, 2006 $123,777.60 $10,314.80
November 1, 2006 - October 31, 2007 $127,800.36 $10,650.03
Promptly following the commencement date the parties agree to execute and
deliver a commencement date agreement memorializing the commencement date, the
termination date, and setting forth the applicable dates of each Lease Year.
3
NINTH: Section 1.1 shall be amended so as to provide that (i) the number of
reserved parking spaces in the executive parking lot shall be reduced from four
(4) to two (2), and (ii) the number of unreserved spaces available for Tenant
shall be not less than eighteen (18).
TENTH: Article II is hereby amended to include a new Section 2.5 thereof,
which shall read as follows:
Section 2.5 - Tenant shall have a one time option to cancel this agreement
at the expiration of the third Lease year subject to the following:
1. Notification by Tenant of its desire to exercise this option shall be
give to the Landlord, not later than January 31, 2006, time being of the
essence.
2. Tenant is not in default in any of the terms, covenants and conditions
of the Lease at the time notice of cancellation is given, or at the effective
date thereof.
3. Simultaneously with the transmission of notice to exercise its option to
cancel, Tenant shall include payment to the Landlord in the sum of $25,900.00,
which sum is neither a penalty nor a forfeiture, but constitutes reimbursement
of unamortized construction costs and Brokerage fees.
ELEVENTH: Article III of the Lease is hereby amended, to include a new
Section 3.4, which shall read as follows:
Section 3.4 As additional rent during each and every year during the term
hereof and any renewals or extensions the Tenant shall pay to the Landlord its
proportionate share of any increase in Real Estate taxes over the 2002-2003
School Tax, and the 2002 Town Tax.
A. Landlord and Tenant covenant and agree that for purposes of this
Article, or at such other place as the term "proportionate", "pro-rata share",
or words of similar import and intent are used in the Lease, Tenant's share
shall constitute 2.15%.
B. Tenant shall similarly pay its proportionate share as determined in
sub-paragraph A above of any ad valorem assessments, or impositions against the
real property of which the Demised Premises form a part and its proportionate
share of any taxes which shall be imposed in lieu of any ad valorem real
property tax as the same is presently considered, except that the Tenant shall
not .be obligated to pay any portion of any assessment or imposition (whether
payable in installments or otherwise) which have become a lien prior to the
commencement of the term of this Lease. In the event that there shall be any
general or special assessments or impositions against the said real property
which the Tenant is obligated to pay a proportionate share, the Landlord agrees
that if the said assessments or impositions may be paid in installments that the
4
Landlord will elect to pay the same in installments and the Tenant shall only be
responsible to pay its proportionate share of those installments which cover the
period of the term of the Lease.
TWELFTH: Article IV of the Lease is hereby amended, to include a new
Section 4.6, which shall read as follows:
Section 4.6 Throughout the term of this Lease, Landlord shall supply and
Tenant shall pay for the electricity in the Demised Premises and for the common
areas for normal lighting, The Tenant shall use no electric equipment in the
Demised Premises other than desktop computers, servers, routers, copiers, fax
machines, and other normal small office business machines, If the Tenant
introduces equipment onto the premises other than other normal small office
business machines, Tenant shall reimburse Landlord for the cost of electricity
necessary for same. The Landlord covenants to provide and pay for heat,
air-conditioning, elevator service and electricity between the hours of 8:00
a.m. and 6:00p.m. Monday through Friday and Saturday between the hours of
8:00a.m. to 1:00p,m.. However, if one of the days above is a "Holiday", the HVAC
system shall not be in operation. The term "Holiday" shall mean New Years Day,
Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas, and such other Holidays as may, from time to time be nationally
recognized.
The cost of electricity to the Tenant, during the term of this Lease, shall
be determined as follows:
Tenant shall pay the sum of $12,357.50 per year payable in equal monthly
installments of $1,029.79 in advance. In the event that any time during the term
of this Lease Landlord's cost per kWh shall be increased above $.16 per kWh (the
average annual kWh in effect during the last 12 months) then, in that event upon
presentation to Tenant of reasonable documentation evidencing such increase, the
percentage of such increase shall be paid to the Landlord as additional rent as
hereinabove provided.
THIRTEENTH: The work letter described as Exhibit "C" in Section 5.1 of the
original Lease dated August 11, 1995 is hereby amended to include and reflect
the work letter and plans attached to this amendment as Exhibit "B".
FOURTEENTH: A. Tenant acknowledges that the sole and exclusive Broker which
brought about the Lease with MortgageIt, Inc. is Julian Studley and that the
sole and exclusive Broker who brought about the Lease for the premises demised
herein is CB Richard Ellis. Landlord agrees to pay the commission due and owing
CB Richard Ellis for the commission earned on the demised space and Tenant
5
agrees to indemnify and hold harmless Landlord against any claims or expenses
which the Landlord may incur by reason of the Tenant having dealt with any
Broker other than CB Richard Ellis in connection with this Lease.
B. Landlord agrees that it shall pay that portion of the commission due and
owing to Julian Studley which is attributed the last three years of the Lease
with MortgageIt, Inc. and agrees to indemnify and hold harmless Tenant against
any claims or expenses which Tenant may incur by reason thereof.
C. Tenant agrees to pay that portion of the commission due and owing to
Julian Studley which is attributed to the first three years of the Lease with
MortgageIt, Inc. and agrees to indemnify and hold harmless Landlord against any
and all claims or expenses which Landlord may incur by reason thereof, or from
any other Broker.
FIFTEENTH: Tenant shall have one (1) five year option to renew the term of
Tenant's Lease provided:
1. Tenant is not in default in the terms, covenants and conditions of the
Lease at the time of notification of Tenant's intention to exercise its option
or at the commencement of the option term;
2. Tenant shall provide written notice not later than January 31, 2007,
time being of the essence, of Tenant's intention to exercise its option to
renew.
3. This option is for the benefit of the Tenant and any assignees of Tenant
which control, are controlled by, or under common control with Tenant.
4. All of the terms, covenants and conditions of the Lease shall remain in
full force and effect.
5. The said renewal shall be the basic rent during the last year during the
term of this Lease, increased by 3.25%, and, further increased by 3.25% for each
and every year of the remaining term.
SIXTEENTH: Section 4.5 of the Lease is hereby amended to provide that the
Tenant shall not be liable for any supervisory or other fees to Landlord in
connection with its relocation from the original premises to the new premises,
including, without limitation any charges for the freight elevator, so long as
the relocation occurs on any weekday between the hours of 9:00a.m. and 5:00 p.m.
Supervisory fees incurred by Tenant pursuant to the terms of this paragraph
6
shall be deemed items of additional rent and shall be billed at the rate of
$30.00 for each hour, or fractionional part thereof.
SEVENTEENTH: Notwithstanding anything to the contrary set forth in Sections
6.3 and 22.3 of the Lease or otherwise, Tenant shall not be obligated to remove
any Tenant improvements, wiring or cabling from the original premises or the new
premises.
EIGHTEENTH: Notwithstanding anything set forth in Section 11.1 of theease
or otherwise, Landlord and Tenant each hereby release and waive all right of
recovery against the other or anyone claiming through or under each of them by
way of subrogation or otherwise for any loss which is covered by a standard
all-risk casualty insurance policy. Landlord and Tenant further agree that each
insurance policy carried by them with respect to the new premises and/or the
building of which the new premises comprise a part shall include a waiver of
subrogation by the insurance carrier in favor of the other party.
NINETEENTH: Sections 11.3 and 12.2(i) of the Lease are hereby modified to
provide lit any rent abatement pursuant to either subsection shall be equitable.
TWENTIETH: The Landlord shall request from the holder of any Mortgage
hereinafter placed upon the property of which the demised premises form a part
the issuance of its standard form non-disturbance letter in favor of the Tenant
provided further that said non-disturbance clause can be obtained at no cost to
Landlord. Landlord further agrees to make a reasonable effort to obtain said
non-disturbance letter.
TWENTY-FIRST: Pursuant to Article 17 of the Lease, Landlord acknowledges
that Tenant's present notice address is 151 Farmington Avenue (TN41), Hartford,
Connecticut 06156-9690, Attention: Corporate Real Estate Department.
TWENTY-SECOND: The Phrase "that it may" hereby replaces "to" in the first
line of Section 22.1.
TWENTY-THIRD: The sixty (60) day period set forth in Section 22.3 of the
Lease is hereby reduced to thirty (30) days. Further, the Lease is hereby
modified to provide that the provisions of Section 22.4 shall not apply to any
transaction with any entity that controls, is controlled by, or is under common
control with Tenant.
TWENTY-FOURTH: Section 30.1 is modified to provide that Tenant will pay
150% of the monthly rate for the time Tenant remains in possession for a period
not to exceed sixty (60) days and 200% thereafter. Said paragraph is further
modified to provide that Tenant's liability for consequential damages only,
7
shall accrue if Tenant remains in possession for a period longer than ninety
(90) days. All other damages for which Tenant shall be liable, shall accrue if
Tenant remains in possession for a period longer than sixty (60) days.
TWENTY-FIFTH: The foregoing provisions are intended to modify said Lease
only in the foregoing respects and such modifications and the terms hereof as
herein set forth are to be strictly construed, It is further agreed that except
as hereinabove provided all of the terms, covenants and conditions of said Lease
dated the 11th day of August, 1995 and amended the 31st day of May, 2001 shall
continue to remain in full force and effect as therein written and shall be read
and construed together with this instrument.
TWENTY-SIXTH: This Amendment may be signed in separate counterparts, all of
which taken together, shall constitute a single agreement.
In witness whereof, the parties hereto have hereunto set their hands and
seals the day and year first above written.
THE TILLES INVESTMENT COMPANY ING NORTH AMERICA
INSURANCE COMPANY
By: /s/ Peter Tilles By: /s/ Ron Falkner
-------------------------- ---------------------------------
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals the day and year first above written.
THE TILLES INVESTMENT COMPANY
By: /s/ Peter Tilles
--------------------------------
MORTGAGEIT, INC.
By: /s/ Larry P. Lewis
--------------------------------
Larry P. Lewis
Chief Operating Officer
8
Exhibit A
Furniture Plan omitted.
Exhibit - B
WORK LETTER
ING
1000 Woodbury Road
Woodbury, NY 11797
June 5, 2002
Revised August 22, 2002
Revised August 26, 2002
All work shall be as indicated on the following construction documents:
1 of 8 Title Sheet Undated
4 of 8 Furniture & Demolition Plan 7/2/02
5 of 8 Construction & Ceiling Plan 7/2/02
6 of 8 Panel & Finish Plan 7/2/02
7 of 8 Door Schedule, Details & Elevations 7/2/02
8 of 8 Details & Elevation 7/2/02
Bulletin # 1 Drawing 2 8/20/02
ING -- Standard Finishes Undated
as prepared by Jung / Brannan Associates, Inc.
One Waterville Road
Farmington, Connecticut 06032
1. PARTITIONING
- -----------------
All new partitions provided by the Landlord shall consist of.5/8" gypsum board
applied to 2 1/2" metal studs and shall extend to the underside of the
acoustical ceiling grid. Sound attenuating insulation shall be provided in all
new partitions. Demising partitions shall consist of 5/8" gypsum board applied
to 3 1/2" metal studs 16" o/c. with sound attenuating insulation and shall
extend from the concrete floor slab to the underside of the floor above. The
amount of such partitioning shall be as indicated on me plan attached. Landlord
shall remove and dispose of existing partitions as required to complete the work
of this alteration.
Fire rates enclosures of all columns, air shafts and demising partitions shall
be constructed in accordance with the requirements of the New York State uniform
Fire Prevention and Building Code.
2. DOORS AND BUCKS
- --------------------
Landlord shall relocate the existing wood doors and metal knock down door frames
as necessary to complete the work as indicated. Landlord shall reuse the
existing Building Standard Atheans levers as manufactured by Schlage. This
hardware shall comply with the requirements of the Americans with Disability Act
A maximum of four (4) locksets shall be included as part of this work letter.
3. PAINTING AND FINISHES
- ------------------------
All new partitions provided by the Landlord shall be painted with two coats of
Benjamin Moore paint as indicated on the attached ING finish schedule. The
partitions of the conference rooms and reception area shall receive Type I vinyl
wallcovering as indicated on the attached ING finish schedule. All existing
doors shall be finished with a coat of clear varnish and all door jambs shall be
finished with an oil based semi gloss paint.
4. FLOORING
- -------------
Landlord shall remove the existing carpeting throughout the Demised Premises and
shall furnish and install new carpeting as per ING standard finishes. Vinyl
composition moor tile shall be provided in the kitchen area, storage and telco
room. All partitions provided by the Landlord shall receive 4" vinyl cove base.
5. CEILING
- ------------
Landlord shall remove me existing ceiling tiles throughout the Demises Premises
and shall furnish and install Armstong Second Look I ceiling dies. Sound
attenuating insulation shall be installed above the acoustical ceiling as noted
on the plans attached.
6. ELECTRIC
- -------------
Landlord shall furnish and install the new electric outlets and circuitry in
accordance with the National Electrical Code and as per the plan attached. Power
wiring of the Tenant's equipment is not included unless outlined in this exhibit
or indicated on plan attached. This work shall be wired from the existing
building electrical distribution system.
7. LIGHTING
- -----------
Landlord shall rearrange the existing light fixtures as indicated on the plan
attached. These fixtures shall be recessed and shall have 1 1/2" x 1 1/2"
paracube lenses Landlord shall reuse existing fixtures and devices where
possible.
8. HEATING, VENTILATION AND AIR CONDITIONING
- ----------------------------------------------
Landlord shall reconfigure me existing supply registers and return grilles
throughout the Demised Premises. This work shall be completed in accordance with
the original building design and building standards. Registers and grilles shall
be cleaned prior to installation. All registers throughout the Demised Premises
shall tie connected to the existing mechanical systems. The general design
criteria for air conditioning shall be 74 degrees F. inside when the outside
temperature is 95 degrees F. Heating shall provide 70 degrees inside when the
outside temperature is 5 degrees F.
Landlord shall install the supplemental cooling only unit for the
telecommunication room as noted. The Tenant shall be responsible for all cost of
the unit delivered to the construction site. At the option of the ING, Landlord
or Tenant shall purchase the Liebert - Mini Mate unit as specified after the
submission of an additional work order indicating the Landlord's cost.
9. MISCELLANEOUS
- ------------------
Landlord shall furnish and install the fallowing items as indicated on the plans
attached:
1. Plastic laminate kitchen countertop, cotta as indicated on the ING
standard finishes.
2 Building Standard upper and lower kitchen cabinets with a lowered
section for the kitchen sink.
3. Building Standard window treatment on all exterior windows.
Tenant shall provide and install the following items at the Tenant's sole cost
and expense:
1. All furniture and equipment including reception desk and secretarial
stations, unless otherwise indicated in this exhibit.
2. All signage and Interior directories.
3. All built-in cabinetry work including bookshelves.
4. Appliances and vending machines.
The Tenant shall arrange, at the Tenant's sole cost and expense, for the moving
of all furniture and equipment, dismantle and assembly of all moveable
partitioning and ether work necessary to complete the work of this alteration
not outlined in this Work Letter.
10. NOTES
- ----------
All subcontractors, hired by the Tenant, stall coordinate schedules and moves
with the Landlord's office to ensure a smooth and controlled construction
sequence.
All delays, caused as a result of changes by me Tenant shall not modify the date
of possession and the commencement of rent payments by the Tenant.
All work of this alteration shall be completes during normal business hours.
END OF SECTION
ING-STANDARD FINISHES
FLOOR FINISHES:
- --------------------------------------------------------------------------------
CARPET: 4" VINYL WALLBASE:
- ------ -----------------
Mfg: Shaw Mfg: Johnsonite
Spec: Contact Rick Gondon Color: #40 Black
@ 800-424-7429 x6556 for pricing and
specification information
VINYL COMPOSITION TILE:
- ----------------------
Mfg: Armstrong Premium Excelon
Style: Stonetex
Color: 52143-Sandstone Tan
WALL FINISHES:
VINYL WALLCOVERING:
- ------------------
Mfg: Surface Materials
Style: Contrex
Style #: V-12035
PAINT:
- -----
General Wall Cover: (Off White) Accent Wall Color:
Mfg: Benjamin Moore Mfg: Benjamin Moore
Finish: Regal Aqua Velvet Finish: Regal Aqua Velvet
Color: #232 Color: #1203 (Terra Cotta)
Door Frames: Accent Wall Color:
Mfg: Benjamin Moore Mfg: Benjamin Moore
Finish: Semi-Gloss Finish: Regal Aqua Velvet
Color: Black Color: HC-154 (Navy Blue)
Accent Wall Cover:
- -----------------
Mfg: Pittsburgh Paints
Finish: Latex Eggshell
Color: #317-5-Cracker Bitz (Tan)
WALL FINISHES:
- -------------
PLASTIC LAMINATES (Cabinetry/Millwork):
Mfg: Nevamar Mfg: Nevamar
Color: Foundry/Textured Color: Maize Shibori/Textured
Number: #S-2-84T Number: #SH-2-2T
Mfg: Nevamar Mfg: Nevamar
Color: Black/Textured Color: Ochre Tempera/Textured
Number: #S-6-1T Number: #TM-2-1T
Mfg: Nevamar
Color: Charcoal Matrix/Textured
Number: #MR-6-2T
SOLID SURFACES (Reception Countertop):
Mfg: Corian
Color: Midnight Sierra Family
Exhibit 10. (m)
AUTOMATIC REINSURANCE AGREEMENT
Effective as of January 15, 1996
Between the
LINCOLN SECURITY LIFE INSURANCE COMPANY
(hereinafter referred to as the "Company")
And
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
(hereinafter referred to as the "Reinsurer")
1
AUTOMATIC REINSURANCE AGREEMENT
Table of Contents
Page
ARTICLE I ...................................................................4
Basis of Reinsurance
Automatic Coverage
Special Automatic Coverage
Exceptions to Automatic Coverage
Facultative Reinsurance
ARTICLE II ..................................................................6
Notification of Cession
Policy Forms
Notification of Underwriting Rules
ARTICLE III .................................................................7
Commencement and Termination of Liability
ARTICLE IV ..................................................................8
Oversights - Clerical Errors
ARTICLE V ...................................................................9
Plan of Reinsurance
ARTICLE VI..................................................................10
Reinsurance Premiums
Life Premiums
ARTICLE VII.................................................................11
Premium Tax Credits
ARTICLE VIII................................................................13
Reinsurance Administration
ARTICLE IX..................................................................15
Reductions
ARTICLE X...................................................................16
Retention Limit Increases (Recapture)
ARTICLE XI..................................................................17
Extended and Paid-Up Insurance
2
ARTICLE XII ................................................................18
Reinstatements
ARTICLE XIII ...............................................................19
Policy Changes
ARTICLE XIV ................................................................20
Settlement of Claims
ARTICLE XV .................................................................23
Records
ARTICLE XVI ................................................................23
Insolvency
ARTICLE XVII................................................................24
Arbitration
ARTICLE XVIII...............................................................25
Parties to Agreement
ARTICLE XIX.................................................................26
Duration of Agreement
ARTICLE XX .................................................................27
Entire Agreement
EXHIBIT I ..................................................................29
Maximum Retention Limits
Automatic Binding Limits
REINSURANCE PREMIUM ALLOWANCES..............................................30
EXHIBIT II
ELIGIBLE PLANS OF INSURANCE ................................................32
EXHIBIT III
TERMS FOR SPECIFIC POLICY REPLACEMENT & EXCHANGE SITUATION..................33
EXHIBIT IV
3
ARTICLE I
Basis of Reinsurance
1. On and after the fifteenth day of January 1996, amounts of individual life
insurance which have been issued by the Company to standard and substandard
lives on any of the plans of insurance listed in Exhibit III, shall be
automatically reinsured under this Agreement on the basis hereinafter
stated. Once the Company has retained its maximum retention limit on a risk
as specified in Exhibit I, the entire amount in excess of such amount shall
be automatically reinsured under this Agreement with the Reinsurer.
Excepted are risks excluded from automatic coverage under paragraph 4 of
this Article and policies written by agencies whose business is
specifically reinsured elsewhere or other defined classes of business which
are to be automatically reinsured elsewhere. The Reinsurer shall be advised
of the classes of business that are not to be reinsured under this
Agreement, although it shall not be necessary to indicate to what
reinsurer(s) such classes of business are to be ceded.
Automatic Coverage
2. Except as specified in Paragraph 4 of this Article, whenever coverage is
available under this Agreement, the Company shall cede and the Reinsurer
shall automatically accept its specified share of the risk as defined in
Paragraph 1 of this Article.
Special Automatic Coverage
3. Even though the Company may already be on the risk for its maximum limit of
retention under policies previously issued and therefore unable to retain
any part of the insurance currently applied for, the Company, without
retaining any more for its own account, shall still have the right to cede
automatically the full amount of new insurance to the Reinsurer, within the
limits specified in Paragraph 4, below, on the same terms on which the
Company would be willing to accept the risk for its own account if it did
not already have its maximum limit of retention.
Exceptions to Automatic Coverage
4. Reinsurance shall not be ceded automatically on any life if:
a.) the amount of life insurance in force on that life in all companies
plus the amount currently being applied for, less the amount of all
policies absolutely assigned to the Company (provided the sum of all
such absolute assignments does not exceed ten million dollars for
issue age of lives up to age 70 and five million dollars for issue age
of lives at or over age 70) exceeds ten million dollars ($10,000,000)
for issue age of lives up to age 70 and five million dollars
($5,000,000) for issue age of lives at or over age 70; or
b.) if the amount of insurance currently applied for and to be reinsured
under this Agreement on that life, plus all amounts of insurance which
the Company then reinsures on that life under this Agreement or any
4
other life reinsurance agreement, exceed the Automatic Binding
Capacity, as indicated in Exhibit I; or
c.) the substandard mortality rating assessed by the Company to the risk
exceeds class P (500%) or its equivalent on an extra premium basis; or
d.) the Company has submitted the risk for facultative consideration
within the last two years.
Facultative Reinsurance
5. When reinsurance is not available as automatic reinsurance under Article I,
the Company may submit for facultative consideration to the Reinsurer a
request for any amount of reinsurance that the Company may require.
When the Company desires facultative reinsurance, it will send to the
Reinsurer any and all information it has about the risk, including
specifically but not limited to copies of the application, medical
examiners' reports, attending physicians' statements, inspection reports,
and other papers bearing on the insurability of the risk. Upon receipt of
the information, the Reinsurer will analyze the risk promptly and as soon
as possible notify the Company of its decision and its classification of
the risk.
5
ARTICLE II
Notification of Cession
1. At the beginning of each quarter, the Company shall notify the Reinsurer of
all risks ceded under this Agreement on which it has received the initial
premium since the last quarterly notification.
Policy Forms
2. Upon request, the Company shall file with the Reinsurer copies of all
policy forms.
Notification of Underwriting Rules
3. Prior to their introduction, the Company shall notify the Reinsurer of the
introduction of new underwriting programs to be reinsured under this
Agreement or of modification to programs already covered by the Agreement.
6
ARTICLE III
Commencement and Termination of Liability
l. The liability of the Reinsurer under this Agreement for automatic
reinsurance shall commence simultaneously with the beginning of the
Company's liability under its corresponding insurance.
2. The liability of the Reinsurer under this Agreement for facultative
reinsurance shall commence simultaneously with the beginning of the
Company's liability under its corresponding insurance, subject to the
Reinsurer's having given the Company an unconditional approval on the
application for reinsurance.
3. In no event shall the Reinsurer's liability for reinsurance continue after
termination of the Company's liability under its corresponding insurance.
7
ARTICLE IV
Oversights - Clerical Errors
1. Should the Company fail to cede reinsurance that otherwise should have been
ceded on an automatic basis, or should the Company or the Reinsurer fail to
comply with any of the other terms of this Agreement, and if this is shown
to be unintentional and the result of a misunderstanding, oversight or
clerical error on the part of either the Company or the Reinsurer, then
this Agreement shall not be deemed abrogated thereby, but all companies
shall be restored to the position they would have occupied had no such
misunderstanding, oversight or clerical error occurred.
8
ARTICLE V
Plan of Reinsurance
1. Reinsurance ceded under this Agreement shall be on a basis which is
commonly known as Coinsurance. The Reinsurer shall be liable for its share
of reserves, including any deficiency reserves, and death claims.
2. Reinsurance shall be subject to the same terms and conditions as the policy
issued by the Company to the insured.
3. The reinsurance shall be in force for the amount determined from the
reinsurance cession, provided the Company's policy is in force.
9
ARTICLE VI
Reinsurance Premiums
Life Premiums
1. The reinsurance premiums shall be the premiums, excluding the policy fee,
which the Company charges its insureds, less the appropriate allowance
given in the attached Exhibit II. The Reinsurer shall receive a share of
the Reinsurance premium equivalent to the Reinsurer's share of the face
amount. The flat extra is considered part of the reinsurance premium which
has separate allowances described in paragraphs 2 and 3 of this Article.
2. Risks Bearing Permanent Flat Extras for More than Five Years
The total reinsurance premiums for such risks shall be at rates provided in
Paragraph 1 of this Article plus the following percentage of the flat extra
premium charged by the Company under the original policy for the face
amount reinsured.
First Year 25%
Renewal Year 90%
Risks Bearing Temporary Flat Extras for Five Years or Less
3. The total reinsurance premiums for such risks shall be at the rates
provided in Paragraph 1 of this Article plus the following percentage of
the temporary flat extras premium charged under the original policy for the
face amount reinsured.
First Year 90%
Renewal Year 90%
10
ARTICLE VII
Premium Tax Credits
1. The reinsurance allowances applicable under this Agreement take into
consideration the Company's liability for premium taxes. Accordingly, the
Reinsurer shall make no separate reimbursement to the Company for premium
taxes on the portion of the Company's premium paid to the Reinsurer as
reinsurance premiums.
DAC Tax
2. 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 taxable years for which this Agreement
remains in effect unless such election is terminated by mutual written
agreement of the parties hereto with the consent, if required, of the
Commissioner of the Internal Revenue Service.
a.) The term "party" will refer to either the Company or the Reinsurer as
appropriate.
b.) The terms used in this Article are defined by reference to Treasury
Regulation Section 1.848-2 in effect as of December 29, 1992. The term
"net consideration" will refer to either net consideration as defined
in Treasury Regulation Section 1.848-2(f) or; gross premium or other
consideration" as defined in Treasury Regulation Section 1.848-3(b) as
appropriate.
c.) The party with the positive net 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)(l).
d.) 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.
e.) The Company will submit a schedule to the Reinsurer by May 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.
11
f.) The Reinsurer may contest such calculation by providing an alternative
calculation to the Company in writing within thirty (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 the net
consideration as determined by the Company in the Reinsurer's tax
return for the previous year.
g.) If the Reinsurer contests the Company's calculation of the net
consideration, the parties will act in good faith to each 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.
12
ARTICLE VIII
Reinsurance Administration
1. Reinsurance ceded under this Agreement shall be Bordereau
Administration.
a. The Reinsurer shall have the responsibility of maintaining
adequate records for the administration of the reinsurance ceded
hereunder.
b. Reinsurance premiums shall be paid on an annual basis in advance,
but if a reinsured policy is terminated or reduced in accordance
with the provisions of this Agreement, the Reinsurer shall refund
the Company the unearned portion of the reinsurance premium.
c. Reinsurance premiums and adjustments shall be accounted for and
settled monthly for facultative business and quarterly for
automatic business. Within forty-five (45) days after the
beginning of each calendar month or quarter, the Reinsurer shall
calculate a statement of premiums for all outstanding reinsurance
falling due within the previous month or quarter. The statement
shall also include adjustments in Reinsurance premiums due in
previous billing cycles. 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. Except
as provided in Article IV, the payment of reinsurance premiums
shall be a condition precedent to the liability of the Reinsurer
under reinsurance covered by this Agreement. In the event of the
non-payment of reinsurance premiums as provided in this
paragraph, the Reinsurer shall have the right to terminate the
reinsurance under all policies having reinsurance premiums in
arrears by giving a thirty days notice of termination in writing.
As of the close of this thirty day period, if the delinquent
premium remains unpaid, the Reinsurer's liability will terminate
for the risks described in the preceding sentence and the risks
where the reinsurance premiums become delinquent during the
thirty day period. Policies on which reinsurance premiums
subsequently fall due will automatically terminate if reinsurance
premiums are not paid when due as provided in this paragraph.
Regardless of these terminations, the Company will continue to be
liable to the Reinsurer for all earned unpaid reinsurance
premiums.
The Company may reinstate the terminated risks within sixty days
after the effective date of termination by paying the delinquent
reinsurance premiums for the risks in force prior to the
termination. However, the Reinsurer will not be liable for any
claim incurred between the dates of termination and
reinstatement.
13
The effective date of reinstatement will be the day the required
back premiums are received by the Reinsurer.
d. In addition to the premium accounting described above, the
Reinsurer will create appropriate reports on new business
reserves, terminations and changes, policy exhibits and an annual
inforce listing.
14
ARTICLE IX
Reductions
1. If all or any part of any insurance policy reinsured under this Agreement
shall be reduced or terminated, the amount of reinsurance carried by the
Reinsurer with respect to that policy shall be reduced proportionally as of
the date and time of such reduction or termination. In no case shall the
company be required to assume a risk for an amount in excess of its regular
retention limit for the age at issue and mortality rating of the policy
under which reinsurance is being reduced or terminated.
15
ARTICLE X
Retention Limit Increases (Recapture)
1. If the Company increases its limit of retention, a proportionate reduction
may be made at the option of the Company in the reinsurance in force on all
lives on which the Company had its maximum limit of retention at the time
reinsurance was ceded. However, no risk shall be recaptured prior to the
tenth (10th) anniversary of the original reinsurance of the risk.
2. Recapture shall be effected as follows:
a. After the retention increase is effected, the Company shall notify the
Reinsurer of its intention to recapture within ninety (90) days from
the effective date of such recapture.
b. Each eligible policy shall be recaptured on the first policy
anniversary on or next following the effective date of recapture.
c. All eligible policies shall be recaptured unless there is an agreement
to the contrary mutually expressed in writing.
d. If the Company has reinsured any portion of the policy in another
company, the reduction in reinsurance ceded under this Agreement shall
be in the same proportion to the total reduction in reinsurance as the
amount reinsured under this Agreement bears to the total reinsurance
on the policy.
e. In determining the new retention for a particular class, the rules for
the classification at time of issue which may include, but are not
limited to, age and rating at issue, shall be used.
f. The recaptured amounts must be retained by the ceding company without
benefit of reinsurance from some other source.
16
ARTICLE XI
Extended and Paid-Up Insurance
1. Should a reinsured policy lapse and extended or paid-up insurance be in
force in accordance with the provisions of the policy, the amount of
reinsurance shall be adjusted. For any resulting adjustment in the amount
of insurance, a corresponding adjustment of reinsurance shall be made.
17
ARTICLE XII
Reinstatements
1. Should a lapsed insurance policy be reinstated in accordance with its terms
and the rules of the Company, the reinsurance under such policy shall be
reinstated automatically. Premiums and interest on reinstated reinsurance
shall be payable only to the extent that the Company collects premiums and
interest on such insurance.
18
ARTICLE XIII
Policy Changes
1. Should the Company make any material changes in the provisions and
conditions of a policy issued to an insured and upon which reinsurance
shall have been granted hereunder, the Company shall, within a reasonable
time, inform the Reinsurer of such change.
2. Should a policy reinsured under this Agreement be exchanged for or
converted to a new policy of the Company, the new policy shall be
considered as a continuation of the original policy if any of the following
conditions exist:
a.) full new evidence of insurability, commensurate with the full current
amount of insurance, is not secured;
b.) full new suicide and contestability periods, commensurate with those
used for normal newly issued policies, are not employed;
c.) a commission lower than that normally paid for new issues of the plan
of insurance on the new policy is paid.
If such policy is so construed as a continuation of the original policy, the
full amount of reinsurance on the original policy shall be continued on the new
policy. Except as specifically provided in Exhibit IV, point-in-scale
reinsurance rates measured from the effective date of the original policy would
be payable by the Company. The recapture period applicable to the original
policy would govern the reissued policy and duration would be measured from the
effective date of the original policy.
19
ARTICLE XIV
Settlement of Claims
1. In the case of a claim on a reinsured policy, whether claim payment is made
under the strict policy conditions or compromised for a lesser amount, the
settlement made by the Company shall be unconditionally binding upon the
Reinsurer. The Company shall keep the Reinsurer informed of any claim which
might be contested or compromised or where unusual claim investigation
expenses are contemplated and, where practical, the Company may consult
with the Reinsurer. However, such consultation shall not impair the
Company's freedom to determine the proper action on the claim and the
settlement made by the Company shall still be unconditionally binding on
the Reinsurer.
2. The Company shall furnish the Reinsurer with copies of the proofs of claim.
If the Reinsurer so requests, the Company shall furnish the Reinsurer with
any information the Company may possess in connection with the claim.
Payment in settlement of the reinsurance under a claim approved and paid by
the Company for a life reinsured hereunder shall be made by the Reinsurer
upon the receipt of the claim papers. If the total amount reinsured is
$500,000 or more, and if the Company so requests, then the amount due for
that claim will become payable as soon as the company approves the claim
and notifies the Reinsurer.
3. The Reinsurer shall share in the claim expense of any contest or compromise
of a claim in the same proportion that the risk reinsured hereunder bears
to the total risk of the Company on all policies being contested by the
Company and shall share in the total amount of any reduction in liability
in the same proportion. Claim expense shall include, but not be limited to,
cost of investigation, legal fees, court costs and interest charges.
Compensation of officers and employees and any possible extra contractual
damages, except as provided in paragraph 6 of this Article, shall not be
considered claim expenses.
4. In the event of an increase or reduction in the amount of the Company's
insurance on any policy reinsured hereunder because of an overstatement or
understatement of age or misstatement of sex, established after the death
of the insured, the Company and the Reinsurer shall share in such increase
or reduction in proportion to their respective net amounts under such
policy.
5. If the Company decides to contest a claim, the Reinsurer may pay its full
share, as if the claim were not contested, to the Company and this will
fulfill the Reinsurer's obligation for that claim. However, the Reinsurer
may, at its option after consultation with the Company, join in the contest
and then share in the expenses of the contest and any reduction in
liability, as specified in paragraph 3 of this Article, with respect to
this claim. The Reinsurer will be deemed to have joined in the contest
unless it notifies the Company of its intentions not to join within 48
hours of receiving written notification of the Company's intention to
contest.
20
6.a. If the Reinsurer joins in the contest, the Reinsurer shall share in the
claim expense of the contest or compromise of a claim in the same
proportion that the risk reinsured hereunder bears to the total risk of the
Company on all policies being contested by the Company and shall share in
the total amount of any reduction in liability in the same proportion.
Claim expense shall include, but not be limited to, cost of investigation,
legal fees, court costs and interest charges. Compensation of salaries of
officers and employees and any possible extra contractual damages, except
as provided in paragraph 6 of this Article shall not be considered claim
expenses.
b. Subject to the provision of Paragraphs c and d of this Article XIV, the
Reinsurer shall reimburse the Company for its share of any noncontractual
damages (including, but not limited to, punitive, exemplary, compensatory
or consequential damages) assessed against the Company, provided the
conditions precedent to liability for noncontractual damages as specified
in paragraph d of this Article, are met.
c. The Reinsurer shall not be liable for any portion of noncontractual damages
assessed on the basis of fault or wrongdoing on the part of the Company,
its agents or representatives other than for denying or contesting the
claim.
d. Notwithstanding the provisions of Paragraphs b and c, the Reinsurer shall
participate in noncontractual damages assessed against the Company only in
those cases where it is clear that the denial or contesting of the claim
was the sole basis for the award or whenever the total amount of
contractual claims and noncontractual damages is equal to or less than the
face amount of the policy.
e. The Reinsurer shall proportionately share in any assessment of Statutory
Penalties (herein defined as those amounts awarded as a penalty, but fixed
in amount by statute).
Conditions Precedent to Liability
f. Conditions precedent to liability for noncontractual damages are as
follows:
1. The Reinsurer shall have had the opportunity to review the complete
claim file prior to any final action by the Company that indicates to
the claimant that the claim is being denied or contested; and
2. Upon completion of such review, the Reinsurer shall have agreed in
writing that the claim should be denied or contested.
21
Covered Expenses
g. Legal fees incurred in defense against noncontractual damages shall be
covered expenses. The Reinsurer shall reimburse the Company for such
expenses in the same proportion as described in Paragraph 6a.
22
ARTICLE XV
Records
1. The Reinsurer shall have the right at all reasonable times and for any
reasonable purpose to inspect at the Home Office of the Company all books
and documents relating to this reinsurance.
ARTICLE XVI
Insolvency
1. In the event of the insolvency of the Company, all reinsurance made, ceded,
renewed or otherwise becoming effective under this Agreement shall be
payable by the Reinsurer directly to the Company or to their liquidator,
receiver or statutory successor on the basis of the liability of the
Company under the contract reinsured without diminution because of the
insolvency of the Company. 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 of the
pendency of a claim against the 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, at its own expense, in the proceeding where such
claim is to be adjudicated any defense or defenses which they may deem
available to the Company or its liquidator or receiver or statutory
successor.
2. It is further understood that the expense thus incurred by the Reinsurer
shall be chargeable, subject to court approval, against the 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. Where two or more assuming insurers are
involved in the same claim and a majority in interest elect to interpose
defense to such claim, the expense shall be apportioned in accordance with
the terms of the Reinsurance Agreement as though such expense had been
incurred by the Company.
3. In the insolvency of the Reinsurer, all Reinsurance made, assumed, renewed
or otherwise becoming effective under this Agreement shall be payable by
the Reinsurer or by its liquidator, receiver, or statutory successor on the
basis of the liability of the Reinsurer, directly to the Company, under the
contract reinsured without diminution because of the insolvency of the
Reinsurer. In the event of such insolvency, the Company shall have the
right to offset the payment of reinsurance premiums to such Reinsurer by
such Reinsurer's share of claims and related expenses as defined in Article
XIV.
23
ARTICLE XVII
Arbitration
1. In the event of any difference arising hereafter between the parties hereto
with reference to any transaction under this Agreement, the same shall be
referred to three arbitrators who must be executive officers of life
insurance or life reinsurance companies other than the two parties to this
Agreement or their affiliates, each of the Company and the Reinsurer to
appoint one of the arbitrators and such two arbitrators to select the
third. If either party refuses or neglects to appoint an arbitrator within
thirty (30) days after receipt of the written request for arbitration, the
other party may appoint a second arbitrator.
2. If the two arbitrators fail to agree on the selection of a third arbitrator
within thirty (30) days of their appointment, each of them shall name three
individuals, of whom the other shall decline two and the decision shall be
made by drawing lots.
3. The arbitrators shall consider this Agreement not merely as a legal
document but also as a gentlemen's agreement. In resolving the dispute, the
arbitrators will give full consideration to the customs and practices of
the life insurance and life reinsurance industry, insofar as they are not
in conflict with the specific terms of this Agreement. They shall decide by
a majority vote of the arbitrators. There shall be no appeal from their
written decision.
4. Each party shall bear the expense of its own arbitration, including its
arbitrator and outside attorney fees, and shall jointly and equally bear
with the other party the expense of the third arbitrator. Any remaining
costs of the arbitration shall be apportioned by the arbitrators.
5. Arbitration will be governed under the laws of the State of New York.
24
ARTICLE XVIII
Parties to Agreement
1. 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 Company and the Reinsurer. The acceptance of
reinsurance hereunder shall not create any right or legal relation whatever
between the Reinsurer and the original insureds or the beneficiaries under
any policies of the Company which may be reinsured hereunder.
25
ARTICLE XIX
Duration of Agreement
1. This Agreement shall be unlimited as to its duration but may be cancelled
at any time insofar as it pertains to the handling of new business
thereafter by the Company or the Reinsurer, giving ninety (90) days notice
of cancellation in writing. The Reinsurer shall continue to accept
reinsurance in accordance with this Agreement during the ninety (90) day
period aforesaid. The reinsurance under this Agreement shall be maintained
in force as long as such policies shall remain in force and reinsurance
premiums are paid when due, except as provided in Articles IX and X.
26
ARTICLE XX
Entire Agreement
1. This Agreement shall constitute the entire Agreement between the parties
with respect to business reinsured hereunder. There are no understandings
between the parties other than as expressed in this Agreement and any
future change or modifications to this Agreement shall be null and void
unless made by amendment to this Agreement and signed by both parties.
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their duly authorized representatives:
Security-Connecticut Life Insurance Company
By: /s/ William Casill
-----------------------------------------------
Title Vice President and Actuary
Attest:
By: /s/ Peter V. Susi
-----------------------------------------
Title A.V.P. and Assoc. Actuary
-----------------------------------------
Lincoln Security Life Insurance Company
By: /s/ J. Paul Chhabra
-----------------------------------------------
Vice President and Actuary
Attest:
By: /s/
-----------------------------------------------
Title V.P. Underwriting
28
EXHIBIT I
Maximum Retention Limits
Life:
Rating Ages 0-69 Ages 70 and Over
Standard $100,000 $50,000
TBL 1-4 $100,000 $50,000
TBL 5-16 $50,000 $50,000
Automatic Binding Limits
Life:
Rating Ages 0-69 Ages 70 and Over
------ --------- ----------------
Standard $5,000,000 $2,500,000
TBL 1-4 $5,000,000 $2,500,000
TBL 5-16 $2,500,000 $2,500,000
29
REINSURANCE PREMIUM ALLOWANCES
EXHIBIT II
30
ALLOWANCES
Securi-T-5
First year 100%
Renewal years 34%
Securi-T-10
First year 100%
Renewal years 28%
Lifeline-10
First year 100%
Renewal years 30%
Lifeline-15
First year 100%
Renewal years 32%
31
ELIGIBLE PLANS OF INSURANCE
Plan Name Plan Type Date Added
Securi-T-5 Term January 15, 1996
Securi-T-10 Term January 15, 1996
Lifeline-10 Term January 15, 1996
Lifeline-15 Term January 15, 1996
EXHIBIT III
32
TERMS FOR SPECIFIC POLICY REPLACEMENT & EXCHANGE SITUATION
I. Term Conversions, Term to Permanent Exchange
A. If the conversion, replacement or exchange occurs before the fifth
anniversary of the original policy, use the YRT rates effective the
date of the original issue, shown in Exhibit II of the Reinsurance
Agreement effective July 1, 1989 for the age at issue for the new
policy plus the following first year single premium:
Age Single Premium per $1000
Under 40 $ .50
40 to 49 1.00
50+ 3.00
B. If the conversion occurs after the fifth anniversary of the original
policy, use the reinsurance rates described in paragraph I.A., on a
point-in-scale basis, that is, based upon the age at issue of the
original policy and attained duration, with only fifty (50%) percent
of the rate payable in the year following the reissue.
II. Exchange to Term
A. If full new evidence of insurability is secured, use reinsurance
allowances in Exhibit II on a new issue basis, that is, based upon age
at issue of the new policy.
B. If full new evidence of insurability is not secured, use reinsurance
allowances in Exhibit II on a point-in-scale basis, that is, based
upon age at issue of the original policy and attained duration.
EXHIBIT IV
Lincoln Security-Life Insurance Company Rates Effective 1/15/96
Form 11200NY
33
AMENDMENT I
Effective May 1, 1996
Amendment to the Automatic Reinsurance Agreement (effective January 15, 1996)
between Lincoln Security Life Insurance Company, hereinafter referred to as the
"Company", and Security-Connecticut Life Insurance Company, hereinafter referred
to as the "Reinsurer".
It is hereby agreed that on and after the first day of May 1996, under the above
mentioned reinsurance agreement, Article I, paragraph 4, will be replaced with
the following:
Exceptions to Automatic Coverage
4. Reinsurance shall not be ceded automatically on any policy issued on and
after April 1, 1996, if:
a. the amount of life insurance in force on that life in all companies
plus the amount currently applied for, less the amount of all policies
absolutely assigned to the Company (provided the sum of all such
absolute assignments does not exceed twenty million dollars for issue
age of lives up to age 70 and ten million dollars for issue age of
lives at or over age 70) exceeds twenty million dollars ($20,000,000)
for issue age of lives up to age 70 and ten million dollars
($10,000,000) for issue age of lives at or over age 70; or
b. if the amount of insurance currently applied for and to be reinsured
under this Agreement on that life, plus all amounts of insurance which
the Company then reinsures on that life under this Agreement on any
other life reinsurance agreement, exceed the Automatic Binding
Capacity, as indicated on Exhibit I; or
c. the substandard mortality rating assessed by the Company to the risk
exceeds Class P (500%) or its equivalent on an extra premium basis; or
d. the Company has submitted the risk for facultative consideration
within the last two years.
1
Except as herein specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and this amendment is to be added to and made
part of the aforesaid Agreement.
Security-Connecticut Life Insurance Company
By: /s/ William Casill
-------------------------------------------------------
William J. Casill
Title Vice President and Actuary
-------------------------------------------------------
Attest:
By: /s/ Peter V. Susi
-------------------------------------------------------
Title Assistant Vice President and Assoc. Actuary
-------------------------------------------------------
Lincoln Security Life Insurance Company
By: /s/ Barry St. Pierre
-------------------------------------------------------
Title Senior Vice President
-------------------------------------------------------
Attest:
By: /s/ J. Paul Chhabra
-------------------------------------------------------
Title Vice President and Actuary
-------------------------------------------------------
2
AMENDMENT II
Effective on or after November 20, 1996, the Reinsurance Agreement (effective
January 15, 1996) between Security-Connecticut Life Insurance, herein referred
to as the "Reinsurer", and Lincoln Security Life Insurance Company, herein
referred to as the "Company", shall be amended to include the following:
The Reinsurer agrees to establish a Trust Agreement in favor of the Company to
replace the "Letter of Credit" Amendment, effective November 28, 1995. The trust
account will be at least equal to the aggregate of the statutory reserves plus
any paid and unpaid losses recoverable from reinsurance assumed by the Reinsurer
from the Company under all such Reinsurance Agreements.
The Trust Agreement shall be established in compliance with Regulation 114 of
the New York Insurance Regulations and shall be subject to the following
provisions:
1. Assets deposited in the trust account shall be valued according to their
current fair market value, and shall consist only of United States legal
tender, certificates of deposit issued by a United States bank and payable
in United States legal tender, and investments of the types specified in
paragraphs (1), (2), (3), (8), and (10) of subsection (a) of section 1404
of the New York Insurance Law, provided that such investments are issued by
an institution that is not the parent, subsidiary, or affiliate of either
the grantor or the beneficiary.
2. Prior to depositing assets with the trustee, the Reinsurer is required to
execute assignments, endorsements in blank, or transfer legal title to the
trustee of all shares, obligations or any other assets requiring
assignments, in order that the Company, or the trustee upon the direction
of the Company, may whenever necessary negotiate any such assets without
consent or signature from the Reinsurer or any other entity.
3. All settlements of account between the Company and the Reinsurer are
required to be made in cash or its equivalent.
4. The Reinsurer and the Company agree that the assets in the trust account,
established pursuant to the provisions of the Reinsurance Agreement, may be
withdrawn by the Company at any time, notwithstanding any other provisions
in the Reinsurance Agreement, and shall be utilized and applied by the
Company or any successor by operation of law of the Company, including
without limitation, any liquidator, rehabilitator, receiver or conversator
of the Company, without diminution because of insolvency on the part of the
Company or the Reinsurer, only for the following purposes:
a) to reimburse the Company for the Reinsurer's share of premiums
returned to the owners of policies reinsured under the Reinsurance
Agreement on account of cancellations of such policies;
1
b) to reimburse the Company for the Reinsurer's share of surrenders and
benefits on losses paid by the Company pursuant to the provisions of
the policies reinsured under the Reinsurance Agreement;
c) 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
policies reinsured under the Reinsurance Agreement. Such account shall
include, but not be limited to, amounts for policy reserves, reserves
for claims and losses incurred, loss adjustments, expenses, and
unearned premiums; and
d) to pay any other amounts the Company claims are due under the
Reinsurance Agreement.
5. The Reinsurer may be given the right to seek approval from the Company to
withdraw from the trust account all or any part of the assets contained
therein and transfer such assets to the Reinsurer, provided:
a) The Reinsurer shall, at the time of such withdrawal, replace the
withdrawn assets with other qualified assets having a market value
equal to the market value of the assets withdrawn so as to maintain at
all times the deposit in the required amount; or
b) after such withdrawals and transfer, the market value of the trust
account is no less than 102 percent of the required amount.
6. The Company shall be the sole judge as to the application of this
provision, but shall not unreasonably or arbitrarily withhold its approval
and provide for:
a) the return of any amount withdrawn in excess of the actual amounts
required for subparagraphs (4), (a)-(c) of this Amendment, or in the
case of subparagraph (4), (d), any amounts that are subsequently
determined not to be due; and
b) interest payments at a rate not in excess of the prime rate of
interest, on the amounts held pursuant to subparagraph (4), (c) of
this Amendment.
7 Any arbitration panel or court of competent jurisdiction may permit the
award of:
a) interest at a rate different from that provided in subparagraph (6),
(b) of this Amendment;
b) court or arbitration costs;
2
c) attorney's fees; and
d) any other reasonable expenses.
Except as herein specified, all of the terms and conditions of the existing
Reinsurance Agreements between the Reinsurer and the Company shall continue to
apply, and this Amendment shall be attached to and made part of each such
Reinsurance Agreement.
3
In witness whereof; the parties hereto have caused this Amendment to be executed
in duplicate by their duly authorized representatives:
Security-Connecticut Life Insurance Company
By: /s/ William Casill
-------------------------------------------------------
Title Vice President and Actuary
-------------------------------------------------------
Attest: /s/ Peter V. Susi
-------------------------------------------------------
Title Assistant Vice President and Assoc. Actuary
-------------------------------------------------------
Lincoln Security Life Insurance Company
By: /s/ Robert Voight
-------------------------------------------------------
Title Vice President
-------------------------------------------------------
Attest: /s/ John Lockhart
-------------------------------------------------------
Title Assistant Controller & Assistant Treasurer
-------------------------------------------------------
4
AMENDMENT III
Effective June 15, 1997
Amendment to the Automatic Reinsurance Agreement (effective January 15, 1996)
between Lincoln Security Life Insurance Company, hereinafter referred to as the
"Company", and Security-Connecticut Life Insurance Company, hereinafter referred
to as the "Reinsurer".
It is hereby agreed that on and after the fifteenth day of June 1997, under the
above mentioned reinsurance agreement, Exhibit II will be amended to include the
attached.
Except as herein specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and this amendment is to be added to and made
part of the aforesaid agreement.
Security-Connecticut Life Insurance Company
By: /s/ William Casill
-------------------------------------------------------
Title Vice President and Actuary
-------------------------------------------------------
Attest: /s/ Peter V. Susi
-------------------------------------------------------
Title Assistant Vice President and Assoc. Actuary
-------------------------------------------------------
Lincoln Security Life Insurance Company
By: /s/ Robert Voight
-------------------------------------------------------
Title Vice President
-------------------------------------------------------
Attest: /s/ John Lockhart
-------------------------------------------------------
Title Assistant Controller and Assistant Treasurer
-------------------------------------------------------
REINSURANCE PREMIUM ALLOWANCES
EXHIBIT II
ALLOWANCES
SECURI-T 5
Duration SPNS PNS SNS PS SS
-------- ---- --- --- --- ---
1 100% 100% 100% 100% 100%
2+ 34% 35% 35% 31% 31%
SECURI-T 10
Duration SPNS PNS SNS PS SS
-------- ---- --- --- --- ---
1 100% 100% 100% 100% 100%
2+ 32% 31% 31% 27% 27%
Lifeline 10
Duration SPNS PNS SNS PS SS
-------- ---- --- --- --- ---
1 100% 100% 100% 100% 100%
2+ 29% 30% 30% 26% 26%
Lifeline 15
Duration SPNS PNS SNS PS SS
-------- ---- --- --- --- ---
1 100% 100% 100% 100% 100%
2+ 31% 32% 32% 29% 29%
Policy Fee: None.
Recapture: Reinsurance ceded under the program will not be eligible for
recapture before the tenth anniversary of the reinsured risk.
Rates Effective 2/18/97
AMENDMENT IV
Effective April 1, 1998
Amendment to the Automatic Reinsurance Agreement (effective January 15, 1996)
between ReliaStar Life Insurance Company of New York, hereinafter referred to as
the "Company" and Security-Connecticut Life Insurance Company, hereinafter
referred to as the "Reinsurer."
It is hereby agreed that on and after the first of April 1998, under the above
mentioned reinsurance agreement, Exhibit II will be amended to include the
attached.
Accept as herein specified, all terms and conditions of the Automatic
Reinsurance Agreement shall apply, and this amendment is to be added to and made
part of the aforesaid agreement.
Accept as herein specified, all terms and conditions of the Automatic
Reinsurance Agreement and shall apply, and the amendment is to be added to and
made part of the aforesaid agreement.
Security-Connecticut Life Insurance Company
By: /s/ William Casill
------------------------------------------------------------
Title: Vice President and Actuary
------------------------------------------------------------
Attest: /s/ Ava M. Zils
------------------------------------------------------------
Title: Reinsurance Officer
------------------------------------------------------------
ReliaStar Life Insurance Company of New York
By: /s/ Fritz Riemenschneider
------------------------------------------------------------
Title: Assistant Vice President and Compliance Officer
------------------------------------------------------------
Attest: /s/ Kenneth Quenstedt
------------------------------------------------------------
Title: Assistant Vice President
------------------------------------------------------------
Reinsurance Premium Allowances
EXHIBIT II
Allowances
Lifeline 10
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 29%
Lifeline 15
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 29%
Lifeline 20
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 34%
RNY 5
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 35%
Policy fee: None
Recapture: Reinsurance ceded under the program will not be eligible for
recapture before the tenth anniversary of the reinsured risk.
ReliaStar Life Insurance Company of New York Rates effective April 1, 1998
Rates modified on February 10, 1998
AMENDMENT V
Effective September 1, 1998
Amendment to the Automatic Reinsurance Agreement (effective January 15, 1996)
between ReliaStar Life Insurance Company of New York, hereinafter referred to as
the "Company", and Security-Connecticut Life Insurance Company, hereinafter
referred to as the "Reinsurer".
It is hereby agreed that on and after the first day of September 1998, under the
above mentioned reinsurance agreement, Exhibit I, will be amended with the
attached.
Except as hereby specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and the amendment is to be attached to and
made part of the aforesaid Agreement.
Security-Connecticut
Life Insurance Company
Attest: /s/ Peter V. Susi By: /s/ Ava M. Zils
----------------- -------------------------
Title: 2nd V.P. and Actuary Title: Reinsurance Officer
--------------------- -------------------------
ReliaStar Life Insurance
Company of New York
Attest: /s/ William Bonneville By: /s/ Fritz Riemenschneider
---------------------- -------------------------
Title: Senior Vice President Title: Asst. VP & Compliance Officer
---------------------- -------------------------
EXHIBIT I
RETENTION LIMITS APPLICABLE TO TERM POOL
Underwriting Maximum Retension
- ----------- -----------------
Program 300,000
Individual
AUTOMATIC BINDING CAPACITY APPLICATION TO TERM POOL
Underwriting Automatic Binding
- ------------ -----------------
Program 6,000,000
Individual
AMENDMENT VI
Effective April 1, 2000
Amendment to the Automatic Reinsurance Agreement (effective January 15, 1996)
between ReliaStar Life Insurance Company of New York hereinafter referred to as
the "Company", and Security-Connecticut Life Insurance Company, hereinafter
referred to as the "Reinsurer".
It is hereby agreed that on and after the first day of April 2000, under the
above mentioned reinsurance agreement, Exhibit II, will be amended with the
attached.
Except as hereby specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and the amendment is to be attached to and
made part of aforesaid Agreement.
Security-Connecticut
Life Insurance Company
Attest: /s/ Diane Sylvester By: /s/ Peter Susi
------------------- --------------------------------
Title: 2nd Vice President Title: 2nd Vice President and Actuary
------------------- --------------------------------
ReliaStar Life Insurance
Company of New York
Attest: /s/ William Bonneville By: /s/ Fritz Riemenschneider
---------------------- --------------------------------
Title: Executive Vice President Title: Asst. VP & Compliance Officer
------------------------ --------------------------------
Reinsurance Premium Allowances
EXHIBIT II
Allowances
LifeLine 10
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 14%
LifeLine 15
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 19%
LifeLine 20
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 27%
RNY 5
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 25%
Policy Fee: None
Recapture: Reinsurance ceded under the program will not be eligible for
recapture before the tenth anniversary of the reinsured risk.
AMENDMENT VII
Effective November 1, 2001
Amendment to the Reinsurance Agreement (effective January 15, 1996) between
ReliaStar Life Insurance Company of New York, formally Lincoln Security Life
Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that effective on and after the first day of November 1,
2001, the above mentioned Reinsurance Agreement is amended as follows:
1. Article I, paragraph 1, is clarified that Company may enter into
reinsurance arrangements whereby Company will cede risks to certain
reinsurers on a first dollar quota share basis prior to ceding Company's
excess retention to Reinsurer. To the extent Company's designated maximum
retention is exceeded after ceding amounts under a first dollar quota
reinsurance arrangement, Reinsurer shall accept amounts in excess of
Company's retention as provided in this Agreement.
2. The exceptions to automatic reinsurance coverage set forth in Article I,
paragraph 4, shall not apply to policies issued on and after the effective
date of this Amendment.
3. Exhibit I is amended with the attached.
4. The allowances set forth in Exhibit II is amended to include the attached
allowances which shall apply to policies issued after the effective date of
this Amendment.
5. Exhibit III is replaced by the attached Plans of Insurance with the
appropriate effective dates. In addition, it is agreed that all new plans
of Company's term insurance shall be eligible plans of insurance to be
ceded under this Reinsurance Agreement, unless the Reinsurer elects in
writing not to participate in the coverage for a newly designed permanent
term plan within 20 days after receiving requisite plan information which
Company must provide to Reinsurer at least 25 days prior to commencing
cessions to Reinsurer. Such new plans shall use the appropriate reinsurance
allowances then being used for new policies reinsured under the Reinsurance
Agreement, unless the parties amend this Agreement in writing providing
another set of reinsurance allowances to be applicable for the new plan of
insurance.
Except as herein specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and this amendment is to be added to and made
part of the aforesaid Agreement.
Security-Connecticut Life Insurance Company
By: /s/ Bruce Loughran
-------------------------------------------------------
Title: Second Vice President and Actuary
-------------------------------------------------------
Attest:
-------------------------------------------------------
By: /s/ Eric Swan
-------------------------------------------------------
Title: Assistant Actuary
-------------------------------------------------------
ReliaStar Life Insurance Company of New York
By: /s/ William Bonneville
-------------------------------------------------------
Title: Executive Vice President
-------------------------------------------------------
Attest:
-------------------------------------------------------
By: /s/ Kenneth Quenstedt
-------------------------------------------------------
Title: AVP - IS
-------------------------------------------------------
EXHIBIT I
Effective November 1, 2001
RETENTION LIMITS APPLICABLE TO TERM POOL:
----------------------------------------
$300,000
AUTOMATIC BINDING APPLICABLE TO TERM POOL:
------------------------------------------
Automatic Binding Capacity - Individual Life
Rating Ages - 0-75 Rating Ages - 76-80 Rating Ages - 81-85
Standard 50,000,000 Standard 30,000,000 Standard 25,000,000
Table 1-6 50,000,000 Table 1-4 30,000,000 Table 1-2 25,000,000
Table 7-16 35,000,000 Table 5-16 0 Table 3-16 0
EXHIBIT II
Reinsurance Premium Allowances
TermSmart NY 5
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 19%
TermSmart NY 10
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 14%
TermSmart NY 15
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 18%
TermSmart NY 20
Duration All Underwriting Classes
-------- ------------------------
1 100%
2+ 20%
Policy Fee: None.
Recapture: Reinsurance ceded under the program will not be eligible for
recapture before the tenth anniversary of the reinsured risk.
EXHIBIT III
ELIGIBLE PLANS OF INSURANCE
PLAN NAME PLAN TYPE DATE ADDED
--------- --------- ----------
TermSmart NY 5 Term November 1, 2001
TermSmart NY 10 Term November 1, 2001
TermSmart NY 15 Term November 1, 2001
TermSmart NY 20 Term November 1, 2001
AMENDMENT VIII
Effective September 9, 2002
Amendment to the Automatic Reinsurance Agreement, effective January 15, 1996,
between ReliaStar Life Insurance Company of New York (Company), and
Security-Connecticut Life Insurance Company (Reinsurer).
It is hereby agreed that on and after the ninth day of September 2002, under the
above mentioned reinsurance agreement, Exhibit II, will be amended with the
attached.
Except as hereby specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and the amendment is to be attached to and
made part of aforesaid Agreement.
Security-Connecticut Life Insurance Company
By: /s/ Richard Lau
-------------------------------------------------------
Title: Vice President and Actuary
-------------------------------------------------------
Date: 2/25/04
-------------------------------------------------------
Attest: /s/ Mary Broesch
-------------------------------------------------------
Title Vice President and Actuary
-------------------------------------------------------
Date 2/25/04
-------------------------------------------------------
ReliaStar Life Insurance Company of New York
By: /s/ Richard Lau
-------------------------------------------------------
Title: Vice President and Actuary
-------------------------------------------------------
Date: 2/25/04
-------------------------------------------------------
Attest: /s/ Mary Broesch
-------------------------------------------------------
Title Vice President and Actuary
-------------------------------------------------------
Date 2/25/04
-------------------------------------------------------
Reinsurance Premium Allowances
EXHIBIT II
ALLOWANCES
September 9, 2002
All Underwriting Classes
Plan Name Duration 1 Duration 2+
TermSmart 5 100% 15%
TermSmart 10 100% 17%
TermSmart 15 100% 23%
TermSmart 20 100% 23%
Policy Fee: None
Recapture: Reinsurance ceded under the program will not be eligible for
recapture before the tenth anniversary of the reinsured risk.
See enclosed C.D. for rates.
AMENDMENT IX
Effective June 30, 2003
Amendment to the Automatic Reinsurance Agreement, effective January 15, 1996,
between ReIiaStar Life Insurance Company of New York (Company), and
Security-Connecticut Life Insurance Company.
It is hereby agreed that on and after the thirtieth day of June 2003, under the
above mentioned reinsurance agreement, Exhibit II, will be amended with the
attached.
Except as hereby specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and the amendment is to be attached to and
made part of aforesaid Agreement.
Security-Connecticut Life Insurance Company
By: /s/ Richard Lau
-------------------------------------------------------
Richard Lau
Title: Vice President
-------------------------------------------------------
Date: 2/25/04
-------------------------------------------------------
Attest: /s/ Mary Broesch
-------------------------------------------------------
Mary Broesch
Title Vice President
-------------------------------------------------------
Date 2/25/04
-------------------------------------------------------
ReliaStar Life Insurance Company of New York
By: /s/ Richard Lau
-------------------------------------------------------
Richard Lau
Title: Vice President
-------------------------------------------------------
Date: 2/25/04
-------------------------------------------------------
Attest: /s/ Mary Broesch
-------------------------------------------------------
Mary Broesch
Title Vice President
-------------------------------------------------------
Date 2/25/04
-------------------------------------------------------
Reinsurance Premium Allowances
EXHIBIT II
ALLOWANCES
June 30, 2003
All Underwriting Classes
Plan Name Duration 1 Duration 2+
TermSmart 5 100% 15%
TermSmart 10 100% 17%
TermSmart 15 100% 23%
TermSmart 20 100% 23%
TermSmart 30 100% See attached Table I
Policy Fee: None
Recapture: Reinsurance ceded under the program will not be eligible for
recapture before the tenth anniversary of the reinsured risk.
See enclosed C.D. for rates
TABLE I
Renewal allowances
Band 1 Issue Risk Class
Sex Age SPNS PNS NS PT TB
--- ---- --- -- -- --
Male 18 - 30 21% 22% 23% 23% 23%
Male 31 - 40 19% 18% 19% 20% 20%
Male 41+ 16% 19% 23% 23% 23%
Female 18 - 30 17% 17% 18% 18% 18%
Female 31 - 40 17% 17% 18% 18% 18%
Female 41+ 17% 17% 18% 18% 18%
Band 2 Issue Risk Class
Sex Age SPNS PNS NS PT TB
--- ---- --- -- -- --
Male 18 - 30 21% 21% 23% 23% 23%
Male 31 - 40 18% 17% 18% 20% 20%
Male 41+ 15% 18% 23% 23% 23%
Female 18 - 30 16% 16% 18% 18% 18%
Female 31 - 40 16% 16% 18% 18% 18%
Female 41+ 16% 16% 18% 18% 18%
Band 3 Issue Risk Class
Sex Age SPNS PNS NS PT TB
--- --- ---- --- -- -- --
Male 18 - 30 18% 18% 22% 35% 35%
Male 31 - 40 15% 14% 16% 17% 17%
Male 41+ 12% 15% 22% 22% 22%
Female 18 - 30 13% 13% 16% 16% 16%
Female 31 - 40 13% 13% 16% 16% 16%
Female 41+ 13% 13% 16% 16% 16%
Band 4 Issue Risk Class
Sex Age SPNS PNS NS PT TB
--- --- ---- --- -- -- --
Male 18 - 30 17% 17% 22% 22% 22%
Male 31 - 40 14% 13% 15% 17% 17%
Male 41+ 12% 14% 22% 22% 22%
Female 18 - 30 12% 12% 15% 15% 15%
Female 31 - 40 12% 12% 15% 15% 15%
Female 41+ 12% 12% 15% 15% 15%
AMENDMENT X
Effective October 1, 2003
Amendment X to the Automatic Reinsurance Agreement, effective January 15, 1996,
between Security-Connecticut Life Insurance Company (Reinsures) and ReliaStar
Life Insurance Company of New York (Company).
Effective October 1, 2003, Security-Connecticut Life Insurance Company has been
merged with ReliaStar Life Insurance Company and thereafter ReliaStar Life
Insurance Company will assume all the business of Security-Connecticut Life
Insurance Company reinsured under the Automatic Reinsurance Agreement effective
January 15, 1996 between Security-Connecticut Life Insurance Company and
ReliaStar Life Insurance Company of New York.
All of the rights accorded to and duties, obligations and liabilities assumed by
Security-Connecticut Life Insurance Company under the Agreement shall be
accorded to and assumed by ReliaStar Life Insurance Company as if ReliaStar Life
Insurance Company had been the original party to the Reinsurance Agreement
instead of Security-Connecticut Life Insurance Company.
The terms and conditions of the Agreement are not changed in any way except as
stated herein.
Amendment X shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns.
In witness of the above, ReliaStar Life and ReliaStar Life of New York have by
their respective officers executed and delivered this Amendment X in duplicate
on the dates indicated below, with an Effective Date of October 1, 2003.
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Richard Lau By: /s/ Richard Lau
---------------------------- ----------------------------------------
Richard Lau Richard Lau
Title: Vice President Title: Vice President
-------------- --------------
Date: 2/25/04 Date: 2/25/04
------- -------
Attest: /s/ Mary Broesch Attest: /s/ Mary Broesch
----------------- -----------------
Mary Broesch Mary Broesch
Title Vice President Title Vice President
-------------- --------------
Date 2/25/04 Date 2/25/04
------- -------
AMENDMENT XI
Effective November 1, 2003
Amendment to the Automatic Reinsurance Agreement, effective January 15, 1996,
between ReliaStar Life Insurance Company of New York (Company), and ReliaStar
Life Insurance Company.
It is hereby agreed that on and after the first day of November 2003, under the
above mentioned reinsurance agreement, Exhibit II, will be amended with the
attached.
Except as hereby specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and the amendment is to be attached to and
made part of aforesaid Agreement.
RELIASTAR LIFE INSURANCE COMPANY
By: /s/ Richard Lau
-------------------------------------------------------
Richard Lau
Title: Vice President
-------------------------------------------------------
Date: 2/25/04
-------------------------------------------------------
Attest: /s/ Mary Broesch
-------------------------------------------------------
Mary Broesch
Title: Vice President
-------------------------------------------------------
Date: 2/25/04
-------------------------------------------------------
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Richard Lau
-------------------------------------------------------
Richard Lau
Title: Vice President
-------------------------------------------------------
Date: 2/25/04
-------------------------------------------------------
Attest: /s/ Mary Broesch
-------------------------------------------------------
Mary Broesch
Title Vice President
-------------------------------------------------------
Date 2/25/04
-------------------------------------------------------
Reinsurance Premium Allowances
EXHIBIT II
ALLOWANCES
November 1, 2003.
All Underwriting Classes
Plan Name Duration 1 Duration 2+
TermSmart 5 100% 14%
TermSmart 10 100% 16%
TermSmart 15 100% 20%
TermSmart 20 100% 21%
TermSmart 30 100% See attached Table I
Policy Fee: None
Recapture: Reinsurance ceded under the program will not be eligible for
recapture before the tenth anniversary of the reinsured risk.
TABLE I
TABLE I
Renewal allowances
Band 1 Issue Risk Class
Sex Age SPNS PNS NS PT TB
--- ---- --- -- -- --
Male 18 - 30 21% 22% 23% 23% 23%
Male 31 - 40 19% 18% 19% 20% 20%
Male 41+ 16% 19% 23% 23% 23%
Female 18 - 30 17% 17% 18% 18% 18%
Female 31 - 40 17% 17% 18% 18% 18%
Female 41+ 17% 17% 18% 18% 18%
Band 2 Issue Risk Class
Sex Age SPNS PNS NS PT TB
--- ---- --- -- -- --
Male 18 - 30 21% 21% 23% 23% 23%
Male 31 - 40 18% 17% 18% 20% 20%
Male 41+ 15% 18% 23% 23% 23%
Female 18 - 30 16% 16% 18% 18% 18%
Female 31 - 40 16% 16% 18% 18% 18%
Female 41+ 16% 16% 18% 18% 18%
Band 3 Issue Risk Class
Sex Age SPNS PNS NS PT TB
--- --- ---- --- -- -- --
Male 18 - 30 18% 18% 22% 35% 35%
Male 31 - 40 15% 14% 16% 17% 17%
Male 41+ 12% 15% 22% 22% 22%
Female 18 - 30 13% 13% 16% 16% 16%
Female 31 - 40 13% 13% 16% 16% 16%
Female 41+ 13% 13% 16% 16% 16%
Band 4 Issue Risk Class
Sex Age SPNS PNS NS PT TB
--- --- ---- --- -- -- --
Male 18 - 30 17% 17% 22% 22% 22%
Male 31 - 40 14% 13% 15% 17% 17%
Male 41+ 12% 14% 22% 22% 22%
Female 18 - 30 12% 12% 15% 15% 15%
Female 31 - 40 12% 12% 15% 15% 15%
Female 41+ 12% 12% 15% 15% 15%
AMENDMENT XII
Effective May 1, 2004
Amendment XII to the Automatic Reinsurance Agreement, effective January 15,
1996, between ReliaStar Life Insurance Company (Reinsurer) and ReliaStar Life
Insurance Company of New York (Company).
The parties hereby agree to append Exhibit I of the above referenced agreement
for new business written on or after May 1, 2004 as follows:
A. Automatic Binding Limits
Aviation* and Professional Sports Risk
------------------------------------------
Rating Ages - 0-75 Ages - 76-80 Ages - 81-85
Standard $25,000,000 $15,000,000 12,500,000
Table 1-2 $25,000,000 $15,000,000 12,500,000
Table 3-4 $25,000,000 $15,000,000 0
Table 5-6 $25,000,000 0 0
Table 7-16 $17,000,000 0 0
*Aviation Exclusion Rider (AER) required for ages under l6 and
above 75.
The parties hereby agree to amend Exhibit I of the above referenced agreement
for new business written on or after May 1, 2004 as follows:
B. Jumbo Limit
As it is known to Company at issue, the total then inforce plus the total
amount applied for, using the largest scheduled death benefit applied for
on the life may not be in excess of $65,000,000 on any one life.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this Amendment is to be added to and made part of the
aforesaid Agreement.
In witness of the above, ReliaStar Life and ReliaStar Life of New York have by
their respective officers executed and delivered this Amendment XII in duplicate
on the dates indicated below, with an Effective Date of May 1, 2004.
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Richard Lau By: /s/ Richard Lau
------------------------------------ -----------------------------
Richard Lau Richard Lau
Title: Vice President Title: Vice President
------------------------------------ -----------------------------
Date: 6/17/04 Date: 6/17/04
------------------------------------ -----------------------------
Attest:/s/ Mary Broesch Attest: /s/ Mary Broesch
------------------------------------ -----------------------------
Mary Broesch Mary Broesch
Title Vice President Title Vice President
------------------------------------ -----------------------------
Date 6/17/04 Date 6/17/04
------------------------------------ -----------------------------
AMENDMENT XIII
EFFECTIVE JUNE 14, 2004
To
AUTOMATIC REINSURANCE AGREEMENT (effective January 15, 1996)
This Amendment is between
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK, (Company), 1000 Woodbury Road,
Suite 208, Woodbury, New York 11797.
and
RELIASTAR LIFE INSURANCE COMPANY (Company), 20 Washington Avenue, South,
Minneapolis, MN 55401.
It is hereby agreed that on and after the fourteenth day of June 2004, under the
above mentioned reinsurance agreement, Exhibit II, will be amended with the
attached.
Except as hereby specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and the amendment is to be attached to and
made part of aforesaid Agreement.
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY
NEW YORK
By: /s/ Richard Lau By: /s/ Richard Lau
------------------------------------ -----------------------------
Richard Lau Richard Lau
Title: Vice President & Actuary Title: Vice President & Actuary
------------------------------------ -----------------------------
Date: 7/15/04 Date: 7/15/04
------------------------------------ -----------------------------
Attest:/s/ Mary Broesch Attest:/s/Mary Broesch
------------------------------------ -----------------------------
Mary Broesch Mary Broesch
Title Vice President & Actuary Title Vice President & Actuary
------------------------------------ -----------------------------
Date 6/17/04 Date 6/17/04
------------------------------------ -----------------------------
EXHIBIT II
PRODUCTS COVERED BY AMENDMENT
AND
ALLOWANCES
June 14, 2004
PIan Name Plan Date Allowances Allowances
Code Added Duration 1 Duration 2+
TermSmart 10 TSM 107 6/14/04 100% 18%
TermSmart 15 TSM 157 6/14/04 100% 20%
TermSmart 20 TSM207 6/14/04 100% 18.5%
TermSmart 30 TSM307 6/14/04 100% 18.5%
Policy Fee: None
Recapture:Reinsurance ceded under the program will be eligible for recapture as
follows: after the fifteenth anniversary of the reinsured risk for
TermSmart 10 and 15; after the twentieth anniversary of the reinsured
risk for TermSmart 20 and after the thirtieth anniversary of the
reinsured risk for TermSmart 30.
See enclosed C.D. for premium rates.
TermSmart 05 premium rates and allowances remain unchanged from Amendment XI
dated November 1, 2003. TermSmart 05 will no longer be available for sale
effective July 12, 2004.
Exhibit 10.(n)
REINSURANCE AGREEMENT
Effective as of April 1, 1984
Between the
LINCOLN SECURITY LIFE INSURANCE COMPANY
(hereinafter referred to as the "Company")
and
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
(hereinafter referred to as the "Reinsurer")
AUTOMATIC REINSURANCE AGREEMENT
Page
----
ARTICLE I Basis of Reinsurance 4
Automatic Coverage 4
Special Automatic Coverage 4
Limited Retention 4
Exceptions to Automatic Coverage 5
Conditional Receipt Coverage 5
Facultative Reinsurance 5
ARTICLE II Notification of Cession 6
Policy Forms 6
Notification of Underwriting Rules 6
ARTICLE III Commencement & Termination of Liability 6
ARTICLE IV Oversights - Clerical Errors 7
ARTICLE V Plan of Reinsurance 7
ARTICLE VI Reinsurance Premiums-Life Premiums 8
Permanent Flat Extras 8
Temporary Flat Extras 9
Disability Waiver and Payor Benefits 9
Accidental Death Benefits 9
ARTICLE VII Tax Credits 9
ARTICLE VIII Reinsurance Administration 10
ARTICLE IX Reductions 10
ARTICLE X Retention Limit Increases (Recapture) 11
ARTICLE XI Extended and Paid-Up Insurance 11
ARTICLE XII Reinstatements 12
ARTICLE XIII Policy Changes 12
ARTICLE XIV Settlement of Claims 12
Conditions Precedent to Liability 14
Covered Expenses 14
ARTICLE XV Records 15
ARTICLE XVI Insolvency 15
ARTICLE XVII Arbitration 15
AUTOMATIC REINSURANCE AGREEMENT - cont'd.
Page
ARTICLE XVIII Parties to Agreement 16
ARTICLE XIX Duration of Agreement 16
ARTICLE XX Deficiency Reserves 16
Signature Page 17
Exhibit I Maximum Limits of Company Retention and
Maximum Limits of Automatic Reinsurance
Coverage 18
Exhibit II Reinsurance Premiums 19-22
Exhibit III Plans of Insurance 23
ARTICLE I
Basis of Reinsurance
1. On the basis hereinafter stated, the excess over the Company's retention on
Individual Ordinary Life (including Universal Life), Waiver of Premium
Disability, and Accidental Death insurance issued directly by the Company
to standard and substandard lives on any of the Company's policy forms,
shall be reinsured with the Reinsurer automatically in accordance with the
Company's individual ordinary underwriting rules or shall be submitted to
the Reinsurer on a facultative basis.
Automatic Coverage
2. Except as specified in Paragraph 5, whenever coverage is available under
this Agreement, as specified in Paragraph 1 of this Article, the Company
shall cede and the Reinsurer shall automatically accept the excess over the
Company's designated maximum retention up to the maximum Automatic Limits
specified in Exhibit I.
Special Automatic Coverage
3. Even though the Company may already be on the risk for its maximum limit of
retention under policies previously issued and therefore unable to retain
any part of the insurance currently applied for, the Company, without
retaining any more for its own account, shall still have the right to cede
automatically the full amount of new insurance to the Reinsurer, within the
limits specified in Paragraph 2, above, on the same terms on which the
Company would be willing to accept the risk for its own account if it did
not already have its maximum limit of retention.
Limited Retention
4. Whenever the Company retains less than its scheduled retention, as
specified in Exhibit I, on life insurance policies issued directly by the
Company to standard and substandard lives on any of the Company's policy
forms, the automatic coverage shall be equal to three times the Company's
retention on the life.
4
Exceptions to Automatic Coverage
5. Reinsurance shall not be ceded automatically on any life if:
a) The amount of Life insurance in force plus the amount currently being
applied for on that life in all companies exceeds Six and One Half
Million Dollars ($6,500,000); or
b) The substandard mortality rating assessed by the Company to the risk
exceeds Class P (500%) or its equivalent on an extra premium basis
(for flat extras, each $2.50 equals one table); or
c) The insurance is the result of a group conversion where full evidence
of insurability has not been secured.
Conditional Receipt Coverage
6. If the Company becomes liable under a conditional receipt before
reinsurance has been arranged on a risk that clearly would have been
ceded under this Agreement, the Reinsurer will nonetheless be liable
for the excess over the Company's Conditional Receipt retention limit,
as indicated in Exhibit I, up to the maximum amount of Automatic
Reinsurance Conditional Receipt Coverage specified in Exhibit I,
provided the risk is not excluded from coverage by paragraph 5 of this
Article.
Facultative Reinsurance
7. When reinsurance is not available as Automatic Reinsurance under
Article I, the Company shall submit for facultative consideration to
the Reinsurer a request for any amount of reinsurance that the Company
may require.
When the Company desires facultative reinsurance, it will send to the
Reinsurer any and all information it has about the risk, including
specifically but not limited to copies of the application, medical
examiners' reports, attending physicians' statements, inspection
reports, and other papers bearing on the insurability of the risk.
Upon receipt of the information, the Reinsurer will analyze the risk
promptly and as soon as possible notify the Company of its decision
and its classification of the risk.
5
ARTICLE II
Notification of Cession
1. At the beginning of each quarter, the Company shall notify the Reinsurer of
all risks ceded under this Agreement since the last quarterly notification
on which it has received the initial premium.
Policy Forms
2. The Company shall file with the Reinsurer copies of all policy forms.
Notification of Underwriting Rules
3. The Company will notify the Reinsurer of its existing underwriting
programs, any new underwriting programs, or any modifications to existing
or new programs. For new programs or modifications of programs, such
notification shall be sent to the Reinsurer at the earliest possible date
but no later than the date the announcement of such new program or
modification is released to the field force of the Company.
ARTICLE III
Commencement and Termination of Liability
1. The liability of the Reinsurer under this Agreement for automatic
reinsurance shall commence simultaneously with the beginning of the
Company's liability under its corresponding insurance.
2. The liability of the Reinsurer under this Agreement for facultative
reinsurance shall commence simultaneously with the beginning of the
company's liability under its corresponding insurance, subject to the
Reinsurer's having given the Company an unconditional approval on the
application for reinsurance.
3. In no event shall the Reinsurer's liability for reinsurance continue after
termination of the Company's liability under its corresponding insurance.
6
ARTICLE IV
Oversights - Clerical Errors
1. Should the Company fail to cede reinsurance that otherwise should have been
ceded on an Automatic basis, or fail to comply with any of the other terms
of this Agreement, and if this is shown to be unintentional and the result
of a misunderstanding, oversight or clerical error on the part of either
the Company or the Reinsurer, then this Agreement shall not be deemed
abrogated thereby, but both companies shall be re-stored to the position
they would have occupied had no such misunderstanding, oversight or
clerical error occurred.
ARTICLE V
Plan of Reinsurance
1. Reinsurance of Life risks shall be on the Yearly Renewal Term Plan. The
amount at risk for this plan shall be: (a x b) -R, where:
a is equal to the total number of units of coverage for the policy
(each unit generally provides $1,000 of level face amount, or $1,000
initial face amount in the case of policies with varying face amount),
b is the face amount for the current policy year for one unit of
coverage, minus the Special Reserve for one unit coverage; and R is
the Company's retention.
2. The Special Reserve (tV) per unit at the end of policy year, t, for t equal
to 10 or less, is defined for a policy with 10 or more years of premium as
follows:
For t = 2 through t = 10 tV = 10 CV - d(l0-t), where 10CV is the 10th
Cash Value per unit as defined by the Company's EDP system, and d = 10
CV / 9 to the lower $. For t = 1, the value of tV is zero.
If the policy has n years of premiums where n is between 5 and 9 inclusive,
then tV = n CV - (n-t) d where n CV is the nth Cash Value per unit, and d =
n CV / (n-I) to the lower $.
3. The Special Reserve for plans with less than 5 years of premiums and for
Universal Life will be the Cash Value.
7
4. For a policy with 10 or more premiums, the Special Reserve per unit after
the 10th year is equal to the Cash Value per unit to dollars and cents. If
there is reinsurance, the Company's retention is the original retention,
provided the insurance plan does not have a scheduled increase, nor an
increase due to insurance purchased by dividends, nor an increase due to
recapture. If the Company's original retention is increased by recapture,
the Company's retention shall refer to the increased retention as of the
effective date of recapture.
5. Reinsurance of Disability benefits shall be on a coinsurance basis in
accordance with the original forms of the Company. The initial reinsured
amount shall be equal to the initial amount of corresponding life insurance
and the amount of Disability reinsured shall remain constant. Reinsurance
of Accidental Death benefits shall be on a YRT basis at the rate given in
Exhibit II - Part 4.
ARTICLE VI
Reinsurance Premiums
Life Premiums
1. Until further notice, reinsurance premiums shall be at the rates given in
the attached Exhibit II. For the Security-21 product, re-insurance premiums
shall be at the rates given in Exhibit II--Part 3. For joint policies,
reinsurance premiums shall be double the rates given in the attached
Exhibit II at the joint equal age of the insureds. If the amounts required
for each insured differ, the Company shall reinsure the greater amount of
reinsurance on the policy. For those plans specified in Exhibit III, the
Reinsurer guarantees that premium rates for a given attained age, rating
and duration shall not exceed the higher of the rate shown in the attached
schedule (Exhibit II) for that age, rating and duration or the Company's
own gross premium.
Risks Bearing Permanent Flat Extras for More than Five Years
2. The total reinsurance premiums for such risks shall be at rates provided in
Paragraph 1 of this Article plus the following percentage of the flat extra
premium charged by the Company under the original policy for the face
amount reinsured.
First Year 25%
Renewal Years 90%
8
Risks Bearing Temporary Flat Extras for Five Years or Less
3. The total reinsurance premiums for such risks shall be at the rates
provided in Paragraph 1 of this Article plus 90% of the temporary flat
extra premium charged under the original policy for the face amount
reinsured.
Disability Waiver and Payor Benefits
4. The premium to be charged by the Reinsurer for the reinsurance of
Disability Waiver benefits and for Payor benefits on juvenile policies
shall be at the following percentage of the rate charged by the Company for
the amount reinsured.
First Year 25%
Renewal Years 90%
Accidental Death Benefits
5. The premiums to be charged by the Reinsurer for the reinsurance of
Accidental Death benefits shall be at the rates given in Exhibit II - Part
4.
ARTICLE VII
Tax Credits
1. Except in those instances where the Reinsurer is taxed directly and
independently on premiums collected by it from the Company, the Reinsurer
shall reimburse the Company for taxes on reinsurance premiums paid to such
states as do not allow reinsurance premiums paid to the Reinsurer by the
Company as a deduction in the tax statement of the Company. Such tax
reimbursement shall be at an average tax rate unless the Company requests
reimbursement at the exact tax rate.
9
ARTICLE VIII
Reinsurance Administration
1. Reinsurance ceded under this Agreement shall be on a self-administration
basis.
a) The Company shall have the responsibility of maintaining adequate
records for the administration of the reinsurance ceded hereunder.
b) Reinsurance premiums shall be paid on an annual basis in advance, but
if a reinsured policy is terminated or reduced in accordance with the
provisions of this Agreement, the Reinsurer shall refund the Company
the unearned portion of the reinsurance premium.
c) Reinsurance premiums and adjustments shall be accounted for and
settled quarterly. Within 45 days after the beginning of each calendar
quarter, the Company shall send to the Reinsurer a statement of
premiums for all outstanding new reinsurance which has been ceded and
renewal premiums for all renewal reinsurance falling due within the
previous quarter. The statement shall also include adjustments in
reinsurance premiums due in previous quarters. 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.
Except as provided in Article IV, the payment of reinsurance premiums
shall be a condition precedent to the liability of the Reinsurer under
reinsurance covered by this Agreement. In the event of non-payment of
reinsurance premiums as provided in this paragraph, the Reinsurer
shall have the right to terminate the reinsurance under all policies
having reinsurance premiums in arrears.
d) In addition to the premium accounting described above, the Company
will send to the Reinsurer appropriate Reports on New Business,
Reserves, Termination and Changes, Policy Exhibit, and an Annual
Inforce listing.
ARTICLE IX
Reductions
1. If all or any part of any insurance coverage reinsured under this
Agreement shall be reduced or terminated, the amount of reinsurance
carried by the Reinsurer with respect to that coverage shall be
reduced by the total amount of insurance coverage reduced or
terminated as of the date and time of such reduction or termination.
The reduction in the reinsurance of the Reinsurer shall be that
proportion of the total amount of the reduction which reinsurance of
the Reinsurer bears to the total amount reinsured. In no case shall
the Company be required to assume a risk for an amount in excess of
its regular retention limit for the age at issue and mortality rating
of the insured under the policy with respect to which reinsurance is
being reduced or terminated.
10
ARTICLE X
Retention Limit Increases (Recapture)
1. If the Company increases its limit of retention, a corresponding
reduction may be made at the option of the Company in the reinsurance
in force on all lives on which the Company had its maximum limit of
retention at the time reinsurance was ceded. However, no risk shall be
recaptured prior to the 10th policy anniversary (20th policy
anniversary for Security-21).
2. Recapture shall be effected as follows:
(a) After the retention increase is effected, the Company shall
promptly notify the Reinsurers of its intention to recapture.
(b) Each eligible policy shall be recaptured on the first policy
anniversary following the retention increase.
(c) All eligible policies shall be recaptured unless there is
agreement to the contrary expressed in writing.
(d) If the Company has reinsured any portion of the risk in another
company, the reduction in reinsurance ceded under this treaty
shall be in the same proportion to the total reduction in
reinsurance as the amount reinsured under the treaty bears to the
total reinsurance on the risk.
(e) In determining the new retention for a particular class, the
rules for classification at time of issue, which may include but
are not limited to age and rating at issue, shall be used.
(f) If at the time of recapture the risk is an active claim for
Waiver of Premium Disability, the Life risk shall still
nevertheless be considered eligible for recapture. However, the
Disability reinsurance shall remain in force until such time as
the policy is returned to a premium paying status. The Disability
risk shall be recaptured upon such return to premium paying
status. However, if within two years of said recapture the Waiver
of Premium is resumed due to an extension of the initial
disablement, the Reinsurer shall be liable for payment of its
share of premiums waived by the Company subject to collection of
Disability premiums on the Reinsurer's share of the risk for the
period in which the policy was in a premium paying status.
ARTICLE XI
Extended and Paid-Up Insurance
1. Should a reinsured policy lapse and should extended or paid-up insurance be
in force in accordance with the provisions of the policy, the amount of
reinsurance shall be adjusted accordingly. For any resulting adjustment in
amount of insurance, a corresponding adjustment of reinsurance shall be
made. The Company will continue to pay YRT premiums (Exhibit II) on the
reinsured portion of the Extended Term or Reduced Paid-up policy.
11
ARTICLE XII
Reinstatements
1. Should a lapsed insurance policy be reinstated in accordance with its terms
and the rules of the Company, the reinsurance under such policy shall be
reinstated automatically. Premiums and interest on reinstated reinsurance
shall be payable only to the extent that the Company collects premiums and
interest on such insurance.
ARTICLE XIII
Policy Changes
1. Should the company make any material changes in the provisions and
conditions of a policy issued to an insured and upon which reinsurance
shall have been granted hereunder, the Company shall, within a reasonable
time, inform the Reinsurer of such change.
ARTICLE XIV
Settlement of Claims
1. In the case of a claim on a reinsured policy, whether claim payment is made
under the strict policy conditions or compromised for a lesser amount, the
settlement made by the Company shall be unconditionally binding upon the
Reinsurer. The Company shall keep the Reinsurer informed of any claim which
might be contested or compromised or where unusual claim investigation
expenses are contemplated and, where practical, the Company may consult
with the Reinsurer. However, such consultation shall not impair the
Company's freedom to determine the proper action on the claim and the
settlement made by the Company shall still be unconditionally binding on
the Reinsurer.
2. The Company shall furnish the Reinsurer with copies of the proofs of claim.
If the Reinsurer so requests, the Company shall furnish the Reinsurer with
any information the Company may possess in connection with the claim.
Payment in settlement of the reinsurance under a claim approved and paid by
the Company for a life reinsured hereunder shall be made by the Reinsurer
upon the receipt of the claim papers. If the total amount reinsured is
$500,000 or more, and if the Company so requests, then the amount due for
that claim will become payable as soon as the Company approves the claim
and notifies the Reinsurer.
12
3. In the event of an increase or reduction in the amount of the Company's
insurance on any policy reinsured hereunder because of an overstatement or
understatement of age or misstatement of sex, established after the death
of the insured, the Company and the Reinsurer shall share in such increase
or reduction in proportion to their respective net amounts under such
policy.
4. If a claim is approved for disability benefits on a policy reinsured, the
Company shall continue to pay premiums for reinsurance except the premium
for disability reinsurance. The Reinsurer shall pay its proportionate share
of the disability benefits on the original policy including the premiums
for benefits that remain in effect during disability.
5. If the Company decides to contest a claim, the Reinsurer may pay its full
share to the Company, as if the claim were not contested, and such payment
shall fulfill the Reinsurer's obligation for that claim. However, the
Reinsurer may, at its option after consultation with the Company, join in
the contest, in which event the Reinsurer will share in the fortunes of the
Company with respect to such claim. The words "the fortunes" are understood
to mean only the expenses of the contest and any reduction in liability as
specified in paragraph 6a of this Article.
6 a. If the Reinsurer joins in the contest, the Reinsurer shall share in
the claim expense of the contest or compromise of a claim in the same
proportion that the net amount at risk reinsured hereunder bears to
the total net risk of the Company on all policies being contested by
the Company and shall share in the total amount of any reduction in
liability in the same proportion. Claim expense shall include, but not
be limited to, cost of investigation, legal fees, court costs and
interest charges. Compensation of salaries of officers and employees
and any possible extra contractual damages, except as provided in
paragraph 6 of this Article shall not be considered claim expenses.
b. Subject to the provisions of Paragraphs c and d of this Article XIV,
the Reinsurer shall reimburse the Company for its share of any
noncontractual damages (including, but not limited to, punitive,
exemplary, compensatory or consequential damages) assessed against the
Company, provided the conditions precedent to liability for
noncontractual damages as specified in paragraph d of this Article,
are met.
c. The Reinsurer shall not be liable for any portion of noncontractual
damages assessed on the basis of fault or wrongdoing on the part of
the Company, its agents or representatives other than for denying or
contesting the claim.
13
d. Notwithstanding the provisions of Paragraphs b and c, the Reinsurer
shall participate in noncontractual damages assessed against the
Company only in those cases where it is clear that the denial or
contesting of the claim was the sole basis for the award or whenever
the total amount of contractual claims and noncontractual damages is
equal to or less than the face amount of the policy.
e. The Reinsurer shall proportionately share in any assessment of
Statutory Penalties (herein defined as those amounts awarded as a
penalty, but fixed in amount by statute).
Conditions Precedent to Liability
f. Conditions precedent to liability for noncontractual damages are as
follows:
1. The Reinsurer shall have had the opportunity to review the
complete claim file prior to any final action by the Company that
indicates to the claimant that the claim is being denied or
contested; and
2. Upon completion of such review, the Reinsurer shall have agreed
in writing that the claim should be denied or contested.
Covered Expenses
g. Legal fees incurred in defense against noncontractual damages shall be
covered expenses. The Reinsurer shall reimburse the Company for such
expenses in the same proportion as described in Paragraph 6a.
14
ARTICLE XV
Records
1. The Reinsurer shall have the right at all reasonable times and for any
reasonable purpose to inspect at the Home Office of the Company all books
and documents relating to this reinsurance.
ARTICLE XVI
Insolvency
1. In the event of the insolvency of the Company, all reinsurance made, ceded,
renewed or otherwise becoming effective under this Agreement shall be
payable by the Reinsurer directly to the Company or to their liquidator,
receiver or statutory successor on the basis of the liability of the
Company under the contract reinsured without diminution because of the
insolvency of the Company. 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 of the
pendency of a claim against the 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, at its own expense, in the proceeding where such
claim is to be adjudicated any defense or defenses which they may deem
available to the Company or its liquidator or receiver or statutory
successor.
2. It is further understood that the expense thus incurred by the Reinsurer
shall be chargeable, subject to court approval, against the 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. Where two or more assuming insurers are
involved in the same claim and a majority in interest elect to interpose
defense to such claim, the expense shall be apportioned in accordance with
the terms of the Reinsurance Agreement as though such expense had been
incurred by the Company.
ARTICLE XVII
Arbitration
1. In the event of any difference arising hereafter between the Company and
the Reinsurer with reference to this Agreement or any transaction under
this Agreement, the same shall be referred to three arbitrators who must be
executive officers of life insurance companies or life reinsurance
companies other than the parties to this Agreement or their affiliates,
each of contending companies to appoint one of the arbitrators and such two
arbitrators to select the third. Should the two arbitrators not be able to
agree on the choice of the third, then appointment shall be left to the
President of the American Council of Life Insurance.
15
2. The arbitrators so chosen shall consider this Reinsurance Agreement not
merely as a legal document but also as a gentlemen's agreement. They shall
not be bound by any rules of law. They shall decide by a majority of votes
and from their written decision there shall be no appeal. The cost of
arbitration, including the fees of the arbitrators, shall be borne equally
by the Reinsurer and the Company.
ARTICLE XVIII
Parties to Agreement
1. 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 Reinsurer and the original insureds or the
beneficiaries under any policies of the Company which may be reinsured
hereunder.
ARTICLE XIX
Duration of Agreement
1. This Agreement shall be unlimited as to its duration but may be cancelled
at any time insofar as it pertains to the handling of new business
thereafter by the Company or the Reinsurer, giving ninety (90) days notice
of cancellation in writing. The Reinsurer shall continue to accept
reinsurance in accordance with this Agreement during the ninety (90) day
period aforesaid. The reinsurance under this Agreement shall be maintained
in force as long as such policies shall remain in force and reinsurance
premiums are paid when due, except as provided in Articles IX and X.
ARTICLE XX
Deficiency Reserves
1. For the plans of insurance specified in Exhibit III, the Reinsurer
guarantees that the YRT reinsurance premiums will not exceed the gross
premiums of the Company.
16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their duly authorized representatives.
LINCOLN SECURITY LIFE INSURANCE COMPANY
By: /s/ Stanley Avitabile, Exec. V.P. & Med Director
------------------------------------------------
Authorized Officer Title
Attest:
By: /s/ Paul Chhabra, 2nd V.P. & Actuary
--------------------------------------------
Authorized Officer Title
Dated at: Avon, CT, this 4th day of April, 1984
-------- --- ----- ----
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
By: /s/ Timothy Fitch, 2nd V.P. & Actuary
------------------------------------------------
Authorized Officer Title
Attest:
By: /s/ Ann O'Brien, Assistant Secretary
-------------------------------------
Authorized Officer Title
Dated at: Avon, CT, this 4th day of April, 1984
-------- --- ----- ----
17
EXHIBIT I
Maximum Limits of Company Retention and Limits of Reinsurance Coverage
----------------------------------------------------------------------
I. Maximum Limits of Company Retention
A. Life: All Ages, All Ratings through Table P (500%)
$100,000
B. Waiver of Premium: Same as Life
C. Accidental Death: $0
D. Conditional Receipt: $50,000
II. Maximum Limits of Automatic Reinsurance Coverage
A. Life: All Ages, All Ratings through Table P (500%)
$900,000
B. Waiver of Premium: Same as Life
C. Accidental Death: $300,000
D. Conditional Receipt: $900,000
Minimum Initial Cession - the minimum amount to be reinsured on any policy
is $10,000. Reinsurance shall be cancelled if reinsured amount falls below
$2,500.
18
EXHIBIT II - 2
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
YEARLY RENEWABLE TERM RATES
Table omitted.
19
EXHIBIT II - 2
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
YEARLY RENEWABLE TERM RATES
(cont'd)
Table omitted.
20
SECURITY CONNECTICUT
EXPERIENCE REFUND YRT PREMIUMS PER $1000
MALE STANDARD RISK
AGE NEAREST BIRTHDAY
Table omitted.
EXHIBIT II - PART 3
1. SEC-21 will be reinsured on a YRT basis, using the rates on pages 21-a
through 21-j.
Substandard rates are 25% of the standard rates for each table (25%) of
extra mortality.
Female rates are equal to male rates set back 6 years.
No policy fee.
2. One and Five Year R&C will be reinsured on a YRT basis, with the YRT rate
equal to the gross premium less the following commission allowances:
Commission Allowance
---- Policy Year ----
Band(s) 1 2-5 6-10 11+
------- - --- ---- ---
1-2 100% 24% 24% 17%
3-4 100% 16% 11% 4%
5 85% 26% 11% 4%
21
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
NONSMOKER BAND 1
Table omitted.
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
NONSMOKER BAND 2
Table omitted.
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
NONSMOKER BAND 3
Table omitted.
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
NONSMOKER BAND 4
Table omitted.
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
NONSMOKER BAND 5
Table omitted.
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
SMOKER BAND 1
Table omitted.
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
SMOKER BAND 2
Table omitted.
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
SMOKER BAND 3
Table omitted.
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
SMOKER BAND 4
Table omitted.
SECURITY CONNECTICUT LIFE INSURANCE COMPANY
SECURITY 21
YEARLY RENEWABLE TERM RATES
SMOKER BAND 5
Table omitted.
EXHIBIT II - PART 4
Accidental Death Benefit Rates
Standard
.54
Substandard
Substandard premium shall be the appropriate multiple of the standard premium.
22
EXHIBIT III
Plans of Insurance
Economy Life - 5-1/2% (#10640NY)
Increasing Premium Whole Life (#10780NY)
Life Paid Up at 95 (#10850NY)
23
ADDENDUM I
Addendum to the Reinsurance Agreement (effective April 1, 1984) between the
Lincoln Security Life Insurance Company, hereinafter referred to as the
"Company", and Security-Connecticut Life Insurance Company, hereinafter referred
to as the "Reinsurer".
It is hereby agreed that Exhibit II - Part 5 shall be added to the above
mentioned Reinsurance Agreement to incorporate reinsurance rates for Joint
Design and Estate Design effective the dates stated within.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this Addendum is to be attached to and made part of
the aforesaid agreement.
Security-Connecticut Life Insurance Company
Witness: /s/ Paul V. Susi By: /s/ William Casill
------------------------------- -------------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
------------------------------- -------------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert J. Voight
------------------------------- --------------------------------
Title: Actuary Title: Executive Vice President
------------------------------- -------------------------------
MULTIPLE LIFE
REINSURANCE PREMIUMS
EXHIBIT II - PART 5
Table omitted.
JOINT DESIGN SERIES
FIFTEEN YEAR SELECT REINSURANCE PROGRAM
Effective June 1, 1992
USE OF THE RATE SCHEDULE
The YRT premium shall be derived by applying the rates herein:
SUBSTANDARD RISKS
- -----------------
The reinsurance premium for substandard risks rated on a multiple mortality
table basis shall be equal to a multiple of the standard rate proportionate to
the mortality classification. Thus, the premium for a Class D (200%) risk shall
be equal to twice the standard premium.
POLICY FEE
None.
ANNUAL GIOR REINSURANCE RATES - PREFERED/STANDARD
Table omitted.
ANNUAL JOINT DESIGN REINSURANCE RATES FOR LSNY - PREFERED - TWO NONSMOKERS
Table omitted.
ANNUAL JOINT DESIGN REINSURANCE RATES FOR LSNY - PREFERED - TWO SMOKERS
Table omitted.
ANNUAL JOINT DESIGN REINSURANCE RATES FOR LSNY - PREFERED - SMOKER/NONSMOKER
Table omitted.
ANNUAL JOINT DESIGN REINSURANCE RATES FOR LSNY - STANDARD - TWO NONSMOKERS
Table omitted.
ANNUAL JOINT DESIGN REINSURANCE RATES FOR LSNY - STANDARD - TWO SMOKERS
Table omitted.
ANNUAL JOINT DESIGN REINSURANCE RATES FOR LSNY - STANDARD - SMOKER/NONSMOKER
Table omitted.
ESTATE DESIGN SERIES
FIFTEEN YEAR SELECT REINSURANCE PROGRAM
Effective November 1, 1992
USE OF THE RATE SCHEDULE
The appropriate YRT premium shall be derived by applying the rates herein:
SUBSTANDARD RISKS
A table rating on either or both lives will be converted into a joint table
rating or a joint flat extra or a combination of the two. For the joint table
rating portion of the risk, the total reinsurance premium will be equal to the
standard reinsurance premium increased by a proportional amount. For the joint
flat extra portion of the risk associated with the individual table rating(s),
the total reinsurance premium will be increased by the joint flat extra. For a
joint flat extra attributable to a flat extra rating on one or both of the
individuals, the total reinsurance premium will be determined in accordance with
paragraph 2 or 3 of Article VI, as appropriate.
POLICY FEE
None.
AMENDMENT II
Amendment to Reinsurance Agreement (effective April 1, 1984) between the Lincoln
Security Life Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
1. It is hereby agreed that on and after the first day of January, 1987,
Article VII, "Tax Credits" under the above mentioned Reinsurance Agreement
shall be replaced with the following:
The Reinsurance premium rates under this Agreement take into
consideration the Company's liability for premium taxes. Accordingly,
the Reinsurer shall make no separate reimbursement to the Company for
premium taxes on premiums paid to the reinsurer.
2. It is hereby agreed that on and after the first day of January, 1987
Exhibit II - Part 2 shall be replaced with the attached.
All provisions of the Reinsurance Agreement not in conflict with the provisions
of this amendment will continue unchanged.
Security-Connecticut Life Insurance Company
Witness: /s/ Paul V. Susi By: /s/ William Casill
----------------------------- ----------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
----------------------------- ----------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert J. Voight
------------------------------ ----------------------------
Title: Actuary Title: Executive Vice President
------------------------------ ----------------------------
REINSURANCE PREMIUMS
Exhibit II - Part 2
Fifteen Year Select YRT Reinsurance Program
Use of the Rate schedule
The appropriate YRT premium shall be derived by applying the following multiples
to the rates contained herein:
Underwriting Multiple
Classification
--------------
Standard 1.00
Preferred 0.83
Non-preferred 1.09
The schedule contains YRT rates for male issue ages 0-85.
Female Rates
Age 0 - Use rates for males issues age 0
Ages 1-5 - Use rates for males issue age 1
Ages 6 and older - Use rates for males five years younger.
Female risks are subject to the maximum true issue age limit of 85.
Policy fee:
None.
Substandard Risks:
The reinsurance premium for substandard risks rated on a multiple table
basis shall be equal to the multiple of the standard rate proportionate to
the mortality classification. Thus, the premium for a Class D (200%) risk
shall be equal to twice the standard premium.
SECURITY CONNECTICUT
EXPERIENCE REFUND YRT PREMIUMS PER $1000
MALE STANDARD RISK
AGE NEAREST BIRTHDAY
SUB-POOL A - CLASSICAL UNDERWRITING
Table omitted.
SECURITY CONNECTICUT
EXPERIENCE REFUND YRT PREMIUMS PER $1000
MALE STANDARD RISK
AGE NEAREST BIRTHDAY
SUB-POOL A - NON-CLASSICAL UNDERWRITING
Table omitted.
SECURITY CONNECTICUT
EXPERIENCE REFUND YRT PREMIUMS PER $1000
MALE STANDARD RISK
AGE NEAREST BIRTHDAY
SUB-POOL A
ULTIMATE RATES
Table omitted.
SECURITY CONNECTICUT
EXPERIENCE REFUND YRT PREMIUMS PER $1000
MALE STANDARD RISK
AGE NEAREST BIRTHDAY
UNDIFFERENTIATED ULTIMATE RATES
Table omitted.
SECURITY CONNECTICUT
EXPERIENCE REFUND YRT PREMIUMS PER $1000
MALE STANDARD RISK
AGE NEAREST BIRTHDAY
SUB-POOL B CLASSICAL UNDERWRITING
Table omitted.
SECURITY CONNECTICUT
EXPERIENCE REFUND YRT PREMIUMS PER $1000
MALE STANDARD RISK
AGE NEAREST BIRTHDAY
SUB-POOL B NON-CLASSICAL UNDERWRITING
Table omitted.
SECURITY CONNECTICUT
EXPERIENCE REFUND YRT PREMIUMS PER $1000
MALE STANDARD RISK
AGE NEAREST BIRTHDAY
SUB-POOL B
ULTIMATE RATES
Table omitted.
SECURITY CONNECTICUT
EXPERIENCE REFUND YRT PREMIUMS PER $1000
MALE STANDARD RISK
AGE NEAREST BIRTHDAY
UNDIFFERENTIATED ULTIMATE RATES
Table omitted.
AMENDMENT III
Amendment to Reinsurance Agreement (effective April 1, 1984) between the Lincoln
Security Life Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that on and after the first day of January, 1987, under the
above mentioned reinsurance agreement, Article I, paragraph 5 shall be placed
with the following:
Exceptions to Automatic Coverage
5. Reinsurance shall not be ceded automatically on any life if:
a. The amount of life insurance in force plus the amount currently being
applied for on that life in all companies exceeds ten million dollars
($10,000,000); or
b. The substandard mortality rating assessed by the Company to the risk
exceeds Class P (500%) or its equivalent on an extra premium basis
(for flat extras, each $2.50 equals one table); or
c. The insurance is the result of group conversion where full evidence of
insurability has not been secured.
d. The Company has submitted the risk for facultative consideration
outside of the Agreement.
All provisions of the Reinsurance Agreement not in conflict with the provisions
of the amendment will continue unchanged.
Security - Connecticut Life Insurance Company
Witness: /s/ Paul Susi By: /s/ William Casill
---------------------------- --------------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
---------------------------- --------------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert Voight
---------------------------- --------------------------------
Title: Actuary Title: Executive Vice President
---------------------------- --------------------------------
AMENDMENT IV
Amendment to Reinsurance Agreement (effective April 1, 1984) between the Lincoln
Security Life Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that on and after the first day of July, 1989 Exhibit II -
Part 2 shall be replaced with the attached.
All provisions of the Reinsurance Agreement not in conflict with the provisions
of the amendment will continue unchanged.
Security-Connecticut Life Insurance Company
Witness: /s/ Paul Susi By: /s/ William Casill
----------------------------- ------------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
----------------------------- ------------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert Voight
----------------------------- ------------------------------
Title: Actuary Title: Executive Vice President
----------------------------- ------------------------------
REINSURANCE PREMIUMS
EXHIBIT II - PART 2
Fifteen Year Select Reinsurance Program
Use of the Rate Schedule
The appropriate YRT premium shall be derived by applying the following multiples
to the rates combined herein:
Issue Ages 0-59
Duration PNS PS NS S
-------- --- -- -- -
1 .10 .10 .29 .28
2 .87 .83 1.04 .96
3 .90 .84 1.05 .97
4 .89 .84 1.05 .97
5-10 .89 .85 1.07 .98
11+ .85 .82 1.00 .95
Issue Ages 60+
Duration PNS PS NS S
-------- --- -- -- -
1 .12 .12 .32 .28
2 .89 .85 1.07 .96
3 .92 .86 1.08 .97
4 .91 .86 1.08 .97
5-10 .91 .87 1.10 .98
11+ .87 .84 1.03 .95
Female Rates
- ------------
Age 0 Use rates for males issue age 0
Ages 1 to 5 Use rates for males issue age 1
Ages 6 to older Use rates for males 5 years younger
Female risks are subject to the maximum true issue age limit of 85.
Substandard Risks
The reinsurance premiums for substandard risks rated on a multiple mortality
tables basis shall be equal to the multiple of the standard rate proportionate
to the mortality classification. Thus, the premium for a Class D (200%) risk
shall be equal to twice the standard premium.
Policy Fee
- ----------
None.
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
NON-REFUND PREMIUM RATES PER $1000
STANDARD MALE NON-SMOKER
AGE NEAREST BIRTHDAY
Table omitted.
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
NON-REFUND PREMIUM RATES PER $1000
STANDARD MALE SMOKER
AGE NEAREST BIRTHDAY
Table omitted.
AMENDMENT
Amendment to each Reinsurance Agreement listed herein between Lincoln Security
Life Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that on and after the effective date of each such Agreement
listed, Article VIII, "Reinsurance Administration", shall be replaced with the
following:
1. Reinsurance ceded under this Agreement shall be Bordereau administration.
a. The Reinsurer shall have the responsibility of maintaining adequate
records for the administration of the reinsurance ceded hereunder.
b. Reinsurance premiums shall be paid on an annual basis in advance, but
if a reinsured policy is terminated or reduced in accordance with the
provisions of this Agreement, the Reinsurer shall refund the Company
the unearned portion of the reinsurance premium.
c. Reinsurance premiums and adjustments shall be accounted for and
settled monthly and quarterly. Within 45 days after the beginning of
each calendar month or quarter, the Reinsurer shall calculate a
statement of premiums for all outstanding reinsurance falling due
within the previous month or quarter. The statement shall also include
adjustments in reinsurance premiums due in previous months or
quarters. 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. Except as provided in Article
IV, the payment of reinsurance premiums shall be a condition precedent
to the liability of the Reinsurer under reinsurance covered by this
Agreement. In the event of non-payment of reinsurance premiums as
provided in this paragraph, the Reinsurer shall have the right to
terminate the reinsurance under all policies having reinsurance
premiums in arrears.
d. In addition to the premium accounting described above, the Reinsurer
will create appropriate reports on New Business, Reserves,
Terminations and changes, Policy Exhibit, and an Annual Inforce
listing.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply and this amendment is to be attached to and made part of
the aforesaid Agreement.
Security-Connecticut Life Insurance Company
Witness: /s/ Paul Susi By: /s/ William Casill
----------------------------- ------------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
----------------------------- ------------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert Voight
----------------------------- ------------------------------
Title: Actuary Title: Executive Vice President
----------------------------- ------------------------------
Treaty Type Treaty Effective Date
----------- ---------------------
Automatic/YRT April I, 1984
Automatic/Co. January 1, 1987
AMENDMENT
Amendment to each Reinsurance Agreement listed herein between Lincoln Security
Life Insurance Company, hereinafter referred to as the "Company" and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
1. The Company and the Reinsurer each represents and warrants that it is
subject to taxation under Subchapter "L" of the Internal Revenue Code of
1986 (the "code").
2. The terms used in this Amendment are defined by Reference to Regulation
Section 1.848-2(g)(8) promulgated on December 29, 1992, whereby:
a. Each party shall attach a schedule to its Federal Income Tax return
which identifies the relevant reinsurance agreements for which the
joint election under the Regulation has been made;
b. The party with net positive consideration, as defined in the
Regulation promulgated under Code Section 848, for such Reinsurance
Agreements for each taxable year, shall capitalize specified policy
acquisition expenses with respect to such Reinsurance Agreements
without regard to the general deductions limitation of Section 848(c)
(1);
c. Each party agrees to exchange information pertaining to the amount of
net consideration under such Reinsurance Agreements each year to
ensure consistency;
d. The Company will submit a schedule to the Reinsurer by June 1 of each
year of its calculation of the net consideration for the preceding
calendar year. The Reinsurer may contest such calculation by providing
an alternative calculation to the Company in writing within thirty
(30) days of the Reinsurer's receipt of the Company's calculation. The
Company and the Reinsurer 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.
The provisions of this Agreement shall be subject to all the Terms of the
Agreement which do not conflict with the Terms hereof.
Security-Connecticut Life Insurance Company
Witness: /s/ Paul Susi By: /s/ William Casill
----------------------------- ------------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
----------------------------- ------------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert Voight
----------------------------- ------------------------------
Title: Actuary Title: Executive Vice President
----------------------------- ------------------------------
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
Treaty Type Treaty Effective Date
----------- ---------------------
Automatic/YRT April 1, 1984
Automatic/CO January 1, 1987
AMENDMENT
Amendment to each Reinsurance Agreement listed herein between Lincoln Security
Life Insurance Company, hereinafter referred to as the "Company" and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that on and after the first day of January, 1994, under all
Reinsurance Agreements between the Company and the Reinsurer, the entire
Agreement Article will be added and the Arbitration Article will be replaced.
Entire Agreement
1. This Agreement, Amendments, and Addenda shall constitute the entire
agreement between the parties with respect to business reinsured hereunder.
There are no understandings between the parties other than as expressed in
this Agreement and any future change or modification of this Agreement
shall be null and void unless made by Amendment to the Agreement and signed
by both parties.
Arbitration
1. In the event of any difference arising hereafter between the contracting
parties with reference to any transaction under this Agreement, the same
shall be referred to three arbitrators who must be executive officers of
life insurance or life reinsurance companies other than the two parties to
this Agreement or their affiliates, each of the contracting companies to
appoint one of the arbitrators and such two arbitrators to select the
third. If either party refuses or neglects to appoint an arbitrator within
thirty (30) days after receipt of the written request for arbitrators, the
initiating party may appoint a second arbitrator.
2. If the two arbitrators fail to agree on the selection of a third arbitrator
within thirty (30) days for their appointment, each of them shall name
three individuals, of whom the other shall decline two, and the decision
shall be made by drawing lots.
3. The arbitrators shall consider this Reinsurance Agreement not merely as a
legal document but also a gentlemen's agreement. In resolving the dispute,
the arbitrators will give full consideration to the customs and practices
of the life insurance and life reinsurance industry, insofar as they are
not in conflict with the specific terms of this Agreement. The arbitrators
shall decide by a majority vote. There shall be no appeal from their
written decision.
4. Unless the arbitrators decide otherwise, each party shall bear the expense
of its own arbitration, including its arbitrator and outside attorney fees,
and shall jointly and equally bear with the other party the expense of the
third arbitrator. Any remaining costs of the arbitration proceedings shall
be appointed by the Board of Arbitrators.
IN WITNESS WHEREOF, the Company and the Reinsurer have caused their names to be
subscribed and duly attested thereunder by their respective authorized officers.
Security-Connecticut Life Insurance Company
Witness: /s/ Paul Susi By: /s/ William Casill
----------------------------- ------------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
----------------------------- ------------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert Voight
----------------------------- ------------------------------
Title: Actuary Title: Executive Vice President
----------------------------- ------------------------------
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
Treaty Type Treat/ Effective Date
----------- ---------------------
Automatic/YRT April 1, 1984
Automatic/CO January 1, 1987
AMENDMENT
Effective on and after November 28, 1995, all Reinsurance Agreements between
Security-Connecticut Life Insurance Company, herein referred to as the
"Reinsurer", and Lincoln Security Life Insurance Company, herein referred to as
the "Company", shall be amended to include the following:
The Reinsurer agrees to establish an irrevocable Letter of Credit in favor of
the Company. The Amount of such Letter of Credit will be at least equal to the
aggregate of the statutory reserves plus any paid and unpaid losses recoverable
from reinsurance assumed by the Reinsurer from the Company under all such
Reinsurance Agreements.
The irrevocable Letter of Credit shall be issued in compliance with Regulation
133 of the New York Insurance Regulations and shall be subject to the following
provisions:
1. The Reinsurer and the Company agree that the Letter of Credit provided by
the Reinsurer pursuant to the provisions of this Amendment may be drawn
upon at any time, notwithstanding any other provision in these reinsurance
agreements and may be utilized by the Company or any successor by operation
of law of the Company including, without limitation, any liquidator,
rehabilitation, receiver or conservator of the Company for the following
purposes:
a. To reimburse the Company for the Reinsurer's share of premiums
returned to the owners of policies insured under these reinsurance
agreements on account of cancellations of such policies;
b. To reimburse the Company for the Reinsurer's share of surrenders and
benefits or losses paid by the Company under the terms and provisions
of the policies reinsured under these reinsurance agreements;
c. 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
policies reinsured under these agreements such amount shall include,
but not be limited to, amounts for policy reserves, reserves for
claims and losses incurred (including losses incurred but not
reported), loss adjustment expense and unearned premiums;
d. To pay any other amounts the Company claims are due under these
reinsurance agreements.
2. All of the foregoing should be applied without diminution because of
insolvency on the part of the Company or the Reinsurer.
3. The Company shall return immediately any amounts drawn on the Letter of
Credit in excess of the actual amounts required for paragraphs 1a, 1b and
1c of this amendment or in the case of paragraph ld of this section, any
amounts that are subsequently determined not to be due.
4. The Company shall pay the Reinsurer an interest payment, at a rate
equivalent to the prime rates of interest of the bank issuing the Letter of
Credit, on all amounts held pursuant to paragraphs 1c of this amendment.
Except as herein specified, all of the terms and conditions of the existing
Reinsurance Agreements between the Reinsurer and the Company shall continue to
apply, and this Amendment shall be attached to and made part of each such
Reinsurance Agreement.
In witness of the above, this Amendment is signed in duplicate at the dates and
places indicated.
LINCOLN SECURITY LIFE INSURANCE COMPANY
Witness: /s/ Kim E. Audia By: /s/ Robert J. Voight
------------------------- ------------------------------
Title: Sr. Vice President
------------------------
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
Witness: /s/ Kim E. Audia By: /s/ Richard Mocarski
------------------------- ------------------------------
Title: VP, Controller & Treasurer
-------------------------------
REINSURANCE AGREEMENT
Lincoln Security Life Insurance Company ("Company")
and
Security-Connecticut Life Insurance Company ("Reinsurer")
TREATY TYPE TREATY EFFECTIVE DATE
----------- ---------------------
Automatic/YRT April 1, 1984
Automatic/CO January 1, 1987
AMENDMENT V
Amendment to Reinsurance Agreement (effective April 1, 1984) between the Lincoln
Security Life Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that on and after the first day of January, 1992, Exhibit II
- - Part 2 shall be replaced with the attached.
All provisions of the Reinsurance Agreement not in conflict with the provisions
of the amendment will continue unchanged.
Security-Connecticut Life Insurance Company
Witness: /s/ Paul V. Susi By: /s/ William Casill
----------------------------- ------------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
----------------------------- ------------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert J. Voight
----------------------------- ------------------------------
Title: Actuary Title: Executive Vice President
----------------------------- ------------------------------
REINSURANCE PREMIUMS
EXHIBIT II - PART 2
Fifteen Year Select Reinsurance Program
Duration PNS PS NS S
-------- --- -- -- -
1 .00 .00 .00 .00
2-15 .74 .71 .88 .84
16+ .76 .73 .91 .87
Female Rates
Age 0 - Use rates for males issue age 0
Ages 1 to 5 - Use rates for males issue age 1
Ages 6 to older - Use rates for males 5 years younger
Female risks are subject to the maximum true issue age limit of 85.
Substandard Risks
The reinsurance premiums for substandard risks rated on a multiple mortality
tables basis shall be equal to the multiple of the standard rate proportionate
to the mortality classification. Thus, the premium for a Class D (200%) risk
shall be equal to twice the standard premium.
Policy Fee
None.
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
NON-REFUND PREMIUM RATES PER $1000
STANDARD MALE NON-SMOKER
AGE NEAREST BIRTHDAY
Table omitted.
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
NON-REFUND PREMIUM RATES PER $1000
STANDARD MALE SMOKER
AGE NEAREST BIRTHDAY
Table omitted.
AMENDMENT VI
Amendment to the Reinsurance Agreement effective April 1, 1984, between the
Lincoln Security Life Insurance Company, hereinafter referred to as the
"Company", and Security-Connecticut Life Insurance Company, hereinafter referred
to as the "Reinsurer".
It is hereby agreed that Exhibit III shall be replaced with the attached with
the appropriate effective dates.
All provisions of the Reinsurance Agreement not in conflict with the provisions
of the amendment will continue unchanged.
Security-Connecticut Life Insurance Company
Witness: /s/ Paul V. Susi By: /s/ William Casill
----------------------------- ------------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
----------------------------- ------------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert J. Voight
----------------------------- ------------------------------
Title: Actuary Title: Executive Vice President
----------------------------- ------------------------------
Plans of Insurance
Omitted.
AMENDMENT VII
Amendment to Reinsurance Agreement (effective April 1, 1984) between the Lincoln
Security Life Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that Exhibit II - Part 4 shall be replaced with the attached
with the stated effective dates.
All provisions of the Reinsurance Agreement not in conflict with the provisions
of the amendment will continue unchanged.
Security-Connecticut Life Insurance Company
Witness: /s/ Paul V. Susi By: /s/ William Casill
----------------------------- ------------------------------
Title: A.V.P. & Assoc. Actuary Title: Vice President & Actuary
----------------------------- ------------------------------
Lincoln Security Life Insurance Company
Witness: /s/ J. Paul Chhabra By: /s/ Robert J. Voight
----------------------------- ------------------------------
Title: Actuary Title: Executive Vice President
----------------------------- ------------------------------
Accidental Death Benefit Rates
Standard
Effective January 1, 1985
$0.52
Effective January 1, 1988
$0.48
Effective January 1, 1991
$0.45
Effective January 1, 1994
$0.34
Substandard
Substandard premium shall be the appropriate multiple of the standard premium.
EXHIBIT II - PART 4
AMENDMENT VIII
Effective on or after November 20, 1996, the Reinsurance Agreement (effective
April 1, 1984) between Security-Connecticut Life Insurance, herein referred to
as the "Reinsurer", and Lincoln Security Life Insurance Company, herein referred
to as the "Company", shall be amended to include the following:
The Reinsurer agrees to establish a Trust Agreement in favor of the Company to
replace the "Letter of Credit" Amendment, effective November 28, 1995. The trust
account will be at least equal to the aggregate of the statutory reserves plus
any paid and unpaid losses recoverable from reinsurance assumed by the Reinsurer
from the Company under all such Reinsurance Agreements.
The Trust Agreement shall be established in compliance with Regulation 114 of
the New York Insurance Regulations and shall be subject to the following
provisions:
1. Assets deposited in the trust account shall be valued according to their
current fair market value, and shall consist only of United States legal
tender, certificates of deposit issued by a United States bank and payable
in United States legal tender, and investments of the types specified in
paragraphs (1), (2), (3), (8), and (10) of subsection (a) of section 1404
of the New York Insurance Law, provided that such investments are issued by
an institution that is not the parent, subsidiary, or affiliate of either
the grantor or the beneficiary.
2. Prior to depositing assets with the trustee, the Reinsurer is required to
execute assignments, endorsements in blank, or transfer legal title to the
trustee of all shares, obligations or any other assets requiring
assignments, in order that the Company, or the trustee upon the direction
of the Company, may whenever necessary negotiate any such assets without
consent or signature from the Reinsurer or any other entity.
3. All settlements of account between the Company and the Reinsurer are
required to be made in cash or its equivalent.
4. The Reinsurer and the Company agree that the assets in the trust account,
established pursuant to the provisions of the Reinsurance Agreement, may be
withdrawn by the Company at any time, notwithstanding any other provisions
in the Reinsurance Agreement, and shall be utilized and applied by the
Company or any successor by operation of law of the Company, including
without limitation, any liquidator, rehabilitator, receiver or conversator
of the Company, without diminution because of insolvency on the part of the
Company or the Reinsurer, only for the following purposes:
a) to reimburse the Company for the Reinsurer's share of premiums
returned to the owners of policies reinsured under the Reinsurance
Agreement on account of cancellations of such policies;
b) to reimburse the Company for the Reinsurer's share of surrenders and
benefits on losses paid by the Company pursuant to the provisions of
the policies reinsured under the Reinsurance Agreement;
c) 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
policies reinsured under the Reinsurance Agreement. Such account shall
include, but not be limited to, amounts for policy reserves, reserves
for claims and losses incurred, loss adjustments, expenses, and
unearned premiums; and
d) to pay any other amounts the Company claims are due under the
Reinsurance Agreement.
5. The Reinsurer may be given the right to seek approval from the Company to
withdraw from the trust account all or any part of the assets contained
therein and transfer such assets to the Reinsurer, provided:
a) The Reinsurer shall, at the time of such withdrawal, replace the
withdrawn assets with other qualified assets having a market value
equal to the market value of the assets withdrawn so as to maintain at
all times the deposit in the required amount; or
b) after such withdrawals and transfer, the market value of the trust
account is no less than 102 percent of the required amount.
6. The Company shall be the sole judge as to the application of this
provision, but shall not unreasonably or arbitrarily withhold its approval
and provide for:
a) the return of any amount withdrawn in excess of the actual amounts
required for subparagraphs (4), (a)-(c) of this Amendment, or in the
case of subparagraph (4), (d), any amounts that are subsequently
determined not to be due; and
b) interest payments at a rate not in excess of the prime rate of
interest, on the amounts held pursuant to subparagraph (4), (c) of
this Amendment.
7. Any arbitration panel or court of competent jurisdiction may permit the
award of:
a) interest at a rate different from that provided in subparagraph (6), (b)
of this Amendment;
b) court or arbitration costs;
c) attorney's fees; and
d) any other reasonable expenses.
Except as herein specified, all of the terms and conditions of the existing
Reinsurance Agreements between the Reinsurer and the Company shall continue to
apply, and this Amendment shall be attached to and made part of each such
Reinsurance Agreement.
In witness whereof; the parties hereto have caused this Amendment to be executed
in duplicate by their duly authorized representatives:
Security-Connecticut Life Insurance Company
By: /s/ William Casill
---------------------------------------
Title: Vice President and Actuary
---------------------------------------
Attest: /s/ Paul V. Susi
----------------------------------
Title: A.V.P. & Assoc. Actuary
----------------------------------
Lincoln Security Life Insurance Company
By: /s/ Robert J. Voight
---------------------------------------
Title: Vice President
---------------------------------------
Attest: /s/ John Lockhart
-----------------------------------
Title: Assistant Controller, Assistant
Treasurer
-----------------------------------
AMENDMENT IX
Effective May 1, 1996
Amendment to Reinsurance Agreement (effective April 1, 1984) between the Lincoln
Security Life Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that on and after the first day of May 1996, under the above
mentioned reinsurance agreement, Article I, paragraph 5, shall be replaced with
the following:
Exceptions to Automatic Coverage
5. Reinsurance shall not be ceded automatically on any policy issued on and
after April 1, 1996, if:
a. The amount of life insurance in force on that life in all companies
plus the amount currently being applied for, less the amount of all
policies absolutely assigned to the Company (provided the sum of all
such absolute assignments does not exceed twenty million dollars for
issue age of lives up to age 70 and ten million dollars for issue age
of lives at or over age 70) exceeds twenty million dollars
($20,000,000) for issue age of lives up to age 70 and ten million
dollars ($10,000,000) for issue age of lives at or over age 70; or
b. if the amount of insurance currently applied for and to be reinsured
under this Agreement on that life, plus all amounts of insurance which
the Company then reinsures on that life under this Agreement or any
other life reinsurance agreement, exceed the Automatic Binding
Capacity, as indicated in Exhibit I; or
c. the substandard mortality rating assessed by the Company to the risk
exceeds Class P (500%) or its equivalent on an extra premium basis; or
d. the Company has submitted the risk for facultative consideration
within the last two years.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this amendment is to be added to and make part of the
aforesaid Agreement.
Security-Connecticut Life Insurance Company
By: /s/ William Casill
---------------------------------------
William Casill
Title: Vice President and Actuary
---------------------------------------
Attest:
By: /s/ Paul V. Susi
---------------------------------------
Title: Assistant Vice President and Assoc.
Actuary
---------------------------------------
Lincoln Security Life Insurance Company
By: /s/ Barry St. Pierre
---------------------------------------
Title: Senior Vice President
---------------------------------------
Attest:
By: /s/ J. Paul Chhabra
---------------------------------------
Title: Vice President and Actuary
---------------------------------------
AMENDMENT X
Effective July 7, 1997
Amendment to the Reinsurance Agreement (effective April 1, 1984) between the
Lincoln Security Life Insurance Company, hereinafter referred to as the
"Company", and Security-Connecticut Life Insurance, hereinafter referred to as
the "Reinsurer".
It is hereby agreed, for all policies issued on and after the seventh day of
July 1997, under the above mentioned reinsurance agreement, Exhibit II - Part 5,
will be amended with the attached.
Security-Connecticut Life Insurance Company
By: /s/ William Casill
---------------------------------------
Title: Vice President and Actuary
----------------------------------------
Attest: /s/ Bruce Loughran
----------------------------------
Title: Second V.P. and Actuary
----------------------------------
Lincoln Security Life Insurance Company
By: /s/ Robert J. Voight
---------------------------------------
Title: Vice President
---------------------------------------
Attest: /s/ John Lockhart
-----------------------------------
Title: Assistant Controller/Assistant
Treasurer
-----------------------------------
MULTIPLE LIFE
REINSURANCE PREMIUMS
EXHIIT II - PART 5
ESTATE DESIGN SERIES
FIFTEEN YEAR SELECT REINSURANCE PROGRAM
Effective July 7, 1997
USE OF THE RATE SCHEDULE
The appropriate YRT premium shall be derived by applying the following multiples
to the rates combined herein:
NS/NS
JEA 0-37 38-42 43-45 46-47 48-52 53-57 58-62 63-70 71+
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
DUR
1 0 0 0 0 0 0 0 0 0
2-10 0.31 2-10 0.28 0.25 0.18 0.17 0.16 0.16 0.16
11-14 0.29 0.26 0.23 0.18 0.17 0.16 0.16 0.16 0.18
15 0.65 0.59 0.53 0.41 0.39 0.38 0.38 0.38 0.40
16 0.63 0.57 0.51 0.41 0.39 0.38 0.38 0.38 0.40
17-20 0.63 0.57 0.51 0.41 0.39 0.38 0.38 0.38 0.40
21+ 0.43 0.40 0.37 0.27 0.26 0.26 0.26 0.26 0.26
NS/S
JEA 0-37 38-42 43-45 46-47 48-52 53-57 58-62 63-70 71+
------------------------------------------------------------------------------------------------------
DUR
1 0 0 0 0 1 0 0 0 0 0
2-10 0.31 0.28 0.25 0.18 0.17 0.16 0.16 0.16 0.12
11-14 0.29 0.26 0.23 0.18 0.17 0.16 0.16 0.16 0.12
15 0.65 0.59 0.53 0.41 0.39 0.38 0.38 0.38 0.28
16 0.63 0.57 0.51 0.41 0.39 0.38 0.38 0.38 0.28
17-20 0.63 0.57 0.51 0.41 0.39 0.38 0.38 0.38 0.28
21+ 0.43 0.40 0.37 0.27 0.27 0.26 0.26 0.26 0.21
S/S
JEA 0-37 38-42 43-45 46-47 48-52 53-57 58-62 63-70 71+
------------------------------------------------------------------------------------------------------
DUR
1 0 0 0 0 1 0 0 0 0 0
2-10 0.31 0.28 0.25 0.18 0.17 0.16 0.16 0.16 0.18
11-14 0.29 0.26 0.23 0.18 0.17 0.16 0.16 0.16 0.18
15 0.66 0.60 0.54 0.42 0.40 0.39 0.39 0.39 0.41
16 0.64 0.58 0.52 0.42 0.40 0.39 0.39 0.39 0.41
17-20 0.64 0.58 0.52 0.42 0.40 0.39 0.39 0.39 0.41
21+ 0.44 0.41 0.38 0.28 0.28 0.27 0.27 0.27 0.28
Guaranteed Annuity COIs
Table omitted.
SUBSTANDARD RISKS
- -----------------
A table rating on either or both lives will be converted into a joint table
rating or a joint flat extra or a combination of the two. For the joint table
rating portion of the risk, the total reinsurance premium will be equal to the
standard reinsurance premium increased by a proportional amount. For the joint
flat extra portion of the risk associated with the individual table rating(s),
the total reinsurance premium will be increased by the joint flat extra. For a
joint flat extra attributable to a flat extra rating on one or both of the
individuals, the total reinsurance premium will be determined in accordance with
paragraph 2 or 3 of Article VI, as appropriate.
POLICY FEE
None.
AMENDMENT XI
Effective April 1, 2000
Amendment to the Automatic Reinsurance Agreement (effective April 1, 1984)
between ReliaStar Life Insurance Company of New York hereinafter referred to as
the "Company", and Security-Connecticut Life Insurance Company, hereinafter
referred to as the "Reinsurer".
It is hereby agreed that on and after the first day of April 2000, under the
above mentioned reinsurance agreement, Exhibit II, Part 2, will be amended with
the attached.
It is hereby agreed that on and after the first day of April 2000, under the
above mentioned reinsurance agreement, Exhibit III, will be replaced with the
attached with the appropriate effective dates.
Except as hereby specified, all the terms and conditions of the Automatic
Reinsurance Agreement shall apply, and the amendment is to be attached to and
made part of aforesaid Agreement.
Security-Connecticut Life Insurance Company
Attest: /s/ Diane Sylvester By: /s/ Paul V. Susi
----------------------- -----------------------------
Title: 2nd Vice President Title: 2nd Vice President & Actuary
ReliaStar Life Insurance Company
Attest: /s/ William Bonneville By: /s/ Fritz Riemenschneider
--------------------------- -----------------------------
Title: Exec. Vice President Title: Assistant Vice President &
---------------------- Compliance Officer
-----------------------------
Reinsurance Premiums
Table omitted.
EXHIBIT II - Part 2
Fifteen Year Select Reinsurance Program
Reinsurance Premiums
Duration SPNS PNS SNS PSM SSM
- -------- ---- --- --- --- ---
1 .00 .00 .00 .00 .00
2 + .36 .46 .60 .46 .62
Female Rates:
Age 0 - Use rates for males issue age 0
Ages 1 to 5 - Use rates for males issue age 1
Ages 6 and older Use rates for males 5 years younger
Female risks are subject to the maximum true issue age limit of 85.
Substandard Risks:
The reinsurance premiums for substandard risks rated on a multiple mortality
tables basis shall be equal to the multiple of the standard rate proportionate
to the mortality classification. Thus, the premium for class D (200%) risk shall
be equal to twice the standard premium.
Policy Fee: None.
AMENDMENT XVI
Effective September 1, 1998
Amendment to the Reinsurance Agreement (effective April 1, 1984) between
ReliaStar Life Insurance Company of New York, formally Lincoln Security Life
Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that effective on and after the first day of September I,
1998, under the above mentioned Reinsurance Agreement, Exhibit I is amended with
the attached.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this amendment is to be added to and made part of the
aforesaid Agreement.
Security-Connecticut Life Insurance Company
By: /s/ Bruce Loughran
---------------------------------------
Title: Second V.P. and Actuary
---------------------------------------
Attest:
-----------------------------------
By: /s/ Eric Swan
---------------------------------------
Title: Assistant Actuary
---------------------------------------
ReliaStar Life Insurance Company of New York
By: /s/ William Bonneville
---------------------------------------
Title: Executive Vice President
---------------------------------------
Attest:
-----------------------------------
By: /s/ Kenneth Quenstedt
---------------------------------------
Title: AVP - IS
---------------------------------------
EXHIBIT I
Effective September 1, 1998
RETENTION LIMITS APPLICABLE TO PERMANENT POOL:
$300,000
AUTOMATIC BINDING APPLICABLE TO PERMANENT POOL:
$6,000,000
AMENDMENT XVII
Effective November 1, 2001
Amendment to the Reinsurance Agreement (effective April 1, 1984) between
ReliaStar Life Insurance Company of New York, formally Lincoln Security Life
Insurance Company, hereinafter referred to as the "Company", and
Security-Connecticut Life Insurance Company, hereinafter referred to as the
"Reinsurer".
It is hereby agreed that effective on and after the first day of November 1,
2001, the above mentioned Reinsurance Agreement is amended as follows:
1. Article I, paragraph 2, is amended for policies issued on and after the
effective date of this Amendment, as follows:
Except as specified in Paragraph 5, whenever coverage is available under
this Agreement, as specified in Paragraph l of this Article I, the Company
shall cede and the Reinsurer shall automatically accept the excess over the
Company's designated maximum retention up to the maximum automatic binding
limits specified in Exhibit I. In addition, it is agreed that Company may
enter into reinsurance arrangements whereby Company will cede risks to
certain reinsurers on a first dollar quota share basis prior to ceding
Company's excess retention to Reinsurer. To the extent the Company's
designated maximum retention is exceeded after ceding amounts under a first
dollar quota reinsurance arrangement, Reinsurer shall accept amounts in
excess of Company's retention as provided in this Agreement.
2. Article I, paragraph 5 is amended to provide that for policies issued on
and after the effective date of this Amendment, the exceptions for automatic
coverage are (a) for insurance resulting from a group conversion where full
evidence of insurance has not been secured , and (b) if the amount of life
insurance in force on that life in all companies plus that currently applied
for, less the amount of all absolutely assigned to the Company, exceeds the
binding limits in Exhibit I.
3. Article I, paragraph 6, is amended to provide that there is no
maximum Automatic Limit or maximum for conditional receipt coverage for policies
issued on and after the effective date of this Amendment.
4. Exhibit I is amended with the attached.
5. The reinsurance rates set forth in Exhibit II is amended to include the
attached rates which shall apply to policies issued after the effective date of
this Amendment.
6. Exhibit III is replaced by the attached Plans of Insurance with the
appropriate effective dates. In addition, it is agreed that all new plans of
Company's permanent insurance, including variable products, shall be eligible
plans of insurance to be ceded under this Reinsurance Agreement, unless the
Reinsurer elects in writing not to participate in the coverage for a newly
designed permanent term plan within 20 days after receiving requisite plan
information which Company must provide to Reinsurer at least 25 days prior to
commencing cessions to Reinsurer. Such new plans shall use the appropriate
reinsurance rates then being used for new policies reinsured under the
Reinsurance Agreement, unless the parties amend this Agreement in writing
providing another set of reinsurance rates to be applicable for the new plan of
insurance.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this amendment is to be added to and made part of the
aforesaid Agreement.
Security-Connecticut Life Insurance Company
By: /s/ Bruce Loughran
---------------------------------------
Title: Second V.P. and Actuary
---------------------------------------
Attest:
-----------------------------------
By: /s/ Eric Swan
---------------------------------------
Title: Assistant Actuary
---------------------------------------
ReliaStar Life Insurance Company of New York
By: /s/ William Bonneville
---------------------------------------
Title: Executive Vice President
---------------------------------------
Attest:
----------------------------------
By: /s/ Kenneth Quenstedt
---------------------------------------
Title: AVP - IS
---------------------------------------
EXHIBIT I
Effective November 1, 2001
RETENTION LIMITS APPLICABLE TO PERMANENT POOL:
$300,000
AUTOMATIC BINDING APPLICABLE TO PERMANENT POOL:
Automatic Binding Capacity - Individual Life
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Rating Ages - 0-75 Rating Ages - 76-80 Rating Ages - 81-85
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Standard 50,000,000 Standard 30,000,000 Standard 25,000,000
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Table 1 - 6 50,000,000 Table 1-4 30,000,000 Table 1-2 25,000,000
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Table 7 - 16 35,000,000 Tables 5-16 0 Table 3-16 0
- ------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Automatic Binding Capacity - Survivorship/Joint Life*
- --------------------- --------------------------- ----------------- -------------------------- --------------- -------------------
Rating Oldest Ages - 0-75 Rating Oldest Age - 76-80 Rating Oldest Ages -
81-85
- --------------------- --------------------------- ----------------- -------------------------- --------------- -------------------
Standard 50,000,000 Standard 30,000,000 Standard 25,000,000
- --------------------- --------------------------- ----------------- -------------------------- --------------- -------------------
Table 1 - 6 50,000,000 Table 1-4 30,000,000 Table 1-2 25,000,000
- --------------------- --------------------------- ----------------- -------------------------- --------------- -------------------
Table 7+ 35,000,000 Tables 5+ 0 Table 3+ 0
- --------------------- --------------------------- ----------------- -------------------------- --------------- -------------------
*Refer to Individual Life Automatic Binding Capacity Chart when one life is
uninsurable.
EXHIBIT II
Reinsurance Rates
Super
Preferred Preferred Standard Preferred Standard
Duration Non-Tobacco Non-Tobacco Non-Tobacco Tobacco Tobacco
1 .00 .00 .00 .00 .00
2+ .90 .94 1.02 1.09 1.19
EXHIBIT III
Plans of Insurance
Omitted.
AMENDMENT XVIII
Effective October 1, 2003
Amendment XVIII to the Automatic Reinsurance Agreement, effective April 1, 1984,
between Security-Connecticut Life Insurance Company (Reinsurer) and ReliaStar
Life Insurance Company of New York (Company).
Effective October 1, 2003, Security-Connecticut Life Insurance Company has been
merged with ReliaStar Life Insurance Company and thereafter ReliaStar Life
Insurance Company will assume all the business of Security-Connecticut Life
Insurance Company reinsured under the Automatic Reinsurance Agreement effective
April 1, 1984 between Security-Connecticut Life Insurance Company and ReliaStar
Life Insurance Company of New York.
All of the rights accorded to and duties, obligations and liabilities assumed by
Security-Connecticut Life Insurance Company under the Agreement shall be
accorded to and assumed by ReliaStar Life Insurance Company as if ReliaStar Life
Insurance Company had been the original party to the Reinsurance Agreement
instead of Security-Connecticut Life Insurance Company.
The terms and conditions of the Agreement are not changed in any way except as
stated herein.
Amendment XVIII shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns.
In witness of the above, ReliaStar Life and ReliaStar Life of New York have by
their respective officers executed and delivered this Amendment XVIII in
duplicate on the dates indicated below, with an Effective Date of October 1,
2003.
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Richard Lau By: /s/ Richard Lau
---------------------------- -------------------------------
Richard Lau Richard Lau
Title: Vice President Title: Vice President
---------------------------- -------------------------------
Date: 2/25/04 Date: 2/25/04
---------------------------- -------------------------------
Attest: /s/ Mary Broesch Attest: /s/ Mary Broesch
------------------------ --------------------------
Mary Broesch Mary Broesch
Title: Vice President Title: Vice President
------------------- ---------------------
Date: 2/25/04 Date: 2/25/04
------------------- ---------------------
AMENDMENT XIX
Effective March 1, 2001
Amendment XIX to the Automatic Reinsurance Agreement, effective April 1, 1984,
between ReliaStar Life Insurance Company (Reinsurer) and ReliaStar Life
Insurance Company of New York (Company).
It is hereby agreed that effective on and after the March 1, 2001 under the
above mentioned Reinsurance Agreement, Exhibit III is amended with the attached.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this Amendment is to be added to and made part of the
aforesaid Agreement.
In witness of the above, ReliaStar Life and ReliaStar Life of New York have by
their respective officers executed and delivered this Amendment XIX in duplicate
on the dates indicated below, with an Effective Date of March 1, 2001.
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Richard Lau By: /s/ Richard Lau
---------------------------- -------------------------------
Richard Lau Richard Lau
Title: Vice President Title: Vice President
---------------------------- -------------------------------
Date: 2/25/04 Date: 2/25/04
---------------------------- -------------------------------
Attest: /s/ Mary Broesch Attest: /s/ Mary Broesch
------------------------ --------------------------
Mary Broesch Mary Broesch
Title: Vice President Title: Vice President
------------------- ---------------------
Date: 2/25/04 Date: 2/25/04
------------------- ---------------------
EXHIBIT III
Plans of Insurance
Plan Name Policy Form Number Effective Date Termination Date
- --------------------------------------------------------------------------------------------------------------------
Economy Life 10640NY April 1, 1984
- --------------------------------------------------------------------------------------------------------------------
Security 21 10780NY April 1, 1984 April 1, 1990
- --------------------------------------------------------------------------------------------------------------------
One/Five Year R&C 10860NY April 1, 1984
- --------------------------------------------------------------------------------------------------------------------
Life Paid Up at 95 10850NY April 1, 1984
- --------------------------------------------------------------------------------------------------------------------
Designer Life 10840NY April 1, 1984
- --------------------------------------------------------------------------------------------------------------------
Designer Life Plus 10890NY October 1, 1985 December 1, 1987
- --------------------------------------------------------------------------------------------------------------------
Designer Life III 10980NY August 1, 1985 December 1, 1987
- --------------------------------------------------------------------------------------------------------------------
New Life II/Plus 10960NY February 1, 1986 December 1, 1987
- --------------------------------------------------------------------------------------------------------------------
New Life I 10970NY February 1, 1986 December 1, 1987
- --------------------------------------------------------------------------------------------------------------------
Premier Design 11060NY January 1, 1988
- --------------------------------------------------------------------------------------------------------------------
Guarantee Life 11220NY January 1, 1991
- --------------------------------------------------------------------------------------------------------------------
Joint Design 11260NY June 1, 1992
- --------------------------------------------------------------------------------------------------------------------
Estate Design 11400NY November 1, 1992
- --------------------------------------------------------------------------------------------------------------------
Design UL B-UL-1195-97 April 1, 2000
- --------------------------------------------------------------------------------------------------------------------
Variable Estate Design NY 85-438 February 1, 2001
- --------------------------------------------------------------------------------------------------------------------
Select Life NY II 86-025 March 1, 2001
- --------------------------------------------------------------------------------------------------------------------
Design UL (2001) 1132R NY March 1, 2001
- --------------------------------------------------------------------------------------------------------------------
AMENDMENT XX
Effective February 1, 2002
Amendment XX to the Automatic Reinsurance Agreement, effective April 1, 1984,
between ReliaStar Life Insurance Company (Reinsurer) and ReliaStar Life
Insurance Company of New York (Company).
It is hereby agreed that effective on and after the February 1, 2002 under the
above mentioned Reinsurance Agreement, Exhibit III is amended with the attached.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this Amendment is to be added to and made part of the
aforesaid Agreement.
In witness of the above, ReliaStar Life and ReliaStar Life of New York have by
their respective officers executed and delivered this Amendment XX in duplicate
on the dates indicated below, with an Effective Date of February 1, 2002.
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Richard Lau By: /s/ Richard Lau
---------------------------- -------------------------------
Richard Lau Richard Lau
Title: Vice President Title: Vice President
---------------------------- -------------------------------
Date: 6/11/04 Date: 6/11/04
---------------------------- -------------------------------
Attest: /s/ Mary Broesch Attest: /s/ Mary Broesch
------------------------ --------------------------
Mary Broesch Mary Broesch
Title: Vice President Title: Vice President
------------------- ---------------------
Date: 6/11/04 Date: 6/11/04
------------------- ---------------------
EXHIBIT III
Plans of Insurance
Omitted.
- ---------------------------------------------------------------------------------------------------------------------
Plan Name Policy Form Number Effective Date Termination Date
- ---------------------------------------------------------------------------------------------------------------------
Economy Life 10640NY April 1, 1984
- ---------------------------------------------------------------------------------------------------------------------
Security 21 10780NY April 1, 1984 April 1, 1990
- ---------------------------------------------------------------------------------------------------------------------
One/Five Year R&C 10860NY April 1, 1984
- ---------------------------------------------------------------------------------------------------------------------
Life Paid Up at 95 10850NY April 1, 1984
- ---------------------------------------------------------------------------------------------------------------------
Designer Life 10840NY April 1, 1984
- ---------------------------------------------------------------------------------------------------------------------
Designer Life Plus 10890NY October 1, 1985 December 1, 1987
- ---------------------------------------------------------------------------------------------------------------------
Designer Life III 10980NY August 1, 1985 December 1, 1987
- ---------------------------------------------------------------------------------------------------------------------
New Life II/Plus 10960NY February 1, 1986 December 1, 1987
- ---------------------------------------------------------------------------------------------------------------------
New Life I 10970NY February 1, 1986 December 1, 1987
- ---------------------------------------------------------------------------------------------------------------------
Premier Design 11060NY January 1, 1988
- ---------------------------------------------------------------------------------------------------------------------
Guarantee Life 11220NY January 1, 1991
- ---------------------------------------------------------------------------------------------------------------------
Joint Design 11260NY June 1, 1992
- ---------------------------------------------------------------------------------------------------------------------
Estate Design 11400NY November 1, 1992
- ---------------------------------------------------------------------------------------------------------------------
Design UL B-UL-1195-97 April 1, 2000
- ---------------------------------------------------------------------------------------------------------------------
Variable Estate Design NY 85-438 February 1, 2001
- ---------------------------------------------------------------------------------------------------------------------
Select Life NY II 86-025 March 1, 2001
- ---------------------------------------------------------------------------------------------------------------------
Design UL (2001) 1132R NY March 1, 2001
- ---------------------------------------------------------------------------------------------------------------------
Premier Design 1135R NY February 1, 2002
- ---------------------------------------------------------------------------------------------------------------------
AMENDMENT XXI
Effective May 1, 2004
Amendment XIX to the Automatic Reinsurance Agreement, effective April 1, 1484,
between ReliaStar Life Insurance Company (Reinsurer) and ReliaStar Life
Insurance Company of New York (Company).
The parties hereby agree to append Exhibit I of the above referenced agreement
for new business written on or after May 1, 2004 as follows:
A. Automatic Binding Limits
Aviation* and Professional Sports Risks
-------------------------------------------------------------------------------
Rating Ages 0-75 Ages 76-80 Ages 81-85
-------------------------------------------------------------------------------
Standard $25,000,000 $15,000,000 $12,500,000
-------------------------------------------------------------------------------
Tables 1-2 $25,000,000 $15,000,000 $12,500,000
-------------------------------------------------------------------------------
Tables 3-4 $25,000,000 $15,000,000 $0
-------------------------------------------------------------------------------
Tables 5-6 $25,000,000 $0 $0
-------------------------------------------------------------------------------
Tables 7-16 $17,500,000 $0 $0
-------------------------------------------------------------------------------
*Aviation Exclusion Rider (AER) required for ages under l6 and above 75.
The parties hereby agree to amend Exhibit I of the above referenced agreement
for new business written on or after May 1, 2004 as follows:
B. Jumbo Limit
As it is known to Company at issue, the total then inforce plus the total amount
applied for, using the largest scheduled death benefit applied for on the life
may not be in excess of $65,000,000 on any one life.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this Amendment is to be added to and made part of the
aforesaid Agreement.
In witness of the above, ReliaStar Life and ReliaStar Life of New York have by
their respective officers executed and delivered this Amendment XXI in duplicate
on the dates indicated below, with an Effective
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Richard Lau By: /s/ Richard Lau
---------------------------- -------------------------------
Richard Lau Richard Lau
Title: Vice President Title: Vice President
---------------------------- -------------------------------
Date: 6/17/04 Date: 6/17/04
---------------------------- -------------------------------
Attest: /s/ Mary Broesch Attest: /s/ Mary Broesch
------------------------ --------------------------
Mary Broesch Mary Broesch
Title: Vice President Title: Vice President
------------------- ---------------------
Date: 6/17/04 Date: 6/17/04
------------------- ---------------------
AMENDMENT XXII
Effective June 30, 2004
Amendment XXII to the Automatic Reinsurance Agreement, effective April 1, 1984,
between ReliaStar Life Insurance Company (Reinsurer) and ReliaStar Life
Insurance Company of New York (Company).
It is hereby agreed that effective on and after the June 30, 2004 under the
above mentioned Reinsurance Agreement, Exhibit III is amended with the attached.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this Amendment is to be added to and made part of the
aforesaid Agreement.
In witness of the above, ReliaStar Life and ReliaStar Life of New York have by
their respective officers executed and delivered this Amendment XXII in
duplicate on the dates indicated below, with an Effective Date of June 30, 2004.
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Richard Lau By: /s/ Richard Lau
---------------------------- -------------------------------
Richard Lau Richard Lau
Title: Vice President Title: Vice President
---------------------------- -------------------------------
Date: July 16, 2004 Date: July 16, 2004
---------------------------- -------------------------------
Attest: /s/ Mary Broesch Attest: /s/ Mary Broesch
------------------------ --------------------------
Mary Broesch Mary Broesch
Title: Vice President Title: Vice President
------------------- ---------------------
Date: 7/16/04 Date: 7/16/04
------------------- ---------------------
EXHIBIT III
Plans of Insurance
- -----------------------------------------------------------------------------------------------------------------------
Plan Name Policy Form Number Effective Date Termination Date
- -----------------------------------------------------------------------------------------------------------------------
Economy Life I0640NY April 1, 1984
- -----------------------------------------------------------------------------------------------------------------------
Security 21 10780NY April 1, 1984 April 1, 1990
- -----------------------------------------------------------------------------------------------------------------------
One/Five Year R&C 10860NY April 1, 1984
- -----------------------------------------------------------------------------------------------------------------------
Life Paid Up at 95 I0850NY April 1, 1984
- -----------------------------------------------------------------------------------------------------------------------
Designer Life 10840NY April 1, 1984
- -----------------------------------------------------------------------------------------------------------------------
Designer Life Plus 10890NY October 1, 1985 December 1, 1987
- -----------------------------------------------------------------------------------------------------------------------
Designer Life Ill 10980NY August 1, 1985 December 1, 1987
- -----------------------------------------------------------------------------------------------------------------------
New Life II/Plus 10960NY February 1, 1986 December 1, 1987
- -----------------------------------------------------------------------------------------------------------------------
New Life I 10970NY February 1, 1986 December 1, 1987
- -----------------------------------------------------------------------------------------------------------------------
Premier Design 11060NY January I, 1988
- -----------------------------------------------------------------------------------------------------------------------
Guarantee Life 11220NY January 1, 1991
- -----------------------------------------------------------------------------------------------------------------------
Joint Design 11260NY June 1, 1992
- -----------------------------------------------------------------------------------------------------------------------
Estate Design 11400NY November 1, 1992
- -----------------------------------------------------------------------------------------------------------------------
Design UL B-UL-1195-97 April 1, 2000
- -----------------------------------------------------------------------------------------------------------------------
Variable Estate Design NY 85-438 February 1, 2001
- -----------------------------------------------------------------------------------------------------------------------
Select Life NY II 86-025 March 1, 2001
- -----------------------------------------------------------------------------------------------------------------------
Design UL (2001) 1132R NY March 1, 2001
- -----------------------------------------------------------------------------------------------------------------------
Premier Design 1135R NY February 1, 2002
- -----------------------------------------------------------------------------------------------------------------------
GPUL 1175R NY June 30, 2004
- -----------------------------------------------------------------------------------------------------------------------
AMENDMENT XXIII
Effective October 1, 2004
Amendment XXIII to the Automatic Reinsurance Agreement, effective April 1, 1984,
between ReliaStar Life Insurance Company (Reinsurer) and ReliaStar Life
Insurance Company of New York (Company).
It is hereby agreed that effective on and after the October 1, 2004 under the
above mentioned Reinsurance Agreement, Exhibit III is amended with the attached.
Except as herein specified, all the terms and conditions of the Reinsurance
Agreement shall apply, and this Amendment is to be added to and made part of the
aforesaid Agreement.
In witness of the above, ReliaStar Life Insurance Company and ReliaStar Life
Insurance Company of New York have by their respective officers executed and
delivered this Amendment XXIII in duplicate on the dates indicated below, with
an Effective Date of October 1, 2004.
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Richard Lau By: /s/ Richard Lau
---------------------------- -------------------------------
Richard Lau Richard Lau
Title: Vice President & Actuary Title: Vice President & Actuary
---------------------------- -------------------------------
Date: 10/08/04 Date: 10/08/04
---------------------------- -------------------------------
Attest: /s/ Mary Broesch Attest:/s/ Mary Broesch
------------------------ --------------------------
Mary Broesch Mary Broesch
Title: Vice President & Actuary Title: Vice President & Actuary
------------------------ ------------------------
Date: 10/08/04 Date: 10/08/04
------------------- ---------------------
EXHIBIT III
Plans of Insurance
- ----------------------------------------------------------------------------------------------------------------------------
Plan Name Policy Form Number Effective Date Termination Date
- ----------------------------------------------------------------------------------------------------------------------------
Economy Life 10640NY April 1, 1984
- ----------------------------------------------------------------------------------------------------------------------------
Security 21 10780NY April 1, 1984 April 1, I990
- ----------------------------------------------------------------------------------------------------------------------------
One/Five Year R&C 10860NY April 1, 1984
- ----------------------------------------------------------------------------------------------------------------------------
Life Paid Up at 95 10850NY April 1, 1984
- ----------------------------------------------------------------------------------------------------------------------------
Designer Life 10840NY April 1, 1984
- ----------------------------------------------------------------------------------------------------------------------------
Designer Life Plus 10890NY October 1, 1985 December 1, 1987
- ----------------------------------------------------------------------------------------------------------------------------
Designer Life III 10980NY August 1, 1985 December 1, 1987
- ----------------------------------------------------------------------------------------------------------------------------
New Life II/Plus 10960NY February 1, 1986 December 1, 1987
- ----------------------------------------------------------------------------------------------------------------------------
New Life I 10970NY February 1, 1986 December 1, 1987
- ----------------------------------------------------------------------------------------------------------------------------
Premier Design 11060NY January 1, 1988
- ----------------------------------------------------------------------------------------------------------------------------
Guarantee Life 11220NY January 1, 1991
- ----------------------------------------------------------------------------------------------------------------------------
Joint Design 11260NY June 1, 1992
- ----------------------------------------------------------------------------------------------------------------------------
Estate Design 11400NY November 1, 1992
- ----------------------------------------------------------------------------------------------------------------------------
Design UL B-UL-1195-97 April 1, 2000
- ----------------------------------------------------------------------------------------------------------------------------
Variable Estate Design NY 85-438 February 1, 2001
- ----------------------------------------------------------------------------------------------------------------------------
Select Life NY II 86-025 March 1, 2001
- ----------------------------------------------------------------------------------------------------------------------------
Design UL (2001) 1132R NY March 1, 2001
- ----------------------------------------------------------------------------------------------------------------------------
Premier Design 1135R NY February 1, 2002
- ----------------------------------------------------------------------------------------------------------------------------
GPUL 1175R NY June 30, 2004
- ----------------------------------------------------------------------------------------------------------------------------
ING Capital Accumulator UL 131906R October 1, 2004
- ----------------------------------------------------------------------------------------------------------------------------
Investor Elite 86-756 October 1, 2004
- ----------------------------------------------------------------------------------------------------------------------------
Premier Design 86-810 October 1, 2004
- ----------------------------------------------------------------------------------------------------------------------------
GPSUL 1176NY October 1, 2004
- ----------------------------------------------------------------------------------------------------------------------------
Exhibit 31.1
CERTIFICATION
I, David A. Wheat, certify that:
1. I have reviewed this annual report on Form 10-K of ReliaStar Life Insurance
Company of New York;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: March 29, 2005
-----------------
By /s/ David A. Wheat
----------------------------------------------------------------
David A. Wheat
Director, Senior Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)
Exhibit 31.2
CERTIFICATION
I, James R. Gelder, certify that:
1. I have reviewed this annual report on Form 10-K of ReliaStar Life Insurance
Company of New York;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date March 29, 2005
-------------------
By /s/ James R. Gelder
-----------------------------------------------------------------
James R. Gelder
Director and Chairman, President and Chief Executive Officer
(Duly Authorized Officer and Principal Executive Officer)
Exhibit 32.1
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of ReliaStar Life
Insurance Company of New York (the "Company") hereby certifies that, to the
officer's knowledge, the Company's Annual Report on Form 10-K for the year ended
December 31, 2004 (the "Report") fully complies with the requirements of Section
13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
By /s/ David A. Wheat
March 29, 2005 ---------------------------------------
- -------------- David A. Wheat
Date Director, Senior Vice President
and Chief Financial Officer
Exhibit 32.2
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, the undersigned officer of ReliaStar Life
Insurance Company of New York (the "Company") hereby certifies that, to the
officer's knowledge, the Company's Annual Report on Form 10-K for the year ended
December 31, 2004 (the "Report") fully complies with the requirements of Section
13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that
the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
By /s/ James R. Gelder
March 29, 2005 ------------------------------------
- -------------- James R. Gelder
Date Director and Chairman, President
and Chief Executive Officer