Exhibit 10.22

 

 

REINSURANCE AGREEMENT

 

EFFECTIVE: OCTOBER 1, 2005

 

BETWEEN

 

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY

5000 Westown Parkway, Suite 440

WEST DES MOINES, IOWA 50266

(Referred to in this Agreement as the Company)

 

AND

 

HANNOVER LIFE REASSURANCE COMPANY OF AMERICA

800 North Magnolia Ave., Suite 1400

ORLANDO, FLORIDA 32803

(Referred to in this Agreement as the Reinsurer)

 

 

AUTOMATIC YRT

HA-AEIL-05

 

March 22, 2006

 

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Table of Contents

 

Article I

 

Preamble

 

 

 

 

 

Article II

 

Automatic Reinsurance

 

 

 

 

 

Article III

 

Liability

 

 

 

 

 

Article IV

 

Duration of Agreement

 

 

 

 

 

Article V

 

Premiums

 

 

 

 

 

Article VI

 

Claims and Claim Reimbursements

 

 

 

 

 

Article VII

 

Experience Refunds

 

 

 

 

 

Article VIII

 

Accounting and Reporting

 

 

 

 

 

Article IX

 

Recapture

 

 

 

 

 

Article X

 

Extra Contractual Obligations

 

 

 

 

 

Article XI

 

General Provisions

 

 

 

 

 

Article XII

 

DAC Tax

 

 

 

 

 

Article XIII

 

Insolvency

 

 

 

 

 

Article XIV

 

Reinsurer’s Right of Notice of Unusual Practices

 

 

 

 

 

Article XV

 

Arbitration

 

 

 

 

 

Article XVI

 

Confidentiality

 

 

 

 

 

Article XVII

 

Execution

 

 

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Exhibit A

 

Reinsurer’s Share and Company’s Share

 

 

 

Exhibit B-1

 

Plans Covered

 

 

 

Exhibit B-2

 

Reinsured Risks

 

 

 

Exhibit C-1

 

Procedures For Reporting

 

 

 

Exhibit C-2

 

Request For Financial Reporting Information

 

 

 

Exhibit D

 

Reinsurance Premium Calculation

 

 

 

Exhibit E

 

Experience Refund Calculation

 

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ARTICLE I

 

PREAMBLE

 

1)             Parties to the Agreement. This is a Yearly Renewable Term
Reinsurance Agreement for indemnity reinsurance (the “Agreement”) solely between
Hannover Life Reassurance Company of America, Orlando, Florida (the
“Reinsurer”), and American Equity Investment Life Insurance Company, West Des
Moines, Iowa (the “Company”), collectively referred to as the “parties”.

 

The acceptance of risks under this Agreement will create no right or legal
relationship between the Reinsurer and the annuitant, owner or beneficiary of
any insurance policy or other contract of the Company.

 

The Agreement will be binding upon the Company and the Reinsurer and their
respective successors and assigns.

 

2)             Compliance. This Agreement applies only to the issuance of
insurance by the Company in a jurisdiction in which it is properly licensed.

 

The Company represents that it is in compliance with all state and federal laws
applicable to the business reinsured under this Agreement. In the event that the
Company is found to be in non-compliance with any law material to this
Agreement, the Agreement will remain in effect and the Company will indemnify
the Reinsurer for any loss the Reinsurer suffers as a result of the
non-compliance, and will seek to remedy the non-compliance immediately upon
discovery thereof.

 

3)             Construction. This Agreement will be construed in accordance with
the laws of the state of Iowa.

 

4)             Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the business reinsured hereunder. There are
no understandings between the parties other than as expressed in this Agreement.
Any change or modification to this Agreement will be null and void unless made
by amendment to this Agreement and signed by both parties.

 

5)             Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination will not impair or affect the
validity or the enforceability of the remaining provisions of this Agreement.

 

6)             Assignment. Neither party may assign, transfer, sell, convey or
otherwise dispose of any of its rights, duties or obligations under this
Agreement without the prior written consent of the other party, which consent
shall not be unreasonably withheld; provided, however, that the parties
acknowledge and agree that the Reinsurer may retrocede any or all of the risks
that it accepts under this Agreement.

 

…END OF ARTICLE I

 

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ARTICLE II

 

AUTOMATIC REINSURANCE

 

1)             General Conditions. On and after the Effective Date (as specified
in Article XVII) of this Agreement, the Company will cede to the Reinsurer a
portion of the “Reinsured Risks”, which are those risks specified in
Exhibit B-2, in respect of the policy plans listed in Exhibit B-1 (the
“Reinsured Policies”).

 

The Reinsurer will automatically accept its share (the “Reinsurer’s Share”) of
the Reinsured Risks on the above-referenced policies, provided that the Company
retains in full its share (the “Company’s Share”) of the same risks. The Company
will not transfer, assign, convey, reinsure or otherwise dispose of its share of
the Reinsured Risks without the Reinsurer’s written consent.

 

The Reinsurer’s Share and the Company’s Share are specified in Exhibit A. The
Reinsurer’s Share and the Company’s Share may be revised, at any quarter end, by
mutual consent of both parties.

 

…END OF ARTICLE II

 

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ARTICLE III

 

LIABILITY

 

1)             Reinsurer’s Liability. The Reinsurer’s liability will commence on
the effective date of this Agreement, will continue in accordance with the terms
and conditions of this Agreement, and will end on termination of this Agreement.
Payment by the Company to the Reinsurer of all Reinsurance Premiums due under
this Agreement, as specified in Article V, is a condition precedent to the
Reinsurer’s liability hereunder.

 

…END OF ARTICLE III

 

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ARTICLE IV

 

DURATION OF AGREEMENT

 

1)             This Agreement is indefinite as to its duration. The Company or
the Reinsurer may terminate this Agreement with respect to the reinsurance of
new business by giving ninety (90) days written notice of such termination to
the other party.

 

During the notification period, the Company will continue to cede and the
Reinsurer will continue to accept policies covered under the terms of this
Agreement. The Reinsurer will not be liable for policies with issue dates on and
after the ninetieth (90th) day after the date notice is given.

 

Reinsurance coverage on all Reinsured Policies will remain in force until the
termination or expiry of the Reinsured Policies or until the contractual
termination of reinsurance under the terms of this Agreement, as provided for in
Article V and Article IX, whichever comes first. When reinsurance coverage is no
longer in force, this Agreement will be terminated.

 

…END OF ARTICLE IV

 

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ARTICLE V

 

PREMIUMS

 

1)             Premiums. The basis of calculation of the premiums (the
“Reinsurance Premiums”) for the risks reinsured under this Agreement is shown in
Exhibit D.

 

2)             Premium Guarantee. The basis of calculation of the Reinsurance
Premiums, and the “Reinsurance Premium Rate”, which is also specified in
Exhibit D, are guaranteed for the duration of this Agreement.

 

3)             Payment of Premiums and Reporting. Reinsurance Premiums in
respect of each of the Reinsured Policies are payable by the Company to the
Reinsurer quarterly in arrears. The Company will self-administer the
calculation, reporting and payment of Reinsurance Premiums due, in accordance
with Article VIII.

 

4)             Failure to Pay Premiums. The payment of Reinsurance Premiums is a
condition precedent to the liability of the Reinsurer for reinsurance covered by
this Agreement. In the event that Reinsurance Premiums are not paid within
thirty (30) days of the Remittance Date, as specified in Article VIII, the
Reinsurer will have the right to terminate the reinsurance under all policies
having Reinsurance Premiums in arrears. If the Reinsurer elects to exercise its
right of termination, it will give the Company thirty (30) days written notice
of its intention.

 

If all Reinsurance Premiums in arrears, including any that become in arrears
during the thirty- day notice period, are not paid before the expiration of the
notice period, the Reinsurer will be relieved of all liability under those
policies as of the last date to which Reinsurance Premiums have been paid.
Reinsurance on policies on which Reinsurance Premiums subsequently fall due will
automatically terminate as of the last date to which premiums have been paid for
each policy, unless reinsurance premiums on those policies are paid on or before
their Remittance Dates. Reinsurance Premiums in arrears shall accrue interest at
a rate of ten percent (10%) per annum.

 

Terminated reinsurance may be reinstated, subject to approval by the Reinsurer,
within sixty (60) days of the date of termination, and upon payment of all
Reinsurance Premiums in arrears including any interest accrued thereon. The
Reinsurer will have no liability for any claims incurred between the date of
termination and the date of the reinstatement of the reinsurance. The right to
terminate reinsurance will not prejudice the Reinsurer’s right to collect
premiums for the period during which reinsurance was in force prior to the
expiration of the thirty (30) days notice.

 

If the Reinsurer terminates reinsurance on all of the Reinsured Policies in
accordance with the provisions in this paragraph 4, this will constitute
contractual termination of reinsurance, as referred to in Article IV.

 

The Company will not force termination under the provisions of this
Article solely to avoid the provisions regarding recapture in Article IX, or to
transfer the reinsured policies to another reinsurer.

 

…END OF ARTICLE V

 

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ARTICLE VI

 

CLAIMS AND CLAIM REIMBURSEMENTS

 

1)             Claim Amounts. Claims covered under this Agreement include only
claims relating to the Reinsured Risks on the Reinsured Policies. The amounts
payable in respect of such claims (the “Claim Amounts”) are defined in
Exhibit B-2.

 

2)             Claim Reimbursements. Where claims have been made under this
Agreement, reimbursements of these claims may in certain circumstances be made
at a later date. The amounts payable in respect of such reimbursements (the
“Claim Reimbursements”) are defined in Exhibit B-2.

 

3)             Payment of Claim Amounts, Claim Reimbursements and Reporting.
Claim Amounts in respect of each of the Reinsured Policies are payable by the
Reinsurer to the Company quarterly in arrears. Claim Reimbursements in respect
of each of the Reinsured Policies are payable by the Company to the Reinsurer
quarterly in arrears. The Company will self-administer the calculation and
reporting of the Claim Amounts and Claim Reimbursements due, in accordance with
Article VIII.

 

…END OF ARTICLE VI

 

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ARTICLE VII

 

EXPERIENCE REFUNDS

 

1)             At the end of each quarter, an experience refund will be
calculated and, if positive, paid by the Reinsurer to the Company. The Company
will self-administer the calculation and reporting of any such amount due (the
“Experience Refund Amount”), in accordance with Article VIII.

 

The calculation of the Experience Refund Amount is described in Exhibit E.

 

…END OF ARTICLE VII

 

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ARTICLE VIII

 

ACOUNTING AND REPORTING

 

1)             Quarterly Reporting. The company will self-administer the
calculation and payment of Reinsurance Premiums, Claim Amounts, Claim
Reimbursements and Experience Refunds due under this Agreement. Within thirty
(30) days after the end of each quarter (the “Remittance Date”), the Company
will send the Reinsurer a report that contains the information shown in
Exhibit C-1 and Exhibit C-2, showing the Reinsurance Premiums, Claim Amounts,
Claim Reimbursements and Experience Refund Amount due for that quarter. If an
amount is due the Reinsurer, the Company will remit that amount together with
the statement. If an amount is due the Company, the Reinsurer will remit such
amount within thirty (30) days of receipt of the statement.

 

2)             Electronic Data Transmission. The Company shall report its
reinsurance transactions via electronic media. The Company shall consult with
the Reinsurer to determine the appropriate reporting format. Should the Company
subsequently desire to make changes in the data format or the code structure,
the Company shall communicate such changes to the Reinsurer in writing
(describing in reasonable detail the changes) and obtain the Reinsurer’s written
approval thereof prior to the use of such changes.

 

3)             Policy Changes. Whenever a change is made in the status, plan,
amount or other material feature of a policy reinsured under this Agreement, the
Company will notify the Reinsurer of such change with the next statement
following the month in which the change was made.

 

…END OF ARTICLE VIII

 

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ARTICLE IX

 

RECAPTURE

 

1)             The Company may recapture the risks reinsured under this
Agreement as of the end of any quarter beginning October 1, 2008, subject to a
non-negative Experience Account Balance as defined in Exhibit E. On recapture,
the regular quarterly accounting and reporting described in Article VIII will be
completed and any amounts owed the Reinsurer or the Company will be paid. No
amounts other than those specified in Article VIII will be due either of the
parties on recapture or thereafter.

 

On recapture, that portion of the Reinsured Risks in respect of the Reinsured
Policies, which was previously ceded to the Reinsurer in accordance with
Article II, will be recaptured by the Company. The Reinsurer’s liability in
respect of the Reinsured Risks on the Reinsured Policies will cease and this
Agreement will be terminated with effect from the end of the quarter in
question.

 

Recapture will constitute a contractual termination of reinsurance, as referred
to in Article IV.

 

No form of partial recapture is allowed under this Agreement.

 

…END OF ARTICLE IX

 

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ARTICLE X

 

EXTRA CONTRACTUAL OBLIGATIONS

 

1)             The Reinsurer will not participate in any Extra Contractual
Obligations, including, but not limited to, Punitive Damages or Compensatory
Damages, that are awarded against the Company as a result of an act, omission,
or course of conduct committed by the Company, its agents, or representatives in
connection with the risks reinsured under this Agreement.

 

For purposes of this Article, the following definitions will apply.

 

“Extra Contractual Obligations” shall mean any liabilities or obligations of
the Company other than those liabilities or obligations arising under the
express terms and conditions of the risks reinsured under this Agreement.
Payments not covered by this Agreement include, but are not limited to:
(a) delayed claims interest; (b) statutory or regulatory fines or other
penalties; (c) ex gratia payments; (d) Compensatory Damages; (e) Punitive
Damages or exemplary damages; (f) consequential damages; (g) declaratory
judgments; (h) legal fees or expenses; (i) costs relating to the investigation,
settlement or handling of claims; (j) payments resulting from the failure to
pay, the delay in payment, or errors in calculating or administering the payment
of benefits or claims or any other amounts due or alleged to be due under or in
connection with the risks reinsured under this Agreement; (k) costs relating to
the administration of the risks reinsured under this Agreement; (l) costs
relating to the design, marketing, sale, underwriting, production, issuance,
rating and cancellation of the risks reinsured under this Agreement; (m) any
other costs or expenses of settling or adjudicating contested claims, if such
costs or expenses are not incurred in the ordinary course of claims settlement
or payment.

 

“Punitive Damages” are those damages awarded as a penalty, the amount of which
is neither governed nor fixed by statute.

 

“Compensatory Damages” are those amounts awarded to compensate for the actual
damages sustained, and are not awarded as a penalty, nor fixed in amount by
statute.

 

…END OF ARTICLE X

 

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ARTICLE XI

 

GENERAL PROVISIONS

 

1)             Currency. All payments and reporting by both parties under this
Agreement will be made in United States Dollars (US$).

 

2)             Premium Tax. The Reinsurer will not reimburse the Company for
premium taxes.

 

3)             Inspection of Records. The Reinsurer and the Company, or their
duly authorized representatives, will have the right to inspect and audit
original papers, records, and all documents relating to the business reinsured
under this Agreement including but not limited to underwriting, claims
processing, and administration. Such access will be provided during regular
business hours at the office of the inspected party. The Reinsurer may suspend
payments relating to matters in dispute that arise from such inspection and
audit until such dispute is resolved by the parties either through mutual
agreement or by arbitration in accordance with Article XV.

 

4)             USA Patriot Act and Blocked Persons. The Company covenants to the
Reinsurer that it will comply with United States Treasury Department’s Office of
Foreign Assets Control and USA Patriot Act requirements (the “Laws”) in
connection with the Reinsured Policies. The Company agrees to indemnify and hold
harmless the Reinsurer from and against any and all sanctions, penalties,
assessments and other liabilities suffered or incurred by the Reinsurer arising
from any breach by the Company of the Laws.

 

5)             Off-Set. Any debts or credits, in favor of or against either the
Reinsurer or the Company with respect to this Agreement, are deemed mutual debts
or credits and may be offset, and only the balance will be allowed or paid.

 

The right of offset will not be affected or diminished because of the insolvency
of either party.

 

6)             Errors and Omissions. If through unintentional error, oversight,
omission, or misunderstanding (collectively referred to as “errors”), the
Reinsurer or the Company fails to comply with the terms of this Agreement and
if, upon discovery of the error by either party, the other is promptly notified,
each thereupon will be restored to the position it would have occupied if the
error had not occurred, including interest.

 

If it is not possible to restore each party to the position it would have
occupied but for the error, the parties will endeavor in good faith to promptly
resolve the situation in a manner that is fair and reasonable, and most closely
approximates the intent of the parties as evidenced by this Agreement.

 

For the avoidance of doubt, the parties agree that this paragraph 6 relates only
to clerical errors.

 

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However, the Reinsurer will not provide reinsurance for policies that do not
satisfy the parameters of this Agreement, nor will the Reinsurer be responsible
for negligent or deliberate acts or for repetitive errors in administration by
the Company. If either party discovers that the Company has failed to cede
reinsurance as provided in this Agreement, or failed to comply with its
reporting requirements, the Reinsurer may require the Company to audit its
records for similar errors and to take the actions necessary to avoid similar
errors in the future.

 

7)     Company Forms and Rates. The Company will furnish the Reinsurer with
copies of its application forms, policy forms and any other forms or tables
needed for proper handling of reinsurance under this Agreement. The Reinsurer
acknowledges that the Company may on occasion need to make changes to its forms
or tables, or introduce new forms. Where this occurs, the parties agree that:

 

(i) where the forms in question do not introduce or change any provisions that
relate to the Reinsured Risks, the Company is required only to furnish the
Reinsurer with copies of the relevant forms, and the Reinsurer’s liability will
remain unchanged; and

 

(ii) where the forms in question introduce or change provisions that relate to
the Reinsured Risks, the Reinsurer’s liability will cease in respect of each of
the Reinsured Policies to which the forms relate, unless the Company obtains
from the Reinsurer written agreement to the contrary.

 

…END OF ARTICLE XI

 

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ARTICLE XII

 

DAC TAX

 

1)             The parties to this Agreement agree to the following provisions
pursuant to Section 1.848-2(g)(8) of the Income Tax Regulations effective
December 29, 1992, under Section 848 of the Internal Revenue Code of 1986, as
amended:

 

a.             The term ‘party’ refers to either the Company or the Reinsurer,
as appropriate.

 

b.             The terms used in this Article are defined by reference to
Regulation Section 1.848-2, effective December 29, 1992.

 

c.             The party with the net positive consideration for this Agreement
for each taxable year will capitalize specified policy acquisition expenses with
respect to this Agreement with regard to the general deductions limitation of
Section 848(c)(1).

 

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 with 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. 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
within the required timeframe, the Reinsurer will report the net consideration
as determined by the Company in the Reinsurer’s tax return for the previous
calendar year.

 

f.              If the Reinsurer contests the Company’s calculation of the net
consideration, the parties will act in good faith to reach an agreement as to
the correct amount within thirty (30) days of the date the Reinsurer submits its
alternative calculation. If the Company and the Reinsurer reach an agreement on
an amount of net consideration, each party will report the agreed upon amount in
its tax return for the previous calendar year.

 

g.             Both the Company and the Reinsurer represent and warrant that
they are subject to United States taxation under either Subchapter L or
Subpart F of Part III of Subchapter N of the Internal Revenue Code of 1986, as
amended.

 

…END OF ARTICLE XII

 

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ARTICLE XIII

 

INSOLVENCY

 

1)             Insolvency. The Company will be deemed insolvent when it:

 

a.  applies for or consents to the appointment of a receiver, rehabilitator,
conservator, liquidator or statutory successor of its properties or assets; or

 

b. is adjudicated as bankrupt or insolvent; or

 

c.  files or consents to the filing of a petition in bankruptcy, seeks
reorganization to avoid insolvency or makes formal application for any
bankruptcy, dissolution, liquidation or similar law or statute; or

 

d. becomes the subject of an order to rehabilitate or an order to liquidate as
defined by the insurance code of the jurisdiction of the party’s domicile.

 

2)             Insolvency of the Company. In the event of the insolvency of the
Company, all reinsurance payments due under this Agreement will be payable
directly to the liquidator, rehabilitator, receiver, or statutory successor of
the Company, without diminution because of the insolvency, for those claims
allowed against the Company by any court of competent jurisdiction or by the
liquidator, rehabilitator, receiver or statutory successor having authority to
allow such claims.

 

In the event of insolvency of the Company, the liquidator, rehabilitator,
receiver, or statutory successor will give written notice to the Reinsurer of
all pending claims against the Company on any policies reinsured within a
reasonable time after such claim is filed in the insolvency proceeding. While a
claim is pending, the Reinsurer may investigate and interpose, at its own
expense, in the proceeding where the claim is adjudicated, any defense or
defenses that it may deem available to the Company or its liquidator,
rehabilitator, receiver, or statutory successor.

 

The expense incurred by the Reinsurer will 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 that may accrue to the Company
solely as a result of the defense undertaken by the Reinsurer. Where two or more
reinsurers are participating in the same claim and a majority in interest elect
to interpose a defense or defenses to any such claim, the expense will be
apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by the Company.

 

The Reinsurer will be liable only for the amounts reinsured and will not be or
become liable for any amounts or reserves to be held by the Company on policies
reinsured under this Agreement.

 

…END OF ARTICLE XIII

 

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ARTICLE XIV

 

REINSURER’S RIGHT OF NOTICE OF UNUSUAL PRACTICES

 

1)             In providing reinsurance facilities to the Company under this
Agreement, the Reinsurer has granted the Company considerable authority with
respect to automatic binding power, reinstatements, claim settlements, and the
general administration of the reinsurance account. To facilitate transactions,
the Reinsurer has required the minimum amount of information and documentation
possible, reflecting its utmost faith and confidence in the Company. The
Reinsurer assumes that, except as otherwise notified in writing by the Company,
and agreed to in writing by the Reinsurer, the underwriting, claims, general
administrative processing rules or guidelines, and other insurance practices
employed by the Company with respect to reinsurance ceded under this Agreement
are generally consistent with the customary and usual practices of the insurance
industry as a whole. Where the Company does engage in exceptional or uncustomary
practices or implements a change in its underwriting rules or guidelines, with
respect to business covered under this Agreement, the Company agrees to advise
the Reinsurer in writing forty-five (45) days prior to implementing such
practice or change and receive a written acceptance of said practice or change
from the Reinsurer before assigning any liability to the Reinsurer with respect
to any reinsurance issued under such practice or change. The Company
acknowledges and agrees that its covenant to the Reinsurer to so advise the
Reinsurer of any exceptional or uncustomary practice or implementation of such a
significant change including changes in its key managerial personnel and
corporate or legal structure is a material incentive to the Reinsurer agreeing
to enter into this Agreement, and absent such a covenant, the Reinsurer would
not have entered into this Agreement.

 

…END OF ARTICLE XIV

 

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ARTICLE XV

 

ARBITRATION

 

1)             It is the intention of the Reinsurer and the Company that the
customs and practices of the life insurance and reinsurance industry will be
given full effect in the operation and interpretation of this Agreement. The
parties agree to act in all matters with the highest good faith. However, if the
Reinsurer and the Company cannot mutually resolve a dispute that arises out of
or relates to this Agreement, the dispute will be decided through arbitration as
a precedent to any right of action hereunder.

 

To initiate arbitration, either the Company or the Reinsurer will notify the
other party in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The party to which the notice is sent will
respond to the notification in writing within fifteen (15) days of its receipt.

 

There will be three arbitrators who will be current or former senior officers of
life insurance or life reinsurance companies other than the parties to this
Agreement, their affiliates or subsidiaries. Each of the parties will appoint
one of the arbitrators and these two arbitrators will select the third. If
either party refuses or neglects to appoint an arbitrator within sixty (60) days
of the initiation of the arbitration, the other party may appoint the second
arbitrator. If the two arbitrators do not agree on a third arbitrator within
thirty (30) days of the appointment of the second arbitrator, then each
arbitrator shall nominate three individuals selected from the ARIAS-US list of
certified arbitrators. Each arbitrator shall then decline two of the nominations
presented by the other arbitrator. The third arbitrator shall then be chosen
from the remaining two nominations by drawing lots.

 

Once chosen, the arbitrators are empowered to select the site of the arbitration
and decide all substantive and procedural issues by a majority of votes. As soon
as possible, the arbitrators will establish arbitration procedures as warranted
by the facts and issues of the particular case. The arbitrators will have the
power to determine all procedural rules of the arbitration, including but not
limited to inspection of documents, examination of witnesses and any other
matter relating to the conduct of the arbitration. The arbitrators may consider
any relevant evidence; they will weigh the evidence and consider any objections.
Each party may examine any witnesses who testify at the arbitration hearing.

 

The arbitrators will base their decision on the terms and conditions of this
Agreement and the customs and practices of the life insurance and reinsurance
industries rather than on strict interpretation of the law. The decision of the
arbitrators will be made by majority rule and will be submitted in writing. The
decision will be final and binding on both parties and there will be no appeal
from the decision. Either party to the arbitration may petition any court having
jurisdiction over the parties to reduce the decision to judgment.

 

Unless the arbitrators decide otherwise, each party will bear the expense of its
own arbitration activities, including its appointed arbitrator and any outside
attorney and witness fees. The parties will jointly and equally bear the expense
of the third arbitrator and other costs of the arbitration.

 

This Article will survive termination of this Agreement.

 

…END OF ARTICLE XV

 

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ARTICLE XVI

 

CONFIDENTIALITY

 

1)             The Company and the Reinsurer agree that Customer and Proprietary
Information will be treated as confidential. Customer Information includes, but
is not limited to, medical, financial, and other personal information about
proposed, current, and former policyowners, annuitants, applicants, and
beneficiaries of policies issued by the original Company. Proprietary
Information includes, but is not limited to, business plans and trade secrets,
mortality and lapse studies, underwriting manuals and guidelines, applications
and contract forms, and the specific terms and conditions of this Agreement.

 

Customer and Proprietary Information will not include information that:

 

a.             is or becomes available to the general public through no fault of
the party receiving the Customer or Proprietary Information (the “Recipient”);

 

b.             is independently developed by the Recipient;

 

c.             is acquired by the Recipient from a third party not covered by a
confidentiality agreement; or

 

d.             is disclosed under a court order, law or regulation.

 

The parties will not disclose such information to any other parties unless
agreed to in writing, except as necessary for retrocession purposes, as
requested by external auditors, as required by court order, or as required or
allowed by law or regulation.

 

The Company acknowledges that the Reinsurer can aggregate data with other
companies reinsured with the Reinsurer as long as the data cannot be identified
as belonging to the Company.

 

…END OF ARTICLE XVI

 

17

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ARTICLE XVII

 

EXECUTION

 

This Agreement is effective as of 12:01 a.m. on October 1, 2005 (the “Effective
Date”).

 

This Agreement has been made in duplicate and is hereby executed by both
parties.

 

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY

WEST DES MOINES, IOWA

 

Date:

 

3/26/06

 

 

 

 

 

By:

 

/s/ Wendy L. Carlson

 

 

 

 

 

Title:

 

General Counsel

 

 

 

 

 

Witness:

 

/s/ Sandra Lockhart

 

 

 

HANNOVER LIFE REASSURANCE COMPANY OF AMERICA

ORLANDO, FLORIDA

 

Date:

 

3/29/06

 

 

 

 

 

By:

 

/s/ Jeffrey R. Burt

 

 

 

 

 

Title:

 

VP – Marketing

 

 

 

 

 

Witness:

 

/s/ Gary L. Gray

 

 

…END OF ARTICLE XVII

 

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EXHIBIT A

 

REINSURER’S SHARE AND COMPANY’S SHARE

 

The Reinsurer’s Share is forty percent (40%), which is the portion of the
Reinsured Risks accepted by the Reinsurer. The Company’s Share is sixty percent
(60%), which is the portion of the Reinsured Risks retained by the Company.

 

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EXHIBIT B-1

 

PLANS COVERED

 

This Agreement provides for reinsurance of the Company’s Single Premium Deferred
Annuities (SPDAs) and Flexible Premium Deferred Annuities (FPDAs), with the plan
codes listed below.

 

All such plans issued and in-force as of the Effective Date of the Agreement and
all such plans issued on or after the Effective Date are reinsured under the
Agreement.

 

With respect to plans reinsured with EquiTrust Life Insurance Company as of the
Effective Date of this Agreement, the Agreement provides reinsurance on the
portion of such plans not reinsured with EquiTrust Life Insurance Company.

 

Plan Codes

 

ACCUMULATOR

 

FPDA-3 7.3

 

I-2001TX

 

INDEX-26

 

SNF ACC55

BN PROCEED

 

FPDA-3 REV

 

I-2001TX-5

 

INDEX-27

 

SNF ACCUM

BRAVO

 

FPDA-3FL

 

I-2002

 

INDEX-27IN

 

SPDA-1

BRAVO 2003

 

FPDA-3IN

 

I-2002 REV

 

INDEX-28

 

SPDA-1(3%)

CUMULATOR

 

FPDA-3TX

 

I-25 (REV)

 

INDEX-28IN

 

SPDA-1PA

F-3FLREV

 

FPDA-4

 

I-27 (REV)

 

INDEX-28KY

 

SPDA-1PLUS

F-3INREV

 

FPDA-4PA

 

I-27REV IN

 

INDEX-29

 

SPDA-1SNF

F-3REVTX

 

FPDA-4SNF

 

I-27REV KY

 

INDEX-30

 

SPDA-1UT

FPD22.25IN

 

FPDA-5

 

I-29 (REV)

 

INDEX-3-05

 

SPDA-2

FPD32.25IN

 

FPDA5 2.25

 

IDX-1-05IN

 

INDEX-30IN

 

SPDA-2(3%)

FPD72.25IN

 

FPDA5225IN

 

IDX-1-05KY

 

INDEX-30KY

 

SPDA-2PA

FPD82.25IN

 

FPDA-5FL

 

IDX-26 7.5

 

INDEX-4

 

SPDA-2SNF

FPDA-1

 

FPDA-5PLUS

 

IDX-4-05TX

 

INDEX-4-05

 

SPDA-5

FPDA-1(3%)

 

FPDA-6

 

INDEX

 

INDEX-5

 

STRETCH

FPDA-10

 

FPDA-6FL

 

INDEX-1

 

INDEX-5-05

 

SUPER-7

FPDA-10SNF

 

FPDA-6TX

 

INDEX-2

 

INDEX-6

 

SUPER-7REV

FPDA-10TX

 

FPDA-7

 

INDEX-10

 

INDEX-6SNF

 

SUPER-7TX

FPDA-10VA

 

FPDA7 2.25

 

INDEX-1-05

 

INDEX-6TX

 

SUPR7 2.25

FPDA-11

 

FPDA-8

 

INDEX-12

 

INDEX-8

 

SUPR7225IN

FPDA-11SNF

 

FPDA8 2.25

 

INDEX-13

 

INDEX-T03

 

 

FPDA-11TX

 

FPDA-PD2

 

INDEX-15

 

INDEXP3

 

 

FPDA-1PA

 

GFIR

 

INDEX-16

 

INDEXP3FL

 

 

FPDA-1SNF

 

GFIR2-3

 

INDEX-17

 

INDEXP3-PA

 

 

FPDA-2

 

GFIR-5

 

INDEX-18

 

INDEXP3TX

 

 

FPDA2 2.25

 

I-19 (REV)

 

INDEX-19

 

INDX-2

 

 

FPDA2-2001

 

I-19 REV7

 

INDEX-22

 

INDX-I

 

 

FPDA-2PLUS

 

I-2000

 

INDEX-23

 

INDX-IIN

 

 

FPDA-2TX

 

I-2000TX

 

INDEX-24

 

INDX-IPA

 

 

FPDA-3

 

I-2000TX-5

 

INDEX-25

 

INDX-ITX

 

 

FPDA3 2.25

 

I-2001

 

INDEX-25WA

 

S-7TXREV

 

 

 

20

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EXHIBIT B-2

 

REINSURED RISKS

 

The following risks are covered under this Agreement, resulting in the Claim
Amounts and Claim Reimbursements defined below, for each of the Reinsured
Policies:

 

(a) Waiver of Surrender Charge on Partial Withdrawal

 

Where the contract issued by the Company to the holder of one of the Reinsured
Policies provides for it, the Company waives the surrender charge that normally
applies to surrenders or withdrawals, and allows a free partial withdrawal. The
cost to the Company of such waived surrender charges is a Reinsured Risk under
this Agreement.

 

Any surrender charge waived for any reason other than as provided for in the
contract originally issued to the holder of the Reinsured Policy by the Company
is not a Reinsured Risk.

 

Without prejudice to the generality of the foregoing, in no event will a
surrender charge waived in the following circumstances be considered a Reinsured
Risk:

 

(i) on withdrawal in the first contract year of the Reinsured Policy;

(ii) on partial withdrawals in excess of 10% of the fund value in any contract
year of the Reinsured Policy;

(iii) at the discretion of the Company;

(iv) as required or demanded of the Company by any third party.

 

Where a surrender charge actually waived by the Company is a Reinsured Risk, the
Reinsurer’s Share of that surrender charge is a Claim Amount.

 

Where the contract issued by the Company to the holder of one of the Reinsured
Policies provides for it, the Company applies a charge on surrender, to recover
any surrender charge waived on partial withdrawal during the preceding twelve
months. Where the waived surrender charge on the partial withdrawal in question
was a Reinsured Risk under this Agreement, the Reinsurer’s Share of the charge
applied on surrender (to recover the surrender charge waived on the partial
withdrawal) is a Claim Reimbursement.

 

(b) Waiver of Surrender Charge on Death

 

In the event of the death of the holder of one of the Reinsured Policies, the
Company waives the surrender charge that would have applied if the policy had
been surrendered as at the date of death. The cost to the Company of such waived
surrender charges is a Reinsured Risk under this Agreement.

 

The Reinsurer’s Share of any such waived surrender charge is a Claim Amount.

 

21

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EXHIBIT C-1

 

PROCEDURES FOR REPORTING

 

The Company will maintain adequate records to administer the reinsurance
accounts and will cede reinsurance under this Agreement on a bordereau
self-administration basis. The Company will provide the Reinsurer with an
activity report on computer disk or other mutually agreed upon electronic media,
substantially in conformity with the following:

 

A)            Quarterly Statement of Reinsured Policies

 

The Company will provide the Reinsurer with a report of all reinsured policies
issued or renewing during the past quarter, which should include the following:

 

1)             Policy number

2)             Policy status

3)             Policy plan

4)             Name: surname, first name, middle initial

5)             Issue age

6)             Sex

7)             Issue date

8)             Fund value at beginning of quarter

9)             Applicable surrender charge at beginning of quarter (or policy
date if later)

10)           Reinsurance Premium for quarter

11)           Claim Amount(s) for quarter

12)           Claim Reimbursement for quarter

 

B)            QUARTERLY EXPERIENCE REFUND STATEMENT

 

The Company will provide the Reinsurer with a statement showing the calculation
of the Experience Refund Amount for the quarter, which should include the
following items:

 

1)             Total Reinsurance Gain (TRG)

2)             Total Reinsurance Risk Charge (TRRC)

3)             Experience Account Balance at the end of the previous quarter
(EABt-1)

4)             Experience Account Balance at the end of the current quarter
(EABt)

5)             Experience Refund Amount (ERA)

 

The terms and symbols used above are defined in Exhibit E.

 

22

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EXHIBIT C-2

 

REQUEST FOR FINANCIAL REPORTING INFORMATION

 

Please provide the following information as soon as practical after the close of
the quarter but not later than the due date as stated in Article VIII. Please
provide monthly or other interim reports if available. All reports should
include both the Reinsurer’s Treaty Number (HA-AEIL-05) as well as the Company’s
reference number. The Company must maintain and provide, upon request,
sufficiently detailed reports such that reserve calculations can be
independently verified by the Reinsurer’s auditors and examiners.

 

A)            Quarterly Reporting

 

1)     Policy counts.

2)     Statutory reserves, split by issue year and (if appropriate) in
accordance with Exhibits 5–8 of the statutory annual statement.

3)     Policy level detail statutory reserve listing via electronic media.

 

B)            Annual Statutory Reporting

 

1)     Statutory reserves, in Exhibit 5 format.

2)     Page 7, Analysis of Increase in Reserves.

3)     Policy Exhibit.

4)     Policy level detail statutory reserve listing via electronic media.

5)     Exhibit reconciling detail listing to summary reports.

 

C)            Statutory Annual Statement, when published.

 

23

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EXHIBIT D

 

REINSURANCE PREMIUM CALCULATION

 

The Reinsurance Premium (RP) payable each quarter in respect of each of the
Reinsured Policies is given by:

 

RP = RPR × FV × RS × SC ÷ 4

 

where

 

RPR is the Reinsurance Premium Rate, which is 7.2%;

FV is the fund value of the policy at the beginning of the quarter (or zero if
the policy date falls after the beginning of the quarter in question);

RS is the Reinsurer’s Share, as specified in Exhibit A;

SC is the surrender charge applicable to the policy at the beginning of the
quarter (or zero if the policy date falls after the beginning of the quarter in
question).

 

24

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EXHIBIT E

 

EXPERIENCE REFUND CALCULATION

 

The method of calculation of the Experience Refund Amount is described below.

 

Define the following terms in respect of each Reinsured Policy:

 

RP is the Reinsurance Premium for the quarter, calculated in accordance with
Exhibit D;

FV is the fund value of the policy at the beginning of the quarter;

RS is the Reinsurer’s Share, as specified in Exhibit A;

SC is the surrender charge applicable to the policy at the beginning of the
quarter (or policy date if later);

CA is the Claim Amount on the policy in the quarter, where the Claim Amount is
as defined in Exhibit B-2;

CR is the Claim Reimbursement on the policy in the quarter, where the Claim
Reimbursement is as defined in Exhibit B-2;

 

Calculate the Reinsurance Gain (RG) on the policy as:

 

RG = RP - (CA - CR)

 

Calculate the Reinsurance Risk Charge (RRC) for the policy as:

 

RRC = FV × RS × SC × (0.1 + 0.02) × 0.0125

 

Calculate the Total Reinsurance Gain (TRG) and Total Reinsurance Risk Charge
(TRRC) as the sum of the values of RG and RRC, calculated as described above,
for all the Reinsured Policies.

 

The Experience Account Balance at the end of the quarter (EABt) is defined as:

 

EABt = min[0, (EABt-1 × 1.03) + TRG - TRRC]

 

where EABt-1 is the Experience Account Balance at the end of the previous
quarter (or zero if the Experience Refund Calculation is being done for the
first time).

 

The Experience Refund Amount (ERA) for the quarter is given by:

 

ERA = max[0, (EABt-1 × 1.03) + TRG - TRRC]

 

25

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