REINSURANCE AGREEMENT

                               between

                 AMERICAN CAPITOL INSURANCE COMPANY
                                 of
                            HOUSTON, TEXAS
              (hereinafter referred to as the "Company")

                                and
              REPUBLIC-VANGUARD LIFE INSURANCE COMPANY
                                 of
                            DALLAS, TEXAS
             (hereinafter referred to as the "Reinsurer")




                                         TREATY # UL98-OCO
                                         ORDINARY
                                         COINSURANCE












                        TABLE OF CONTENTS


                             ARTICLES


        I.       PURPOSE
       II.       DURATION OF RISK
      III.       CONSIDERATIONS
       IV.       BENEFIT PAYMENTS
        V.       ACCOUNTING AND SETTLEMENT
       VI.       REPRESENTATIONS AND WARRANTS
      VII.       ARBITRATION
     VIII.       INSOLVENCY
       IX.       TERMINATION
        X.       GENERAL PROVISIONS
       XI.       EXECUTION AND EFFECTIVE DATE


                            SCHEDULES


        A.       POLICIES AND RISKS REINSURED
        B.       NOTICES
        C.       EXPERIENCE REFUND FORMULA
        D.       SEGREGATED ASSET ACCOUNT
        E.       ADDITIONAL RECAPTURE AMOUNT
        F.       INVESTMENT GUIDELINES






















                              PREAMBLE


This Agreement is made and entered into by and between American
Capitol Insurance Company (hereinafter referred to as the "Company")
 and Republic-Vanguard Life Insurance Company (hereinafter referred
to as the "Reinsurer").

The Company and the Reinsurer mutually agree to reinsure on the
terms and conditions stated herein.  This Agreement is an indemnity
reinsurance agreement between the Company and the Reinsurer and
performance of the obligations of each party under this Agreement
shall be rendered solely to the other party.  In no instance shall
anyone other than the Company or the Reinsurer have any rights under
this Agreement.


                               ARTICLE I
                               PURPOSE


1.01   Policies Reinsured.  The Company has assumed through co-
insurance or assumption reinsurance certain individual life insurance
policies which it desires to reinsure hereunder.  The Policies and
Quota Share thereof described in Schedule A, which is attached hereto
and by this reference made a part hereof, constitute this block (the
portion of such policies reinsured hereunder are hereinafter referred
to as the "Policy" or "Policies").

1.02   Purpose of Agreement.  The purpose of this Agreement is to
provide for the indemnity reinsurance by the Reinsurer of 100% of the
interest of the Company in the policies reinsured hereunder.  It is
the intent of the parties that the Reinsurer's profits on the Policies
shall be limited to only the experience, as defined herein, if any, of
the Policies and the Reinsurer shall have no other recourse against
the Company for payments other than those amounts specifically allowed
for herein.  This Agreement shall commence on the Effective Date of
this Agreement, is subject to the terms and conditions set forth
herein, and shall cease upon the termination date of this Agreement
as defined in Article IX.




                              ARTICLE II
                           DURATION OF RISK

2.01   Duration.  Except as otherwise provided herein, this Agreement
shall be unlimited in duration.

2.02   Reinsurer's Liability.  The liability of the Reinsurer with
respect to any Policy will begin simultaneously with that of the
Company, but not prior to the Effective Date of this Agreement.  The
Reinsurer's liability with respect to any Policy will terminate on
the date the Company's liability on such Policy is terminated.

2.03   Recapture.  The Policies are eligible for recapture without
the Additional Recapture Amount specified in Schedule E commencing
ten (10) years after the date on which the Negative Experience Refund
Carryforward, as defined in C.02, first reaches zero.  In the event
the Company elects to recapture the Policies prior to the date fall-
in ten (10) years after the date on which the Negative Experience
Refund Carryforward first reaches zero, other than for a reason
specified in Article IX, the amount due from the Reinsurer to the
Company as part of the terminal monthly cash settlement shall be
reduced by the Additional Recapture Amount.  In the event the Company
elects to recapture a percentage, but less than 100%, of the risks of
the Policies, as provided above, then such percentage recapture shall
apply to all the Policies and the Additional Recapture Amount shall
be determined proportionately.  Furthermore, the Company may
recapture any such policies as specifically provided for in Article
IX with any and all appropriate notices as may be contained therein.


                               ARTICLE III
                             CONSIDERATIONS


3.01   Initial Portfolio Transfer.  On the Effective Date of this
Agreement, the Company shall pay to the Reinsurer an amount equal to
the reserves as defined in 10.01 less the reinsurance reserve credits
on reinsurance ceded, if any, on the Policies.  The Company may make
such payment directly to a segregated asset account established by
the Reinsurer as defined in Schedule D and attached hereto (herein-
after referred to as the "segregated asset account").  Such segregated
asset account shall be maintained for the duration of this agreement
and the assets housed therein, as defined herein, shall be separate
and distinct from any other assets of the Reinsurer.  Both parties
agree that, as of the Effective Date of this Agreement, the value of
the bonds transferred to the Reinsurer, shall be equal to the fair
market value as required under the Internal Revenue Code Section 1060.
Such payment shall be the net payment as of the Effective Date of
this Agreement and it is specifically understood that the Initial
consideration as defined in paragraph 3.02 below shall be offset
against this payment and only the net amount of assets needs to be
actually transferred to the Reinsurer as of such date.


3.02   Initial Consideration.  Simultaneously with the payment
defined in 3.01 above, the Reinsurer shall pay the Company a
consideration for such Policies in an amount equal to thirteen
million five hundred thousand dollars ($13,500,000).


3.03   Premiums.  The Reinsurer's portion of all premiums collected
on the Policies (net of any other reinsurance premiums related to
reinsurance in force prior to the Effective Date of this Agreement)
shall become the sole property of the Reinsurer as of the Effective
Date of this Agreement and the Company shall remit any and all such
collected premiums as of the end of each calendar month to the
Reinsurer as part of the monthly settlement contained herein.


3.04   Commission Allowance.  The Reinsurer shall pay to the Company
a commission allowance equal to the following:  a commission
allowance on first year premiums at the rate of 35% on Plan OG2
(5 Pay Life), 40% on Plan OG3(10 Pay Life), 45% on Plan OG4 (15 Pay
Life), 50% on Plans 801 (Whole Life), 810 (Whole Life), 821 (10 Year
Term) and OG5 (20 Pay Life), 55% on Plan OG1 (Whole Life), and 60%
on Plan 820 (Whole Life); a commission allowance on renewal premiums
for new ordinary business (1997 issues) at the rate of 7% of premiums
for policy years 2 through 10 and 3% of premiums thereafter; and a
commission allowance on renewal premiums for ordinary and industrial
(pre-1997 issues) at the rate of 10% of premiums for policy years 2
and 3, 4% of premiums for policy year 4, 3% of premiums for policy
years 5 through 15 inclusive, 2% of premiums for policy years 16
through 20 inclusive.


3.05   Premium Tax Allowance.  The Reinsurer shall pay to the Company
a premium tax allowance equal to 2.5% of all premiums collected on
the Policies.


3.06   Income Tax Reimbursement.  The Company and the Reinsurer agree
to remain liable for their respective Federal Income Tax liabilities,
including any "DAC" taxable income that may be incurred by the
reinsurance of the Policies by the Reinsurer.


3.07   Administration.  The Company shall provide all administration
for the Policies.  The Reinsurer shall pay the Company an
administration fee in an amount equal to the following: $25  for each
death claim processed during a month, $10 for each surrender processed
during a month, $.8333 for each industrial premium paying policy in
force at the beginning of the month, $.4167 for each industrial paid
up policy in force at the beginning of the month, $2.0833 for each
ordinary premium paying policy in force at the beginning of the
month $1.0417 for each ordinary paid up policy in force at the
beginning of the month and $.4167 for each policy, whether industrial
or ordinary, on extended term insurance at the beginning of the month.
The above per transaction and per policy expenses shall increase 2%
compounded)on each anniversary of the Effective Date of this Agreement.


In addition to the foregoing, the Reinsurer shall pay the Company an
additional administration fee equal to 17% of the premiums collected
on ordinary policies.


3.08   Policy Loan Interest.  The Company agrees to pay the Reinsurer
monthly, any and all interest earned, on an incurred basis, on any of
the outstanding policy loans on the Policies.


3.09   Adjustment to Initial Consideration.  Section 4.5 of that
certain Coinsurance Agreement between Universal Life Insurance Company
("Universal") and the Company provides for the possibility of an
adjustment to the ceding fee the Company is to pay Universal pursuant
to that Coinsurance Agreement.  In the event that Universal pays the
Company an amount pursuant to that Section 4.5, the Company agrees to
pay the Reinsurer a like amount as an adjustment to the Initial
Consideration defined in paragraph 3.02 of this Agreement.


                              ARTICLE IV
                           BENEFIT PAYMENTS


4.01   Notice.  Upon request of the Reinsurer, the Company will notify
the Reinsurer monthly after receipt of any information on a claim or
surrender on a policy to the extent it is reinsured hereunder.  Upon
such request, the reinsurance claim form and copies of notifications,
claim papers, and proofs will be furnished the Reinsurer as soon as
possible.


4.02   Liability and Payment.  The Reinsurer will accept the decision
of the Company on payment of a benefit on a policy reinsured hereunder.
The Reinsurer will pay to the Company monthly the reinsurance benefit
on the Policies.  Such reinsurance benefit shall be defined as the
Reinsurer's portion of the total death, surrender or other policy
benefits paid by the Company, net of other reinsurance, during such
month.


4.03   Contested Claims.  The Company will advise the Reinsurer of its
intention to contest, compromise, or litigate a claim involving a
policy reinsured hereunder.  The Reinsurer will pay its share of the
additional expenses of the contest in addition to its share of the
claim itself, or it may choose not to participate.  If the Reinsurer
chooses not to participate, it will discharge its liability by payment
to the Company of the full amount of its liability on the policy
reinsured.


4.04   Dividends to Policyholders.  The Reinsurer shall reimburse to
the Company the actual dividends paid to the policyholders reinsured
hereunder during any and all calendar months for which this Agreement
is in effect.  Such dividends shall be computed on the dividend scale
in effect as of the Effective Date of this Agreement.  No changes
shall be made to such dividend scale without the express written
consent of the Reinsurer.


                              ARTICLE V
                        ACCOUNTING AND SETTLEMENT


5.01   Agreement Accounting Period.  The accounting period for this
Agreement shall be on a calendar month basis unless otherwise
specified herein.


5.02   Monthly Reports.  Within 10 working days after the end of each
calendar month the Company will submit to the Reinsurer a monthly
accounting report which shall contain the amount of premiums,
commission allowance, administration fees, benefits, dividends to
policyholders, reserves, outstanding policy loans and interest
incurred thereon, due and unpaid premiums, due and deferred premiums,
any and all claim reserves as calculated in accordance with NAIC
Convention Blank Exhibit 11, number of Policies and in force for such
calendar month.


5.03   Monthly Cash Settlements.  Within 10 working days after the
end of each calendar month the Company shall pay to the Reinsurer:
     a)   For the first month only, the net portfolio transfer as
          defined in 3.01; and
     b)   the net amount of premiums as defined in 3.03; and
     c)   any experience refunds paid to the Company, if any, as part
of an other reinsurance agreements, as described in 10.05; and
     d)   the interest on outstanding policy loans as defined in 3.08;
and
     e)   the decrease, if any, in outstanding policy loans as defined
in 3.08.


Simultaneously, the Reinsurer shall pay to the Company:
     a)   For the first month only the initial consideration as
defined in 3.02; and
     b)   the net paid reinsurance benefits, as defined in 4.02; and
     c)   the commission allowance as defined in 3.04; and
     d)   the premium tax allowance defined in 3.05; and
     e)   the administration fees as defined in 3.07; and
     f)   the dividends to policyholders as defined in 4.04; and
     g)   the experience refund as defined in Schedule C.01 attached
hereto, if any; and
     h)   the increase, if any, in outstanding policy loans as defined
in 3.08.


5.04   Amounts Due Monthly.  Except as otherwise specifically provided
in this Agreement, all amounts due to be paid to either the Company or
the Reinsurer under this Agreement on a monthly basis shall be
determined on a net basis as of the last day of each calendar month and
shall be due and payable as of such date.  If the amounts, as defined
in 5.03 above, cannot be determined at such dates as defined herein, on
an exact basis, such payments will be paid in accordance with a mutually
agreeable formula which will approximate the actual payments.


5.05   Delayed Payments.  For purposes of 5.04 above, if there is a
delayed settlement of a payment due, there will be an interest penalty
assessed, in an amount calculated as:  the amount of the payment which
is delinquent, multiplied by ten percent (10%), multiplied by the number
of days such amount has been delinquent, regardless of holidays or
weekends, and divided by the whole number 365.  For purposes of this
paragraph, a payment shall be considered delayed after 20 working days
from the date such payment is due.  For purposes of this Agreement the
number of days a payment is delinquent shall commence on the day
following the date such payment is deemed overdue, as defined above, and
shall end on the date such payment is mailed.


5.06   Offset of Payments.  Any debts or credits, liquidated or
unliquidated, in favor of or against either the Company or the Reinsurer
with respect to this Agreement only shall be set-off and only the
balance shall be allowed or paid.


                             ARTICLE VI
                     REPRESENTATIONS AND WARRANTS


6.01   Representations of the Company.  The Company represents and
warrants as follows:
     a)   it is a corporation duly organized, existing and in good
standing under the laws of the State of Texas; and
     b)   it is empowered under applicable laws and by its charter and
bylaws to enter into and perform the duties contemplated in this
Agreement; and
     c)   it has taken all requisite corporate proceedings to authorize
it to enter into and perform the duties contemplated in this Agreement;
and
     d)   no person under its control shall commit any action that would
violate any state law or regulation, in those jurisdictions covered
hereunder, governing administration or servicing of insurance as defined
thereunder; and
     e)   it has obtained any and all regulatory approvals as may be
required for the Company to cede the Policies covered hereunder and to
assure whatever reserve credits it may wish to take for such cession.
     f)   it has provided certain data, both oral and written, as part
of the Reinsurer's due diligence process and that such data is complete
and accurately describes the current financial condition of the Company
and the Policies eligible for reinsurance hereunder.
     g)   it is a U.S. taxpayer.


6.02   Representations and Warrants of the Reinsurer.  The Reinsurer
represents and warrants as follows:
     a)   it is a corporation duly organized, existing and in good
standing under the laws of the State of Texas; and
     b)   it is empowered under applicable laws and by its charter and
bylaws to enter into and perform the duties contemplated in this
Agreement; and
     c)   it has taken all requisite corporate proceedings to authorize
it to enter into and perform the duties contemplated in this Agreement;
and
     d)   it has obtained any and all regulatory approvals as may be
required for the Reinsurer to provide the reinsurance covered hereunder.
     e)   it has provided certain data, both oral and written, as part
of the Company's due diligence process and that such data is complete
and accurately describes the current financial condition of the
Reinsurer.
     f)   it is a U.S. taxpayer.


6.03 Covenants.  The Reinsurer and the Company agree as follows:
     a)   to indemnify, defend and hold harmless the other, its
directors, officers, employees and agents from any and all claims,
actions, suits, judgments, damages (including punitive or exemplary
damages), fines and other proceedings, whether civil, criminal (only to
the extent permitted by law or public policy),administrative,
investigative or otherwise, together with all costs, expenses and other
amounts, including attorney's fees, arising or alleged to have arisen
out of any act, error or omission related to or resulting from the
performance of the duties, obligations or responsibilities of the other
party, its directors, officers, employees and agents, under this
Agreement; and
     b)   the Reinsurer shall have no obligation arising out of any
breach of any duty on the part of the Company to any insured covered
hereunder.  The Company shall remain solely liable for all fines,
penalties or other assessments imposed against the Reinsurer by any
Insurance Department or other governmental entity for any conduct of the
Company, its employees or authorized representatives, which was not
expressly authorized, in writing, by the Reinsurer; and
     c)   any and all materials, information, proposals, studies or
other documents relative to this Agreement are confidential and
proprietary.  Neither party shall disclose, directly or indirectly, any
information obtained from the other party, relative to this Agreement,
to any third party without the express written consent of the other
unless applicable statute, law or regulation requires such disclosure.


6.04 Expenses.  Each of the parties agrees to pay all costs incurred by
it for actuarial, legal and other services received or utilized in
connection herewith.



                            ARTICLE VII
                            ARBITRATION


7.01 Agreement.  All disputes and differences between the Company and
the Reinsurer on which an agreement cannot be reached will be decided by
arbitration, regardless of the insolvency of either party, unless the
conservator, receiver, liquidator, or statutory successor is
specifically
exempted from an arbitration proceeding by applicable state law.
Either party may initiate arbitration by providing written notification
to the other party.  Such written notice shall contain a brief statement
of the issue(s), the failure on behalf of the parties to reach amicable
agreement and the date of demand for arbitration.  The arbitrators will
regard this Agreement from the standpoint of practical business and
equitable principles rather than that of strict law.  The arbitrators
shall be solely responsible for determining what shall be considered and
what procedure they deem appropriate and necessary in the gathering of
such facts or data to decide such dispute.  The arbitrators shall render
their decision not later than 45 days following the close of the
arbitration hearings, if any.  Both parties agree that the decision of
the arbitrators is final and binding and that no appeal shall be made
from that decision.  Should either party fail to comply with the
decision of the arbitrators, the other party shall have the right to
seek and receive the assistance of an appropriate court to enforce the
decision of the arbitrators.  The costs of the arbitration are to be
borne equally by both parties unless the arbitrators decide otherwise.


7.02 Method.  Three arbitrators will decide any differences.  They must
be, or have been, officers of life insurance companies other than the
two parties to this Agreement or any company owned by, or affiliated
with, either party.  One of the arbitrators is to be appointed by the
Company, another by the Reinsurer, and they shall select a third before
arbitration begins.  Should one party fail to comply with the notice to
arbitrate and fail to select an arbitrator, the other party shall have
the right to appoint such arbitrator on their behalf.  The appointments
shall be made in the following manner:  the Company and the Reinsurer
shall each present an initial list of five prospective arbitrators to
the other party within 25 days of the mailing of the notification
initiating the arbitration.  The Company and the Reinsurer shall select
one arbitrator each from the list supplied by the other party.  Should
the selected arbitrator decline to serve, another name shall be selected
from the respective list.  The party who initiated the list will submit
as many additional names as necessary so that at all times there will be
a pool of five names from which the other party may make its selection.
The two arbitrators, once selected, shall then select the third
arbitrator from the remaining eight names on the two lists.  Should the
two arbitrators be unable to agree on a choice for the third arbitrator
the remaining eight names shall be placed in a pool and the final
arbitrator shall be drawn at random from such account.  If the
prospective arbitrator so chosen shall decline to serve as the third
arbitrator, another prospective arbitrator shall be randomly selected
until the original account is exhausted.  The parties shall continue to
replace the pool with an additional eight names until an arbitrator is
found.


                            ARTICLE VIII
                             INSOLVENCY


8.01 Agreement.  In the event of the Company's insolvency, the
Reinsurer's contractual liability on the Policies shall continue to be
determined by all the terms, conditions and limitations under this
Agreement, but the Reinsurer will make settlement (1) directly to the
Company's liquidator, conservator, receiver or statutory successor, and
(2) without increase or diminution because of the Company's insolvency.
The liquidator, conservator, receiver or statutory successor of the
Company shall give the Reinsurer written notice of the pendency of a
claim against the Company on any Policy within a reasonable time after
such claim is filed in the insolvency proceeding.  During the pendency
of any such claim, the Reinsurer may investigate such claim and
interpose in the Company's name (or in the name of the Company's
liquidator, receiver or statutory successor), in the proceeding where
such claim is to be adjudicated, any defense or defenses which the
Reinsurer may deem available to the Company or its liquidator, receiver
or statutory successor.  The expense thus incurred by the Reinsurer
shall be chargeable, subject to court approval, against the Company as a
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.


                               ARTICLE IX
                              TERMINATION


9.01 Termination by Mutual Consent.  This Agreement may be terminated at
any time by mutual written consent of the parties.


9.02 Termination by Term.  This Agreement shall automatically and
immediately terminate at the date the liability of the Company on the
last Policy covered hereunder terminates.  Any and all amounts that may
be owed one party by the other and remain unpaid as of such date shall
immediately become due and payable as of the date such last policy
expires.  No additional accounting or settlements, other than the
customary and usual monthly settlement as defined in 5.03, will be made,
with the last day of such month defined as the date of termination as
contemplated by this paragraph 9.02.


9.03 Recapture by Company.  In addition to the recapture rights provided
for in 2.03, the Company shall have the additional right to recapture
the Policies in full only, at such time and in such manner as set forth
below for any of the following numerated defaults by the Reinsurer,
should the Reinsurer:
     a)   have ceased doing business; or
     b)   been voluntarily or involuntarily placed in conservatorship,
receivership, liquidation, bankruptcy, or been dissolved; or
     c)   been proven culpable for fraud or embezzlement; or
     d)   failed to comply with any applicable federal, state or
municipal statute, law, rule, or regulation governing the insurance or
reinsurance of the Policies; or
     e)   be found in default of this Agreement or the Trust Agreement,
as defined therein; or
     f)   allow its statutory Capital and Surplus as defined within the
meaning of the NAIC Convention Blank to become less than $5,000,000, at
any time, for the duration of this Agreement; or
     g)   have the reserve credit taken by the Company with respect to
this Agreement disallowed by any state in which the Company is licensed,
unless such disallowance results from some action taken by the Company,
other than the act of entering into this Agreement.  The Reinsurer and
the Company agree to cooperate in resolving any issue that has resulted
in the disallowance of the reserve credit.


The Company shall give written notice to the Reinsurer that the
Reinsurer is in default of one or more of the conditions described
above.  The Reinsurer shall have fifteen (15) days in which to remedy
such default(s).  If at the end of such fifteen (15) days, the Reinsurer
shall have failed to secure such remedy as may be required in the sole
opinion of the Company, the Policies shall be immediately eligible for
recapture as of the sixteenth (16th) day from the date such notification
of default(s) was first sent.


9.04 Method of Termination or Recapture.  Should this Agreement be
terminated or recaptured for any of the reasons contained in this
Article or paragraph 2.03, the Reinsurer agrees to take the following
actions:
     a)   the Reinsurer will use every and all best efforts to promptly
transfer to the Company copies of all insureds' files, documents,
reports, records, correspondence or other documents relating to the
Policies so recaptured or terminated that the Reinsurer may have in its
possession; and
     b)   to pay any and all amounts that may be due the Company within
ten (10) days of receipt by the Reinsurer of the terminal settlement
specified below as provided by the Company.


The Company agrees to take the following actions:
     a)   to prepare the terminal monthly accounting report in
accordance with 5.02; and
     b)   to prepare the terminal monthly cash settlement in accordance
with 5.03 for the period from the end of the last month for which
settlement has been made to the effective date of termination as
described above.  In addition, such settlement shall include a terminal
reserve transfer in the amount of the reserve released by the Reinsurer
because of such terminated Policies, less, the outstanding policy loans
on such terminated Policies, less, the amount of due and deferred
premium asset on such terminated Policies, less, if applicable, the
Additional Recapture Amount, as of such terminal accounting date.  In no
event should this calculation of the terminal reserve transfer be an
amount less than zero (0); and
     c)   should the Company voluntarily recapture any or all of the
Policies, as described within this Agreement, the Company shall pay to
the Reinsurer the absolute value of the terminal experience refund
formula, as defined in Schedule C.01, should such calculation result in
a negative value, in proportion to the percentage of the Policies
recaptured, for the terminal accounting period, if any.


                                  ARTICLE X
                              GENERAL PROVISIONS


10.01 Reserves.  The term "reserves," whenever used for the purpose of
this Agreement, shall mean the gross statutory reserves that would have
been required under Texas regulation and in accordance with accepted
actuarial industry practice on the Policies had this Agreement not have
been placed in effect.


10.02 Extra contractual Damages.  The Reinsurer does not indemnify and
shall not be liable for any extra contractual damages or liability of
any kind whatsoever of the Company's resulting from, but not limited to:
negligent, reckless or intentional wrongs; fraud; oppression; bad faith;
or strict liability.


10.03 Misunderstandings and Oversights.  If any failure to pay amounts
due or to perform any other act required by this Agreement is
unintentional and caused by misunderstanding or oversight, the Company
and the Reinsurer will adjust the situation to what it would have been
had the misunderstanding or oversight not occurred.


10.04 Reinstatements.  If a policy reinsured hereunder that was reduced,
terminated, or lapsed, is reinstated, the reinsurance for such policy
under this Agreement will be reinstated automatically to the amount that
would have been in force if the policy had not been reduced, terminated,
or lapsed.


10.05 Facility of Reinsurance.  The Company and the Reinsurer hereby
acknowledge and agree that the coinsurance cession of the Policies will
not alter certain third party reinsurance agreements that may already be
in effect on these Policies.  Experience refunds paid to the Company as
part of any other reinsurance agreement in force on the Policies while
this Agreement is in effect shall be paid to the Reinsurer as part of
the settlements hereunder.  Furthermore, the Company shall not enter
into any other reinsurance agreements that would cover the Policies,
without the express written approval of the Reinsurer.  The Reinsurer
will not unreasonably withhold its approval as contemplated within this
paragraph.


10.06 Policy Administration.  The Company shall administer the Policies
and shall perform all accounting for such Policies.


10.07 Policy Changes.  Should the Company make any material changes
after the Effective Date of this Agreement in the provisions and
conditions of the Policies, the Company shall, within a reasonable time,
inform the Reinsurer of such change.  There shall then be a
corresponding change in the related reinsurance and appropriate cash
adjustments shall be made consistent with the changed rules of the
Company.


10.08 Audit.  The Company or the Reinsurer, their respective employees
or authorized representatives may audit, inspect and examine, during
regular business hours, at the home office of the Company or the
Reinsurer, provided that twenty-four (24) hour advance notice has been
given to the other party, any and all books, records, statements,
correspondence, reports, trust accounts and their related documents or
other documents that relate to the policies covered hereunder.  The
audited party agrees to provide a reasonable work space for such audit,
inspection or examination and to cooperate fully and to faithfully
disclose the existence of and produce any and all necessary and
reasonable materials requested by such auditors, investigators, or
examiners.  The expense of the respective party's employee(s) or
authorized representative(s) engaged in such activities shall be borne
solely by such party.


10.09 Integration.  This Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter of
this Agreement, and this Agreement, including the Schedules attached
hereto, contains the sole and entire agreement between the parties with
respect to the subject matter hereof.


10.10 Law and Venue.  This Agreement has been finally executed in the
State of Texas and is subject to and is to be interpreted in accordance
with the laws of the State of Texas except that it is agreed that the
provisions of Article VII shall be governed by the American Arbitration
Association.  Venue for any action, suit or other proceeding shall be
exclusively in Harris County.  The parties agree to waive any other
venue.


10.11 Nonwaiver.  No forbearance on the part of either party to insist
upon compliance by the other party with the terms of this Agreement
shall be construed as, or constitute a waiver of, any of the terms of
this Agreement.


10.12 Counterparts.  This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same instrument.


10.13 Severability.  In the event that any provision or term of this
Agreement shall be held by any court to be illegal or unenforceable, all
of the other terms and provisions shall remain in full force and effect,
except if the provision or term held to be illegal or unenforceable is
also held to be a material part of this Agreement such that the party in
whose favor the material term or provision was stipulated herein would
not have entered into this Agreement without such term or provision,
then the party in whose favor the material term or provision was
stipulated shall have the right, upon such holding, to terminate this
Agreement.


10.14 Amendments.  Any change or modification to the Agreement shall be
null and void unless made by amendment to the Agreement and signed by
both parties.


10.15 Schedules and Paragraph Headings.  Schedules attached hereto are
made a part of this Agreement.  Paragraph headings are provided for
reference purposes only and are not made a part of this Agreement.


10.16 Net Investment Income.  For purposes of this Agreement the term
Net Investment Income as used for the experience refund calculation in
Schedule C.03 shall mean the result of:  a) the amount of gross
investment income earned on the segregated asset account during the
month calculated in a manner consistent with the calculation of such
amounts in Column 7, of Exhibit 2 of the Company's NAIC convention
blank, plus, b) any realized capital gains for such month on such assets
or (less) any realized capital losses for such month on such assets,
less, c) the investment expenses as calculated for Exhibit 2, lines 11
and 12 of the Company's NAIC Convention Blank on such assets (except
that such investment expenses shall not exceed .125%, on an annual basis
of the average balance of the segregated asset account defined in
Schedule D), plus, d) the amount of investment income paid to the
Reinsurer by the Company on the outstanding policy loans on the policies
as defined in 3.08.


10.17 Financial Reports.  The Company and the Reinsurer each agree to
furnish the other with their respective NAIC Convention Blank
Statements, as required by their respective state laws within 15 days
after such reports are due to be filed with such respective states.


10.18 Survival.  The representations, warrants, covenants and agreements
respectively required to be made by the Company and the Reinsurer in
this Agreement shall survive the termination or expiration of this
Agreement.


10.19 Service of Suit.  It is agreed that in the event of the failure of
the Reinsurer to pay any amount claimed to be due under this Agreement,
Reinsurer, at the request of the Company, will submit to the
jurisdiction of any court of competent jurisdiction within the United
States of America and will comply with all requirements necessary to
give such court jurisdiction, and all matters arising hereunder shall be
determined in accordance with the law and practice of such court.
Nothing in this clause constitutes or should be understood to constitute
a waiver of the Reinsurer's rights to commence an action in any court of
competent jurisdiction in the United States, to remove an action to a
United States District Court, or to seek a transfer of a case to another
court as permitted by the laws of the United States or of any state in
the United States.  Service of process in any such suit may be made upon
any then duly elected officer of the Reinsurer at the address specified
in Schedule B (agent for service of process).  In any suit instituted
against the Reinsurer upon this Agreement, the Reinsurer will abide by
the final decision of such court or of any appellate court in the event
of an appeal.  The agent for service of process is authorized and
directed to accept service of process on behalf of the Reinsurer in any
such suit and/or, upon the request of the Company, to give a written
undertaking to the Company that the agent for service of process will
enter a general appearance on behalf of the Reinsurer in the event that
such a suit shall be instituted.


It is agreed that in the event of the failure of the Company to pay any
amount claimed to be due under this Agreement, Company, at the request
of the Reinsurer, will submit to the jurisdiction of any court of
competent jurisdiction within the United States of America and will
comply with all requirements necessary to give such court jurisdiction,
and all matters arising hereunder shall be determined in accordance with
the law and practice of such court.  Nothing in this clause constitutes
or should be understood to constitute a waiver of the Company's rights
to commence an action in any court of competent jurisdiction in the
United States, to remove an action to a United States District Court, or
to seek a transfer of a case to another court as permitted by the laws
of the United States or of any state in the United States.  Service of
process in any such suit may be made upon any then duly elected officer
of the Company at the address specified in Schedule B (agent for service
of process).  In any suit instituted against the Company upon this
Agreement, the Company will abide by the final decision of such court or
of any appellate court in the event of an appeal.  The agent for service
of process is authorized and directed to accept service of process on
behalf of the Company in any such suit and/or, upon the request of the
Reinsurer, to give a written undertaking to the Reinsurer that the agent
for service of process will enter a general appearance on behalf of the
Company in the event that such a suit shall be instituted.


10.20 Notices.  All notices and other communications under this
Agreement must be in writing and will be deemed to have been duly given
if delivered personally or mailed, by certified mail, return receipt
requested, first class postage, prepaid, to the addresses and to the
attention of the parties described in Schedule B attached hereto.


                             ARTICLE XI
                     EXECUTION AND EFFECTIVE DATE


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate, with an Effective Date of January 1, 1998.

AMERICAN CAPITOL INSURANCE COMPANY (Company)


By:  /s/John Cornett
    ------------------------------
    John Cornett

Title: President

Date:  March 3, 1998


     Attest: /s/Dan R. Stites
             ----------------------
             Dan R. Stites

     Title:  Vice President

     Date:   March 3, 1998


REPUBLIC-VANGUARD LIFE INSURANCE COMPANY (Reinsurer)

By: /s/Robert O. Holliday
    -----------------------
    Robert O. Holliday
Title: Vice President & Marketing Actuary

Date:  March 3, 1998


     Attest: /s/Colin Rainier
            -----------------------
             Colin Rainier
Title:  Vice President & Group Actuary

     Date:   March 3, 1998







                                   SCHEDULE A

                         POLICIES AND RISKS REINSURED


Under this Agreement, the Reinsurer reinsures 100% of the risks on the
blocks of individual industrial and ordinary life insurance policies
assumed by the Company pursuant to that certain Coinsurance Agreement
dated January 1, 1998 between American Capitol Insurance Company and
Universal Life Insurance Company.









                                   SCHEDULE B

                                     NOTICES



     IF TO THE COMPANY:


          American Capitol Insurance Company
          10555 Richmond Avenue
          Houston,  TX  77042
          Attention:     John Cornett, President



     IF TO THE REINSURER:


          Republic-Vanguard Life Insurance Company
          2727 Turtle Creek Boulevard
          Dallas, TX   75219
          Attention:  Robert O. Holliday, Vice President









                                   SCHEDULE C

                           EXPERIENCE REFUND FORMULA


C.01 Retrocession Option.  After the first monthly settlement for which
the experience refund formula (defined in C.02) produces a positive
result, the Reinsurer will, if the Company requests in writing within
ten years of such settlement, at the Company's sole option, retrocede
100% of the Policies to the Company.


Upon the retrocession described above, the Company agrees to pay the
Reinsurer a monthly experience refund, payable as part of the first
monthly settlement for which the following formula produces a positive
amount, in the amount of 30% of such positive amount and during the
subsequent 120 calendar months that then produce a positive amount in
the amount of 30% of such then positive amount.  No experience refunds
will be made after those 120 subsequent calendar months have elapsed.
For any and all calendar months that such formula results in a negative
amount such amount shall be treated as zero (0) for the cash settlement
purposes as defined in 5.03.  The terminal experience refund shall be
calculated in accordance with the following formula except the absolute
value of a negative result shall be paid in accordance with 9.04.


In no event will the Reinsurer be obligated to pay the Company an
experience refund.


C.02 Experience Refund Formula.  The experience refund calculation shall
be made in accordance with the following formula:

     The Current Month's Experience as defined C.03, below;

LESS

     For the first month only, the Initial Consideration as defined in
3.02;

LESS

     The negative experience refund carryforward, defined as the
absolute value of any negative result of this calculation for the
immediately preceding month.


C.03 Calculation of Current Month's Experience.  The current month's
experience shall be made in accordance with the following formula.


     The Premiums as defined in 3.03;

PLUS

     The Net Investment Income as defined in 10.16;

PLUS

     The Experience Refunds paid on other reinsurance agreements as
defined in 10.05;

PLUS

     Any decrease in the Reserves as defined in 10.01 for the month.
For the final terminal experience refund calculation the ending reserve
for the terminal month shall be the reserve immediately prior to the
actual recapture or termination of this Agreement;

PLUS

     Any increase in the amount of due and deferred asset on the
Policies

LESS

     Any decrease in the amount of due and deferred asset on the
Policies;

LESS

     The Reinsurer's profit retention as defined in C.04 below;

LESS

     The net Benefits paid by the Reinsurer as defined in 4.02;

LESS

     The Administration Fee as defined in 3.07;

LESS

     The Commission Allowance as defined in 3.04;

LESS

     The Premium Tax Allowance as defined in 3.05;

LESS

     The Dividends to Policyholders as defined in 4.04;

LESS

     Any increase in the Reserves as defined in 10.01 for the month.
For the final terminal experience refund calculation the ending reserve
for the terminal month shall be the reserve immediately prior to the
actual recapture or termination of this Agreement;

LESS

     One month's interest on the absolute value of any negative result
of this calculation for the immediately preceding month at a monthly
interest rate of 0.52%.


C.04 Maximum Reinsurer's Profit Retention.  The Reinsurer agrees to
limit the maximum profit it retains from the earning on the Policies, if
any, to an amount equal to 0.27% of the negative experience
carryforward, as defined in Schedule C.02, as of the end of such month
for which this calculation is being made, commencing with the month
ending January 31, 1998 and for every month thereafter for the duration
of this Agreement.









                                  SCHEDULE D

                           SEGREGATED ASSET ACCOUNT


D.01 Purpose.  The Company and the Reinsurer agree that the initial net
amount of assets transferred to the Reinsurer as provided for in 3.01
shall be housed in a segregated asset account established by the
Reinsurer for the purpose of determining the Net Investment Income as
defined in 10.16 and to be used in the experience refund formula as
defined in C.03.


D.02 Admissible Assets.  The assets used to maintain this segregated
asset account shall consist of cash, certificates of deposit issued by
any national or state chartered bank or savings and loan association
and/or securities, in which the laws of the Reinsurer's state of
domicile authorizes domestic insurers to invest and which meet the
Investment Guidelines presented in Schedule F.


D.03 Determination of the Segregated Asset Account Balance.  As of the
effective date of this Agreement the initial account balance shall be
equal to the difference between the initial premium as defined in 3.01
and the initial consideration as defined in 3.02.  Subsequently, as of
the end of every month thereafter, the account balance shall be
calculated as:  the Reserves as defined in 10.01 as of the end of such
month for which this calculation is being made, less, the outstanding
policy loans as defined in 3.08 as of the end of such month for which
this calculation is being made, less, the amount of due and deferred
asset as of the end of the such month for which this calculation is
being made, less, the absolute value of the negative experience refund
carryforward, as defined in C.02, if any.


D.04 Management of Account Assets.  The Company agrees to allow the
Reinsurer to provide for the management of such assets either directly
by the Reinsurer or its duly appointed third party asset manager.  The
account assets shall be managed in strict accordance with the Investment
Guidelines presented in Schedule F.  The Reinsurer, or its designated
investment advisor, may from time to time substitute or exchange assets
contained within this account provided such assets so substituted or
exchanged are admissible assets as defined herein and meet the
Investment Guidelines presented in Schedule F.  The Reinsurer will
immediately notify the Company of such substituted or exchanged assets.
The Company reserves the right to challenge any so substituted or
exchanged assets within five (5) working days such asset first appeared
in such account.  Should the Company elect to so challenge any such
asset the Reinsurer agrees to replace such asset with an admissible
asset acceptable to the Company, which acceptance shall not be
unreasonably withheld.


D.05 Additions to or Withdrawals from the Account.  Should the book
value of the assets contained within the account, as of the end of any
month, exceed the amount required by D.03, above, the Reinsurer shall be
allowed to withdraw such excess assets.  The specific assets to be
released shall be those assets as designated by the Company and the
Company shall make such designation no later than ten (10) working days
after the close of such month for which this comparison is being made.
Should the book value of the assets contained within the account as of
the end of any month be less than the amount required by D.03 above, the
Reinsurer shall deposit cash or its equivalent into this account in an
amount equal to such deficiency within twelve (12) working days after
the close of such month for which this comparison is being made.







                                    SCHEDULE E

                          ADDITIONAL RECAPTURE AMOUNT


In the event the Company elects to recapture the Policies prior to the
date falling ten (10) years after the date on which the Negative
Experience Refund Carryforward first reaches zero, other than for a
reason specified in Article IX, the amount due from the Reinsurer to the
Company as part of the terminal monthly cash settlement specified in
paragraph 9.04(b) shall be reduced by the amount listed below (the
"Additional Recapture Amount"), which shall be calculated as $1,750,000
less the sum of Retained Experience Profits, as defined below, received
by the Reinsurer prior to the effective date of such recapture.


Retained Experience Profits are all the Experience Refunds paid to
Republic-Vanguard by American Capitol under this treaty or any
retrocession treaty between the parties covering the blocks of business
described in Schedule A.











                                     SCHEDULE F

                               INVESTMENT GUIDELINES


1.   General.  These Investment Guidelines are developed with the
understanding that the parties depend upon a steady, secure and
calculable income generated by the assets in the segregated asset
account to meet cash flow needs, thus necessitating a well balanced, low
risk portfolio.  The purpose of these investment guidelines is to
maximize the yield on investments within the limitations necessary to
assure and secure a steady investment income stream.


2.   Objectives.  The following objectives, ranked by priority, should
be accomplished:

     (1)  The investments should be secured.  To provide safety of
principal and interest, investment instruments have to be of high
quality.

     (2)  The maturity of the investments should be matched with the
expected future liquidity needs in order to avoid realized capital
losses.

     (3)  A high return on investments on a before tax basis.

     (4)  The portfolio has to be well diversified by category as well
as by issuer.

3.   Portfolio Guidelines.

     (1)  Portfolio duration must be managed to match projected
liability duration, plus or minus 1/2 year.

     (2)  Portfolio convexity should be maximized to a level as close as
possible to that of the liabilities, not to fall below -1.0.

     (3)  All investments have to be in US dollar denominated
securities.

     (4)  Investments must be listed with the Securities Valuation
Office of the National Association of Insurance Commissioners ("NAIC").
If a given security is not listed at the time of purchase, Reinsurer
shall apply for listing of such security prior to the end of the
calendar quarter in which the purchase is made.

     (5)  All investment must be rated a category 1 or category 2 by the
NAIC when purchased.  No more than 10% of the portfolio shall be
invested in NAIC category 2 investments.

     (6)  Investments shall be limited to bonds and short term
securities (maturity of less than 1 year).

     (7)  Short term securities shall be limited to (a) US Treasury
Bills, Bonds, or Notes; commercial notes of US corporations, bankers
acceptances and loan participations having an A-1 or P-1 quality rating
and not to exceed 5% of the portfolio per issuer;  interest-bearing
accounts and certificates of deposit of US banks and savings and loan
associations not to exceed FDIC or FSLIC limits;  shares in money market
mutual funds not to exceed 5% of the portfolio.

     (8)  No investments will be made in mortgage backed security
derivatives (inverse-floaters, interest only strips, and principal only
strips).

     (9)  In regard to mortgage backed securities:  no Z-Class, Accrual
Bonds, and similar tranches such as Jump-Z tranches should be held in
the portfolio; no inverse floating or super-floating CMOs should be held
in the portfolio; no synthetic mortgage securities should be held in the
portfolio.  Mortgage backed securities will be managed so as to minimize
prepayment risk.

     (10) No more than 25% of the portfolio will be invested in mortgage
backed and asset backed securities.

     (11) No investments will be made in callable securities

     (12) No investments will be made in municipal bonds.

     (13) No more than 5% of the portfolio will be invested in any one
corporate issuer.

     (14) No transaction that will result in a realized capital loss in
excess of $3,000 will be executed without the advance written approval
of the Company.

     (15) No investment will be made in a security that is not publicly
traded without the advance written approval of the Company.

4.   Reporting.

     (1)  Within 8 working days of the end of each calendar month, the
Reinsurer will provide the Company with the details of net investment
income for the portfolio and any realized capital gains and losses for
such calendar month.

     (2)  Within 45 calendar days of the end of each calendar quarter,
the Reinsurer will provide the Company with detailed and summary
information regarding the investments in the portfolio, the changes in
the portfolio since the preceding quarter, and any other information
that the Company might reasonably request.