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







<PAGE>



                                   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    







<PAGE>



                                     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 coinsurance 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 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
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 (hereinafter 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 any
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 ScheduleC.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 Extracontractual Damages.  The Reinsurer does not indemnify and shall
not be liable for any extracontractual 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             

<PAGE>
                                   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.



<PAGE>



                                   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



     

<PAGE>

                                   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.



<PAGE>



                                  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.



<PAGE>

                                    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.





<PAGE>



                                     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.