Document:

Exhibit
4.10A

 

INDENTURE

DATED AS OF OCTOBER 29,
1999

RESIGNATION AS TRUSTEE

 

Whereas, the undersigned was
named the initial Indenture Trustee under the Indenture, dated as of October 29,
1999 (the “Indenture”) between the American Equity Investment Life Holding
Company, (the “Company”) and the undersigned, (the “Resigning Trustee”); and

 

Whereas, the undersigned has
served as the Indenture Trustee from October 29, 1999 to the present; and

 

Whereas, subparagraph (b) of
Section 610 of the Indenture permits the Trustee to resign as follows:

 

“(b) The Trustee may
resign at any time by giving written notice thereof to the Company”; and

 

Whereas, the undersigned now
wishes to resign as Trustee.

 

Now Therefore, pursuant to
subparagraph (b) of Section 610 of the Indenture, the undersigned,
WEST DES MOINES STATE BANK, hereby resigns as Trustee, effective upon the
appointment of a Successor Trustee and acceptance by written instrument
executed by such Successor Trustee and delivery to the Company and the
Resigning Trustee.

 

 

	
  WEST
  DES MOINES STATE BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Carol T. Stone

  	
   

  
	
   

  	
  Name:
  Carol T. Stone

  	
   

  
	
   

  	
  Title:
  Senior Trust Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  February 8,
  2006

  	
   

  

 

 

INDENTURE

DATED AS OF OCTOBER 29,
1999

CHANGE OF PAYING AGENT AND
REGISTRAR

 

Whereas, under the
Indenture, dated as of October 29, 1999 (the “Indenture”) between the
American Equity Investment Life Holding Company, (the “Company”) and West Des
Moines State Bank (the “Indenture Trustee”), the Indenture Trustee initially
acted as the Paying Agent and the Registrar; and

 

Whereas, the Indenture
Trustee has served as the Paying Agent and the Registrar from October 29,
1999 to the present; and

 

Whereas, Section 313 of
the Indenture permits the Company to change any Paying Agent or Registrar as
follows:

 

“Section 313. Paying
Agent and Registrar.  The Trustee
will initially act as Paying Agent and Registrar.  The Company may change any Paying Agent,
Registrar or co-registrar without prior notice. 
The Company or any of its Affiliates may act in any such capacity.”; and

 

Whereas, the Company now
wishes to appoint itself as Paying Agent and Registrar.

 

Now Therefore, pursuant to Section 313
of the Indenture, the Company hereby appoints itself and hereby accepts such
appointment as Paying Agent and Registrar, effective upon the date hereof.

 

 

	
  AMERICAN
  EQUITY INVESTMENT LIFE INSURANCE COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Ted M. Johnson

  	
   

  
	
   

  	
  Name:
  Ted M. Johnson

  	
   

  
	
   

  	
  Title:
  Vice President - Accounting

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  February     ,
  2006

  	
   

  

 

 

INDENTURE

DATED AS OF OCTOBER 29, 1999

ACCEPTANCE OF APPOINTMENT AS TRUSTEE

 

Whereas, the West Des Moines
State Bank has resigned as Indenture Trustee (the “Resigning Trustee”) pursuant
to the Indenture, dated as of October 29, 1999 (the “Indenture”) between
the American Equity Investment Life Holding Company, (the “Company”) and West
Des Moines State Bank, as Indenture Trustee.

 

Whereas, the Company wishes
to appoint the undersigned as Successor Trustee; and

 

Whereas, Section 611 of
the Indenture requires the Successor Trustee to accept an appointment as
follows:

 

“Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to the Company and
to the retiring Trustee an instrument accepting such appointment, and thereupon
the resignation or removal of the retiring Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee;” and

 

Whereas, the undersigned now
wishes to accept the appointment as Successor Trustee.

 

Now Therefore, pursuant to Section 611
of the Indenture, the undersigned, WILMINGTON TRUST COMPANY, hereby accepts the
appointment as Successor Trustee, effective upon delivery of this instrument to
the Company and to the Resigning Trustee.

 

 

	
  WILMINGTON
  TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Geoffrey J. Lewis

  	
   

  
	
   

  	
  Name:
  Geoffrey J. Lewis

  	
   

  
	
   

  	
  Title:
  Financial Services Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  September 12,
  2006

  	
   

  

 

 

TRUST PREFERRED SECURITIES
GUARANTEE AGREEMENT

DATED AS OF OCTOBER 29,
1999

RESIGNATION AS PREFERRED
GUARANTEE TRUSTEE

 

Whereas, the undersigned was
named the initial Preferred Guarantee Trustee under the Trust Preferred
Securities Guarantee Agreement, dated as of October 29, 1999 (the “Guarantee
Agreement”) between the American Equity Investment Life Holding Company, (the “Guarantor”)
and the undersigned, (the “Resigning Preferred Guarantee Trustee”); and

 

Whereas, the undersigned has
served as the Preferred Guarantee Trustee from October 29, 1999 to the
present; and

 

Whereas, Section 4.2 of
the Guarantee Agreement permits the Preferred Guarantee Trustee to resign as
follows:

 

“(b)                           Subject to Section 4.2(c), the Preferred
Guarantee Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Preferred Guarantee
Trustee and delivered to the Guarantor.

 

(c)                                  The Preferred Guarantee Trustee shall hold
office and shall not be removed in accordance with Section 4.2(a) or
resign in accordance with Section 4.2(b) unless and until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Preferred
Guarantee Trustee and delivered to the Guarantor and, in the case of a
resignation in accordance with Section 4.2(b), the resigning Preferred
Guarantee Trustee.”; and

 

Whereas, the undersigned now
wishes to resign as Preferred Guarantee Trustee.

 

Now Therefore, pursuant to Section 4.2
of the Guarantee Agreement, the undersigned, WEST DES MOINES STATE BANK, hereby
resigns as Preferred Guarantee Trustee, effective upon the appointment of a
Successor Preferred Guarantee Trustee and acceptance by written instrument
executed by such Successor Preferred Guarantee Trustee and delivery to the
Guarantor and the Resigning Preferred Guarantee Trustee.

 

 

	
  WEST
  DES MOINES STATE BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Carol T. Stone

  	
   

  
	
   

  	
  Name:
  Carol T. Stone

  	
   

  
	
   

  	
  Title:
  Senior Trust Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  February 8,
  2006

  	
   

  

 

 

TRUST PREFERRED SECURITIES
GUARANTEE AGREEMENT

DATED AS OF OCTOBER 29,
1999

ACCEPTANCE OF APPOINTMENT AS PREFERRED GUARANTEE
TRUSTEE

 

Whereas, the West Des Moines
State Bank has resigned as Preferred Guarantee Trustee (the “Resigning
Preferred Guarantee Trustee”) pursuant to the Trust Preferred Securities
Guarantee Agreement, dated as of October 29, 1999 (the “Guarantee
Agreement”) between the American Equity Investment Life Holding Company, (the “Guarantor”)
and West Des Moines State Bank, as Preferred Guarantee Trustee.

 

Whereas, the Guarantor
wishes to appoint the undersigned as Successor Preferred Guarantee Trustee; and

 

Whereas, Section 4.2(c) of
the Guarantee Agreement requires the Successor Preferred Guarantee Trustee to
accept an appointment as follows:

 

“(c)                            The Preferred Guarantee Trustee shall hold
office and shall not be removed in accordance with Section 4.2(a) or
resign in accordance with Section 4.2(b) unless and until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Preferred
Guarantee Trustee and delivered to the Guarantor and, in the case of a
resignation in accordance with Section 4.2(b), the resigning Preferred
Guarantee Trustee.”; and

 

Whereas, the undersigned now
wishes to accept the appointment as Successor Preferred Guarantee Trustee.

 

Now Therefore, pursuant to Section 4.2(c) of
the Guarantee Agreement, the undersigned, WILMINGTON TRUST COMPANY, hereby
accepts the appointment as Successor Preferred Guarantee Trustee, effective
upon delivery of this instrument to the Guarantor and to the Resigning
Preferred Guarantee Trustee.

 

 

	
  WILMINGTON
  TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Geoffrey J. Lewis

  	
   

  
	
   

  	
  Name:
  Geoffrey J. Lewis

  	
   

  
	
   

  	
  Title:
  Financial Services Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
  September 12,
  2006Exhibit 10.20

 

COINSURANCE AND YEARLY RENEWABLE TERM REINSURANCE AGREEMENT

 

EFFECTIVE:  DECEMBER 31, 2008

 

BETWEEN

 

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY

West Des Moines, Iowa

 

AND

 

HANNOVER LIFE REASSURANCE COMPANY OF AMERICA

Orlando, Florida

 

1

 

COINSURANCE AND YEARLY RENEWABLE TERM REINSURANCE

 

	
  ARTICLE

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  I.

  	
  PREAMBLE
  AND REINSURANCE PROVIDED

  	
   

  
	
   

  	
   

  	
   

  
	
  II.

  	
  TERM,
  TERMINATION AND RECAPTURE

  	
   

  
	
   

  	
   

  	
   

  
	
  III.

  	
  REINSURANCE
  COVERAGE

  	
   

  
	
   

  	
   

  	
   

  
	
  IV.

  	
  REINSURANCE
  PREMIUMS AND EXPENSE ALLOWANCES

  	
   

  
	
   

  	
   

  	
   

  
	
  V.

  	
  COINSURANCE
  RESERVES

  	
   

  
	
   

  	
   

  	
   

  
	
  VI.

  	
  LOSS
  CARRY FORWARD BALANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  VII.

  	
  NET
  CASH SETTLEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  VIII.

  	
  FINANCIAL
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  IX.

  	
  REPORTS
  AND REMITTANCES

  	
   

  
	
   

  	
   

  	
   

  
	
  X.

  	
  NET
  RETAINED LINES

  	
   

  
	
   

  	
   

  	
   

  
	
  XI.

  	
  EXCLUSIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  XII.

  	
  INSOLVENCY

  	
   

  
	
   

  	
   

  	
   

  
	
  XIII.

  	
  ARBITRATION

  	
   

  
	
   

  	
   

  	
   

  
	
  XIV.

  	
  AGREEMENT,
  AMENDMENTS AND MERGER

  	
   

  
	
   

  	
   

  	
   

  
	
  XV.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  XVI.

  	
  DAC
  TAX

  	
   

  
	
   

  	
   

  	
   

  
	
  XVII.

  	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE
  A — SUBJECT BUSINESS CONTRACTS (TYPES)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE
  B — RATES BY AGE (NEAREST BIRTHDAY)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE C1 — TARGET LCF
  BALANCES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE C2 — ALTERNATIVE
  TARGET LCF BALANCES

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULE D — NET CASH
  SETTLEMENT CALCULATION & REPORT FORMAT

  	
   

  

 

2

 

	
   

  	
  SCHEDULE E — ACTUAL
  RECAPTURE & CURRENT QUOTA SHARE CALCULATION

  	
   

  

 

3

 

ARTICLE I:  PREAMBLE AND
REINSURANCE PROVIDED

 

1.01  -                                                                 This is an Agreement of Coinsurance and
Yearly Renewable Term Reinsurance between:

 

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY

West Des Moines, Iowa

 

(hereinafter referred to as the “Company”)

 

and

 

HANNOVER LIFE REASSURANCE COMPANY OF AMERICA

Orlando, Florida

 

(hereinafter referred to as the “Reinsurer”)

 

Collectively referred to as the “parties”, whereby, the Reinsurer
agrees to indemnify the Company for Covered Losses paid by the Company subject
to all of the terms and conditions of this Agreement.

 

1.02                                                                         Construction: 
This Agreement will
be construed in accordance with the laws of the state of Iowa.

 

 

1.03                                                                         Entire Agreement:  This
Agreement, including any schedules, exhibits, and addenda, and any amendments
hereto, constitutes the entire agreement between the parties with respect to
the business reinsured hereunder. There are no understandings between the
parties other than as expressed in this Agreement. Any change or modification
to this Agreement will be null and void unless made by amendment to this
Agreement and signed by both parties.

 

1.04                                                                         Severability:  If
any provision of this Agreement is determined to be invalid or unenforceable,
such determination will not impair or affect the validity or the enforceability
of the remaining provisions of this Agreement, which shall remain in full force
and effect as though such invalid or unenforceable provisions or clauses had
not been herein included or made a part of the Agreement.

 

ARTICLE II:  TERM, TERMINATION
AND RECAPTURE

 

2.01  -                                                               Effective Date:  The
Effective Date of this Agreement shall be 10:59 p.m., Central Standard
Time, December 31, 2008.

 

4

 

2.02  -                                                               Term:  This Agreement shall remain in
force and the Term of this Agreement shall be from the Effective Date until the
earlier of (i) the date of decrement of the last contract holder of a Subject
Business contract, or (ii) the Recapture Date.

 

2.03  -                                                               Termination and Recapture:  The
Company may terminate this Agreement and recapture all Subject Business
reinsured hereunder at any time after January 1, 2010, provided that such
recapture falls on the last day of a full Accounting Period, by providing
written notice to the Reinsurer by registered or certified mail, return receipt
requested, at least thirty (30) days in advance, such notice to include the
effective date of termination and recapture.

 

The Reinsurer may terminate this Agreement if the Company fails to pay
any reinsurance premium due to Reinsurer by Company hereunder when due, subject
to thirty (30) days’ notice and demand for such payment by the Reinsurer.

 

The date on which this Agreement is terminated by the Company or by the
Reinsurer as set forth in this Section 2.03 shall hereinafter be referred
to as the “Recapture Date”.  On the
Recapture Date, the Company shall pay to the Reinsurer the LCF as of the
Recapture Date determined in accordance with Section 6.01 below.

 

2.04                                                                         Partial Recapture:  As
of the end of each calendar quarter, if the Coinsurance Reserves are greater
than the LCF, the Company may recapture a portion of the Section A Subject
Business in an amount equal to the Coinsurance Reserves less the LCF. Upon
Partial Recapture, the Section A Current Quota Share will be recalculated
to equal the remaining Coinsurance Reserves divided by the statutory reserves
for the Section A Subject Business. 
The actual amount recaptured and the corresponding Section A
Current Quota Share adjustment each quarter will be reflected in Schedule E and
updated as necessary.

 

ARTICLE III:  REINSURANCE
COVERAGE

 

3.01  -                                                               Coverage:

 

(a)          Section A — Coinsurance:  The
Reinsurer shall indemnify the Company for Section A Covered Losses paid by
the Company.

 

(b)         Section B — YRT:  The
Reinsurer shall indemnify the Company for Section B Covered Losses paid by
the Company.

 

3.02  -                                                                 Subject Business: 
“Subject Business” shall mean all contracts issued by the Company and
listed on Schedule A attached hereto and incorporated herein.

 

It is understood and agreed that the Company shall continue to
administer the Subject Business during the Term of this Agreement.

 

5

 

3.03  -                                                               Subject Losses:

 

(a)                                  “Section A Subject Losses” shall mean
all benefits paid by the Company to contract holders of the Section A
Subject Business contracts, including surrender values paid, death benefits
paid, and interest and premium bonuses credited in accordance with the terms of
such Subject Business contracts.  Section A
Subject Losses shall not include annuitization benefits, rider benefits,
extracontractual payments, extracontractual damages, loss adjustment expenses
and other benefits not expressly specified under the terms of the Section A
Subject Business contracts.

 

(b)                                 Section B Subject Losses shall mean all
surrender charges waived by the Company upon death of the contract holders of
the Section B Subject Business contracts, but only as respects that
portion of the Section B Subject Business that is not reinsured under Section A
of this Agreement.  Section B
Subject Losses shall not include annuitization benefits, rider benefits,
extracontractual payments, extracontractual damages, loss adjustment expenses
and other benefits not expressly specified under the terms of the Section B
Subject Business contracts.

 

3.04  -                                                               Covered Losses.

 

(a)                                  “Section A  Covered Losses” shall
equal, for the Accounting Period commencing January 1, 2009,and each Accounting
Period thereafter, Section A Subject Losses on Fixed Annuity policies
multiplied by the Section A Current Quota Share, as defined in Schedule E.

 

(b)                                 “Section B Covered Losses” shall equal,
for the Accounting Period commencing January 1, 2009, and each Accounting
Period thereafter (i) Section B Subject Losses on Fixed Annuity
policies multiplied by the Section B Current Quota Share Fixed Annuities,
as defined in Schedule E plus (ii) Section B Subject Losses on Index
Annuity policies multiplied by the Section B Current Quota Share Indexed
Annuities, as defined in Schedule E.

 

The Reinsurer’s aggregate liability under this Agreement for Section B
Covered Losses shall not exceed Fifty Million dollars ($50,000,000) over the
lifetime of this agreement.

 

(c)                                  The sum of Section A Covered Losses and Section B
Covered Losses shall hereinafter be referred to collectively as “Covered
Losses”.

 

6

 

ARTICLE IV:  REINSURANCE PREMIUMS
AND EXPENSE ALLOWANCES

 

4.01  -                                                               Reinsurance Premium:

 

(a)                                  To
effect reinsurance on the Subject Business, the Company shall pay to the
Reinsurer, on the Effective Date, an initial premium equal to Thirty Million
dollars ($30,000,000).  Section A
Reinsurance Premium shall equal, for the Accounting Period commencing January 1,
2009, and each Accounting Period thereafter, all renewal premiums received by
the Company for the Section A Subject Business multiplied by the Section A
Current Quota Share, as defined in Schedule E.

 

(b)                                 Section B
Reinsurance Premium shall equal, for the Accounting Period commencing January 1,
2009, and each Accounting Period thereafter, the sum of the following:

 

(i)                                   for
each Subject Business contract in force, the applicable rate from Schedule B
attached hereto and incorporated herein, based on the contract holder’s age at
the nearest birthday at the beginning of that Accounting Period, multiplied by the Net Amount at Risk at the beginning of
that Accounting Period; and

 

(ii)                                a
policy fee of eighteen and 75/100 dollars ($18.75) for each Subject Business
contract in force at the beginning of that Accounting Period.

 

“Net Amount at
Risk” as used herein shall mean, with respect to each Subject Business
contract, the Reinsurer’s Section B Current Quota Share of the amount by
which the account value payable to the beneficiary upon death of the contract
holder exceeds the cash surrender value at such time,.

 

(c)                                  The sum of Section A Reinsurance Premium
and Section B Reinsurance Premium shall hereinafter be referred to collectively
as the “Reinsurance Premiums”.  The
Reinsurance Premiums for each Accounting Period shall be due and payable from
the Company to the Reinsurer as part of the settlement for that Accounting
Period in accordance with Schedule D.

 

4.02  -                                                               Expense Allowances:

 

(a)                                 Section A:  The
Reinsurer shall pay to the Company, on the Effective Date, an initial Ceding
Allowance equal to Thirty Million dollars ($30,000,000). Section A Expense
Allowances for the Accounting Period commencing January 1,2009 and each
Accounting Period thereafter shall be equal to (i) 86/100 dollars ($0.86)
per Subject Business contract plus (ii) the applicable premium taxes and
agent commissions actually paid by the Company with respect to each 

 

7

 

Subject Business contract in force multiplied by the Section A
Current Quota Share, as defined in Schedule E.

 

(b)                                 Section B:  Section B
Expense Allowances for each Accounting Period shall equal zero.

 

(c)                                  The Section A Expense Allowances and the
Section B Expense Allowances for each Accounting Period shall hereinafter
be referred to collectively as the “Expense Allowances”.  The Expense Allowances for each Accounting
Period shall be due and payable from the Reinsurer to the Company as part of
the settlement for that Accounting Period in accordance with Schedule D.

 

(d)                                 All direct or allocable expenses or taxes are
included in the Expense Allowances.

 

4.03  -                                                               Reinsurer’s Fee:  As
an inducement to and in consideration for entering into this Agreement, the
Company agrees to pay the Reinsurer a transaction fee equal to One Hundred
Fifty Thousand dollars ($150,000) within three (3) days after the date
this Agreement is executed.  The Company
acknowledges and agrees that payment by the Company to the Reinsurer of the
Reinsurer’s Fee is a condition precedent to the liability of the Reinsurer
hereunder.

 

ARTICLE V:  COINSURANCE RESERVES

 

5.01  -                                                               Coinsurance Reserves:  The
Coinsurance Reserves on December 31, 2008 shall equal Thirty Million
dollars ($30,000,000).  The Coinsurance
Reserves at the end of each Accounting Period thereafter shall equal the
statutory reserves for the Section A Subject Business calculated by the
Company, multiplied by the Section A Current Quota Share, as defined in
Schedule E, prior to any current period recapture.

 

ARTICLE VI:  LOSS CARRY FORWARD
BALANCE

 

6.01  -                                                               Loss Carry Forward Balance:  The
Loss Carry Forward (“LCF”) on December 31, 2008 shall be an amount equal
to the Coinsurance Reserves as of that date. 
The LCF for each Accounting Period thereafter shall be equal to: (i) the
LCF on the last day of the immediately preceding Accounting Period, accumulated
with interest, less (ii) Reinsurer’s Net Profit as defined in Section 7.01,
plus (iii) any Experience Refund as defined in Section 7.04.

 

6.02  -                                                               Reinsurance Risk Charge:  The
initial Reinsurance Risk Charge is Three Hundred Seventy-Five Thousand dollars
($375,000), and is due within three 

 

8

 

(3) days after the date this Agreement is executed.  The Reinsurance Risk Charge due at the end of
each Accounting Period shall equal the Reinsurance Risk Charge Rate in effect
for such Accounting Period in accordance with Section 6.03, multiplied by
the result of:

 

LCFt-1 * (1+i)
— min( RSPt, LCFt-1 * (1+i) — min( CRt,
TLCFt ) )

 

	
   

  	
   

  	
  Where:

  	
   

  
	
   

  	
   

  	
  LCFt-1 =

  	
  LCF
  on the last day of the previous Accounting Period

  
	
   

  	
   

  	
  i
  =

  	
  LCF
  interest rate of 6.4%

  
	
   

  	
   

  	
  RSPt =

  	
  Reinsurer’s
  Statutory Profit (as defined in Section 7.02) for the Accounting Period

  
	
   

  	
   

  	
  CRt,=

  	
  Coinsurance
  Reserves balance on the last day of the Accounting Period, before any
  Partial Recapture

  
	
   

  	
   

  	
  TLCFt =

  	
  Target
  LCF, or Alternative Target LCF if the Alternative Target LCF is being used
  to calculate the Experience Refund for the current Accounting Period, on the
  last day of the Accounting Period

  

 

6.03  -                                                               Reinsurance Risk Charge Rate:  If
the Company is not, and was not, in violation of one or more of the Financial
Covenants at any time during the current Accounting Period or any prior
Accounting Period, then the Reinsurance Risk Charge Rate shall equal one and
25/100 percent (1.25%).

 

If Company is or was in violation of one or more of the Financial
Covenants at any time during the current Accounting Period or any prior
Accounting Period, then the Reinsurance Risk Charge Rate for the current and
following Accounting Periods shall equal one and 50/100 percent (1.50%).

 

ARTICLE VII: NET CASH SETTLEMENT

 

7.01 -                                                                  Net Cash Settlement:  The
Net Cash Settlement for each Accounting Period shall be calculated on or before
the Settlement Date for such Accounting Period in accordance with the
illustration set forth in Schedule D attached hereto.  If the result of this calculation is
positive, such amount will be paid by the Company to the Reinsurer.  If the result of this calculation is
negative, such amount will be paid by the Reinsurer to the Company.

 

7.02 -                                                                  Reinsurer’s Statutory Profit: 
Reinsurer’s Statutory Profit shall equal the sum of (i) Section A
Reinsurance Premium, plus (ii) Section B Reinsurance Premium, plus (iii) interest
on the Coinsurance Reserves at the LCF interest rate, minus (iv) Section A
Covered Losses, minus (v) Section B Covered Losses, minus (vi) Expense
Allowances, minus (vii) the change in Coinsurance Reserves between the
last day of the immediately preceding Accounting Period, after any Partial
Recapture, and the last day of current Accounting Period, before any Partial
Recapture.

 

9

 

7.03 -                                                                  Reinsurer’s Net Profit: 
Reinsurer’s Net Profit shall equal the Reinsurer’s Statutory Profit
minus the Reinsurance Risk Charge.

 

7.04 -                                                                  Experience Refund:  If
the Reinsurer’s Net Profit for an Accounting Period is greater than zero (0) and
the Company is not, and was not, in violation of one or more of the Financial
Covenants at any time during that Accounting Period or any prior Accounting
Periods, an Experience Refund equal to: (i) the Reinsurer’s Net Profit on
the Subject Business for the Accounting Period; less (ii) the difference
between (a) the LCF on the last day of the immediately preceding
Accounting Period, accumulated with interest, and (b) the lesser of the
Coinsurance Reserves and the Target LCF listed on Schedule C1 attached hereto
on the last day of the current Accounting Period shall be paid by the Reinsurer
to the Company as part of the settlement for that Accounting Period in
accordance with Schedule D, if such amount is positive.

 

If the Reinsurer’s Net Profit for an Accounting Period is greater than
zero (0) and the Company is or was in violation of one or more of the
Financial Covenants at any time during that Accounting Period or any prior
Accounting Periods, an Experience Refund equal to (i) the Reinsurer’s Net
Profit on the Subject Business for the Accounting Period; less (ii) the
difference between (a) the LCF on the last day of the immediately
preceding Accounting Period, accumulated with interest and (b) the lesser
of the Coinsurance Reserves and the Alternative Target LCF listed on Schedule
C2 attached hereto on the last day of the current Accounting Period shall be
paid by the Reinsurer to the Company as part of the settlement for that
Accounting Period in accordance with Schedule D, if such amount is positive.

 

At the sole option of the Reinsurer, the Experience Refund may be
recalculated at the end of any Accounting Period to include Experience Refunds
for all Accounting Periods in the current calendar year.  For the avoidance of doubt, this may require
the Company to return (a portion of) previous Experience Refunds to pay for
current period losses.  Upon any such
recalculation of the Experience Refund, the Net Cash Settlement will be
recalculated accordingly and the parties agree to immediately pay each other
amounts due based upon such recalculation.

 

Upon repayment in full of LCF, the Experience Refund for each reporting
period thereafter shall be equal to 50% of the Reinsurer’s Net Profit.

 

10

 

ARTICLE VIII: 
FINANCIAL COVENANTS

 

8.01  -                                                               Non-Compliance with Financial Covenants:  The
Company shall notify the Reinsurer within five (5) Business Days of any failure
by the Company to comply with one or more of the Financial Covenants.

 

8.02  -                                                               Financial Covenants:  The
Financial Covenants are:

 

(a)                                  the Company shall maintain Risk Based
Capital, as measured by the formula prescribed by the insurance department of
the Company’s state of domicile, of no less than one-hundred twenty-five
percent (125%) of the Company Action Level;

 

(b)                                 the Company shall maintain Total Surplus of
not less than one-hundred-twenty-five-million dollars ($125,000,000);

 

(c)                                  there shall be no Change of Control of the
Company, where “Change of Control” is signaled by the requirement that the
Company, or the parent of the Company, file such change with any insurance
department or with the Securities Exchange Commission;

 

(d)                                 there shall be no Material Change (as defined
in Section 8.04) in the overall credit quality of the Company’s investment
portfolio from the Effective Date;

 

(e)                                  the
insurance financial strength rating of the Company as assigned by A.M.
Best Company shall not be less than “B++”; and

 

(f)                                    the Financial Leverage Ratio (as defined in Section 8.03)
of the Company and its corporate parent combined shall not be greater than
sixty percent (60%).

 

(g)                                 The Company will be responsible for
determining credited rates and non-guaranteed elements for the Subject Business
and will only vary such items in a manner consistent with its documented
procedures in effect on the Effective Date and historical practice.  The weighted average yield on the Company’s
invested assets shall not fall below the weighted average crediting rate on the
Subject Business plus one and 50/100 percent (1.50%), at the end of two
consecutive Accounting Periods.

 

8.03  -                                                               Financial Leverage Ratio:  The
Financial Leverage Ratio at any time shall be determined as follows, with the
result expressed as a percentage:

 

11

 

(a)                                  the sum of (i) the principal amount of
senior and subordinated indebtedness outstanding at American Equity Investment
Life Holding Company, and (ii) the principal amount of senior and
subordinated indebtedness outstanding at American Equity Investment Service
Company, excluding any such indebtedness that may be included in (a)(i) herein;

 

divided by

 

(b)                                 the sum of (i) the Company’s Total
Capital and Surplus, (ii) the Company’s Asset Valuation Reserve, and (iii) the
Company’s Interest Maintenance Reserve, where items (i), (ii) and (iii) are
the respective amounts as reported on the Company’s most recent certified
statutory financial statements.

 

8.04  -                                                               Material Change:  A
material change in the overall credit quality of the Company’s investment
portfolio shall have occurred if the credit rating from Standard &
Poor’s, Moody’s or Fitch for more than 20% of the securities in the Company’s
investment portfolio is below investment grade quality.

 

ARTICLE IX:  REPORTS AND
REMITTANCES

 

9.01  -                                                               Company Reports:  The
Company shall provide to the Reinsurer, no less than three (3) Business
Days prior to each Settlement Date, all information and data required by the
Reinsurer to fulfill its obligations and rights under this Agreement and to
satisfy its legal reporting requirements. 
A suggested format for such reporting is attached hereto as Schedule
D.  The Company shall also furnish to the
Reinsurer, on a quarterly basis, a copy of its certified statutory financial
statements at the time such statements are submitted by the Company to the
regulatory authority in its state of domicile, and shall furnish the Reinsurer
with a statement at the end of each Accounting Period that demonstrates the
Company’s compliance with the Financial Covenants.

 

9.02  -                                                               Accounting Period: 
“Accounting Period” shall mean each calendar quarter during the Term of
this Agreement.  In the event the
Recapture Date occurs at any time other than at the end of a calendar quarter,
the last Accounting Period shall be the period from the beginning of that
calendar quarter to the Recapture Date, both dates inclusive.

 

9.03  -                                                               Settlement Dates:  The
Settlement Date for each Accounting Period shall be the  fifteenth (15th ) Business Day after the end of that
Accounting Period.

 

9.04  -                                                               Business Day: 
“Business Day” shall mean any day other than a Saturday, a Sunday, or a
day on which commercial banks in, the State of Florida or the State of Iowa are
authorized by law or executive order to close.

 

12

 

ARTICLE X:  NET RETAINED LINES

 

10.01 -                                                            Application of Other Reinsurance Proceeds:  This
Agreement applies only to that portion of insurance or reinsurance which, after
the application of all reinsurance other than the reinsurance hereunder, the
Company retains net for its own account. 
In calculating the amount of loss hereunder for which the Company shall
be reimbursed, only the loss with respect to such retained portion shall be
included.

 

10.02 -                                                            Collection of Other Reinsurance Proceeds:  The
amount of the Reinsurer’s liability hereunder shall not be increased by reason
of the Company’s inability to collect from any other reinsurers, whether
specific or general, any amounts which may have become due from them, whether
such inability arises from the insolvency of such other reinsurers, or
otherwise, or whether such other reinsurance remains in force during the term
of this Agreement.

 

10.03 -                                                            Other Reinsurance:  In
order to provide that the Reinsurer’s liability under this Agreement shall not
be increased in any calendar year by a change in reinsurance ceded or
recoverable by the Company, the reinsurance arrangements, including treaties,
facultative certificates and interpretations with respect to obligations
thereunder, which were in effect on the Effective Date are deemed to continue
in effect for purposes of all computations hereunder, whether or not such other
reinsurance actually remains in force during the term of this Agreement.

 

ARTICLE XI:  EXCLUSIONS

 

11.01 -                                                            Extracontractual Damages and Loss Adjustment
Expenses:  This Agreement does not cover
extracontractual damages or extracontractual liability resulting from fraud,
oppression, bad faith, strict liability, or negligent, reckless or intentional
wrongs, or otherwise, on the part of the Company or its directors, officers,
employees and agents.  The following
types of damages are examples of damages excluded under this Agreement for the
conduct described above:  actual damages,
damages for emotional distress, punitive or exemplary damages, statutory
penalties, and attorneys fees or legal expenses incurred in the defense of such
claims.  The excluded loss adjustment
expenses include all payments of fees and expenses associated with
investigation, litigation (including without limitation reasonable attorneys’
fees) and settlement of claims, as distinguished from the amount of a
claimant’s recovery from the Company under such claimant’s contract.

 

The Company agrees to defend and hold harmless the Reinsurer from and
against any and all extra contractual obligations and/or loss adjustment 

 

13

 

expenses whatsoever incurred by the Reinsurer arising out of, relating
to or in connection with this Agreement. 
This paragraph shall survive termination of this Agreement.

 

11.02 -                                                            Insolvency Funds:  The
Reinsurer shall not be obligated to pay to the Company any share of any
liability of the Company arising, by contract, operation of law, or otherwise,
from its participation or membership, whether voluntary or involuntary, in any
insolvency fund or from reimbursement of any person for any such
liability.  “Insolvency Fund” includes
any guaranty or insolvency fund, plan, pool, association, or other arrangement
howsoever denominated, established or governed, which provides for any
assessment of or payment or assumption by any person or part of all of any
claim, debt, charge, fee or other obligation of any insurer, or its successors
or assigns which has been declared to be insolvent, or which is otherwise
deemed unable to meet any claim, debt, charge, fee or other obligation in whole
or in part.

 

11.03 -                                                            Dividends:  The Reinsurer shall not
participate in the determination of, nor reimburse the Company for, any
policyholder or other dividends paid by the Company.

 

ARTICLE XII:  INSOLVENCY

 

12.01 -                                                            Reinsurer’s Obligation:  In
the event of the insolvency of the Company, the reinsurance afforded by this
Agreement shall be payable by the Reinsurer on the basis of the liability of
the Company under the Subject Business, without diminution because of such
insolvency, directly to the Company or its liquidator, receiver, conservator,
or statutory successor.

 

12.02 -                                                            Reinsurer’s Notice and Defense of Claims:  The
Reinsurer shall be given written notice of the pendency of each claim or loss
which may involve the reinsurance afforded by this Agreement within a
reasonable time after such claim or loss is filed in the insolvency
proceedings.  The Reinsurer shall have
the right to investigate each such claim or loss and interpose at its own expense,
in the proceeding where the claim or loss is to be adjudicated, any defense
which it may deem available to the Company or its liquidator, receiver,
conservator, or statutory successor.  If
more than one reinsurer is involved, such reinsurers may designate one
reinsurer to act for all.

 

12.03 -                                                            Defense Expense:  The
expense thus incurred by the Reinsurer shall be chargeable, subject to court
approval, against the insolvent Company as part of the expense of liquidation
to the extent of a proportionate share of the benefit which may accrue to the
Company solely as a result of the defense undertaken by the Reinsurer.

 

14

 

12.04 -                                                            Offset:  Any debts or credits,
liquidated or unliquidated, in favor of or against either party on the date of
the receivership or liquidation order (except where the obligation was
purchased by or transferred to be used as an offset) are deemed mutual debts or
credits and shall be set off with the balance only to be allowed or paid.  Although such claim on the part of either
party may be unliquidated or undetermined in amount on the date of the entry of
the receivership or liquidation order, such claim will be regarded as being in
existence as of such date and any credits or claims then in existence and held
by the other party may be offset against it.

 

12.05 -                                                            Rights of Parties: 
Nothing hereinabove set forth in this Article shall in any way
change the relationship or status of the parties hereto, nor enlarge the
obligations of any party to any other except as specifically hereinabove
provided, to wit, to pay the statutory successor on the basis of the amount of
liability determined in the liquidation or receivership proceeding, rather than
on the basis of the actual amount of loss (dividends) paid by the liquidator,
receiver, conservator, or statutory successor to allowed claimants.  Nor, except as hereinabove specifically
provided, shall anything in this Article in any manner create any
obligation or establish any right against the Reinsurer in favor of any third
parties or any other persons not parties to this Agreement.

 

ARTICLE XIII:  ARBITRATION

 

13.01 -                                                            Resolution of Disputes:  As a
condition precedent to any right arising under this Agreement, any dispute
between the Company and the Reinsurer arising out of the provisions of this
Agreement, or concerning its interpretation or validity, whether arising before
or after termination of this Agreement, shall be submitted to arbitration in
the manner set forth in this Article. 
Either party may initiate arbitration of any dispute arising out of the
provisions of this Agreement by giving written notice to the other party, by
registered or certified mail, return receipt requested, of its intention to
arbitrate and of its appointment of an arbitrator in accordance with Section 13.03.

 

13.02 -                                                            Composition of Panel: 
Unless the parties agree upon a single arbitrator within fifteen (15)
days after the receipt of a notice of intention to arbitrate, all disputes
shall be submitted to an arbitration panel composed of two arbitrators and an
umpire, chosen in accordance with Section 13.03 and Section 13.04.

 

13.03 -                                                            Appointment of Arbitrators:  The
members of the arbitration panel shall be chosen from disinterested persons
knowledgeable in the life insurance and life reinsurance business.  The party requesting arbitration (hereinafter
referred to as the “claimant”) shall appoint an arbitrator and give written notice
thereof, by registered or certified mail, return receipt requested, to the
other party (hereinafter referred to as the “respondent”) together with its 

 

15

 

notice of intention to arbitrate.  Unless a single arbitrator is agreed upon by
the parties within fifteen (15) days after the receipt of the notice of
intention to arbitrate, the respondent shall, within thirty (30) days after
receiving such notice, also appoint an arbitrator and notify the claimant
thereof in a like manner.  Before
instituting a hearing, the two arbitrators so appointed shall choose an
umpire.  If, within twenty (20) days
after they are both appointed, the arbitrators fail to agree upon the
appointment of an umpire, the umpire shall be selected using the ARIAS-US
Umpire Appointment Procedure.

 

13.04 -                                                            Failure of Party to Appoint Arbitrator:   If
either party fails to name its arbitrator as described in this Article, the
other party may appoint the second arbitrator.

 

13.05 -                                                            Choice of Law and Forum:  Any
arbitration instituted pursuant to this Article shall be held in Orlando,
Florida, or in a location to be mutually agreed upon by the Company and the
Reinsurer and the laws of the State of Iowa, without regard to its conflict of
laws rules, shall govern the interpretation and application of this Agreement.  Notwithstanding the foregoing, the rights and
procedures applicable to any arbitration commenced under this Article shall
be governed by the Federal Arbitration Act rather than any state arbitration
act.

 

13.06 -                                                            Submission of Dispute to Panel: 
Unless otherwise extended by the arbitration panel, or agreed to by the
parties, each party shall submit its case to the panel within thirty (30) days
after the selection of an umpire.

 

13.07 -                                                            Procedure Governing Arbitration:  All
proceedings before the panel shall be informal and the panel shall not be bound
by the formal rules of evidence. 
The panel shall have the power to fix all procedural rules relating
to the arbitration proceeding.  In
reaching any decision, the panel shall give due consideration to the customs
and usage of the insurance and reinsurance business.  The panel of arbitration will view this
Agreement as an honorable engagement between the parties.

 

13.08 -                                                            Arbitration Award:  The
arbitration panel shall render its decision within sixty (60) days after
termination of the proceeding, which decision shall be in writing, stating the
reasons therefor.  The decision of the
majority of the panel shall be final and binding on the parties to the
proceeding.  Either party to the
arbitration may petition any court having competent jurisdiction to reduce the
decision to judgment.

 

13.09 -                                                            Cost of Arbitration: 
Unless otherwise allocated by the panel, each party shall bear the
expense of its own arbitrator and its own witnesses and shall jointly and
equally bear with the other parties the expense of the umpire and the
arbitration.

 

16

 

13.10 -                                                            Limit of Jurisdiction:  The
arbitration panel does not have the jurisdiction to authorize any punitive
damage awards between the parties.

 

13.11 -                                                            Survival:  This Article will survive
termination of this Agreement.

 

ARTICLE XIV:  AGREEMENT,
AMENDMENTS AND MERGER

 

14.01 -                                                            Agreement:  This Agreement states the
agreement made between the Company and the Reinsurer effective 10:59 p.m.,
Central Standard Time, December 31, 2008. 
This Agreement supersedes all prior understandings and agreements of the
parties.

 

14.02 -                                                            Amendments:  This Agreement may be amended
only by mutual consent of the parties expressed in a written amendment executed
by the parties with the same formalities as this Agreement, and such written
amendment shall be deemed to be an integral part of this Agreement and binding
on the parties hereto.

 

14.03 -                                                            Merger Clause:  The
parties hereto acknowledge that they have read this Agreement, understand it,
and agree to be bound by its terms and conditions.  Further, the parties hereto agree that this
Agreement is the complete and exclusive statement of the Agreement between the
parties, superseding all proposals or prior agreements, oral or written, and
all other communications between the parties relating to the subject matter
hereof.

 

ARTICLE XV:  MISCELLANEOUS

 

15.01 -                                                            Access to Records:  The
Reinsurer, or its duly authorized representatives, shall have the right to
examine, at any reasonable time, all papers, books, accounts, documents and
other records of the Company or any third parties providing services relating
to the Subject Business.  The Company
will cooperate with, and facilitate, or shall cause any relevant third parties
to cooperate and facilitate, any such inspection, and upon request of the
Reinsurer shall make available to the Reinsurer such officers and employees of
the Company, or cause any relevant third parties to make available to the
Reinsurer such officers and employees, as the Reinsurer may reasonably request
to provide information concerning the Subject Business.  Upon request, the Company shall supply the
Reinsurer, at the Reinsurer’s expense, with copies of the whole or any part of
such papers, books, accounts, documents and other records relating to the
Subject Business.  The Reinsurer’s right
of inspection under this Section 15.01 shall continue to exist after
termination of this Agreement as long as one of the parties hereto has a claim
against the other arising from this Agreement.

 

17

 

15.02 -                                                                                                            Counterparts:  This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

 

15.03 -                                                            Currency:  All payments hereunder shall
be made in United States dollars.  All
monetary amounts herein are in United States dollars.  All reports and accounts hereunder shall be
rendered in United States dollars.

 

15.04 -                                                            Disclosures and Approvals:  The
Company represents and warrants, with respect to this Agreement and the
transactions hereunder and with respect to any insurance or reinsurance written
or assumed by the Company which is covered by this Agreement and all transactions
thereunder, that all disclosures and approvals which are necessary or
appropriate under any law or regulation have been made or obtained, or will be
made or obtained in a timely manner.

 

15.05  -                                                         Errors and Omissions: 
Unintentional or inadvertent errors, omissions, oversights, delays or
misunderstandings (collectively “Error”) in the administration of this
Agreement of any nature made by either party shall neither increase nor reduce
the liability of either party from what that liability would have been had no
such Error taken place.  Upon discovery,
the party committing an Error shall correct such Error retroactively to the
time such Error occurred, and advise the other party thereof as soon as
possible.  If it is not possible to
restore each party to the position it would have occupied but for the Error,
the parties will endeavor in good faith to promptly resolve the situation in a
manner that most closely approximates the intent of the parties as evidenced by
this Agreement.  Any resolution made to correct
such an Error will not set a precedent for a similar subsequent Error.  The provisions of this Article shall not
relieve either party of its obligation to perform within the time standards
described in this Agreement or as otherwise mutually agreed.  The provisions of this Article do not
apply to the administration of the insurance provided by the Company or any
other errors or omissions committed by the Company with regards to a Subject
Business.  The Reinsurer will not provide
reinsurance for policies that do not satisfy the parameters of this Agreement.

 

15.06 -                                                            Parties to this Agreement:  This
Agreement is a reinsurance agreement solely between the Company and the
Reinsurer, and performance of the obligations of each party under this
Agreement will be rendered solely to the other party.  In no instance will any party other than the
Company and the Reinsurer have any rights under this Agreement, and the Company
will be and shall remain the only party hereunder that is liable to any
contract holder or beneficiary of any Subject Business contract.  Reinsurance under this Agreement shall not
create any right or legal relationship between the Reinsurer and any other
person, for example, any insured, policyholder, agent, beneficiary, or other
reinsurer.  The Company agrees that it
shall not 

 

18

 

make the Reinsurer a party to any litigation between any such third
party and the Company.

 

This Agreement shall be binding upon all successors, assignees and
transferees of the parties to this Agreement, provided, however, that neither
this Agreement nor any rights or obligations under this Agreement may be
assigned or transferred by either party without the prior written consent of
the other party.  The provisions of this
section are not intended to preclude the Reinsurer from retroceding any portion
of its liability hereunder.

 

15.07 -                                                            Reliance on Information Supplied by the
Company:  The Company acknowledges that, at the
Reinsurer’s request, it has provided the Reinsurer, prior to execution of this
Agreement by the parties, with the information described in Schedule D attached
hereto and incorporated herein (hereinafter, the “Company Information”).  The Company represents that any assumptions
the Company made in preparing the Company Information were based upon informed
judgment and are consistent with sound actuarial principles.  The Company represents that all factual
information contained in the Company Information was, as of the date provided,
complete and accurate in all material respects to the best of the Company’s
knowledge and belief.  The Reinsurer has
relied on Company Information and the foregoing representations in entering
into this Agreement.

 

15.08 -                                                            Right of Offset:  Both
the Company and the Reinsurer shall have, and may exercise at any time, the
right to offset any balance or balances due the other.  Such offset may include balances due under
this Agreement, regardless of whether such balances are in respect of premiums,
or losses or otherwise, and regardless of the capacity of any party, whether as
reinsurer or reinsured or otherwise, under the various agreements
involved.  The right of offset will not
be affected or diminished because of the insolvency of either party.

 

15.09 -                                                            Taxes:  The Company shall be liable
for all taxes, except income and profit taxes of the Reinsurer, on amounts paid
to the Reinsurer under the terms of this Agreement, and shall indemnify and
hold the Reinsurer harmless for any taxes which the Reinsurer may become
obligated to pay on the Company’s behalf.

 

15.10 -                                                            Subrogation:  The Reinsurer shall be
credited with the Reinsurer’s share of subrogation (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost, excluding
salaries of officials and employees of the Company and sums paid to attorneys
as retainer, of obtaining such reimbursement or making such recovery) on
account of losses.  The Company hereby
agrees to enforce its rights to subrogation relating to any expenses if
requested to do so by the Reinsurer (at the expense of the Company) and to the
extent such enforcement is consistent with the Company’s past practices, and to
prosecute all claims arising out of such rights.

 

19

 

15.11 -                                                            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.

 

15.12 -                                                            Survival: The representations, warranties, 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.

 

15.13 -                                                            Utmost Good Faith:  The
parties agree that this Agreement is entered into with the understanding that
the principles of utmost good faith traditional to reinsurance shall be adhered
to in the formation and performance of this Agreement and shall govern the
parties’ rights and obligations and all matters with respect to this Agreement.
This Agreement is entered into in reliance on the utmost good faith of the
parties including, but not limited to, their representations, warranties and
disclosures.

 

15.14 -                                                            Notices:  Any notice or other
communication which is required or permitted to be delivered to any party
hereunder shall be in writing and deemed delivered if sent by
government-sponsored mail; an internationally-recognized overnight carrier with
confirmation receipt of delivery; certified mail, return receipt requested; or
facsimile with confirmation receipt of successful and complete transmission
addressed as follows:

 

If to the Company:

 

American Equity Investment Life Insurance Company

5000 Westown Parkway

West Des Moines, Iowa 50266

Attn:     John Matovina, Chief Financial Officer

Fax:     (515) 221-9989

 

If to the Reinsurer:

 

Hannover Life Reassurance Company of America

800 North Magnolia Avenue, Suite 1400

Orlando, Florida 32803

Attn:     [President]

Fax:      (407) 398-1071

 

ARTICLE XVI:  DAC TAX

 

16.01 -                                                            DAC Tax:  The parties to this Agreement
agree to the following provisions pursuant to Section 1.848-2(g)(8) of
the Income Tax Regulations issued under Section 848 of the Internal
Revenue Code of 1986, as amended (the “Code”):

 

20

 

A.            The
terms “Net
Positive Consideration,” “Specified Policy Acquisition Expenses” and “General
Deductions Limitation” used in this Article are defined by reference to
Regulation Section 1.848-2 and Code Section 848.

 

B.             The party with the
Net Positive Consideration for this Agreement for each taxable year will
capitalize Specified Policy Acquisition Expenses with respect to this Agreement
without regard to the General Deductions Limitation of Code Section 848(c)(1).

 

C.             Both parties agree
to exchange information pertaining to the amount of net consideration under
this Agreement each year, or as otherwise required by the Internal Revenue
Service, to ensure consistency.  The
method and timing of the exchange of such information shall be as follows:

 

1.           The Company will
submit a schedule to the Reinsurer by May 1st of each year with its calculation of the Net
Positive Consideration for the preceding calendar year.  This schedule of calculations will be
accompanied by a statement signed by an officer of the Company stating that the
Company will report such Net Positive Consideration in its income tax return
for the preceding calendar year.  The
Reinsurer may protest such calculation by providing an alternative calculation to
the Company in writing within thirty (30) days of the Reinsurer’s receipt of
the Company’s calculation.  If the
Reinsurer does not notify the Company within the required timeframe, the
Reinsurer will report the Net Positive Consideration as determined by the
Company in the Reinsurer’s income tax return for the preceding calendar year.

 

2.           If the Reinsurer
contests the Company’s calculation of Net Positive Consideration, the parties
will act in good faith to reach an agreement as to the correct amount within
thirty (30) days of the date the Reinsurer submits its alternative
calculation.  If the parties reach an
agreement on the amount of Net Positive Consideration, each party will report
the agreed upon amount in its income tax return for the preceding calendar
year.  If the parties are unable to reach
an agreement on the amount of Net Positive Consideration, then the dispute
shall be resolved pursuant to ARTICLE XIII of this Agreement.

 

D.            Both the Company and
the Reinsurer represent and warrant that they are subject to United States
taxation under either Subchapter L of Chapter 1 of the Code or Subpart F of Part III
of Subchapter N of Chapter 1 of the Code.

 

21

 

ARTICLE XVII:  REPRESENTATIONS,
WARRANTIES AND COVENANTS

 

17.01 -                                                            The Company’s Representations and Warranties:  The
Company represents and warrants to the Reinsurer, in addition to any other
representations and warranties set forth elsewhere in this Agreement, that:

 

A.                        The Company has (a) notified the
Company’s auditors of this Agreement and (b) notified the Company’s
domiciliary state regulator of the proposed transaction under this Agreement;
and

 

B.                          Except for the notice to the Company’s
domiciliary state regulator, there are no governmental or regulatory consents,
approvals or other authorizations necessary or required by law, regulation,
order, decree, judgment or otherwise to be obtained to consummate the
transactions contemplated by this Agreement; and

 

C.                          All of the contracts for the Subject Business
have been filed with and approved by the applicable regulatory authorities as
required by applicable law, rule or regulation; and except as set forth in
the Company’s Annual Statement and SEC filings, none of the contracts for the
Subject Business are the subject of any pending or, to the knowledge of the
Company, threatened litigation, arbitration, action, proceeding, rule, order or
decree the basis of which includes, but is not limited to, discriminatory
practices in the sales and/or rates for the contracts for the Subject Business. 
The Company further represents and warrants that the Reinsurer shall not be
held liable for any damages, claims, costs, expenses, or any other types of
losses that arise or result from any pending or, to the knowledge of the
Company, threatened litigation, arbitration, action, proceeding, rule, order or
decree including but not limited to the actions set forth in the Company’s
Annual Statement and SEC filings.

 

D.                         There is no fact or condition known to the
Company that has not been disclosed to the Reinsurer in writing that has had a
Material Adverse Effect or, to the knowledge of the Company, could reasonably
be expected to have a Material Adverse Effect; where “Material Adverse Effect”
shall mean a material adverse effect on the condition (financial or otherwise),
business, statutory reserves, assets of the Company, results of operation of
the Company or the contracts for the Subject Business as a whole, considering
each of them individually or in the aggregate and

 

E.                           No representation or warranty of the Company
contained in this Agreement or in any other writing to be furnished by the
Company pursuant hereto or previously furnished by the Company to the Reinsurer
in the course of its due diligence investigation contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact required to make the statements herein or therein not misleading; and

 

22

 

F.                           The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Iowa, and
has all licenses, permits or other authority necessary or required by
applicable law, rule or regulation to carry on all business activities
presently conducted by it, and the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by the Company have
been approved by all necessary corporate action on the part of the Company and
will not violate the articles of incorporation or bylaws of the Company or
conflict with or violate any provision of or result in the acceleration of any
indebtedness under or result in a breach under any other contract, agreement or
instrument to which the Company is a party or is subject to any judgment,
order, decree, law, ordinance, rule or regulation applicable to the
Company or its properties or assets; and

 

G.                          Reserves for the Subject Business are
adequate in the aggregate as of the Effective Date, using generally accepted
actuarial methods and assumptions consistently applied, and have been
calculated in accordance with statutory accounting practices; and

 

H.                         This Agreement and the agreements and
covenants herein of the Company constitute valid and binding obligations of the
Company enforceable against it in accordance with its terms, except as:

 

i.                              the enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors’ rights generally, and

 

ii.                           the availability of equitable remedies may be
limited by equitable principles of general applicability.

 

17.02 -                                                            The Company’s Covenants:  The
Company covenants to the Reinsurer and agrees as follows:

 

A.                                  The Company shall report to the Company’s
auditors and the Company’s domiciliary state regulator regarding this Agreement
each year for so long as this Agreement is in force.

 

B.                                    The Company shall request promptly any
consents, approvals or other authorizations, if necessary or required, with
respect to this Agreement and to pursue diligently such requests.

 

C.                                    The Company covenants that it shall not make
any material changes to the contracts for the Subject Business without the
prior written consent of the Reinsurer; provided, however, that prior
written notice to the Reinsurer but not consent of the Reinsurer will be required
for changes to the contracts that are required by the 

 

23

 

Company’s regulator or other governmental authority under applicable
laws or regulations.  Any contracts that are changed without prior written
consent of the Reinsurer shall continue to be reinsured under this
Agreement as if no change has occurred unless and until the Reinsurer consents
in writing to the changes.

 

D.                                   The Company warrants that it will not engage,
employ or otherwise support any non-contractual internal replacement programs
with respect to the contracts for the Subject Business covering more than 10%
of the account values of the Subject Business on the last day of the
immediately preceding Accounting Period without prior written approval of the
Reinsurer.  In such case where the
Reinsurer offers its approval, the Reinsurer will be granted the option by the
Company to continue coverage on any converted contracts, issued by such
replacement program, under the terms of this Agreement.

 

E.                                     The Company shall promptly notify the
Reinsurer of any material change in the methods and assumptions used to
calculate statutory reserves.

 

17.03 -                                                            Indemnification:  Each
party (the “Indemnifying Party”) agrees to indemnify and hold harmless the
other party (the “Indemnified Party”) from and against any and all losses,
damages, costs, expenses or liabilities suffered or incurred by the Indemnified
Party arising out of a breach or threatened breach by the Indemnifying Party of
the representations, warranties and covenants herein of the Indemnifying
Party.  The provisions of this Article shall
survive the closing of the transactions contemplated hereby as well as survive
beyond the termination of this Agreement.

 

24

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives,

 

In West Des Moines, Iowa, this 6th day of March, 2009

 

 

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY

 

 

	
  By:

  	
  /s/ John M. Matovina

  	
   

  	
  By:

  	
  /s/ Judith A. Naanep

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  John M. Matovina

  	
   

  	
  Name:

  	
  Judith A. Naanep

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  EVP & Chief
  Financial Officer

  	
   

  	
  Title:

  	
  VP, Corporate Actuary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  And in Orlando, Florida this 6th day of March, 2009

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HANNOVER LIFE REASSURANCE COMPANY OF AMERICA

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Gary L. Gray

  	
   

  	
  By:

  	
  /s/ Jeffrey R. Burt

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Gary L. Gray

  	
   

  	
  Name:

  	
    Jeffrey R. Burt

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
  Title:

  	
    VP

  

 

25

 

SCHEDULE A
-

SUBJECT BUSINESS CONTRACTS
(TYPES)

 

Section A Covered Forms

 

Fixed Annuities issued in Calendar Years 2003 and 2004

 

	
  FPDA-0

  	
   

  	
  FPDA-1

  	
   

  	
  FPDA-2

  
	
  FPDA2-2001

  	
   

  	
  FPDA-2Plus

  	
   

  	
  FPDA-3

  
	
  FPDA-4

  	
   

  	
  FPDA-5

  	
   

  	
  FPDA-5Plus

  
	
  FPDA-7

  	
   

  	
  FPDA-7 2.25

  	
   

  	
  FPDA-8

  
	
  FPDA8 2.25

  	
   

  	
  SPDA-1

  	
   

  	
  SPDA-2

  
	
  Super-7

  	
   

  	
   

  	
   

  	
   

  

 

Section B Covered Forms

 

Fixed Annuities issued in Calendar Years 2003 and 2004

 

	
  FPDA-0

  	
   

  	
  FPDA-1

  	
   

  	
  FPDA-2

  
	
  FPDA2-2001

  	
   

  	
  FPDA-2Plus

  	
   

  	
  FPDA-3

  
	
  FPDA-4

  	
   

  	
  FPDA-5

  	
   

  	
  FPDA-5Plus

  
	
  FPDA-7

  	
   

  	
  FPDA-7 2.25

  	
   

  	
  FPDA-8

  
	
  FPDA8 2.25

  	
   

  	
  SPDA-1

  	
   

  	
  SPDA-2

  
	
  Super-7

  	
   

  	
   

  	
   

  	
   

  

 

Indexed Annuities issued in Calendar Years 2003 and 2004

 

	
  Bravo

  	
   

  	
  I-2000

  	
   

  	
  I-2001

  
	
  I-2002

  	
   

  	
  Index-1-05

  	
   

  	
  Index-15

  
	
  Index-17

  	
   

  	
  Index-18

  	
   

  	
  Index-19

  
	
  Index-22

  	
   

  	
  Index-23

  	
   

  	
  Index-24

  
	
  Index-25

  	
   

  	
  Index-5

  	
   

  	
   

  

 

26

 

SCHEDULE B

RATES BY AGE (NEAREST BIRTHDAY)

 

YRT Base Rates by Age Nearest Birthday

 

Table Rates are quarterly amounts payable (“QRT” = Quarterly Renewable
Term) per  net amount at risk

 

	
  Age

  	
   

  	
  Quarterly

  Rate (ANB)

  	
   

  
	
  0

  	
   

  	
  0.018713

  	
   

  
	
  1

  	
   

  	
  0.001444

  	
   

  
	
  2

  	
   

  	
  0.001031

  	
   

  
	
  3

  	
   

  	
  0.000750

  	
   

  
	
  4

  	
   

  	
  0.000619

  	
   

  
	
  5

  	
   

  	
  0.000544

  	
   

  
	
  6

  	
   

  	
  0.000506

  	
   

  
	
  7

  	
   

  	
  0.000469

  	
   

  
	
  8

  	
   

  	
  0.000413

  	
   

  
	
  9

  	
   

  	
  0.000356

  	
   

  
	
  10

  	
   

  	
  0.000281

  	
   

  
	
  11

  	
   

  	
  0.000300

  	
   

  
	
  12

  	
   

  	
  0.000450

  	
   

  
	
  13

  	
   

  	
  0.000788

  	
   

  
	
  14

  	
   

  	
  0.001219

  	
   

  
	
  15

  	
   

  	
  0.001706

  	
   

  
	
  16

  	
   

  	
  0.002175

  	
   

  
	
  17

  	
   

  	
  0.002531

  	
   

  
	
  18

  	
   

  	
  0.002756

  	
   

  
	
  19

  	
   

  	
  0.002850

  	
   

  
	
  20

  	
   

  	
  0.002925

  	
   

  
	
  21

  	
   

  	
  0.003056

  	
   

  
	
  22

  	
   

  	
  0.003131

  	
   

  
	
  23

  	
   

  	
  0.003169

  	
   

  
	
  24

  	
   

  	
  0.003244

  	
   

  
	
  25

  	
   

  	
  0.003263

  	
   

  
	
  26

  	
   

  	
  0.003300

  	
   

  
	
  27

  	
   

  	
  0.003375

  	
   

  
	
  28

  	
   

  	
  0.003488

  	
   

  
	
  29

  	
   

  	
  0.003656

  	
   

  
	
  30

  	
   

  	
  0.003844

  	
   

  
	
  31

  	
   

  	
  0.004013

  	
   

  
	
  32

  	
   

  	
  0.004181

  	
   

  
	
  33

  	
   

  	
  0.004388

  	
   

  
	
  34

  	
   

  	
  0.004594

  	
   

  
	
  35

  	
   

  	
  0.004856

  	
   

  
	
  36

  	
   

  	
  0.005100

  	
   

  
	
  37

  	
   

  	
  0.005325

  	
   

  
	
  38

  	
   

  	
  0.005531

  	
   

  
	
  39

  	
   

  	
  0.005681

  	
   

  
	
  40

  	
   

  	
  0.005850

  	
   

  
	
  41

  	
   

  	
  0.006075

  	
   

  
	
  42

  	
   

  	
  0.006394

  	
   

  
	
  43

  	
   

  	
  0.006825

  	
   

  
	
  44

  	
   

  	
  0.007350

  	
   

  
	
  45

  	
   

  	
  0.007950

  	
   

  
	
  46

  	
   

  	
  0.008606

  	
   

  
	
  47

  	
   

  	
  0.009300

  	
   

  
	
  48

  	
   

  	
  0.009975

  	
   

  
	
  49

  	
   

  	
  0.010706

  	
   

  
	
  50

  	
   

  	
  0.011494

  	
   

  
	
  51

  	
   

  	
  0.012394

  	
   

  
	
  52

  	
   

  	
  0.013519

  	
   

  
	
  53

  	
   

  	
  0.014888

  	
   

  
	
  54

  	
   

  	
  0.016463

  	
   

  
	
  55

  	
   

  	
  0.018225

  	
   

  
	
  56

  	
   

  	
  0.020081

  	
   

  
	
  57

  	
   

  	
  0.022088

  	
   

  
	
  58

  	
   

  	
  0.024244

  	
   

  
	
  59

  	
   

  	
  0.026588

  	
   

  
	
  60

  	
   

  	
  0.029081

  	
   

  
	
  61

  	
   

  	
  0.035681

  	
   

  
	
  62

  	
   

  	
  0.034594

  	
   

  
	
  63

  	
   

  	
  0.037613

  	
   

  
	
  64

  	
   

  	
  0.040856

  	
   

  
	
  65

  	
   

  	
  0.044269

  	
   

  
	
  66

  	
   

  	
  0.047944

  	
   

  
	
  67

  	
   

  	
  0.051956

  	
   

  
	
  68

  	
   

  	
  0.056381

  	
   

  
	
  69

  	
   

  	
  0.061219

  	
   

  
	
  70

  	
   

  	
  0.066431

  	
   

  
	
  71

  	
   

  	
  0.071981

  	
   

  
	
  72

  	
   

  	
  0.077981

  	
   

  
	
  73

  	
   

  	
  0.084431

  	
   

  
	
  74

  	
   

  	
  0.091425

  	
   

  
	
  75

  	
   

  	
  0.099000

  	
   

  
	
  76

  	
   

  	
  0.107288

  	
   

  
	
  77

  	
   

  	
  0.116381

  	
   

  
	
  78

  	
   

  	
  0.125794

  	
   

  
	
  79

  	
   

  	
  0.137419

  	
   

  
	
  80

  	
   

  	
  0.149775

  	
   

  
	
  81

  	
   

  	
  0.163650

  	
   

  
	
  82

  	
   

  	
  0.179363

  	
   

  
	
  83

  	
   

  	
  0.217106

  	
   

  
	
  84

  	
   

  	
  0.233681

  	
   

  
	
  85

  	
   

  	
  0.251606

  	
   

  
	
  86

  	
   

  	
  0.271481

  	
   

  
	
  87

  	
   

  	
  0.291638

  	
   

  
	
  88

  	
   

  	
  0.311588

  	
   

  
	
  89

  	
   

  	
  0.331875

  	
   

  
	
  90

  	
   

  	
  0.353400

  	
   

  
	
  91

  	
   

  	
  0.377344

  	
   

  
	
  92

  	
   

  	
  0.403913

  	
   

  
	
  93

  	
   

  	
  0.432750

  	
   

  
	
  94

  	
   

  	
  0.462019

  	
   

  
	
  95

  	
   

  	
  0.490294

  	
   

  
	
  96

  	
   

  	
  0.514463

  	
   

  
	
  97

  	
   

  	
  0.537263

  	
   

  
	
  98

  	
   

  	
  0.558694

  	
   

  
	
  99

  	
   

  	
  0.578756

  	
   

  
	
  100

  	
   

  	
  0.597469

  	
   

  
	
  101

  	
   

  	
  0.614850

  	
   

  
	
  102

  	
   

  	
  0.625000

  	
   

  

 

27

 

Schedule C-1

Target LCF
Balance

 

	
   

  	
   

  	
   

  	
   

  
	
  Interest rate:

  	
   

  	
  6.40%

  	
   

  
	
  # periods:

  	
   

  	
  20

  	
   

  
	
  LCF Adjustment:

  	
   

  	
  $1,758,238.58

  	
   

  

 

	
  Quarter

  	
   

  	
  Interest

  	
   

  	
  Target LCF

  	
   

  
	
  12/31/2008

  	
   

  	
   

  	
   

  	
  30,000,000.00

  	
   

  
	
  3/31/2009

  	
   

  	
  468,892.02

  	
   

  	
  28,710,653.44

  	
   

  
	
  6/30/2009

  	
   

  	
  448,739.88

  	
   

  	
  27,401,154.74

  	
   

  
	
  9/30/2009

  	
   

  	
  428,272.76

  	
   

  	
  26,071,188.92

  	
   

  
	
  12/31/2009

  	
   

  	
  407,485.75

  	
   

  	
  24,720,436.09

  	
   

  
	
  3/31/2010

  	
   

  	
  386,373.84

  	
   

  	
  23,348,571.35

  	
   

  
	
  6/30/2010

  	
   

  	
  364,931.96

  	
   

  	
  21,955,264.73

  	
   

  
	
  9/30/2010

  	
   

  	
  343,154.95

  	
   

  	
  20,540,181.10

  	
   

  
	
  12/31/2010

  	
   

  	
  321,037.57

  	
   

  	
  19,102,980.09

  	
   

  
	
  3/31/2011

  	
   

  	
  298,574.50

  	
   

  	
  17,643,316.01

  	
   

  
	
  6/30/2011

  	
   

  	
  275,760.34

  	
   

  	
  16,160,837.76

  	
   

  
	
  9/30/2011

  	
   

  	
  252,589.60

  	
   

  	
  14,655,188.78

  	
   

  
	
  12/31/2011

  	
   

  	
  229,056.70

  	
   

  	
  13,126,006.90

  	
   

  
	
  3/31/2012

  	
   

  	
  205,156.00

  	
   

  	
  11,572,924.32

  	
   

  
	
  6/30/2012

  	
   

  	
  180,881.73

  	
   

  	
  9,995,567.47

  	
   

  
	
  9/30/2012

  	
   

  	
  156,228.06

  	
   

  	
  8,393,556.95

  	
   

  
	
  12/31/2012

  	
   

  	
  131,189.06

  	
   

  	
  6,766,507.43

  	
   

  
	
  3/31/2013

  	
   

  	
  105,758.71

  	
   

  	
  5,114,027.57

  	
   

  
	
  6/30/2013

  	
   

  	
  79,930.89

  	
   

  	
  3,435,719.88

  	
   

  
	
  9/30/2013

  	
   

  	
  53,699.39

  	
   

  	
  1,731,180.69

  	
   

  
	
  12/31/2013

  	
   

  	
  27,057.89

  	
   

  	
  0.00

  	
   

  

 

Schedule C-2

Alternative Target
LCF Balance

 

	
  Interest rate:

  	
   

  	
  6.40%

  	
   

  
	
  # periods:

  	
   

  	
  12

  	
   

  
	
  LCF Adjustment:

  	
   

  	
  $2,761,200.46 

  	
   

  

 

	
  Quarter

  	
   

  	
  Interest

  	
   

  	
  Target LCF

  	
   

  
	
  12/31/2008

  	
   

  	
   

  	
   

  	
  30,000,000.00

  	
   

  
	
  3/31/2009

  	
   

  	
  468,892.02

  	
   

  	
  27,707,691.56

  	
   

  
	
  6/30/2009

  	
   

  	
  433,063.85

  	
   

  	
  25,379,554.95

  	
   

  
	
  9/30/2009

  	
   

  	
  396,675.69

  	
   

  	
  23,015,030.19

  	
   

  
	
  12/31/2009

  	
   

  	
  359,718.80

  	
   

  	
  20,613,548.53

  	
   

  
	
  3/31/2010

  	
   

  	
  322,184.28

  	
   

  	
  18,174,532.35

  	
   

  
	
  6/30/2010

  	
   

  	
  284,063.11

  	
   

  	
  15,697,395.00

  	
   

  
	
  9/30/2010

  	
   

  	
  245,346.11

  	
   

  	
  13,181,540.65

  	
   

  
	
  12/31/2010

  	
   

  	
  206,023.97

  	
   

  	
  10,626,364.16

  	
   

  
	
  3/31/2011

  	
   

  	
  166,087.25

  	
   

  	
  8,031,250.95

  	
   

  
	
  6/30/2011

  	
   

  	
  125,526.32

  	
   

  	
  5,395,576.81

  	
   

  
	
  9/30/2011

  	
   

  	
  84,331.43

  	
   

  	
  2,718,707.78

  	
   

  
	
  12/31/2011

  	
   

  	
  42,492.68

  	
   

  	
  0.00

  	
   

  

 

28

 

SCHEDULE D
–

EXAMPLE
NET CASH SETTLEMENT CALCULATION AND REPORT FORMAT

 

	
   

  	
   

  	
  Item

  	
   

  	
  Calculation

  	
   

  	
  12/31/2008*

  	
   

  	
  3/31/2009

  	
   

  	
  6/30/2009

  	
   

  
	
  Section A Cover: Coins.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Prems

  	
   

  	
   

  	
   

  	
  30,000,000

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  2

  	
   

  	
  Inv. Income

  	
   

  	
  [24]t-1 x
  ((1 + 0.064)0.25 - 1)

  	
   

  	
  0

  	
   

  	
  468,892

  	
   

  	
  448,740

  	
   

  
	
  3

  	
   

  	
  Benefits

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
  1,010,497

  	
   

  	
  971,008

  	
   

  
	
  4

  	
   

  	
  Allowances

  	
   

  	
   

  	
   

  	
  30,000,000

  	
   

  	
  12,906

  	
   

  	
  12,585

  	
   

  
	
  5

  	
   

  	
  Incr in Res.

  	
   

  	
  [23]t - [24]t-1

  	
   

  	
  30,000,000

  	
   

  	
  (421,828

  	
  )

  	
  (646,555

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  Section A
  Gain

  	
   

  	
  [1] + [2]
  - [3] - [4] - [5]

  	
   

  	
  (30,000,000

  	
  )

  	
  (132,683

  	
  )

  	
  111,702

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section B Cover: YRT

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  YRT Premium

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
  8,837,370

  	
   

  	
  8,440,700

  	
   

  
	
  8

  	
   

  	
  Covered
  Losses

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
  652,660

  	
   

  	
  631,780

  	
   

  
	
  9

  	
   

  	
  Section B
  Gain

  	
   

  	
  [7] -
  [8]

  	
   

  	
   

  	
   

  	
  8,184,710

  	
   

  	
  7,808,921

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Combined Covers

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  Reinsurer’s
  Statutory Profit

  	
   

  	
  [6] + [9]

  	
   

  	
  (30,000,000

  	
  )

  	
  8,052,027

  	
   

  	
  7,920,623

  	
   

  
	
  11

  	
   

  	
  RC -
  Reinsurance Risk Charge

  	
   

  	
  0.0125 *
  ([13] + [14] - Min([13] + [14] - Min([17], [23]), [10]) )

  	
   

  	
  0

  	
   

  	
  358,883

  	
   

  	
  342,514

  	
   

  
	
  12

  	
   

  	
  Reinsurer’s
  Net Profit

  	
   

  	
  [10] - [11]

  	
   

  	
  (30,000,000

  	
  )

  	
  7,693,144

  	
   

  	
  7,578,108

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  LCF BOP

  	
   

  	
  [16]t-1

  	
   

  	
  0

  	
   

  	
  30,000,000

  	
   

  	
  28,710,653

  	
   

  
	
  14

  	
   

  	
  LCF Interest

  	
   

  	
  [16]t-1 x
  ((1 + 0.064)0.25 - 1)

  	
   

  	
  0

  	
   

  	
  468,892

  	
   

  	
  448,740

  	
   

  
	
  15

  	
   

  	
  LCF
  Adjustment

  	
   

  	
  Min([13] +
  [14] - [18], [10])

  	
   

  	
  (30,000,000

  	
  )

  	
  1,758,239

  	
   

  	
  1,758,239

  	
   

  
	
  16

  	
   

  	
  Loss Carry
  Forward Balance (LCF)

  	
   

  	
  [13] + [14]
  - [15]

  	
   

  	
  30,000,000

  	
   

  	
  28,710,653

  	
   

  	
  27,401,155

  	
   

  
	
  17

  	
   

  	
  Target LCF

  	
   

  	
   

  	
   

  	
  30,000,000

  	
   

  	
  28,710,653

  	
   

  	
  27,401,155

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18

  	
   

  	
  Experience
  Refund

  	
   

  	
  [12] -
  [15]

  	
   

  	
  0

  	
   

  	
  5,934,905

  	
   

  	
  5,819,870

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Settlements

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19

  	
   

  	
  Prems

  	
   

  	
  [1] + [7]

  	
   

  	
  30,000,000

  	
   

  	
  8,837,370

  	
   

  	
  8,440,700

  	
   

  
	
  20

  	
   

  	
  Benefits

  	
   

  	
  [3] + [8]

  	
   

  	
  0

  	
   

  	
  1,663,157

  	
   

  	
  1,602,787

  	
   

  
	
   

  	
   

  	
  Allowances

  	
   

  	
  [4]

  	
   

  	
  30,000,000

  	
   

  	
  12,906

  	
   

  	
  12,585

  	
   

  
	
   

  	
   

  	
  Experience
  Refund

  	
   

  	
  [18]

  	
   

  	
  0

  	
   

  	
  5,934,905

  	
   

  	
  5,819,870

  	
   

  
	
  21

  	
   

  	
  Recapture
  Premium

  	
   

  	
  [23] -
  [24]

  	
   

  	
  0

  	
   

  	
  867,518

  	
   

  	
  662,944

  	
   

  
	
  22

  	
   

  	
  Net Cash
  Settlement

  	
   

  	
  [19] -
  [20] - [4] - [18] - [21]

  	
   

  	
  0

  	
   

  	
  358,883

  	
   

  	
  342,514

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reserves

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  23

  	
   

  	
  Coinsurance
  Reserve

  	
   

  	
   

  	
   

  	
  30,000,000

  	
   

  	
  29,578,172

  	
   

  	
  28,064,098

  	
   

  
	
  24

  	
   

  	
  Coins
  Reserve Post Recapture

  	
   

  	
   

  	
   

  	
  30,000,000

  	
   

  	
  28,710,653

  	
   

  	
  27,401,155

  	
   

  
	
  25

  	
   

  	
  Fixed
  Annuity Stat Reserve

  	
   

  	
   

  	
   

  	
  425,643,283

  	
   

  	
  419,658,338

  	
   

  	
  410,207,762

  	
   

  
	
  26

  	
   

  	
  Avg Yield on
  Company Assets

  	
   

  	
   

  	
   

  	
  6.25

  	
  %

  	
  6.25

  	
  %

  	
  6.25

  	
  %

  
	
  27

  	
   

  	
  Avg
  Crediting Rate

  	
   

  	
   

  	
   

  	
  3.50

  	
  %

  	
  3.50

  	
  %

  	
  3.50

  	
  %

  
	
  28

  	
   

  	
  Spread

  	
   

  	
  [28] -
  [29]

  	
   

  	
  2.75

  	
  %

  	
  2.75

  	
  %

  	
  2.75

  	
  %

  

 

*          $150,000
fee referenced in Section 4.03(b), and $375,000 fee referenced in
Section 6.02 not reflected.

 

29

 

SCHEDULE E
–

ACTUAL
RECAPTURE & CURRENT QUOTA SHARE CALCULATION

 

	
   

  	
   

  	
  EOP

  	
   

  	
  EOP Loss

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Section A

  	
   

  	
  Section B Current Quota

  Share

  	
   

  
	
  

  Period

  	
   

  	
  Coinsurance

  Reserve

  	
   

  	
  Carryforward

  Balance

  	
   

  	
  Recapture

  Amount

  	
   

  	
  

  Period

  	
   

  	
  Current

  Quota Share

  	
   

  	
  Fixed

  Annuities

  	
   

  	
  Indexed Annuities

  	
   

  
	
  (t-1)

  	
   

  	
  (CR)

  	
   

  	
  (LCF)

  	
   

  	
  (RA)

  	
   

  	
  (t)

  	
   

  	
  (ACQS)*

  	
   

  	
  (BCQSFA)*

  	
   

  	
  (BCQSIA)*

  	
   

  
	
  12/31/08-

  12/31/08

  	
   

  	
  30,000,000

  	
   

  	
  30,000,000

  	
   

  	
  —

  	
   

  	
  1/1/09-3/31/09

  	
   

  	
  7.04815539

  	
  %

  	
  88.25184461

  	
  %

  	
  95.3

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Section A Current Quota
  Share calculation:

  	
   

  
	
   

  	
  ACQS(t) =
  ACQS(t-1) * [ 1 – [RA(t) / CR(t-1)] ]

  
	
   

  	
   

  	
   

  
	
  Section B Current Quota
  Share Fixed Annuity calculation:

  	
   

  
	
   

  	
  BCQSFA(t) = 95.3% -
  ACQS(t)

  
	
   

  	
   

  	
   

  
	
  Section B Current Quota
  Share Indexed Annuity calculation:

  	
   

  
	
   

  	
  BCQSIA(t) = 95.3%

  

 

* Quota Share will remain
constant at the most recent Quota Share for each following Accounting Period
unless updated following a later Partial Recapture.

 

30

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00155-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00155-of-00352.parquet"}]]