Trans City Life Insurance Company, an Arizona Corporation - Page 26

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          required.                                                                   
               e.  Right To Withhold                                                  
               The 1988 Agreement provided that Guardian would pay                    
          petitioner reinsurance premiums and an initial consideration                
          equal to the total reserves on the reinsurance policies in force            
          at the start of the agreement.  The 1988 Agreement permitted                
          Guardian to elect to withhold funds equal to the coinsurance                
          reserves on the reinsured policies.  The 1988 Agreement permitted           
          petitioner to elect to withhold funds equal to the ceding                   
          commission.  Guardian had to pay petitioner interest on the funds           
          that it withheld, and petitioner had to pay Guardian interest on            
          the funds that it withheld.                                                 
               The 1988 Agreement provided that all moneys due either                 
          Guardian or petitioner would be netted against each other.  The             
          1988 Agreement provided that negative experience refunds could              
          offset positive experience refunds within the same calendar year.           
          The 1988 Agreement allowed petitioner to carry forward negative             
          net refunds for a calendar year to future calendar years.                   
          Although the 1988 Agreement allowed each party to withhold funds            
          equal to the amount specified in the agreement, the parties could           
          not withhold funds in excess of the amount specified.  Within 45            
          days after the end of each calendar quarter, Guardian was                   
          obligated to pay petitioner, and petitioner was obligated to pay            
          Guardian, the amounts due under the 1988 Agreement, subject to              
          each party’s right to withhold funds up to the maximum amount.              







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Last modified: May 25, 2011