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EXHIBIT A
DONARUE & HORROW, LLP
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MICHAEL B. HORROW (State Bar #162917) Bh se DONAHUE & HORROW, LLP . s jee 1960 E. Grand Ave., Suite 1215 = ae El Segundo, California 90245 Ss - Telephone: (310) 322-0300 j pre G Facsimile: (310) 322-0302 bo Bon ony Ml Email: mhorrow@donahuehorrow.com ed r ,. Fie @ Attomeys for Plaintiffs, - on te BRUCE M. KRALL, on behalf of themselves ce a and all others similarly situated ; eS UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CENTRAL DIVISION || BRUCE M. KRALL, ¢ on behalf of himself and all| Case No.: SACV 09-1043-JVS(RNBx) others similarly. situated, "Assigned for all purpases to the Honorable James V. Plaintiffs, Selna vs. FOURTH AMENDED CLASS ACTION COMPLAINT FOR FRAUD, NEGLIGENT . LIFE INSURANCE COMPANY OF THE MISREPRESENTATION, AND SOUTHWEST, and DOES 1 through 10, VIOLATION OF THE UNFAIR inclusive, COMPETITION LAW; DEMAND FOR JURY TRIAL
Defendant.
Plaintiff, BRUCE M. KRALL (“MR. KRALL”), by his attorneys, brings the action against LIFE INSURANCE COMPANY OF THE SOUTHWEST (“LSW”), on behalf of himself and all others similarly situated, and for this complaint allege, pursuant to his own investigation and . knowledge, and otherwise upon information and belief, as follows: SYNOPSIS OF CASE 1. This class action is brought on behalf of all persons who, beginning in 2005, purchased a Revolutionary Life Policy, California Policy Form number 8212CA in the state of California,
Case No. SACV 09-1043-JVS (RNBx) -1- FOURTH AMENDED COMPLAINT AND JURY DEMAND
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DONAHUE & HORROW, LLP
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1 and who have been damaged by LSW’s deceptive misrepresentations concerning 2 performance of these contracts and the likelihood that benefits illustrated prior to purchase of | 3 the contracts could ever be achieved. | 4 2. The LSW Revolutionary Policy is a life insurance contract where the interest credits to the | 5 contract’s investment portion referred to as the “Accumulated Value”. The “Accumulated | 6 Value” is based on LSW determined factors applied to a contractual formula using the | 7 performance of an external index such as the Standard & Poor’s 500 index without | 8 dividends. 9 3. To entice purchasers of these high-cost insurance contracts, LSW used printed illustrations
10 touting the benefits of the “historical performance” of the Standard & Poor’s 500 index in an
11 amount far greater than the Standard & Poor’s 500 index actually returned. LSW
12 deliberately misrepresented the actual rates of return of the Standard & Poor’s 500 index in
13 the printed LSW Revolutionary Life Policy Illustrations to achieve millions of dollars of
14 sales from unsuspecting policyholders and to maximize its sales and profits.
15 4. Plaintiffs allege that LSW’s conduct was fraudulent, negligent, in violation of California
16 Insurance Code Sections 10509.950 et seq. and in violation of the Unfair Competition Law.
17 Plaintiffs also allege that LSW committed fraud at the point of sale of these insurance
18 contracts with Plaintiff and class members.
19 JURISDICTION AND VENUE
20 5. MR. KRALL purchased his LSW Revolutionary Life insurance policy from Defendant while
val living in Orange County, California and he paid his premiums were paid from Orange
22 County, California. Defendant is incorporated and organized under the laws of the State of
23 Texas and has its corporate headquarters at 1300 West Mockingbird Lane, Dallas, Texas
24 75247-4921.
25 6. Upon information and belief, the amount in controversy exceeds $5,000,000 for
26 representative Plaintiffs and class members collectively, exclusive of interest and costs, by
wey, virtue of the combined increase of premium to all class members nationwide, and the revenue 28 and profit reaped by Defendant from its transactions with Plaintiff and the Class, as a direct Case No. SACV 09-1043-JVS (RNBx) —-2-
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and proximate result of the wrongful conduct alleged herein, and by virtue of the statutory
_ damages alleged herein and equitable relief-sought.
10.
Venue is proper within the State of California. Defendant maintains offices, has agents, transacts business, and is found within this state. Moreover, a substantial part of the events and omissions giving rise to the claims alleged herein arose in part within this state. PARTIES Plaintiff, BRUCE M. KRALL, is a former policyholder of a Revolutionary Life insurance policy issued by the LIFE INSURANCE COMPANY OF THE SOUTHWEST with Policy Number LS0136686 and under policy form 8212CA(0305). Plaintiff purchased his policy on March 27, 2007 from an LSW appointed agent (Gerald Wolfe). MR. KRALL currently resides in Ladera Ranch, CA. See Exhibit “A”, BRUCE M. KRALL’s LSW Revolutionary
Life policy.
. Defendant LIFE INSURANCE COMPANY OF THE SOUTHWEST is a stock life insurer
that is wholly owned by National Life Insurance Company of Montpelier, Vermont, a member of a mutual holding company. LSW’s life insurance revenue for 2008 was $174 million and annuity revenue was slightly over $1 billion. The company is licensed in all states of the United States of America except for New York State as well as the District of Columbia. LSW is a Texas domiciled life insurer with its main administrative office in Dallas, Texas with an additional administrative office in Montpelier, Vermont. National Life Insurance Company is wholly owned by its policyholders. See Exhibit “B”, Life Insurance Company of the Southwest’s 2009 Annual Statement.
The true names or capacities, whether individual, corporate, associate, or otherwise, of Defendants, DOES 1 through 10, are unknown to plaintiff who therefore sues said Defendants by such fictitious names. Plaintiff is informed and believes and on such information and belief alleges that each of the Defendants sued herein as a DOE is legally responsible in some manner for the events and happenings referred to herein, and will ask leave of this court to amend this complaint to insert their true names and capacities in place
and instead of the fictitious names when the same become known to plaintiff.
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1 - PLAINTIFF BRUCE M. KRALL
2 11. Plaintiff MR. KRALL purchased policy number LS0136686 from LSW through its
3 then appointed insurance agent Gerald Wolfe of Juris Wealth Management of 8001
4 Irvine Center Drive, a floor, Irvine, CA 92618. Mr. Wolfe used the title when
5 signing letters “Attorney at Law & Wealth Coach.” Mr. Wolfe represented to MR.
6 KRALL at all times that he was a California licensed insurance agent representing
7 LSW. Plaintiff MR. KRALL relied on the special knowledge, training and skill of
8 LSW’s appointed and licensed insurance agent Wolfe and the representations made in
9 the written illustrations dated November 29, 2006 and insurance policy materials 10 when he purchased the LSW Policy. MR. KRALL also relied on Wolfe’s written 11 promises and specialized training and knowledge based on his representations that he 12 was a licensed California insurance agent in purchasing this LSW policy. 13 12. On November 29, 2006, KRALL was presented a Life Insurance Illustration by | 14 Wolfe on LSW letterhead and clearly marked as a document from LSW. See Exhibit 15 “C.” In the Life Insurance Illustration, LSW represented the following notable facts 16 about the LSW Revolutionary Life insurance policy form 8212CA(0305): | 17 e On Page 10, LSW stated that the “assumed interest rate” for Equity Indexed | 18 Strategy I based upon the historical performance, from 1984 to the present, of the | 19 S&P 500 Index with a Participation Rate of 140.00% and an Index Earnings Cap | 20 of 10.00% was 8.40%. | 2) 13. Based on the affirmative representations in the LS W Illustration of November 29, | 22 2006 and the expectations set forth about its performance, MR. KRALL purchased 23 LSW Revolutionary Life insurance form number 8212CA(0305) with an effective 24 date of March 27, 2007 when he was age 47. The Face Amount was $5,175,000. The 25 planned vein was $180,000 payable annually. The contract had a Percent of 26 Premium Expense Charge of 5%, Monthly Administrative Charge of $2,462.42 and a 27 Monthly Policy Fee of $5. The surrender charge for accessing the accumulated value 28 was $98,635.50 in the first year, $143,709.75 in the second year then reducing
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DONAHUE & HORROW, LLP
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annually from there to zero in contract years 11 and later.
After consideration of the suggestions from LSW and Wolfe, MR. KRALL agreed to Equity Indexed Strategy 1 — Point to Point Index with an Initial Participation Rate of 140% and an initial Earnings Cap of 10%.
MR. KRALL paid two annual premiums or a total of $360,000 as of October 1, 2009. After seeing the Policy value diminish rapidly, on October 8, 2009, MR. KRALL surrendered the LSW Policy (See Exhibit “D”). At the time of surrender, the Accumulated Cash Value in MR. KRALL’s LSW Policy was $273,041.59. MR. KRALL then paid a $127,719 “Surrender Penalty” and was sent a check for $145,322.59. As aresult of the misleading representations made to him by LSW in its Illustration of November 29, 2006, MR. KRALL paid $360,000 in premium dollars and subsequently received only $145,322.59. MR. KRALL lost $214,677.41 while owning this LSW Policy from March 27, 2007 to October 8, 2009.
MR. KRALL relied on the November 29, 2006 LSW Illustration to his detriment. LSW falsely represented on Page 10 of the Illustration that the Assumed Interest Rate for Equity Index Strategy 1 based upon historical performance, from 1984 to the present, of the S & P 500 Index with a Participation Rate of 140.00% and Index Earnings Cap of 10.00% was 8.4%. The subsequent pages in the Illustration (i.e. pages 12 to 15) used a current weighted average interest rate of 7.69% in the first year and then rates greater than 8.01% after policy year two. The Illustration culminates with a rate of 8.39% in policy year fifty five (55) by estimating a projected Accumulated Policy Value of greater than 80 million dollars ($80,093,928 on page 13).
LSW knew the representation of the 8.4% rate was false when it authorized ad ratified the presentation of this November 29, 2006 Illustration to KRALL as part of the sales process. LSW knew and expected consumers like MR. KRALL would rely
on the Illustration in purchasing the LSW Revolutionary Life Insurance Policy.
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DONAHUE & HORROW, LLP
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1 19. Attached as Exhibit ’E” is the Declaration of David N. Fuller CFA, ASA. Mr. Fuller 2 is an een in financial valuation consulting services with more than twenty years 3 experience in this field. Mr. Fuller recreated the historical performance as 4 represented by the LSW November 29, 2006 Illustration using the same parameters- 5 notably from Page 10 of the Illustration “from 1984 to the present, of the S & P 500 6 Index with a Participation Rate of 140.00% and Index Earnings Cap of 10.00%” and 7 found that “...8.4% was not historically achievable over any 10-year period or 8 longer.” According to Mr. Fuller, “.. -since 1926 to 2006, there were only two five- 9 year periods when this level of return could have been achieved or exceeded. The 10 first was 1984-1989 and the second was 1994-1999. Historically, the highest 10-year 11 and 20-year periods for Index Strategy 1 were 7.5%.” See Paragraph 11 of the 12 Declaration of David N. Fuller CFA, ASA, attached hereto as Exhibit “E”. 13 20. Based on the LSW Illustration dated November 29, 2006, MR. KRALL purchased the 14 LSW Policy and paid $360,000 in premiums. He justifiably and reasonably relied on 15 the Policy values based on the specialized nature of the sncodiee as it was presented by 16 LSW and its appointed agent Gerald Wolfe. As a result, MR. KRALL lost more than 17 $200,000 when he surrendered the Policy on October 8, 2009. 18 19 LSW VIOLATED CALIFORNIA INSURANCE CODE SECTION 10509-955 (b) BY 20 MISLEADING KRALL AS TO THE “NONGUARANTEED” ELEMENTS IN THE 21 REVOLUTIONARY LIFE POLICY 22 ‘a 21. At Page 10 of the November 29, 2006 Illustration presented to Mr. Krall by Wolfe a4 and titled “Non-Guaranteed Assumed Interest Rate Disclosure”, LSW represented 5 that there were nonguaranteed Participation Rates and Index Earnings Cap for the a Equity Indexed Strategies. However, LSW never identified the Participation Rate 5 and Earnings Rates that were “nonguaranteed”. - \\ Case No. SACV 09-1043-JVS (RNBx) sie:
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DONAHUE & HORROW, LLP
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1 22. A reasonable consumer reading Page 10 of the November 29, 2006 Illustration would 2 not be able to determine that the contractually guaranteed Participation Rate was | 3 really 100% and not the 140% quoted throughout the Policy Illustration or that the 4 Indexed Earnings Cap was actually only guaranteed minimally at 3% and not the 5 10% as used throughout the Policy Illustration to show potential Accumulated Policy 6 Values. There was nothing in the Illustration presented to MR. KRALL on that day 3 or ever that clearly showed the contractually guaranteed elements for the Participation 8 Rate and Earnings Cap versus the nonguaranteed elements. Instead, LSW mixed and 9 matched the guaranteed and nonguaranteed rates and caps together confusing the 10 purchaser and in violation of California law. This is a misleading description of non- 11 guaranteed elements prohibited by California Insurance Code 10509.955 (b)(2). 12 23. The LSW Illustration presented to Mr. Krall on November 29, 2006 violated the 13 following statutory requirements contained in the California Insurance Code Sections 14 because: is 1) Under 10509.955 (a) (2), it failed to identify the business address of the 16 producer or insurer’s authorized representative, Mr. Gerald Wolfe;
“417 2) Under 10509.955 (a) (5), it failed to identify the form number as the Policy 18 Form stated on the illustrations was 8212(0305) and the policy form issued to 19 Mr. Krall was 212CA(0305);
a 3) Under 10509.955 (b) (4), LSW is prohibited from using a Policy Illustration i. that did not comply with the requirements of the California Insurance Code; 73 4) Under 10509.956 (a) (8), the guaranteed elements were not shown before the 24 corresponding nonguaranteed elements;
25 5) Under 10509.956 (c) (1) (C) (i), LSW was required to use the nonguaranteed 26 credited interest at rates that were the average of the guaranteed rates and the et rates contained in the Illustration scale and LSW did not.
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4] CLASS ACTION ALLEGATIONS . 24. Plaintiff brings this action on behalf of himself and on behalf of all other members of
the Class, defined as:
2
3
4 All LSW former and current policyholders who purchased the LSW
5 Revolutionary Life policy form number 8212CA(0305) or predecessor or subsequent forms from LSW from 2005 to the present in the State of California, »
6 and who at the time of purchase or policy delivery were presented with a Policy Illustration that misrepresented the historical rate of return of the S&P 500 Index
7 as filtered through the LSW Revolutionary Life Policy’s parameters.
8
9
25. Upon information and belief, there are hundreds of class members throughout the
State of California. Therefore, individual joinder of all members of the Class would
10 be impracticable. |
11 26. Common questions of law or fact exist as to all members of the Class. These
12 questions predominate over the questions affecting only individual class members. 13 These common legal or factual questions include:
14 a. Whether LSW falsely presented the Accumulated Policy Values as part of its 15 Revolutionary Life Policy Illustrations for policy form number 8212CA(0305) 16 or predecessor or subsequent forms from LSW from 2005 to the present in the 17 State of California;
18 b. Whether LSW’s actions described herein violate California’s Unfair 19 Competition Laws;
20 c. Whether LSW breached its contracts with the Plaintiff and the Class; and 21 d. The appropriate measure of damages, restitution and/or other remedies.
22 27. Plaintiff's claims are typical of the claims of the Class, in that Plaintiffs are LSW 2 Revolutionary Life policyholders who were not informed of LSW’s conduct alleged 24 throughout this Third Amended Complaint, and have received notice that LSW is not 25 providing expected benefits under the contract.
26 28. Plaintiff is an adequate representative of the Class because his interests do not 27 conflict with the interests of the class members he seeks to represent, and he has 28 retained counsel competent and experienced in conducting complex class action
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1 litigation. Plaintiff and his counsel will adequately protect the interests of the Class. | 2 29. A class action is superior to other available means for the fair and efficient | 3 adjudication of this dispute. The damages suffered by each individual class member | 4 likely will be relatively small, especially given the burden and expense of individual | 5 prosecution of the complex litigation necessitated by LSW’s conduct. Thus, it would | 6 be virtually impossible for the class members individually to effectively redress the | 7 wrongs done to them. Moreover, even if the class members could afford individual | 8 actions, it would still not be preferable to class wide litigation. Individualized actions | 9 present the potential for inconsistent or contradictory judgments. By contrast, a class | 10 action presents far fewer management difficulties and provides the benefits of single | 11 adjudication, economies of scale, and comprehensive supervision by a single court. | 12 FIRST CAUSE OF ACTION 13 (Fraud) | 14 30. Plaintiff hereby repeats and realleges the foregoing paragraphs of this Third . | 15 Amended Complaint and incorporates the same as though fully set forth herein. 16 31. LSW falsely represented on Page 10 of the Illustration that the Assumed Interest Rate | 17 for Equity Index Strategy 1 based upon historical performance, from 1984 to the | 18 present, of the S & P 500 Index with a Participation Rate of 140.00% and Index | 19 Earnings Cap of 10.00% was 8.4%. The subsequent pages in the Illustration (i.e. | 20 pages 12 to 15) used a current weighted average interest rate of 7.69% in the first year 21 and then rates greater than 8.01% after policy year two. The Illustration culminates 22 with a rate of 8.39% in policy year fifty five (55) by estimating a projected 23 Accumulated Policy Value of greater than 80 million dollars ($80,093,928 on page 24 13). 2 32. LSW knew the representation of the 8.4% rate was false when it authorized ad 26 ratified the presentation of this November 29, 2006 Illustration to KRALL as part of 27 the sales process. LSW knew and expected consumers like MR. KRALL would rely 28 on the Illustration in purchasing the LSW Revolutionary Life Insurance Policy. Case No. SACV 09-1043-JVS (RNBx) = ee
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33.
34.
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Attached as Exhibit ”E” is the Declaration of David N. Fuller CFA, ASA. Mr. Fuller
is an expert in financial valuation consulting services with more than twenty years
experience in this field. Mr. Fuller recreated the historical performance as
represented by the LSW November 29, 2006 Illustration using the same parameters-
notably from Page 10 of the Illustration “from 1984 to the present, of the S & P 500
Index with a Participation Rate of 140.00% and Index Earnings Cap of 10.00%” and
found that “...8.4% was not historically achievable over any 10-year period or
longer.” According to Mr. Fuller, “...since 1926 to 2006, there were only two five-
year periods when this level of return could have been achieved or exceeded. The
first was 1984-1989 and the second was 1994-1999. Historically, the highest 10-year
and 20-year periods for Index Strategy 1 were 7.5%.” See Paragraph 11 of the
Declaration of David N. Fuller CFA, ASA, attached hereto as Exhibit “E”.
Mr. Fuller stated under oath that “The stated period “from 1984 to present” for Index Strategy 1...would not have grown at an 8.4% CAGR [compounded annual growth rate]. Depending on the actual dates applied, the actual CAGR for SPX with the portfolio restrictions from 1984 would have been approximately 6.8%. If the historical average five- year growth rate had been applied in the Defendant’s projections, the results in the Defendant’s presentation to the Plaintiffs would have been materially different. The average 5-year return for Index Strategy 1, with the Portfolio Restrictions, was 5.9% since 1926 through the end of 2006, as calculated in Schedule A.2. In the 55-year example, if a hypothetical client invested $1.00 at 8.38%, at the end of 55 years, the $1.00 would have compounded to $83.60. If the same client invested $1.00 at the 20-year historical average of 6.0%, he would have $24.65 at the end of 55 years. By increasing the rate approximately 2.4% over 55 years, the projected ending value is inflated by approximately 240%.” See Declaration of David N. Fuller CFA, ASA, attached hereto as Exhibit “E”.
LSW made these affirmative misrepresentations to MR. KRALL, and engaged in this fraudulent conduct, with the purpose of inducing Plaintiff to rely upon them and to
act in reliance thereon. Plaintiff justifiably relied upon LSW’s written representations
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and specifically the November 29, 2006 Illustration and KRALL further reasonably relied upon LSW to not conceal from him material information regarding the historical performance, from 1984 to the present, of the S & P 500 Index with a
Participation Rate of 140.00% and Index Earnings Cap of 10.00% and its impact on
’ cost, benefits, cash values, and out of pocket premiums payable by LSW under this
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Policy. As a result of Plaintiff’s reliance on these representations and lack of knowledge of such fraud, Plaintiff suffered economic losses as outlined above and incorporated herein and consequential damages in an amount to be proven at the time of trial. Based on the LSW Illustration dated November 29, 2006, KRALL purchased the LSW Policy and paid $360,000 in premiums. He justifiably and reasonably relied on the Policy values based on the specialized nature of the product as it was presented by LSW and its appointed agent Gerald Wolfe. KRALL lost more than $200,000 when he surrendered the Policy on October 8, 2009. See Exhibit “D”. The aforementioned acts were performed by LSW with malice, fraud, and oppression and were authorized and ratified by directors, officers and managing agents of defendant compelling and warranting the imposition of punitive damages.
SECOND CAUSE OF ACTION
(Negligent Misrepresentation)
Plaintiff hereby repeats and realleges all of the foregoing paragraphs of this Third Amended Complaint and incorporate the same as though fully set forth herein. LSW negligently failed to reveal the accurate Accumulated Policy Value information to Plaintiff KRALL, and intended by this misrepresentation and omission to induce Plaintiff KRALL to alter his position and purchase the LSW Policy (Exhibit “A”) with the expectation that the income provided by such Policy would be greatly in excess of the income LSW was aware was likely to be provided. Plaintiff was ignorant of the truth concealed by LSW, and acted in justifiable reliance on LSW’s
misconduct in purchasing and paying on the Policy.
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THIRD CAUSE OF ACTION
(Unfair Competition)
41. Plaintiff hereby repeats and realleges the foregoing paragraphs of this Third Amended Complaint and incorporate the same as though fully set forth herein. |
42. As alleged herein, LSW prepared a false and misleading illustration that indicated a | certain result even though LSW knew that such a result was not achievable thereby misleading consumers and misrepresenting what the Policy could actually do. LSW’s Policy language itself also provided no language informing a reasonable person that its sales promises and representations should be ignored and were not true. Plaintiff relied on these materials, including LSW’s affirmative false disclosure when evaluating whether to purchase the Policy.
43. After selling the Policy in this manner, and despite providing written literature and statements to Plaintiff encouraging the retention of the Policy, LSW did not inform Plaintiff that its illustrated result was not sustainable and that it was impossible for the
. results to occur as promised on the illustration.
44. As a result of Plaintiffs reasonable reliance on these representations and lack of knowledge of such false statements, Plaintiff purchased the Policy and suffered economic losses as outlined above and incorporated herein and consequential damages in an amount to be proven at the time of trial.
45. Such conduct constitutes unfair competition as defined under California law and California Business & Professions Code section 17200 et seq. (“UCL”), constituting unfair, fraudulent, and/or unlawful business practices, and further constitutes false advertising under California Business & Professions Code section 17500 et seq. and California Insurance Code section 790.03, et. seq. Plaintiffs have suffered the required injury in fact, and have lost money or property, as the result of LSW’s misconduct described above, conferring Plaintiff with standing to proceed with this UCL claim.
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46.
47.
Plaintiff respectfully requests that the Court enjoin LSW from future acts of those described herein and to apply equitable remedies to cure the harms suffered by Plaintiff and others as a proximate result of defendants’ conduct.
Such injunctive relief will confer on the general public significant benefits. Such enforcement of these rights under their policies is necessary to halt defendants’ conduct and to restore the benefits lost to thousands of covered persons, and the financial burden of such enforcement is, in the interests of justice, borne by the responsible parties. Thus, an award of attorney’s fees for prosecution of this cause of action, and all fees incurred in proving the merits of same, to Plaintiff's counsel payable by defendants, is appropriate under Code of Civil Procedure section 1021.5
or upon any other basis approved by the Court.
WHEREFORE, Plaintiff prays for judgment against defendants as follows:
1. Compensatory damages against defendants in an amount to be proven at trial, including any damages as may be provided for by statute; 2. Punitive damages in an amount appropriate to punish or set an example of these defendants; 3. Reasonable attorneys’ fees; 4. An injunction restraining LSW from engaging in the above-referenced UCL violations and notifying affected California policyholders of certain facts; 5. For costs of suit incurred herein; and 6. For such other and further relief as the court deems just and proper. DATED: October 22, 2010 DOM & H OW, LLP MICHAEL B. HORROW Attorneys for Plaintiff \\ Case No. SACV 09-1043-JVS (RNBx) —13-
FOURTH AMENDED COMPLAINT AND JURY DEMAND
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DEMAND FOR JURY TRIAL
2 3 Plaintiff hereby demands a trial by jury on all causes of action and/or issues so triable. 4
DATED: October 22, 2010
5 6
7 ICHAEL B. HORROW g Attorneys for Plaintiff
9
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+. Gase-2:4.0-ev-09.98-JVS-JDE—Decument- 5-1—Filed-4.0/29/1.0--Rage-1.6-0f.99-PageIDHH4.25 nn
EXHIBIT “A”
sment-5-1. Sica -Page-14 of99...Page|D-#:126.
We, Life Insurance Company of the Southwest, agree to pay the Death Benefit to the Beneficiary, subject to the terms of this policy, when we receive at our Administrative Office due proof that the Insured died
while this policy was in force.
Equity-Indexed Flexible Premium Adjustable Benefit Life Insurance. Flexible premiums are papebie
through the end of the Premium Payment Period or until the prior death of the Insured. The adjustable -
Death Benefit is payable upon the death of the Insured. This policy is nonparticipating.
Right to Review Policy. This policy, at any time within ten days after its receipt by the Owner, may be returned in person or by mail to us or to the agent through whom it was bought. Upon such return, the - policy will be deemed void as of its Effective Date. We will then refund any premium paid.
Effective Date: 03/27/2007
Policy Number: 180136686
Face Amount: $5,175,000
Insured: Bruce M Krall Issue Age: 47
Gus As stated in the application unless later changed
Beneficiary: As stated in the application unless later changed
The data and the terms on this and all following pages are part of ‘this policy.
This contract is a legal contract between the contract Owner and Life Inserance Company of the Southwest. READ YOUR POLICY CAREFULLY.
Signed for Life Insurance Company of the Southwest at Dallas, Texas, as of the Date of Issue, by
Boom A Mk bith WM Mage
President
Qacgee chinn eae
nen ads
Chairman of the Board
LIFE INSURANCE COMPANY OF THE SOUTHWEST
ADMINISTRATIVE OFFICE MAILING ADDRESS: - LIFE INSURANCE COMPANY OF THE SOUTHWEST, ONE NATIONAL LIFE DRIVE, MONTPELIER, VT os604
CUSTOMER SERVICE: 800-732-8939
Home OFFICE ADDRESS: Lire INSURANCE COMPANY OF THE SOUTHWEST, 1300 West Mocuincsirb LANE, DALLAS, TX 75247
LSW 1S 4 STOCK COMPANY.
8212CA(0305)
CUSTOMER SERVICE INFORMATION
’ We are here to serve you
As our policyholder, your satisfaction is very important to us. Should you have a valid claim, or any question about the policy or the premium for it, we fully expect to provide service promptly and fairly. If you do have any questions, please contact the agent who sold the policy or write or call our administrative offices:
Life Insurance Company of the Southwest (“LSW”} ' One National Life Drive Montpelier, Vermont 05604 ae Attention: Customer Service
Telephone: 1-800-732-8939
Should you feel you are not being treated fairly, we want you to know you may contact the California Department of Insurance with your complaint and seek assistance from’ the governmental agency that regulates insurance.
To contact the Department, write or call: Consumer Services Division California Department of Insurance
300 So. Spring Street Los Angeles, California 90013
Consumer Hotline: 1-800-233-9045
yo
8016CA(0697) Cat. No. 44599
DATA SECTION
UA53HM
EFFECTIVE DATE: MAR. 27, 2007
POLICY NUMBER: 1LS0136686 : MATURITY DATE: MAR. 27, 2080
INSURED: BRUCE M KRALL
ISSUE AGE: 47 FACE AMOUNT: $5175000
OWNER: AS STATED IN THE APPLICATION UNLESS LATER CHANGED AS STATED IN THE APPLICATION UNLESS LATER CHANGED
BENEFICIARY: | MONTHLY POLICY DATE: 27TH DEATH BENEFIT OPTION: B MINIMUM MONTHLY PREMIUM: $4641.36
$180000.00 PAYABLE ANNUALLY
PLANNED PERIODIC PREMIUM: © MAR. 27, 2007 TO MAR. 27, 2080
FOR PREMIUM PAYMENT PERIOD:
THIS POLICY MAY TERMINATE PRIOR TO THE END OF THE PREMIUM PAYMENT PERIOD IF PREMIUMS PAID ARE INSUFFICIENT TG CONTINUE COVERAGE. PREMIUMS IN ADDITION TO THE PLANNED PERIODIC PREMIUM MAY BE NECESSARY TO KEEP THIS COVERAGE IN FORCE.
i ‘ ; ' POLICY LOANS AND WITHDRAWALS WILL REDUCE THE CASH SURRENDER VALUE OF THIS POLICY AND MAY RESULT IN TERMINATION OF THIS POLICY PRIOR TO THE DEATH OF
THE INSURED.
MINIMUM FACE AMOUNT: $25000.00 WITHDRAWAL FEE: $25.00 FOR EACH WITHDRAWAL
ADDITIONAL BENEFIT RIDERS: RIDER FOR ACCELERATED BENEFIT,
ACME ORATET DPEWrTorre 9 RIDER FOR ACCELERATED BENEFITS “
RIDER FOR ACCELERATED BENEFITS 3 OVERLOAN PROTECTION RIDER
THE LOAN INTEREST RATE IS VARIABLE. THE LOAN INTEREST RATE AT THE EFFECTIVE
DATE IS 5.80%.
DATA SECTION
PRYR LS0136686 COVER PAGE
19..0f.99.... Page. D.#:1.28...:
DATA SECTION —
GUAR EE Shere OF ‘CALCULATIONS
FACE AMOUNT: $5175000° EFFECTIVE DATE: MAR. 27, 2007
ACCUMULATED VALUE INTEREST RATE: 0.16516% COMPOUNDED MONTHLY, WHICH iS EQUIVALENT TO 2.00% COMPOUNDED PER YEAR
MORTALITY TABLE: COMMISSIONERS 2002 CSO ULTIMATE MALE NON-SMOKER AGE LAST BIRTHDAY
THE INSURED HAS BEEN CLASSIFIED A PREFERRED NON-TOBACCO.
TABLE OF GUARANTEED MAXIMUM COST OF INSURANCE RATES (PER $1,000 PER MONTH)
ATTAINED AGE RATE ATTAINED AGE — RATE ATTAINED AGE RATE 47 .03710 72 2.60426 OF 26. 45342 48 -04859 73 2.88497 98 28,14901 49 .05963 i 74 3.18679. 99 29.96423 . 50 .07509 75 3.51565 - 100 31.70427 . 51 09497 . 76 3.88671 (101 33.25265 52 34679 ~ a7 3 4.31857 102 34.90475 53 .38431 .. 7B 4.82063 103 36. 66691 54 -43185 79 5.38383 104 38.53573 55 - 48524 80 6.01260 105 - 40,51145 56 . 54029 81 6.69705 106 - 42.61697 57 .59369 82 7.42303 107 44,86020 58 . 64709 - 83 8.21697 108 47,25110 59 . 70967 84 9.10125 . 109 49.79713 60 . 78562 85 _ 10.08656 110 5250694 61 ' 87827 86 11.17261 111 55,39319 62 -98597 : B87 12.34897 112 — 58.46521 63 1.10372 88 13.60255 113 - 61.73550 64 1.22650 a9 14.92103 114 65,21324 65 1.35433 90 16.23779 115 . 68,91186 66 1.48387 91 17.53725 116 72.84242
. «BF 1.61928 92 18. 90234 117 77 .01849 - 68 - 1.76227 93 20.34569 118 81.45131 69 1,92286 94 21.87059 119 83.33333 70 2.11028 95 - - 23..38520 MATURITY 83.33333
7i 2.33795 96 24. 86843 DATE
. DATA SECTION PRYR LSO136686 FIRST OF FOUR PAGES -
( DATA SECTION
DEFINITION OF LIFE INSURANCE TEST: GUIDELINE PREMIUM TEST
GUIDELINE SINGLE PREMIUM: $1323512.51 GUIDELINE LEVEL PREMIUM: $281426.79 |
TABLE OF DEATH BENEFIT STANDARD FACTORS
ATTAINED DEATH ATTAINED ' DEATH
AGE BENEFIT AGE BENEFIT FACTOR FACTOR
47 2.030 59 1.340 48 1.970 60 1,300 - 49 1.910 61 1.280 50 1.850 62 1,260 51 1.780 63 1.246 52 1.710 - 64 1,220 53 1.640 65 1.200 54 1.570 66 1,190 55 1.500. 67 1.180 56 1.460 68. 1,170 57 1.420 "69 1,160 58 1.380 70 1.150
. DATA SECTION PRYR L§0136686 SECOND OF FOUR PAGES
' ATTAINED
75 -
AGE
-lled.10/29/10...Page-21 of 99 Page ID #130
DEATH BENEFIT FACTOR
1.136 1.110 1.090 1,070 1.050 1.040 1.030 1.020 © 1.010
Case.2:10-cv-09198-JIVS-JDE Docu
o_
PRVR
“DATA SECTION
FACE AMOUNT:
$5175000 EFFECTIVE DATE: MAR. 27, 2007
AS OF THE EFFECTIVE DATE, THE FOLLOWING RATES ARE APPLICABLE TO INTEREST CREDITING STRATEGIES TO WHICH YOU MAY DIRECT YOUR PREMIUM. THESE RATES
_ARE IN EFFECT UNTIL FUR IESE NOTICE.
FIXED-TERM STRATEGY FIXED-TERM SEGMENT LENGTH;
MINIMUM FIXED-TERM SEGMENT INTEREST RATE: INITIAL FIXED-TERM SEGMENT INTEREST RATE:
EQUITY INDEXED STRATEGY. 1 - POINT TO POINT TINDER:
EQUITY INDEXED TERM:
INITIAL PARTICIPATION RATE: GUARANTEED MINIMUM PARTICIPATION RATE: INITIAL INDEX EARNINGS CAP: GUARANTEED MINIMUM INDEX EARNINGS CAP:
EQUITY INDEXED STRATEGY 2 - POINT TO AVERAGE
INDEX:
EQUITY ENDEXED TERM:
INITIAL PARTICIPATION RATE: GUARANTEED MINIMUM PARTICIPATION RATE: INITIAL INDEX EARNINGS CAP:
GUARANTEED MINIMUM INDEX EARNINGS CAP:
DATA SECTION
LS0136686 THIRD OF FOUR PAGES
3 YEARS 2.002 ANNUAL EFFECTIVE RATE 4,25% ANNUAL EFFECTIVE RATE
STANDARD & POOR'S 500 INDEX
5 YEARS
140%
100%
16.00%
3.00%
STANDARD’ & POOR'S 500 INDEX 5 YEARS 130% 30% NO CAP NO CAP
" PRYR
‘MONTHLY ADMINISTRATIVE CHARGE:.
DATA SECTION
$5175000 MAR. 27, 2007
FACE AMOUNT: EFFECTIVE DATE:
' PERCENT OF PREMIUM EXPENSE CHARGE; 5%
$2462.42
MONTHLY POLICY FEE: $5.00 — _ SURRENDER CHARGES
POLICY YEAR.
Oo COS OF Uf Wo ho Pe
10 aa 11 AND LATER
DATA SECTION »
LSC136686 FOURTH OF FOUR PAGES
SURRENDER CHARGE
$98635.50 143709.75 127719.00 111728.25 95789,.25 79850.25 63859.50 47920.50 31981.50 15990.75 9.00
DATA SECTION
ACCELERATED BENEFITS RIDER 1
POLICY NUMBER: - 180136686 INSURED: | BRUCE M KRALL EFFECTIVE DATE: MAR. 27, 2007 MONTHLY COST: NONE
DATA SECTION ACCELERATED BENEFITS RIDER 1 — PAGE 1 OF 1
_ POLICY NUMBER:
INSURED:
. EFFECTIVE DATE:
MONTHLY COST:
DATA SECTION
ACCELERATED BENEFITS RIDER 2 LS0136686 | BRUCE M KRALL MAR. 27, 2007
NORE
DATA SECTION ACCELERATED BENEFITS RIDER 2 ~ PAGE 1 OF 1
POLICY NUMBER: INSURED: EFFECTIVE DATE:
MONTHLY COST:
DATA SECTION
ACCELERATED BENEFITS RIDER 3. LS0136686 BRUCE M KRALL MAR. 27, 2007
NONE
DATA SECTION | : ACCELERATED BENEFITS RIDER 3 ~ PAGE 1 OF 1
DATA SECTION
OVERLOAN PROTECTION RIDER
POLICY NUMBER = LS0136686 INSURED 3 BRUCE M KRALL
EFFECTIVE DATE MAR, 27, 2007
THE INSURED HAS BEEN CLASSIFIED A PREFERRED NON-TOBACCO.
PERCENT GF ACCUMULATED VALUE EXERCISE CHARGE
ATTAINED EXERCISE ATTAINED EXERCISE ATTAINED AGE CHARGE AGE CHARGE AGE PERCENTAGE PERCENTAGE
75 -3.33 84 3.88 93
76 3.46 85 3.94 94
77 3.47 : 86 4.00 95
78 3.55 87 4.03 96 ‘o ; 79 3.60 ‘88 4.10 97 \ 80 3.65 : 8&9 4.13 38
81 3.73 50 4.17 99+
82 3.79 91 3.39
83 3.85 92 2.59
BATA SECTION
RIDER FOR OVERLOAN PROTECTION - PAGE 1 OF 1
EXERCISE CHARGE PERCENTAGE
_ 8212CA(0305)
INDEX:
SECTION .
GENERAL TERMS OF THIS PoLicy Consideration Entire Contract Representations Incontestability Policy Effective Dates Policy Months, Years and Anniversaries Misstatement of Age or Sex Attained Age Payment of Benefits - Postponement of Benefits Basis of Values Notices Annual Report Projection Report ROLES IN THIS POLICY Owner Beneficiary Trust Beneficiary Change of Beneficiary Assignments Spendthrift Provision PREMIUMS Policy Protection Period Payment of Premiums Net Premium Grace Period . Reinstatement DraTu BENEFIT AND Poticy CHANGES Death Benefit . Death Benefit Options
Changes in Face Amount and Death
Benefit Option —
Suicide Limitation INTEREST CREDITING STRATEGIES
Basic Strategy
Fixed-Term Strategy
‘Bquity-Indexed Strategies
PAGE
a y
AN A HH &
On NN NW
a Oo 2
beh lank No
fed eh fa bm ww
BRA WwW We DD
SECTION
Pouicy VALUES Accumulated Value Monthly Deduction Monthly Cost of Insurance
CASH SURRENDER AND WITHDRAWALS Cash Surrender Value Withdrawals
Poticy Loans © Policy Loans Loan Value — Loan Interest Rate General Loan Terms
PAYMENT OPTIONS Option Effective Date General Payment Option Terms Choice of Gption Change of Payment Option Lump Sum Removal of Proceeds Applied Under a Payment Option - Option 1 -Payment of Interest Only Option 2 -Payments for a Stated Time — Option 3°-Payments for Life Option 4 -Payments of a Stated Amount ; Option 5 - Life Annuity Option 6 - Joint and Two-Thirds Annuity Option 7 - 50% Survivor Annuity
PAGE
25
26
Any riders and Endorsements and a copy of
the application, follow page 27
We, Life Insurance Company of the Southwest, agree to pay the Death Benefit to the Beneficiary, subject to the terms of this policy, when we receive at our Administrative Office due proof that the
Insured diéd while this policy was in force.
GENERAL TERMS OF THIS PoLicy
CONSIDERATION
__. This policy is issued in consideration of the application and payment of the first premium. We will incur no liability. if no premium is paid.
ENTIRE CONTRACT
On the Effective Date the entire contract between the parties is this policy and a copy of the application and all riders and endorsements which are attached at issue. Any change of this contract must be written and may be made only by one of our authorized officers or registrars. We will send the Owner a copy of any application for a change which we approve. It and any additional Data Section shall become part of this contract on the effective date of such change.
<= REPRESENTATIONS
Any statement made by or for the Insured shall be deemed a representation and not a warranty. Unless such statement is in the attached application or in any subsequent application, it shall not be used to:
make this policy void; or
. make any increase in Face Amount void; or make any Reinstatement void; or
defend any claim.
AWN ms
INCONTESTABILITY
After this policy has been in force during the life of the Insured for two years from the Effective Date of the policy, we will not contest it, however,
1. we may contest any increase in Face Amount for which an application is required until such increase has been in force during the life of the Insured for two years from its Efféctive Date; and
2. we may contest any Reinstatement until such Reinstatement has been in force during the life of the Insured for two years from its Effective Date..
: Life Insurance Company. of the Southwest ' Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939 Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8212CA(0305) Page 1
Poricy EFFECTIVE DATES
POLICY MONTHS, YEARS AND ANNIVERSARIES
MISSTATEMENT OF AGE OR SEX
The insurance coverage goes into effect on the Effective Date shown in the Data Section.
Any increase in Face Amount for which an application is required shall become effective on the Monthly Policy Date on or next following the date we approve the application for such increase in Face Amount.
Any increase in Face Amount for which an application is not required shall become effective on the Monthly Policy Date on or next following the. date we receive the request for such increase unless otherwise provided by the policy.
Any decrease in Face Amount requested shall become effective on the Monthly Policy Date on or next following the date we receive the request for such
decrease. .
Any Reinstatement of this policy shall become effective on the Monthly Policy Date on or next following the date we approve the application for
Reinstatement.
Any charige of Death Benefit Option shail become effective on me Monthly Policy Date on or next following the date we receive the request for such
change.
Policy Months, Years and Anniversaries shall be measured from the Effective Date. The Monthly Policy Date shown in the Data Section occurs on the same day each month or on the last day of any month having no such date. The
Pll. w: ah Lie. Te Effective Date is tac sirst Monthly Policy Date.
The Issue Age shown in the Data Section is the age of the Insured on his or her last birthday as of the Bffective Date. It is based on the information shown in
the application.
If the age or sex of the Insured has been misstated, we will adjust the Face Amount to be the amount it would have been had the Monthly Deduction on the date the adjustment takes effect been based on the correct age and sex of the Insured. The adjustment shall take effect on the Monthly Policy Date on or next following the date we receive proof to our satisfaction of such misstatement. If the Insured has died, we will adjust the Face Amount as of the last Monthly Policy Date prior to the Insured’s death.
Life Insurance Company of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8212CA(0305)
Page 2
ATTAINED AGE
PAYMENT OF
’ BENEFITS
POSTPONEMENT OF
BENEFITS
BASIS OF VALUES
The Attained re of the Insured on any date is the Issue Age shown in the Data Section plus the number of Policy Years and Months which have passed since
the Effective Date.
We will pay all benefits under this policy at our Administrative Office. Before payment of any Death Benefit we may investigate the death.
We may delay payment of any amounts which are payable as a result of Cash Surrender or Withdrawal for up to six months after we receive written request in a form satisfactory to us. If we defer such payment for more than 30 days, we will pay interest at a rate not less than 2.00% per year or as mandated by state law, from the date we receive such request to the date of payment.
We may also delay payment of any amounts which are payable as a result of a Policy Loan for up to six months after we receive written request in 2 2 form
satisfactory to vs.
We have the right to postpone payment which is derived from any amount recently paid to us by check or draft, until we are satisfied the.check or draft has been paid by the bank or other financial institution on which it is drawn.
The guaranteed values for this policy are equal to or greater than those required
by the law of the state where this policy is delivered. The guaranteed values are based on the Accumulated Value Interest Rate and Mortality Table shown in the Data Section. A detailed statement of the method of computing values has been filed in the state in which this policy is delivered.
This policy meets the minimum nonforfeiture requirements of the state where this policy is delivered.
The Paid Up Annuity Values, and all tabled values in Payment Options, are based on the 2000 Table for Individual Annuitant Mortality (IAM} and
compound interest at a rate of 1.50% per year.
Life Insurance Company of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
8212CA(0305)
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 Page 3
Notices
Uniess this policy provides otherwise, any requests for changes or notices:
41. fom us to the Owner shall be sent to the last address known to us of
the Owner; and 2. from us to an assignee shall be sent to the last cade known to us of
such assignees and 3. from the Owner or an assignee to us must be in writing and received by
us at our Administrative Office in Montpelier, Vermont.
ANNUAL REPORT
At least once each Policy Year we will send a report to the Owner. The report will show, as of its date:
J. the Accumulated Value; and
2, the Cash Surrender Value; and
3. any debt to us on this policy; and 4. the Death Benefit.
The report will also show a summary of transactions of the previous year and any information required by law.
PROJECTION REPORT
The Owner may request, in writing, a report which projects future values and future Death Benefits for this policy. The report will also show any information required by law. We may charge a fee for the report, not to exceed $25. The Projection Report will be based: on:
1. data the Owner gives us as to Face Amount aud premiums; and 2. such assumptions as either the Owner or we specify.
ROLES IN THIS PoOLicy
OWNER The Owner may:
exercise the rights under this policy; and
. assign the policy; an
release or discharge the policy; and
change the policy if we agree to such change; and . enjoy the benefits under this policy.
Pw
Life Insurance Comparry of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732- 3939 .
Home Office: 1300 West Mockingbird Lane * Dallas, Texas email
8212CA(0305) Page 4
BENEFICIARY
TRUST BENEFICIARY
CHANGE OF BENEFICIARY
~
These actions may be taken without the consent and against the interest of any Beneficiary and any contingent owner. if the Owner cannot change the Beneficiary, these actions may be taken only by the Owner and the Beneficiary jointly. These actions may be taken only while the Insured is alive.
The Owner has the right to change the Beneficiary. If the Owner expressly waives this right, no change can be made. Unless later changed, the Beneficiary shall be as stated in the application. The interest of any Beneficiary who dies before the Insured shall vest in the Owner unless otherwise stated.
If used, the term “children” of any person shall include only lawful children born to or legally adopted by that person.
We may rely on an affidavit by any person. who in our judgment knows the facts to identify any Beneficiary or payee not specified by name. All our liability shall cease when we pay on the basis of such affidavit.
Unless an duthoneed ie or registrar of the Company explicitly agrees in writing, the following provision shall apply when a trust is named as Beneficiary.
In no event is the Company responsible for the application or disposition of any proceeds it pays to a Trust Beneficiary. Payment to a Trust Beneficiary is a full discharge of the liability of the Company. If a designated trust provides for successor trustees, the designation in this policy includes successor trustees. Likewise, if the trust allows amendments, the trust, if so amended, remains asa — designated Bencrelery.
A Trust Beneficiary is considered to be a Beneficiary who did not survive the
Insured ifs pee
1. the trust has been terminated; or 2. the specified testamentary trust does not qualify as such; or 3. for any other reason a Trust Beneficiary is not entitled to any proceeds.
If the Owner has the right, a new Beneficiary may be named from time t time during the life of the Insured by filing at our Administrative Office written notice in such form as we may require. When notice is received at. our Administrative Office, the change shall take effect on the date the novice is signed whether or not the Insured is living at the time of receipt. We will net be
liable for any payment we make before receipt of the written notice at our
Administrative Office.
Life Insurance Company of the Southwest
Administrative Offi ce: One National Life Drive * Montpelier, Vermont 05604 * (800} 732-8939
FEFaTTETS
Home Office: 1300 West ——— Lane * Dallas, Texas 753247 Page $ 5
_Page.34.0f.99 Page.ID#143
ASSIGNMENTS
' ‘We are not responsible for the validity or effect of any assignment of this policy. We will not recognize any assignment until it has been filed at our Administrative Office. The interest of any Beneficiary whom the assignor can change and of any contingent owner shall. be transferred to the assignee by the terms of any assignment. If the assignee acquires a right to proceeds, they shall — be paid in one sum even though a Payment Option may be in effect at the time the assignment was signed. . SPENDTHRIFT PROVISION If we receive at our Administrative Office written request by the Owner for this Spendthrift Provision, then, to the extent allowed by law: 1. only the Owner may transfer, anticipate, commute, or encumber the proceeds of this policy; and 2. only legal process against the Owner may affect the proceeds of this policy. : Any proceeds payable after this request is withdrawn by the Owner shall not be affected by this provision. PREMIUMS PoLicy PROTECTION PERIOD The first 60 policy months following the Effective Date of this policy is referred to as the Policy Protection Period. An increase in coverage does not initiate a new Policy Protection Period. PAYMENT OF PREMIUMS
The first premium is due on the Date of Issue. This first premium cannot be less than the Minimum Monthly Premium shown in the Data Section. ~
During the Policy Protection Period the payment of cumulative premiums, in excess of withdrawals and loans, at least equal to the Minimum Monthly Premiums payable since the Effective Date of the policy will keep the policy in force to the next Monthly Policy Date, as fong as the Accumulated Value is sufficient to provide for Monthly Deductions. Otherwise, this policy wifl remain in force as long as the Cash Surrender Value is palace to provide for Monthly
Deductions.
Life Gerais Company of th the Southwest Administrative Office: One National Life Drive * hsuipelne Vermont 05604 * ae 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8212CA(0305} Page 6
The Planned Periodic Premiums are the prerniams the Applicant has chosen to pay. Planned Periodic Premiums may be paid on an annual, semi-annual, _ guarterly, or monthly basis. The Owner may change the amount or frequency of such premiums at any time by sending a written notice to us at our Administrative Office. However, we may limit any increase in either amount or
frequency.
Premiums in addition to the Planned Periodic Premiums may he necessary to keep this policy and the coverages provided by this policy and any additional benefit riders in force.
We will accept Unscheduled Premiums, which are premiums in addition to the Planned Periodic Premiums. We may limit the number and amount of. Unscheduled Premiums.
All premiums are limited by a minimum and a maximum. The minimum is $25 per premium. The maximum is the limit imposed by the Internal Revenue Code for qualifying the policy as “Life Insurance” for Federal Income Tax purposes, or such lower amount as we may set. We will not accept any premium in excess of the maximum. We will return any premiums not accepted and any interest credited to such premiums to the Owner within 60 days after the end of the Policy Year in which the premiums were received.
i - The first premium may be paid to us either throngh our duly authorized agent : in exchange for a receipt signed by that agent or at our Administrative Office. All later premiums must be paid to us at our Administrative Office.
No premium will be accepted on or after the Maturity Date.
NET PREMIUM
A Net Premium is determined by multiplying a premium received times 1 minus the Percent of Premium Expense Charge stated in the Data Section.
GRACE PERIOD
if on any Monthly Policy Date the Cash Surrender Value is less than the Monthly Deduction on such date, a Grace Period shall start, unless:
1. the policy is within the Policy Protection Period; and 2, the Accumulated Value less any debt to us on this policy is greater than
the Monthly Deduction on that dates and
3. the cumulative premiums paid since the policy’s Effective Date, less any withdrawals and less any debt to us on this policy, are greater than or ‘equal to the cumulative Minimum Monthly Premiums due since the
policy’s Effective Date.
A Grace Period shall be 61 days. During a Grace Period this policy shall remain in force. = , :
Life Insurance Company of the Southwest
Adtinistrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939 Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 . Page 7
8212CA(0305)
The premium needed to keep the policy in force beyond a Grace Period which : ends during the Policy Protection Period shall equal the greater of fa} or (b) | where:
a) equals the sam of the Minimum Monthly Premiums in effect on the policy over all of the months from the Effective Date of the policy to.the start of the Grace Period, plus all withdrawals, plus three times the Minimum Monthly Premium in effect at the beginning of the Grace Period, plus any debt to us on this policy, less all
premiums paid; and where ‘b}’ equals the premium which — will be sufficient to “produce an
Accumulated Value, net of policy debt, equal to two times the Monthly Deduction due on the date the Grace Period began.
The premium needed to keep the policy in force beyond a Grace Period which ends after the Policy Protection Period shall be the premium sufficient to produce a Cash Surrender Value equal to three times the Monthly Deduction due on the date the Grace Peried began.
We will mail notice of the premium needed to the Owner. If such premium is unpaid on the later of:
1. the last day of the Grace Period; or 2. the 31"day after such notice is sent;
then this policy shall terminate without value.
A Grace Period will not begin solely because payments of Planned Periodic Premiums are discontinued. Whether or not premiums are paid, Monthly Deductions will be made from the Accumulated Value. No interest will be credited to this policy during a Grace Period. The terms of this Grace Period provision will determine if and when a Grace Period starts.
Life feranes Company of the Southwest Administrative Office: One National Life Drive * hese Vermont 05604 * (800) 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
$212CA(0305)
Page 8 .
REINSTATEMENT
If this policy terminates after the end of a Grace Period, it may be reinstated. It must be reinstated on a Monthly Policy Date within five years from the start of such Grace Period and prior to the Maturity Date.’
For Reinstatement we will require:
1. an application for Reinstatement; and 2. proof to our satisfaction that the Insured is insurable; and . 3. payment of an amount determined as follows:
a)
b)
If Reinstatement occurs dicing a Policy Protection Period, the required payment shall be an amount equal to the premium which will be sufficient to produce an Accumulated Value, net of policy debt, four times the Monthly Deduction due on the date the Grace
Period began, or, if greater:
1.
the sum of the Minimum Monthly Premiums in effect on the policy over all the months from the Effective Date of this
_ policy to the start of the Grace Period; plas
all withdrawals; plus three times the Minimum Monthly Premium shown in the Data
Section; plus any debt to us on this policy; less
all premiums paid.
If Reinstatement occurs after the Policy Protection Period, the required payment shall be a premium which will make the Cash
i,
Surrender Value sufficient to provide:
two times the Monthly Deduction due on the date the Grace
Period began; plus three times the Monthly Deduction due on the date of
Reinstatement.
We will send the Owner notice of the required payment upon request.
"Life Insurance Company of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8932 © Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 —
8212CA(0305)
Page 9
In the event of Reinstatement:
1. the Accumulated Value of the policy at the time of final lapse will be restored along with the Cash Value available for deductions at the time
~ that the Grace Period began; and 2. the schedule of Surrender Charges for the policy months following the
date the Grace Period began shali become the schedule of Surrender Charges for the policy months following the date of Reinstatement; and
3. the schedule of Monthly Administrative Charges per Thousand for the policy months following the date the Grace Period began shall become the schedule of Monthly Administrative Charges per Thousand for the policy months following the date of Reinstatement. ,
DEATH BENEFIT AND PoLicy GHANGES
DEATH BENEFIT
DEATH BENEFIT OPTIONS
We will pay the Death Benefit to the Beneficiary when we receive at our Administrative Office due proof that the Insured died while this policy was in force. We will pay the Death Benefit in one sum unless a Payment Option is chosen. If the Death Benefit is paid in one sum, it shall be increased by interest from the date of the Insured’s death to the date of payment. We will set the rate of interest at not less than 2.00% per year or as mandated by state law.
The Owner may elect either of two Death Benefit Options, Option A or Option B, for the period prior | to the Insured’s Attained Age 120, The Death Benefit
Option is Stated i ii the Data Section. :
Option A. Under Option A, the Death Benefit is equal to the greater of -
1. the Face Amount of the policy on the date of the Insured’s death; or 2, the Death Benefit Factor shown in the Data Section multiplied by the
Accumulated Value on the date of the Insured’s death;
less the amount of any Monthly Deductions then due and any debt to us on this policy. Option B. Under Option B, the Death Benefit i is equal to the greater of
4. the Hse Amount plus the Accumulated Value of the policy on the date
of the Insured’s death; or 2. the Death Benefit Factor shown in the Data Section mniliplied a the
Accumulated Value on the date of the Insured’s death;
Life Insurance Comparey of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05 604 * ” (300) 732-8939
Home Office: 1300 West Mockingbird Lane * Datflas, Texas 75247
8212CA(0305}
Page 10
as,
CHANGES IN FACE AMOUNT AND DEATH BENEFIT OPTION
less the amount of any Monthly Deductions then due and any debt to us on this
policy.
The Owner may request any of the following changes. We will make a change subject to the conditions stated. These changes may be made only while the Insured is living and after the first Policy Anniversary. We will send the Owner a revised or additional Data Section if any of these changes is made.
Face Amount Increases. We will require an application from the Owner and proof to our satisfaction that the Insured is then insurable. An increase in Face Amount must satisfy the minimum Face Amount requirements of the policy and shall be effective upon the Monthly Policy Date on or next following our
approval.
Face Amount Decreases. We will require a written request from the Owner. A decrease in Face Amount shall be effective upon the Monthly Policy Date on or next following our receipt of the request.
Decreases shal! not be permitted which would reduce the sum of the Face Amount to less than any of the following:
1. the minimmm insurance amount for which the policy would qualify as “Life Insurance” for Federal Income Tax purposes under the Internal
Revenue Code; or 2. the Minimum Face Amount shown in the Data Section; or : 3. 75% of the largest total Face Amount in force at any time in the twelve
policy months prior to our receipt of the request.
A decrease in Face Amount will affect units of Face Amount in the reverse order in which they were created.
. Life Insurance Company of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
8212CA(0305)
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 Page 11
SUICIDE LIMITATION
Death Benefit Option Changes.The Death Benefit Option may be changed once each Policy Year after the first Policy Anniversary prior to the Insured’s Attained Age 120. We will require a written request from the Owner. A change will be | effective ‘on any Monthly Policy Date requested. The change may be made only if after such change the policy would qualify as “Life Insurance” for Federal Income Tax purposes under the Internal Revenue Code. The Minimum Monthly Premium will be recomputed to reflect the change in Options. ;
1. Upon a change from Option A to Option B, the Face Amount shall decrease by an amount equal to the Accumulated Value of the policy just prior té the Effective Date of the change. However, the change may be made only if after such change the Face Amount would not be less than the Minimum Face Amount shown in the Data Section. ;
2. Upon a change from Option B to Option A, the Face Amount shall increase by an amount equal to the Accumulated Value just prior to the Effective Date of the change. No additional Surrender Charges shall be imposed solely because of this change.
If the Insured dies within two years of the Effective Date as the result of suicide, while sane or insane, we will pay only a sum equal to: ,
1. the premiums paid; less 2. any withdrawals made; less 3. any debt to us on this policy.
A similar two-year period shall apply to any increase in Face Amount for which an application is required: Such period shall begin on the Effective Date of any such increase. During such period if the Insured dies as the result of suicide, while sane or insane, we will pay, in lieu of any such increase in Face Amount, only a sam equal to the Cost of Insurance that we have deducted from the
Accumulated Value for such increase. Payment wiil be made to the Beneficiary.
if this policy is. reinstated, a similar two-year period shalt start from the Effective Date of Reinstatement. During such period, if the Insured dies as the result of suicide, while sane or insane, we will pay only a sum equal to:
1. the premiums paid since the Effective Date of Reinstatement; less 2. any withdrawals made since the Effective Date of Reinstatement; less
3. any debt to us on this policy.
Life Insurance Company of the Southwest : Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 8212CA(0305) -
Page 12
Padataioa
INTEREST CREDITING STRATEGIES |
Basic STRATEGY
FEXED-TERM . STRATEGY
Accumulated Value in this policy is apportioned into one or more segments distinguished by their interest crediting strategies. Four interest crediting strategies are made available under this policy. ae
Interest will be credited to the Accumulated Value in the Basic Strategy on a daily basis at a rate not = than 2.00% per year.
The Basic Strategy Misia Value for a Policy Year is seal to 12.5 times the Monthly Deduction due on the first day of that Policy ¥ Year. Tt will remain unchanged until the first day of the next Policy Year.
AH Net Premiums ate paid into the Basic Strategy. On the 21"day of each month, the Accumulated Value in the Basic Strategy that is in excess of the Basic Strategy Minimum Value, subject to a minimum amount of $50.00, will be transferred to one or more of the following three interest crediting strategies according to an allocation selected by the Applicant at the ‘time of policy application. The Owner has the right to change the ailocation selection.
Each transfer of Accumulated Value made to this strategy creates a distinct Fixed-Term Segment. Each Fixed-Term Segment will have a duration of five years. Interest will be credited to the Accumulated Value in each Fixed-Term Segment on a daily basis at a rate not less than 2.00% per year. Interest rates payable on Accumulated Value in any given segment may vary over the lifetime of that segment, and different Fixed-Term Segments may be credited interest at
different rates.
Accumulated Value cannot be transferred out of any Fixed-Term Segment prior to the end of its five-year duration unless the interest rate credited to Accumulated Value in such segment falls below the interest rate initially credited to the segment. Under that scenario, the Owner may request. that the Accumulated Value in this Fixed-Ferm Segment be immediately transferred to the Basic Strategy. Otherwise, the Accumulated Value within a segment will be automatically transferred to the Basic Strategy at the end of the segment’s
five-year duration.
Life nwo Company of ti the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
8212CA(0305)
Home Office: 1300. West Mockingbird Lane * Dallas, Texas 75247 Page 13
Equrry-INDEXED STRATEGIES
Bach transfer of Accumulated Value made to an Equity-Indexed Strategy creates a distinct Equity-Indexed Segment. Each Equity-Indexed Segment will have a duration of five years. Index Earnings will be credited to the Accumulated Value in each segment on each anniversary of the creation of = segment.
Equity- Indexed Strategy 1 (Point- to-Point). Index — will be credited to Accumulated Value in each segment within this Equity-Indexed Strategy on each anniversary of the creation of that segment based on the performance of the
Index on such anniversary.
Equity-Indexed Strategy 2 (Point-to-Average). Index Earnirigs will be credited to Accumulated Value in each segment within this Equity-Indexed Strategy on each anniversary of the creation of thar segment based on the performance of the Index averaged throughout the preceding twelve months. .
Index. Index refers to the Standard & Poor’s 500 Index, excluding dividend income. It will be used in the determination of Index Eamings made to each — segment within an Equity-Indexed Strategy. If the publication of the Index is discontinued, a suitable index will be substituted and you will be notified of
such index. Index Value. The Index Value as of any date is the published value of the Index
at the close of business on that date. If no value was published on that date, the last published value of the Index will be used.
Annual Index Growth. The Annual Index Growth for an Equity-Indexed Segment is calculated on each anniversary of the creation of that segment.
The Annual Index Growth for the Equity-Indexed Strategy 1 is the following:
J. the Index Value as of the current anniversary of the Equity Indexed
Segment; minus 2. the Index Value as of the preceding anniversary of the Equity Indexed
Segment; this difference divided by 3. the Index Value as of the preceding anniversary of the Equity Indexed
Segment.
Life Insurance Company of the Southwest _— Administrative.Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247.
8272CA(0305)
Page 14
Annual Index Growth for the Equity-Indexed Strategy 2 is the following: ©
1. the sum of the Index Values for each day the Index Value was published between the preceding anniversary of the Equity-Indexed Segment and the current anniversary of the Equity-Indexed Segment, excluding the Index Value, for the preceding anniversary but including the Index Value for the current anniversary; divided by
2. the number of days the Index Value was published between the preceding anniversary and the current anniversary excluding the preceding anniversary but including the current anniversary; minus
3. the Index Value as of the preceding anniversary of the Equity-Indexed -
Segment; this difference divided by ,
4. the Index Value as of the preceding anniversary of the Equity-Indexed
Segment.
Participation Rate. Each Equity-Indexed Segment will have a Participation Rate.
The Participation Rate is determined in advance for each twelve-month period - and is subject to change on each anniversary of the creation of a segment. The
Participation Rate will never be less than the Guaranteed Minimum
Participation Rate for the applicable strategy shown in the Data Pages.
Index Earnings Cap. Each Equity-Indexed Segment will have an Index Earnings Cap. The Index Earnings Cap is determined in advance for each twelve-month period and is subject to change on each anniversary of the creation of a segment. The Index Harnings Cap for a segment will never be less than the
Guaranteed Minimum Cap for the applicable strategy shown in the Data Pages.
Index Earnings. The Index Earnings for each Equity-Indexed Segment are calculated on each anniversary of the creation of 2 segment as follows:
1, the Annual Index Growth for the segment multiplied by the segment’s Participation Rate, with this product adjusted so that it is no less than zero and no greater than the segment’s Index Earnings Cap; multiplied by d
2. the value of the Equity-Indexed Segment at the end of the previous day.
Index Earnings are not calculated or credited between anniversaries of a given segment. .
On the’ fifth anniversary of each Equity-Indexed Segment, Index Earnings will be increased as necessaty so that the annual rate of Index Earnings over the five-year length of the segment is at least equal to the guaranteed minimum rate
of 2.00%. .
The Gwner may not elect to transfer Accumulated Value in an Equity-Indexed Segment out of that segment prior to its fifth anniversary, On the fifth anniversary of the creation. of a segment, the Accumulated Value in the Equity-Indexed Segment is automatically transferred to the Basic Strategy.
‘Life Insurance Cannan of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 Page i§
ACCUMULATED VALUE
MoNTHLY DEDUCTION
Life Insurance. Comparry of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 73.
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
_-8212CA(0305)
Poiicy VALUES
if the Accumulated Value of the policy is being calculated in connection with the. termination of the policy, the Index Earnings for each Equity-Indexed - Segment over all full years completed during its elapsed duration will be increased as necessary so that the annual rate of Index Earnings qver those full
years is at least equal to 2.00%.
The Accumulated Value on the policy Effective Date is the initial minus the initial Monthly Deduction.
The Accumulated Value on any other date is equal to the sum of/the values of
the Basic Strategy, the Fixed-Term Strategy, the Equity-Indexed Strategy 1, and the Equity-Indexed Strategy 2.
The Monthly Deduction due on a Monthly Policy Date shall be| the Monthly Cost of Insurance, plus the Monthfy Administrative Charge Thousand Dollars of Face Amount, plus the Monthly. Policy Fee, plus the monthly cost of any additional benefit riders in force on this policy.
Monthly Deductions’ wiil be taken from the Accumulated Value of the policy in the following order:
first, from the Basic Strategy until exhausted; second, from the Fixed-Term Strategy ur Fiisteli exhausted;
Ps ie
. third, from the Equity Indexed Strategy 2 until exhausted; fourth, from the Equity Indexed Strategy 1 until exhausted,
Dw
If the Fixed-Term Strategy and/or the Equity Indexed Strategies have multiple segments, deductions are made in the reverse order in which the created. .
MONTHLY Cost . OF INSURANCE
The “Monthly Cost of Insurance shall be based o the risk classification and duration of this policy, and the Insured’s sex and Issye Age.
The Monthly Cost of Insurance for a given segment i wejeal to:
1. the applicable Monthly Cost of Insurance Ra s multiplied by - 2. the excess of:
a) the Death Benefit plus any debt to us on such date, divided by the
sum 1 plus the monthly Accumulated Value Interest Rate shown in
the Data Section; over b) the Accumulated Value of this policy on such date.
CASH SURRENDER AND WITHDRAWALS
CASH SURRENDER _ VALUE .
The Owner may, by written request to us, surrender this policy while the Insured is living for its Cash Surrender Value, We maly require that the policy be returned to us. When this policy has been surréndered, it shall be null and void and all rights shall cease.
The Cash Surrender Value on any day shall be equal to:
the Accumulated Value on such day; less any Surrender Charge which applies on such day; less
apy debt to us on this policy any QOL ty ls Of) LOS poucy.
wre
The Surrender Charges are shown in the Data Section
Life Insurance| Company of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermdnt 05604 * (800) 732-8939 — Home Offi ice: 1300 West Mockingbird e * Dallas, Texas 75247 j Page 17
8212CA(0305}
WITHDRAWALS
After the first Policy Anniversary and prior to the last day of the Premium Payment Period, the Owner may make withdrawals by written fequest to us. Withdrawals shall be subject ro all of the following terms.
1. Withdrawals may be made only on a Monthly Policy| Date which
follows receipt of such request. 2. A Withdrawal Fee of $25.00 will be charged for each withdrawal made. 3. The amount withdrawn may not exceed the Cash Surrender Value on
the Monthly Policy Date less three times the Monthly
such Monthly Policy Date. 4. The Accumulated Value will be decreased by the
withdrawal. 5. If Death Benefit Option A is in ‘effect on the date of the
Face Amount of the policy will be reduced by an amount equal to the amount of the withdrawal plus the Withdrawal Fee.
Withdrawals, including the Withdrawal Fee, are made from the | Accumulated Value in the following order:
1. first, from the Basic Strategy until exhausted;
2. second, from the Fixed-Term Strategy until exhausted;
3. third, from the Equity Indexed Strategy 2 until exhausted; 4. fourth, from the Equity Indexed Strategy 1 until exhausted.
If the Fixed-Term Strategy and/or the Equity Indexed Strategies have multiple segments, withdrawals are made in the reverse. order of which the segments were
created.
We may defer payment of any withdeawal for not more than six months. If we defer such payment for more than 30 days, we will pay interest from the date we receive such request to the date Of payment at a rate not less than 2.00% of as mandated by state law.
~Poxticy LOANS
Poricy Loans
We will loan an amount up to the Loan Value of the policy less the amount of any outstanding debt, at any time after the first Policy Year. At the time of the loan the policy must be in force. The policy shall be the sole’ security for the loan and must be duly assigned to us.
Life Insurance Company of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 734-8939 ~
Home Office: 1300 West li Lane * Dallas, Texas 75247
8212CA(0305)
8212CA(0305)
LOAN VALUE
LOAN INTEREST RATE :
The Loan Value on any day is equal to:
4. the Accumulated Value on such day; less 2. the Surrender Charge on such day; less 3. three times the Monthly Deductions due jon the most recent prior
Monthly Policy Date.
Any loan shalt bear interest from the date the loan|is made. The Loan Interest Rate may change from Policy Year to Policy Year.
The Loan Interest Rate on the Effective Date of the [policy is stated in the Data Section. Such rate shall apply to any debt to us on/this policy until the rate is changed by us. We may change the Loan Interest Rate only on a Policy Anniversary, after which the changed rate will apply |to any new or existing debt to us on the policy. The Loan Interest Rate is subject to a minimum annual
‘interest rate of 3.00% and shall not exceed the Maximum Rate allowed. The
Maximum Rate allowed is the greater of: 1. the’ Published Monthly Average for the. months before the calendar month in which the Policy Anniversary
occurs; or | 2. the yearly Accumulated Value Interest Rate/shown in the Data Section
plus 1%.
The Published Monthly Average shall be the Moody’s Corporate Bond Yield
Average - Monthly Average Corporates, as published by Moody’s Investors Service, Inc., or any successor to it. If at any time that Published Monthly Average is no longer published, a substantially similar average, established under the law of the state where this policy was delivered, shall be used.
If on any Policy Anniversary the Maximum Rate then allowed is at least 0.50% per year less than the Loan Interest Rate in effect for this policy during the prior Policy Year, we will decrease the Loan Interest Ra for this policy. If on any Policy Anniversary the Maximum Rate then allowed is at least 0.50% per year more than the Loan Interest Rate in effect on this policy during the prior Policy Year, we may increase such Loan Interest Rate. If in¢reased, it shall be increased to a rate not-greater than the Maximum Rate then owed.
We will give to the Owner: 1. notice of the Loan Interest Rate in effect for this policy at the time a loan is made; and : 2, at least 30 days’ advance notice of any increase in the Loan Interest
_ Rate, if there is any debt to us on this policy
Life Insuranc Company of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermpnt 05604 * (800} 732-8939
Home Office: 1300 West Mockingbird\Lane * Dallas, Texas 75247
Page 19.
In no event shall the Loan Interest Rate exceed the highest loay interest rate- allowed by law of the state in which this policy is delivered.
GENERAL LoAN TERMS
After the loan is made, loan interest shall be due on the next and all later Policy - Anniversaries. If any interest is not paid when due, it shail be add d tc the ican and bear interest on the same terms.
The debt seoned by this policy includes ices, unpaid loan interest and accrued loan interest not otherwise due.
Ail or any part of the debt may be paid to us at any time prior to:
1: the death of the Insured; and. 2. surrender of the policy.
However, during a Grace Period the debt may not be repaid. Unless the Owner _ Specifies, any payment to us shall be deemed a premium payment and not payment of the debt. At the death of the Insured or upon the nder of the policy, all debt shall become due at once. It shall be paid from the policy values.
We may defer any policy loan, other than one to pay premiums on our policies, for not more than six months.
PAYMENT OPTIONS
In lieu of a lump sum settlement, all or part of the proceeds of this policy may be applied under a Payment Option. When proceeds are apptied under a Payment Option, all other rights and benefits under this policy shal] cease.
In addition to the following options, other payment options may bel available.
OPTION EFFECTIVE DATE
The Option Effective Date is the date the proceeds hecome payable
Life Insurance Company of the Southaven Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 73.
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 8212CA(0305}
GENERAL PAYMENT © OPpTion TERMS
If the proceeds to be placed under a Payment Option are less than $5,000, we - may pay them in one sim to the payee who otherwise would receive the first payment under the option. If any payments would Jess than $100, we will change the frequency to provide payments of at least/$100.
If the proceeds are assigned on the Option Effective Date, we will pay the assignee’s share in one sum anid place only the balance under the option. After the Option Effective Date neither the payments nor the remaining value may be assigned or encumbered. To the extent the law permits, they are not subject to any claims against the payee.
We may require proof to our satisfaction that any payee is alive on the date any payment is due.
CHOICE OF OPTION
Choice of an option may be made:
1. by the Owner if the Insured is living; or 2. by the Beneficiary if the Insured is not liv
effect.
ng and if no option is in
Equivalent payments for 12-, 6-, ss or 1-month intervals mey be chosen. The options are described in terms of monthly payments. We will quote the amount of other payments on request.
CHANGE OF
We may issue a document stating the terms of the " ion. PayMENT OPTION
The right to change Payment Options exists under Dptions 1, 2, and 4. At the time of change the remaining value under the old option shall become the proceeds to be placed under the new option.
Lump Sum REMOVAL OF. PROCEEDS APPLIED UNDER A PAYMENT OPTION :
Lump sum payments may be taken from the remaining proceeds placed under Payment Options 1, 2, and 4. : Under Options 1 and 4 all or any part of the remaining value may be taken at any time, though no more than four transactions | may be made during any calendar year. Life Insuranc Company of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermpnt 05604 * (800) 732-8939 .
Home Office: 1300 West Mockingbird|Lane * Dailas, Texas 75247 Page 23
8212CA(0305)
OPTION 1 -~-PAYMENT OF INTEREST ONLY
OPTION 2 ~PAYMENTS FOR A SYATED TIME
Life Insurance Company of the Sonthwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * { Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8212CA(0305)
Under Option 2 the entire remaining value may be taken at any ti
No lump sum removal of proceeds may be made under Options 3,
Interest at a rate of 1.50% per year shall be paid either for:
1. the life of a chosen human being; or 2. a chosen period.
‘We may pay more interest in any given year. Upon the earlier of the death of the chosen human being or the end of the chosen period, any remaining value will be paid. The first payment shal] be made one month the Option Effective Date. If the payee is not a human being, payments may) not continue for more than 30 years.
Equal monthly payments shall be made for a stated number of years. The first payment shall be made on the Option Effective Date. The unt of each monthly payment is shown in the table. The monthly payments interest rate of 1.50% per year. We may pay more interest in any year.
800} 732-8939
Page 22
OPTION 3 ~PAYMENTS FOR Life
Option 3. Table on request.
Option 2 Table Monthly Payments for Each $1,000 of
Stated Number of Years Monthly Payments
Equal monthly payments shall be made for any gu thereafter during the life of a chosen human being.| The first payment shall be made on the Option Effective Date. The amount|of each monthly payment depends on the age and sex of the chosen human being on the Option Effective Date and on any guaranteed period chosen. We |may require proof to our satisfaction of such age. We may require like proof that such human being is ~ alive on the date any payment is due. The guaranteed period may be five or ten . years or a Refund period. A Refund period extends until the sum of the payments is equal to the proceeds placed under| the option. The monthly payments are based on an interest rate of 1.50% per year. We may pay more interest in any year during the guaranteed period. We will quote the amount of monthly payments for lower ages and guaranteed periods not shown in the
Life Insurance Comparty of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermpnt 05604 * (800) 732-8939
8212CA(0305)
Home Office: 1300 West Mockingbird |Lane * Dallas, Texas 75247 Page 23
eam
Option 3 Table Nanihty Payments for Each $1,000 of Proceeds
{Amounts shown are for the age nearest birthday on the Option Effective Date)
Male
Age None 10 Years 36 $3.24 ” $3.22 Si 3.31 3.29 52 3.39 3.36
53 3.47 3.44 — 54 . 3.85 3.51 55 3.63 3.60 S56 3.73 3.68 57 3.82 3.77 58 3.92 3.87. 59 4,03 3.97 60 4.15 4.07 61 4.27 4.19 62 4.40 4.30 63 4.54 - 4.42 64 4.69 4.55 65 4.85 - 4.69 66 3.02 4.83 67 3.20 4.98 68 5.39 5.13 69 5.60 5.29 70 5.82 SAS 71 6.05 5.62, 72 6.30 5.79 73 6.57 5.96 74 6.85 6.14 75 7.15 6.32 76 7.47 6.51 77. 7.82, 6.69 78 8.19 6.87 79 8.59 7.05 80 9.01 7.22 81 9.47 7.39 82 9.95 7.56 83 10.47 7.71 84 11.02 7.86 B5+ 11.64 8.00
Life Insurance Company of the Southwest
Guaranteed Period Refund
$3.02 $3.00 3.08 3.06 3.13 3.13 3.19 | 3.19 3.25 3.26 3.31 3.34 3.38 3.41 3.45 3.56 3.52 3.58 3.60 3.68 3.67 3.78 (3.76 3.88 3.84 3.99 3.93 4.11 4.02 4.23 4.2 4.37 4.23 4.51 4.33 4.66 4.45 4.83 4.57 5.00 4,70 - $19 4,82 5.39 4.96 5.61 5.11 5.85 5.25 6.11 5.41 6.39 3.59 6.69 5.75 7.01 5.33 7.36 6.14 7.74 6.34 8.16 6.55 8.60 6.77 9.09 7.80 ‘9.61 7.25 10.18 7.52 10. 79 + Higher ages the same ~
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
8212CA(0305)
Home Office: 1300 West a Lene * Dallas, Texas 75247
Page 24
OPTION 4 — -PAYMENTS OF A STATED AMOUNT
OPTION 5 - LIFE ANNUITY
OPTION 6 - JOINT AND Two-THIRDS ANNUITY
Equal monthly payments of a stated amount shali he made until the proceeds, with interest at 1.50% per year on the. unpaid balance, are used up. The first payment shall be made on the Option Effective Da be at least $10 per month for each $1,000 of p 's placed under this option. We may add more-interest to the unpaid balance in any year, which will extend the number of payments. The last payment will be for the balance only.
Equal monthly payments shall be made in the same er as Option 3 except:
1. the amount of each payment shall be based on our current settlement
rates on the Option Effective Date; and 2. no additional interest shall be paid.
Equal monthly payments shall be made while two chosen human beings are both living. Upon’ the death of either, two-thirds of the amount of such payments shall continue during the life of the survivor. The first payment shall be made on the Option Effective Date. The amount of each monthly payment depends on the ages and sexes of the chosen huinan beings on the Option Effective Date. We may require proof to our satisfaction of their ages. We may
. The amount chosen must
require like proof that any chosen human being is alive on the date any payment ©
conditioned on the life of such human being is due.|The initial amount of each monthly payment is shown in the table. We will q the amount of monthly payments for any other age combination on request.) The monthly paymicnts are based on an interest rate of 1.50% per year. No additional interest shall be paid.
Life Insur Company of the Southwest
Administrative Office: One National Life Drive * Montpelier, Verinprt 05604 * (800) 732-8939
212CA(0305)
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 Page 25
OPTION 7 - 50% SURVIVOR ANNUITY
Life Insurance Company of the Southwest 7 ; _ Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800} 734- Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8212CA(0305)
Option 6 Table Monthly Payments for Each $1,000 of Proceeds
One Male Ages and of
One Female Both $2.97 68 3.03 69 3.09 70 3.16 71 3.22 72 3.23 - 73 3.37 74 3.48 75 3.53 76 3.62 | 77 3.72 78 3.82 79 3.92 80 4.04 $1 4,16 82 4,28 83 442 84
4.57 85+
+ Higher ages the same
Equal monthly payments shall be made during the life of the chosen primary human being. Upon the death of the chosen primary human being, 50% of the amount of such payments shall contime during the life of the chogen secondary human being. The first payment shall be made on the Option Effective Date. The amount of cach monthly payment depends on the ages andj sexes of the chosen human beings on the Option Effective Date. We may reqhire proof to our satisfaction of their ages. We may require like proof that any chosen human being is alive on the date any payment conditioned on the life off such human being is due. The initial amount of each monthly payment is showy in the table. We will quote the amount of monthly payments for any other age combination on request. The monthly payments are based on an interest rate £ 1.50% per year. No additional interest shall be paid. a
Monthly Payments for Each $1,000 of Proceeds
Option 7 Table
(Amounts shown are for the age nearest birthday on the Option! Effective Date)
‘Administrative Office: One National Life Drive * Montpelier, Verm
8212CA{0305)
Male Primary Female Secondary $2.96 ° . 301 -
' 3.07
3.14 3.20 3.27 3.35 3.43 - 3.51 3.60 3.69 3.79 3.89 4.00 4,12 4.24 4.33 4.52
Female ale - Female
Primary Ages imary Primary Male of male Male
Secondary Both Secondary Secondary
$2.85 68 4.67 $4.44 2.90 69 4.83 4.60 2.96 70 5-00 4.76 3.02 71 5.19 4,93 3.08 - 72 5.38 5.12 3.15 73 5.59 3.32 3.22 74 5.82 §.53 3.29 75 6.06 5.77 3.37 76 6.31 6.01 3.45 77 6.59 6.28 3.53 78 6.88 6.57 3.62 79 7.20 6.89 3.72 80 7.54 7.22, 3.82 81 7.90 7.59 3.93 82 8.29 7.98 4.05 3 8.71 8.40 — 4.17 84 9.16 8.86 4.30 85+ 9.64 9.34 + Higher ages the same
Life Insurance Company of the Southwest
Home Office: 1300 West Mockingbird ne * Dailas,
05604 * {800} 732-8933
Texas 75247 Page 27
-1--Filed-1.0/29/1.0...Rage-56-0f.99.-Page 1D-#:
Frxep Net Cost LoAN ENDORSEMENT
This endorsement introduces a Fixed Net Cost Loan option into the policy to which it is attached. The following text is added to the Policy Loans section of
the policy: — “Fixed Net Cost Loan
As an alternative to loans on which interest is charged as described within the Loan Interest Rate provision of this policy, a loan may be taken which has 2 ~ fixed net cost known in advance.
When a Fixed Net Cost Loan is made, Accumulated Value in the amount of the joan and any unpaid loan interest will be removed from the Interest Crediting Strategies in the following order:
. first, from the Basic Strategy until exhausted;
. second, from the Fixed-Term Strategy until exhausted;
third, from the Equity Indexed Strategy 2 until exhausted; and . fourth, from the Equity Indexed Strategy 1 until exhausted.
PWN me
_ If the Fixed-Term Strategy and/or the Equity Indexed Strategies have multiple segments, deductions will be made in the reverse order in which the segments
were created.
The Accumulated Value removed from the Interest Crediting Strategies will be held apart from other Accumulated Value in this policy in a collateral account where it will be credited the same interest rate that will be charged on the Fixed
Net Cost Loan.
Repayments of a Fixed Net Cost Loan, including payments of loan interest, will be. applied to the outstanding loan balance, and the amount repaid will be deposited into the Basic Strategy. The amount of Accumulated Value held in the collateral account will alsa be reduced by the amount of the repayment.
This option may not be selected until the beginning of the tenth policy year. Any outstanding Policy Loans made prior to that time must be repaid before a Fixed Net Cost Loan can be taken. The policy may not have a Fixed Net Cost Loan on it at the same time that a non-Fixed Net Cost Loan is in effect.”
The second paragraph of the Accumulated Value provision of this policy has been revised as follows: ©
“The Accumulated Value on any other date is equal to the sum of the values of the Basic Strategy, the Fixed-Term Strategy, the Equity Indexed Strategy 1, the Equity Indexed Strategy 2, and the value of any loan collateral account.”
; Life Insurance Company of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939 Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247.
8314(0206) Page 1
Signed for Life Insurance Company of the Southwest at Dallas, Texas, by
Secretary
Life Insurance Company of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800} 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8314{0206) *” Page 2
INDEX
SECTION PAGE OVERLOAN PROTECTION RIDER 1 - EXERCISE OF RIDER
interest Crediting Strategies 1 Effect on Policy Loans i Conditions of Rider Exercise 2 Cost OF THIS RIDER 2
GENERAL TERMS Reinstatement 2 Termination ; 2 Effective Date 3
aon, '
8315(0206) —- ra bes
OVERLOAN PROTECTION RIDER
We, Life Insurance Company of the Southwest, agree to the exercise of this rider subject to the conditions stated below.
In the absence of this Overloan Protection Rider, when the debt to us on the policy causes the policy to enter a Grace Period, additional premium must be paid or the policy will lapse. Alternatively, exercise of this rider before the policy lapses will maintain life insurance protection. This rider may be exercised, subject to the Conditions of Rider Exercise = below, if ail
of the following conditions are met:
1. the Insured’s Attained Age is greater than or equal to 75; and 2. the policy to which this rider is attached must have been in force for at
least fifteen years from the policy Effective Date; and
3. outstanding debt on the policy must exceed the total Face Amount of the policy; and
4. the outstanding debt to us divided by the excess of the Accumulated Value over the Surrender Charge must exceed 0.95.
Notification will be sent to you when these conditions have been met. The rider must be exercised within sixty days of the date we mail notification. If not exercised within that sixty days, the rider will be terminated.
EXERGISE oF RIDER
Upon exercise of this rider, the policy to which it is attached will be modified as deseribed below. ;
INTEREST CREDITING STRATEGIES
The Index Earnings for = Equity Indexed Seomiene will be increased as necessary so that the annual rate of Index Earnings for the elapsed term of that segment is at least equal to 2.00%.
All values from the Fixed Term Strategy and the Equity Indexed Strategies will then be transferred to the Basic Strategy. No further transfers from the Basic Strategy to any interest crediting strategy may be made.
EFFECT ON POLicy | Loans
Any Policy Loan which is not a Fixed: Net Cost Loan will be rewritten as a Fixed Net Cost Loan. No additional aad ioans may be made on the policy.
Life Insurance Company of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939 Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8315(0206) Page 1
oe,
CONDITIONS OF RmeER EXERCISE ©
The foliowing conditions will become effective:
no additional premiums may be paid into the policy;
.. withdrawals will no longer be allowed;
Monthly Deductions will cease;
. any additional benefit riders whose monthly cost was included in the Monthly Deduction will be terminated; and . the policy Death Benefit Option will be switched to Option A if Option
-B is in effect. No further change in Death Benefit Option will be permitted. :
Pw be
“
COST OF THIS RIDER | When this rider is exercised, there will be a one time Exercise Charge. The Exercise Charge will be equal to the product of the Exercise Charge Percentage shown on the Overloan Protection Rider Data Page for the Attained Age at the time of exercise multiplied times the Accumulated Value of the policy. The Exercise Charge will be deducted from the Basic Strategy of the policy.
GENERAL TERMS
REINSTATEMENT
If this rider is in force at the time of policy lapse, it may be reinstated upon policy reinstatement.
TERMINATION This rider will terminate on the earliest of the following:
1. the date that the policy to which this rider is atrached terminates or ©
matures; or 2. sixty. days following our mailing of notification that the conditions for
exercising this rider have been met; or 3. the Monthly Policy Date following the receipt of written request to
terminate this rider.
‘Life Insurance Comparry of the Southwest :
Administrative Office: Ong National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939 Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8315¢ 0206) Page 2
EFFECTIVE DaTE
The effective date of this rider is the seis Effective Date unless a later date is - shown below.
Signed for Life Insurance Company of the Southwest at Dallas, Texas, by
Secretary
Rider effective date if different from policy Effective Date:
Life Insurance Company of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939 Hi ome Office: 1300 West Mockincetd Lane * Dallas, Texas 75247 . Page 3
8315(0206)
ACCELERATED BENEFITS RIDER 1
BENEFIT
ACCELERATED BENEFITS AMOUNT
ACCELERATEB BENEFITS INTEREST RATE
MAXIMUM AMO ONT
This rider adds benefits to your policy. It is issued in consideration of the application and your request for coverage. There is no additional cost for this benefit.
‘We will pay the Accelerate Benefits Amount to the Owner during the lifetime of the Insured. Such benefit will be paid:
1, upon election by the Owner; and
2. in lien of payment of the full death benefit of the policy or Other Insured Rider upon death of the Insured; and
3. subject to the terms of this rider.
The Accelerated Benefits Amount {(“Amount” ) will be determined when the Owner elects Accelerated Benefits. It will be determined as of the Election Date. The following factors may be used in the determination of the Amount:
. the Cash Surrender Value of the policy or rider; and future premiums payable under the policy or rider; and future expected lifetime of the Insured; and
. any administrative fee assessed; and
. the Accelerated Benefits Interest Rate in effect.
WR WN
We will declare the Accelerated Benefits Interest Rate. It will not exceed the greater of:
4. the yield on 90-day U.S. Treasury Bills on the Election Date; and 2. the maximum adjustable policy loan interest rate allowed by law on the
Election Date.
The Amount will be paid in one lump sum.
We reserve the right to set 2 maximum amount that we will pay under this and any other Accelerated Benefits Rider on the life of any insured person. If we do so, it will be no less than $500, nop. ;
Life Insurance Company of the Southwest
Adcepsieoneivs Office: One National Life Drive * Montpelier, Vermont 05604 * {800} 732-8939
8052(0798)
Home Off ice: 1300 West Mockingbird Lane * Dallas, Texas 75247 Page 1
wk,
Fury, ELECTION
“PARTIAL ELECTION
"TERMINAL ILLNESS
PHYSICIAN
Under a Full Election, the Amount will be paid in lieu of any future death benefit under this policy or rider. The Amount must first be applied to pay all debt to us on this policy or rider. The policy or rider to which this rider is attached will terminate on the Election Date.
Under a Partial Election, the Amount will be paid in lieu of a portion of any future death benefit payable under this policy or rider.
The Amount must first be applied on a pro rata share of any outstanding debt to us on this policy. A pro rata share of such debt will remain. The debt will be reduced by the percentage of the death benefit accelerated.
The portion of the life insurance coverage that remains in force must not be less than our minimum issue limit for this plan of insurance. The new premiums and charges for the remaining portion will be as if the contract had been originally issued at the reduced amount.
Accelerated Benefits can be elected only if the Insured is Terminally Il. Terminally Ii] means that the Insured under this rider has been certified by a- Physician as having an illness or chronic condition which can reasonably be expected to result in death in 24 months or less from the date of certification.
A Physician is a duly licensed medical Physician who is recognized by the law of the state in which treatment is received. Physician does not include the Owner,
_ the Insured, or a member of the Owner or the Insuted’s immediate families.
DISPOSITION OF AppDED BENEFIT RIDERS
Upon a Full Election, all riders attached to the policy will terminate as if the Insured had died on the election date.
Upon a Partial Election, all riders will continue to be effective subject to the terms and conditions of each rider.
Upon a Full Election or Accelerated Benefits for coverage under an Other Insured Rider, all riders providing additional benefits to the Other Insured will terminate as if the Other Insured had died on the election date. The policy and. all other attached riders will continue to be in force and effective subject to the terms and-conditions of the policy and the other riders.
Life Insurance Company of the Southwest : Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8052(0798)
Page.2
Upon a Partial Election of Accelerated Benefits for coverage under an Other Insured Rider, the policy and all the attached riders will continue to be in force and effective subject to the terms and conditions of the policy and the other
tiders. -
ELECTION DATE
The Election Date is the date that the Application for Election of Accelerated Benefits is signed by the Owner of this policy.
ELECTION
To elect Accelerated Benefits, the Owner must complete an Application ‘for . Election of Accelerated Benefits. We. will provide this Application at the Owner’s request. The Owner must provide us with the written consent of any assignee and any irrevocable beneficiaries. We may request that the contract accompany the Application to our Administrative Office. :
LEGAL REQUIREMENTS
If the Owner is required by law to elect Accelerated Benefits to meet the claims of creditors, whether in bankruptcy or otherwise, Accelerated Benefits will not be available. ;
If the Owner is required by a government agency to elect Accelerated Benefits to apply for, obtain, or keep a government benefit or entitlement, Accelerated
Benefits will not be available.
INCONTESTABILITY
This rider is contestable on the same basis as the policy or rider to which it is attached. |
PROOF OF TERMINAL ILLNESS
We must receive written proof satisfactory to us that the Insured is Terminally Il. Such written proof must include.a statement from a Physician certifying that
the Insured is Terminally Ill.
We have the right to have the Insured examined by a physician of our own choice when and as often as we may reasonably require while an election of Accelerated Benefits is pending. Such examination will be made at our expense.
Life Insurance Company of the Southwest
National Life. Drive * Montpelier, Vermont 05604 * {800} 732-8939 Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 Page 3
Administrative Office: One
8052(0798)
TERMINATION OF ACCELERATED BENEFIT FOR EACH INSURED
Coverage for each Insured under this rider shall terminate on the earliest of:
4. the Election Date for Accelerated Benefits of the Insured; or 2. the date the life coverage for the Insured terminates; or 3. the Monthly Policy Date following our receipt of the Owner’s written
request to terminate the Insured’s coverage under this rider.
TERMINATION OF RIDER
This entire rider shall terminate on the earliest of
1. the Election Date for Accelerated Benefits of the last remaining covered
Insured; or 2. the date the policy terminates; or . 3. the Monthly Policy Date following our receipt of the Owner’s written
request to terminate this rider. EFFECTIVE DaTE
The Effective Date of this rider is the policy’s Date of Issue or Other Insured Rider’s Effective Date unless a later date is shown in the policy’s Data Section.
Qacgue cium (erie
Secretary
Life Insurance Company of the Southwest . Administrative Office: One National Life Drive * Montpelier, Vermant 05604 * (800) 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 8052(6798} . Page 4.
ACCELERATED BENEFITS RIDER 2
This rider adds benefits to your policy. It is issued in consideration of the application and your request for coverage. There is no additional cost for this
benefit.
BENEFITS
TAXATION
ACCELERATED BENEFITS AMOUNT
We will pay the Accélerated Benefits Amount to the Owner during the lifetime of the Insured. Such benefit will be paid:
1. upon election by the Owner; and
2. in lieu of payment of ‘the full death benefit of the policy or Other Insured Rider upon death of the Insured; and
3. subject to the terms of this rider.
The Accelerated Benefits provided under this rider may or may not qualify for favorable tax treatment under the Internal Revenue Code. Benefits that are used to pay for qualified long-term care services may qualify for favorable tax treatment. Certain benefits not exceeding a per diem limit specified in the internal Revenue Code may also qualify for favorable tax treatment. Accelerated Benefits that qualify for favorable tax treatment will be excludable from your income and not subject to federal taxation. Tax laws relating to Accelerated Benefits are complex. You are advised to consult with a qualified tax advisor about circumstances under which you could receive Accelerated Benefits
excludable from income under federal law.
The Accelerated Benefits Amount {“Amount” } will be determined when the Owner elects Accelerated Benefits. ft will be determined as of each Election Date. The following factors may be used in the determination of the Amount:
. The Death Benefit accelerated; and
. the Cash Surrender Value of the policy or rider; and
. future premiums payable under the policy or rider; and _ future expected lifetime of the Insured; and any administrative fee assessed; and ;
. the Accelerated Benefits Interest Rate in effect.
DAD wp ps
Each Amount will be paid in a lump sum.
Life Insurance Company of the Southwest
Administrative Office ice: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939 ©
8095(0399)
_ Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 Page 1
ACCELERATED BENEFITS INTEREST. RATE - We will declare the Accelerated Benefits Interest Rate. It will not exceed the preater of: 1. the yield on 90-day U.S. Treasury Bills on the Election Date; and 2, the maximum adjustable policy foan interest rate allowed by lew on each Election Date. MAXIMUM BENEFITS AMOUNT The maximum Death Benefit accelerated in any year is the lesser of 24% of the life insurance coverage on the initial Election Date or $240,000. This amount is . prorated over other periods of time for either Periodic or Final Elections. We reserve the right to set a maximum amount that we will pay under this and any other Accelerated Benefits Rider on the life of any insured person. If we do so, it will be no less than $500,000. PERIODIC ELECTIONS
Under a Periodic Election, the Amount will be paid in lieu of a portion of any foture death benefit payable under this policy or rider. Periodic elections can not be made more frequently than ence each month.
The Amount must first be applied on a pro rata share of any outstanding debe to us on this policy. A pro rata share of such debt will remain. If applicable, the Cash Value, Cash Surrender Value, Accumulated Value, and Surrender Charge
will also be reduced by the percentage of the death benefit accelerated.
‘The portion of the life insurance coverage that remains in force may. be less than our minimum issue limit for this plan of insurance. The new premiums and charges for the remaining portion will be as if the contract had been originally
issued at the reduced amount. .
Frvaz ELEctTIon ©
Under a Final Election, the Amount will be paid in lieu of any remaining foture death benefit under this policy or rider. The Amount must first be applied to pay all debt to us on this policy or rider. The policy or rider to which this rider is attached will terminate on the Election Date.
Life Insurance Comparry of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * {800} 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 Page 2
8095(0399)
CHRONICALLY ILL
LICENSED HEALTH CARE PRACTITIONER
LIMITATION ON PAYMENTS
Accelerated Benefits can be elected under this rider only if the Insured is Chronically Hl. Chronically Ill means that the Insured has been certified, within the last 12 months, by 2 Licensed Health Care Practitioner as:
1. being unable to perform (without substantial assistance from another person) at least two Activities of Daily Living for a period of at least 90
consecutive days; or 2. requiring substantial supervision for a period of at least 90 consecutive
days by another person to protect oneself from threats to health and safety due to Severe Cognitive Impairment.
Activities of Daily Living are bathing, continence, dressing, eating, toileting, and transferring. ©
Severe Cognitive Impairment-means deterioration or loss in intellectual capacity that is measured by clinical evidence and standardized tests which reliably
measure impairment in:
1. short-term or long-term memory; or 2. orientation to people, places, or time; or 3. deductive or abstract reasoning.
A Licensed Health Care Practitioner is a duly licensed medical Physician, a registered professional nurse, or a licensed social worker and does not include the Owner, the Insured, or a member of the Owner or Insured’s immediate families. “Immediate Family” means a child, spouse, parent, grandparent, or grandchild of the Licensed Health Care Practitioner.
During the first two years that this rider is in effect, we will not accept an Application for Election of Accelerated Benefits under this rider.
Benefits will not be available under this rider if the Insured is eligible for Accelerated Benefits under another rider.
Life Insurance Comparry of the Southwest
Administrative Office: One National Life Drive * Martpelier, Vermont 05604 * (800} 732-8939
8095(0399)
Home Office: 1300 West Mockingbird Lane * Datlas, Texas 75247 Page 3
of. 99... Page ID. #177
DISPOSITION OF AppbeED BENEFIT RIDERS
Exection DATE
ELECTION
LEGAL REQUIREMENTS
INCONTESTABILITY
Upon 2 Periodic Election, all riders will continue to be effective subject to the terms and conditions of each rider. :
Upon a Fina! Election, all riders attached to the policy will terminate as if the Insured had died on the election date.
Upon a Periodic Election of Accelerated Benefits for coverage under an Other Insured Rider, the policy and all the attached riders will continue to be in force and effective ageet to the terms and conditions of the policy and the other
riders.
Upon a Final Blection of Accelerated Benefits for coverage under an Other Insured Rider, all riders providing additional benefits to the Other Insured will terminate as if the Other Insured had died on the election date. The policy and all the other attached riders will continue to be in force and effective subject to the terms and conditions of the policy and the other riders.
The Election Date is the date that the Application for Election of Accelerated Benefits is signed by the Owner of this policy.
To elect Accelerated Benefits, the Owner must complete an Application for Election of Accelerated Benefits. We will provide this Application at the Owner’s request. The Owner must provide us with the written consent of any assignee and any irrevocable beneficiaries. We may request that the contract accompany the Application to our Administrative Office.
if the Owner is required by law to elect Accelerated Benefits to meet the claims of creditors, whether in bankruptcy or otherwise, Accelerated Benefits will not be available. .
If the Owner is required by a government agency to elect Accelerated Benefits to apply for, obtain, or keep a government benefit or entitlement, Accelerated Benefits will not be available.
This rider is deaiseatat on the same ‘Basis as the policy « of rider to which it is attached. .
Life Insurance Company of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8095(0399)
Page 4
PROOF OF CHRONIGALLY ILL
We must receive written proof satisfactory to us that the Insured is Chronically
ii, Such written proof must include a statement from a Licensed Health Care .
Practitioner certifying that the Insured is Chronically Ili.
We have the right to have the Insured examined by a Licensed Health Care Practitioner of our own choice when and as often as we may reasonably require while an election of Accelerated Benefits is pending. Such examinations will be
made at our expense.
TERMINATION OF ACCELERATED BENEFITS FOR Eacu INSURED
Coverage for each Insured under this rider shall terminate on the earliest of:
4. the Final Blection Date for Accelerated Benefits of the Insured; or
2. the date the life coverage for the Insured terminates; or
3. the Monthly Policy Date following our receipt of the Owner’s written request to terminate the Insured’s coverage under this rider.
TERMINATION OF RIDER
This entire rider shall terminate on the earliest of:
1. the Final Election Date for Accelerated Benefits of the last remaining
covered Insured; or 2. the date the policy terminates; or 3. the Monthly Policy Date following our receipt of the Owner’s written
request to terminate this rider.
EFFrective DATE
The Effective Date of this rider is the policy’s Date of Issue or Other Insured Rider’s Effective Date unless a later date is shown in the policy’s Data Section.
Qacgue ne Aart
Secretary
Life Insurance Company of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939 Home: Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8095(0393} Page 5
SECTION
ACCELERATED BENEFITS RIDER 3
Benefits
Taxation
Accelerated Benefits Amount Accelerated Beriefits Interest Rate Qualifying Event
Maximum Death Benefit That May Be Accelerated ;
Limitation on Payments |
Claims ,
Full Election
Partial Election
Disposition of Added Benefit Riders Election Date
Election
_ Legal Requirements Incontestability
Termination of Accelerated Benefits for Each Insured
Termination of Rider Effective Date
PAGE
1 1 1 2 2.
Ann Aw he Bw Ww
nA nN
ACCELERATED BENEFITS RIDER 3
This idee adds benefits to your policy. It is issued in consideration of the application and your request for coverage. There is no additional cost for this
benefit. BENEFITS We will pay the Accelerated Benefits Amount to the Owner during the lifetime of the Insured. Such benefit will be paid: 1. upon election by the Owner; and 2. in lieu of payment of the full death benefit of the policy or Other Insured Rider upon death of the Insured; and 3. subject to the terms of this rider. TAXATION The Accelerated Benefits provided under this rider may or may not be taxable. Tax laws relating to Accelerated Benefits are complex. You are advised to consult with a qualified tax advisor regarding the tax treatment of any benefit paid under this rider. ACCELERATED
BENEFITs AMOUNT
The Accelerated Benefits Amount (“Amount” ) will be determined by us when the Owner files a claim for Accelerated Benefits. It will be determined as of each Election Date. The following factors may be used by us in the determination of the Amount:
the Death Benefit accelerated; and
the Cash Surrender Value of the policy or rider; and
future premiums payable under the policy or rider; and
our assessment of the future expected lifetime of the Insured; and any administrative fee assessed; and
. the Accelerated Benefits Interest Rate in effect.
Sta BG
Each Amount will be paid in a lump sum. The Amount paid will never exceed the Death Benefit accelerated. It will never be less than the Cash Surrender Value, if any, corresponding to the portion of the Death Benefit accelerated.
iif aes Company of the Southwest
Administrative Office ce: One National Life Drive * Montpelier, Vermont 05604 * {800} 732-8939 Home Office: 1300 West ———— Lane * Dallas, Texas 7§247 Page i
$165{0703)
thy,
aati,
ACCELERATED BENEFITS INTEREST RATE
We will declare the Accelerated Benefits Interest Rare. Ir will not exceed the greater of
1. the yield on 90-day U.S. Treasury Bills on the Election Date; and ; 2. the maximum adjustable policy loan interest rate allowed by law on
each Election Date.
QUALIFYING EVENT
An Accelerated Benefit can he elected under this rider only if the Insured
experiences a Qualifying Event covered under this rider while the policy and this rider are in force. The Qualifying Events covered under this rider are: :
1. Heart Attack (myocardial infarction) - The death of a portion of the heart muscle resulting from inadequate blood supply to the relevant area. Heart Attack does not-include angina or the chance finding of electrocardiographic (EKG) changes indicative of a previous heart attack. The diagnosis of Heart Attack must be based on the presence of all of the following:
a) Chest pain;
b) Associated new EKG changes which support the diagnosis; and c}) Elevation of cardiac (heart) enzymes above standard laboratory
levels.
2. Stroke - A cerebrovascular accident or infarction (death) of brain tissue caused by hemorrhage, embolism, or thrombosis lasting more than 24 hours and producing measurable neurological deficit which persists for at least 30 consecutive days following the occurrence of the Stroke. Stroke does not include transient ischernic attacks.
3. Diagnosis of Cancer. Cancer means a disease manifested by the presence of one or more malignant tumors and characterized by the uncontrolled growth and spread of malignant cells and the invasion of normal tissue. Cancer does not inchades
a) Any skin cancer, except invasive malignant melanoma into the dermis or deeper} b) Pre-malignant lesions, benign rumors, or polyps; and — c} Carcinoma in-situ.
4, Diagnosis of End Stage Renal Failure. End Stage Renal Failure means the irreversible and total failure of both kidneys which requires the undergoing of renal transplantation or regular renal dialysis,
_ Life Insurance Contparry of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939 Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8165(0703) Page 2
MaxImMuM DEATH BENEFIT THAT May Be ACCELERATED
LIMITATION ON PAYMENTS
5. Major Organ Transplant - The receipt by transplant of any of the following organs or tissues: heart, hang, liver, kidney, pancreas, or bone marrow. . : ,
6. Diagnosis of ALS(Amyotrophic Lateral Sclerosis) by a qualified Physician.
7. Blindness - The total and permanent loss of sight in both eyes asa result of disease or injury. Total loss of sight in an eye is defined as corrected vision of 20/200 or worse.
The Owner may elect to accelerate alf or a portion of the Insured’s Death Benefit in force under the policy on the Election Date.
We reserve the right fo set a maximum death benefit that may be accelerated under this and any other Accelerated Benefits Rider on the life of any insured person. If we do so, it will be no less than $500,000.
No Accelerated Benefit will be paid under this rider for any Qualifying Event that occurs on or before the 30th day following the effective date of this rider unless such Qualifying Event directly resulted from accidental injury.
No Accelerated Benefit will be paid under this rider for any Qualifying Event that directly results from self-inflicted injury or attempted suicide.
Life Insurance Company of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
8165(0703)
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 Page 3
CLAIMS
Fu. ELECTION
PARTIAL ELECTION
You must send us a written request to file a claim under this rider utilizing a form provided by us. Any claim for benefits for a given Qualifying Event must he filed within 365 days following the occurrence of such Qualifying Event.
Before any benefit can be paid under this rider, you must furnish us with written proof satisfactory to us that the Insured has experienced a Qualifying Event covered under this rider. Such proof will include but not be limited to:
1. A certification from a Physician that the Insured has experienced a
Qualifying Event covered under this rider; and 2. Complete records of the Insured’s medical history, diagnoses, and
treatments,
We have the right to have the Insured examined by 2 Physician of our own choice when and as often as we may reasonably require while a claim for Accelerated Benefits is pending. Such examinations will be made at our expense.
Physician means a doctor of medicine or osteopathy, practicing within the scope of his or her license issued by the jurisdiction in the United States of America in which his or her services are rendered. Physician does not include the Owner, the Insured, or a member of the Owner’s or the Insured’s Immediate ‘Families. Immediate Family means a person’s parents, stepparents, grandparents, spouse, children (adopted, natural, or step), siblings, grandchildren, or in-laws.
Under a Full Election, the Amount will be paid in lien of any future death benefit under this policy or rider. The Amount must first be applied to pay all debt to us on this -policy or rider. The policy or rider to which this rider is attached will rerminate on the Election Date.
Under a Partial Election, the Amount will be’ paid in lieu of a portion of any foture death benefit payable under this policy or rider.
The Amount must first be applied to pay a pro rata share of any outstanding debt to us on this policy. Upon a Partial Election, the Insured’s life insurance Face Amount or Coverage Amount, and if applicable, the Cash Value, Cash Surrender Value, Accumulated Value, Surrender Charge, and outstanding debt under the policy will be reduced in the same proportion as the reduction in the
Insured’s death benefit. >
The portion of the life insurance coverage that remains in force may be less than our minimum issue limit for this plan of insurance. The new premiums and
charges for the remaining portion will be as if the contract had been originally
issued at the reduced amount.
Life Insurance Company of the Southwest ; Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800} 732-8939
Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247
8365(0703}
Page 4
Ns
DISPOSITION OF ADDED BENEFIT RIDERS
ELECTION DATE
ELECTION
LEGAL REQUIREMENTS
INCONTESTABILITY
Upon a Partial Election, all riders will continue to be effective subject to the terms and conditions of each rider. Hf the Insured is eligible for periodic elections of Accelerated Benefits under another rider, the maximum death benefit that may be accelerated under future periodic elections under such other rider will be reduced in the same proportion as the reduction in the Insured’s death benefit upon a Partial Election of benefits under this rider.
Upon a Full Election, all riders attached to the policy will terminate as if the Insured had died on the Election Date. ;
The Election Date is the date that the Application for Election of Accelerated Benefits is sigued by the Owner of this policy.
To elect Accelerated Benefits, the Owner must complete an Application for Election of Accelerated Benefits. We will provide this Application to the Owner once we determine that Accelerated Benefits are payable under this rider. To elect Accelerated Benefits, the Owner must complete this Application and return . it to us within 60 days following its receipt. The Owner must provide us with the written consent of any assignee and any irrevocable beneficiaries. We may request that the contract accompany the Application to our Administrative
Office.
If the Owner is required by law to elect Accelerated Benefits to meet the claims of creditors, whether in bankruptcy or otherwise, Accelerated Benefits will not be available.
¥f the Owner is required bya government agency to elect Accelerated Benefits to apply for, obtain, or keep a government benefit or entitlement, Accelerated Benefits will not be available.
This rider is contestable on the same basis as the policy or rider to which it is attached. : ,
Life Insurance Company of the Southwest
Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800) 732-8939
8165(0703}
” Home Office: 1300 West Mockingbird Lane * Dallas, Texas 75247 ; Page S
Home Office: 1300 West Mockingbird Lane * Dalias, Texas 75247
‘TERMINATION OF ACCELERATED © BENEFITS FOR EACH INSURED
Coverage for each Insured under this rider shall terminate on the earliest of
1. the Full Election Date for Accelerated Benefits of the Insured; ot 2. the date the life coverage for the Insured terminates; or 3. the Monthly Policy Date following our receipt of the Owner’s written
request to terminate the Insured’s coverage under this rider.
TERMINATION OF
RIDER This entire rider shall terminate on the earliest of:
1. the Pull Election Date for Accelerated Benefits of the last remaining
covered Insured: or ~ 2. the.date the policy terminates; or 3. the Monthly Policy Date following our receipt of the Owner’s written
request to terminate this cider.
EFFECTIVE DATE
The Effective Date of this rider is the policy’s Date of Issue or Other Insured Rider’s Effective Date unless a later date is shown in the policy’s Data Section.
Life Insurance Compary of the Southwest Administrative Office: One National Life Drive * Montpelier, Vermont 05604 * (800} 732-8939
3165(0703) Page 6
~~ --Case-2:10-cv-09198-JVS-JDE- Document 5-1 Filed 10/29/10 Page 78 of 99 Page ID #:187
‘EXHIBIT “B
:.. Gase:2:10-ev-09198-JVS-JDE... Document.5-1__ Filed 10/29/10 -Page 79 of 99 Page 1ID-#:188- -
LIFE AND ACCIDENT AND HEALTH COMPANIES . ASSOCIATION EDITION
, ERE ANNUAL STATEMENT
For the Year Ended Decembér 34, 2009
of ine Condition ard Affairs of the Life Insurance Company of the S outhwest — NAIC Group Cede....534, 634 NAIC Company Code... 65528 Employer's ID Nureber... 76-6953004 (Cosrent Period) (Por Pesce} : : ; Onganized under the Laws of Taxes State of Domicile or Port of Enky Texas Country oi Domicile US Incemporated/Organized..... March 7, 1955 Commenced Business... January 2, 1956 Statutory Home Office 1300 West Mockingbird Lane... Ballas. TX... 5247-402 - {Stectand Number} == [GBy ce Town, Stale ond Zip Cod) . Main Administativa Office 4300 West Mockingbird Lano..... Dalles _.. FX... S2ATAG21 214-638-7100 ; {Seat and Nembar) ~ {CBy ar Town, Sint ant Zp Cod} fare Coda) {Telephone Numted Matt Address P.O. Box 589080... Dallas... TX ..... PS3S6-H) ; (Steet and Numbers P.O, 20x} Ckyer Town, Siete and Zin Code) Primary Location ef Books and Records © 1210 West Mockingbird Lare,.... Dallas ... IX... 2474021. AAR {Stestend Number} (Ry ar Town, Stale and Zp One} tira Coda} (Teiopihona Number} laternat Web Ste Address veo Heofsouthweat.com Statutory Statement Contact Michele Renee Holltield Fg-B38-335 ; (rea Cade} {Tetephone Santer) Extensian} reholiifisii@netionalife.com ZiAE S140 EMail Adtresg} fPax Sumber} : OFFICERS. Nama Tile Rame - Bees 1. Wade Hampton Maya Fresziert & CEO 2 Jacque Lyon Cretord Secretary 3. Robdaxt Earl Cotten . ‘Freesurer 4, Craig Alan Smith VP & Appoiniad Actuary OTHER Geektey Samuel Bid F Vice President Thomas Hyde Breernal Sr. YP & Chiat Investmant Officar Sregory Henry Barents St. Vico President Maryann {ama} Elke Vive Prosiisnt Sichole Susan Satis Sxeoutive Vico President Jaycee RoomLaRosa # - Vice President Eric {(rann} Lopez Vice President Carl Jeseph Lutz Exucutive Vico President ‘Egeabeth Hil MacGowan Vice President” Donald Pad Messer # Vice Prosidant Etheard Jones Pany tt Executive Vice President Rusth Barra Smith Sr. Vise Presitert Misheel Cusran Ward Vico President Keith Willam Young ‘Vico President DIRECTORS OR TRUSTEES Hehran{nmn) Assadi ‘Thomas Hyde Brownell Cari Josaph Lutz Exkvand Jones Pasty Ht Wade Herspton Mayo Stafecf... Taxes Countyol.. Ballas
Tha officers ¢f this reporting entity being duly seom, each dapose ard aay that thay ar tie deeedbed officers of sald aporting entity, and that on the reparfing perad stated above, all of he herein descdbed assets ware the absolute property of the said reporting entity, fee and cleer from any leas or claints heraon, except as herein stated, and thet this datement, ingether wih slated exhibits, schedules aad explanations therein covlained, annexad or toferted fp, is a fal and tue statement of sf the assets end flabiifies and of the condition anc affalts of the said reporting entity as of the reporting periad stated above, and of its Income and deductions therefrom for the peried ended, and have been completed in accordance witt the NAIC Annval Sistamect instucdons and Accounting Practices and Procedures’ acral except is the extent frat: {1} stele law may difer; ef, {2} thal stele mutes of requiations saquive dtferanees in reporting act selaisd fo acowunting prastioas and procedures, according to tha hast of thalr isformation, knowledge and belief, respectively, Fialhermore, the scope of this attestation by the described officers also ingiudes the related corresponding electronic filing with the NAIC, whan mepiired, that is an exact copy {axcani for formating differences dhe io electronic Bing) af the encosad slatemant. The electronic fing may be requested by various reguiators in feu of or in adiiten to the enclosed sixtemenL
iSignetze) : Signature} - — Sigretee} Wade Hampton dfayo daca Lynn Crewtord Robe Fad Coton 4. Prated Nama} 2. Priabed Nas} 3, FretedHanes - President & CEO Secretary Traswrar (gp {ite} 3 (Filg} Subsosbed spd satin to Belpre ra a, 1s this sn csiginal fling? . Yes |X} Nof j This day of 20 & Hine 4, State tha amendment number
Case 2:10-cv-09198-JVS-JDE Document'5-1 Filed 10/29/10 Page 80 of 99 Page ID #:189 °
Aniitomineewaote Life insurance Company of the Southwest i
hp apes spats raps Adit Asal
Bonds (Schedule Diesen sila hi ces ciesrsaepaissa neh tiseasasinsnsiines Stacks (Schedute D}: SA Pretend SO 5 ohio nechcananleca aieattsidamsittlannsitaat 22 COPEIOR SOS erence nrneeeernmnervan nein neumnrnnencunnscaniione misintanitenionnes 3 Morigage bans on axat estals Schedu's 5): ; BA FESR tenons 92 Otherthan S50end enue “& Realactetn (Schadkie Ar _ Ai Properins occupied by lhe company fless $0 SPOUMDIENCES) naenonnnains 42 Properties holt ter the production of Income feos 5.....8 DECIDE ir cas wan cic crac dtinoicsecand acinar oasis
43. Propories held er sela fess 3... encumbrances) ne nnennnnel.
S. Cash {@....(6.097,561}, Sch. E-Patt 1}, cash equivelenta &..99,03,599, Sch, &-Part2} and shertdoms imesiments (5.35, 7703, Sh. DAR nn ennnnse
& Contrast loans fincloding $0 premiums ORS} a nnn nennnnnnennvenrneirnn ners 7. Cthordwasted assets (Schedule BA). eeu nnneeannnie noe nmennnene 8, Renelvablas For sects em ie netseenci sangtioe eetentnsnenitennveene
i)
mt rary ote td
(ined hr eePhnt Raley HERAE RON
seimengore rns DS SO4 EST movnenrnes 1G S35, TES
nnn 108, 192, 182
+0. Subzntsts, cash and invesiad assets neg 140 9) en neers 44, Tite plants lose $____0 charged off for Tite newer Gfly) en nnonennnnrenninen 42. lnvestnent inowme-cs and ScetHeth. npn nenmnrane Poetbdtedesnabansbef detedt Regattas he 3, Premiums and consklerations:
43.3 Uncollected premiums and agents’ balances in course of callectiog. wns
#2 Dalemad premluma, agents’ balances and insisiiments booked but deferred ard not yet doe (includleg $.......0 earmied bui unbiied premiurng} a nnronee
43.3 Accued retossective Dremlums ee cnnnecestrneenrtemnennnnnninnenamnpe 14, Relsumnea:
44.4 Amounts recoverable from relasntets on penance nnenroninsmmmeanmniammanune | rennescraranann Ted tt rena eares en AE 1 TE
$4.2 Sunds held by or deposed lth nelnsued COM GAMES enn eneneerenennernnae| ernannnrnened 72825 1 | pena nnnn 22,828
44.3 Oneramounts necehabla andes relents LOAVEOS ennninnaaninecernese : : Ee] ERRER ROR, 3] SORE 15, Amounts receivable mlating ts uninsured plans ee enn ne nner 46.1 Current ederal and fovelge Income tox recnverable and interest thee nuneneenum 16.2 Het deferred fox A856b nenmmiurmesmeineeninmnsennnenunmyrcisamns sesame | 2 47. Qoseandy fonds recelvabia or on Gepost nine snerenumnien menennmpneiiimene 4B, Electroniodate processing equipment and SoMEFC.n cecum en ete ences freer en 89-259 19, Fiemfur and anainment, inducing health ore dadvery ceca ee Pe eeenrmeennnen 2 BSS 20, Not edjesiment in assets and Habiities due to foreleps exrhanga FaleSeeennennecnsee {on 24. Receivables trom parent, subsidlaiies apd alates — nan nnm ane nmeenorne f nmrnaee cB SB AG2 22 Health care ($0) ead ather smounts Tecahabl2.manennienninannarvronrant narnia 5 ST,002 23. Aggregate wite irs fee otter Bhan Invested 268089. a—-vnnarnnnmernanourrnnen enancrnat 428,205 |
24, ‘Total assets exctaiing Separate Accounts, Segregated Aceouns aad Proteciad Call Accounts filers 10) 45 23} a ree mrcnereriernee nc ne nena ninue ne Rena nee
2. From Separate Accounts, Segregated Accounts and Protected Cel AcegUIS oman. 2._ TOTALS {Linas 24 ard 25 win arnt ns ncnimandensnrnnsncmranmr anak mivinnnnna| anne Leo aT ATS : DEVSI.9 OF WRITEINS omen en B79 FEO 82 erinaninad SOFT
ever OF DS HE
22 SAT
PES 5]
anno iB, 25D 581,773
nee Raa pang aaa
C804, Sax options - forty SOSHIORS . wreeemenceisenenmeecrncrars rrcemer reesei HOR, FSR A RE ase ar enti css btti sneha shins sccerntereennreeseenncermmerinried POSTS, CDS Bok Wait Ae ncn neenenesenreraterseenanarncnansunsranetventbevettersatetsmannerineteh CaS, eenete remaireng wate-ins for Line S trom averiow PBR aneveverrenarennarsncananinsse
treme Mahushssrer teerasatiehons
anarareen nnernnaredt
Case 2:10-cv-09198-JVS-JDF Document 5-1: Filed 10/29/10 Page 81-0f 99 Page ID #:190 -
ji aiiacccceas Life Insurance Company of the Scuthwest : LIABILITIES. SURPLUS AND OTHER FUNDS —_
7. Aggregate teense for Be ecnizacts $7,104,045 854 (exhibit 5, Line 56996003 focs $F Included in Line 6.5 Gaiduding 3... 882,208 Modo RES61V8bwnenn ausinnnennnmennnnnnnnennatnmnnmnrtinnmsnnn | mmaarunnnid JEG EOS | moet nnd SISA SO Aggregste raserve Sox accent and heath contiacts (Exhibits, Line 17, Col 1] fineinding 3._._6 Mode Reser. We TET AGS | penenn-nnemnnnenn TOOTS Liahity ior deposit-type canizacts (ExBR 7, Une 14, Col, £) fineluding $2 Modo Rese ¥a an emnnnnnmnenniine pararsnipmcsoann SD PST AUG | arceeinenernnenen $E96 OF Contac caine: 43 Lie Exhibit &, Port 1, He 4.4, Col 1 Jess summa? Gols. %, 10nd 19}. nnn nntenerenete nat stat stent ies enn panes nse SE TEE 42 Anddent anc hoslth (Euhiba 8, Part 1, Line 4.4, sumot Cals. 9, 0 and 19) ne er neeenrenricenminmennin | sensetnmetnnstnnZ$ SO 5, Polleghokden' dividends $___._.0 and couperts $___0 due and unpaid (200084, Line 10) ee 5, Provision for poficyhokisry’ dividends and coupons payable in iojowng celendar year - estimated emounis: 4 OlSdends apporianed for payment fisckiciag $F MOEap nrmecesrnnuninrenensrmuns eines canines cas cacscataacad sence 62 Dividends not yat apportioned tinedigting $8 Ca One nena er amnon etree cian oeeinincncnall anda 35 Coupons and singer benafils Gneluding $0 MOST) a arene nee nen annnentinetenaieninaiaemnmasanspennennentnns 7. Amust provisionally hel der devecred digend poliies not includ bt INE 6 nnn mann ncions nen eernernenee 8 Premaons and ennuly considerations for iis snd accident and heatth contracts meshed 1 advares estS. 8 ékeoenf, Syeluding $1,555 accdent and health pemiurs (Exhiba 1, Part 4, Col 4, sum of Les 4 ad Hee %. Contract labilities not inetudad eisewhere: SE Surrender yaloes on raced CONG CES necrae mentee nen reteset rae eehutnee thereto on tne ded 2.2 Prndsloe for-experience rating refimds, neuding $_____0 ancklent and health experience rating refs mewn | 93 Other ameonts payable on rmemezonce, inckaling $f sseumeed and $0 2d nnn meemnmenrnminnrtataefnavin ” 94 infarest Melnfenance Reserve GAR, Ling Bp a ateeenteinaneenenennnatattatatteat edna “40, ‘Comendssinns fo agers dive or acersed - life apd annelly contracts $__ 255,006, eceident and heath $._.8 ead deposit-type contaci funds $8... 14. Comsiseions and expanse alowenves payshie on reinsufenca 235024 ene 2 Generel expenses due or accrued {Exnibd 2, tna 12, Col. SL. 13. Transfers to Separate Accounts due or acorued {ref} Groluding $0 acomed Sr engense algwances ranognized in reserves, net of rainsured allawencas} 44, Taos, Ecenses and fees dus or acormed, axthiding Rdaral income fares (Exiaba 3, Line $08, 5p aro ommnnene mene mess 45.1 Curent lederal and foreign Income taves, retudng $,......) en tedlized capital gains $o9s26} neve mnietrrtroiminm 15.2 Netdefered tax Bablity.... 49. Uinesmad Invesimant Iecr 8. en nr nine caren nama neneiemeneerenchmeneterenvereiny tant henge taunenenenementnonee 47, Ameunts wahheld or setained by company as agart OF SUSAR ce nenenen cin mrnmitinreiminaes mpene crunenenenennne erenceemevemernd 18. Amaunis held ez agents ecouant, including $......d agents’ cred Dalerieta oo en nnenneneinmennaamneartnes | aspen cenanmaen Abad BT 49. Ramiftancas and Hews met 2890080 eece ney nueetineeeecreineennieadee tines mutnis mines aan unatstustamnermiaran snenacrreuneireencrsean | ecnmeoanmnans tt FOC |. 20, Mefadiustment ln-asects and fabilities dum 2 foralign chee GIES annem erntvntninstetnniaeseretersnemeiin ue atom nee
xe
peered eee nai adeinanetnin imate
teal he Ret Bop MPs es berms pan nt,
AE AEN PA IS HSU pT Fhe aR NL Hat NR rk
23. Miscetancous lishilies: 24,3 Assetyatvaton reserve {AVR Line 18, Col. 7}... 28.2 Remsurance in pecnsthorined Conyers none monenemsncrtestinn eaten ctaeannpnemacanaannrmtnr mares umemincimimessenttes | vemetenmarnmrtstarmmattrtata
nurs netaninnanenteeerciminnanrenaanntctrnstansnstanwnenainerres | acanlebaripaiet mts AOE OES
24.3 Funds held under relnourance feates with unaatrorized relnsurers —nnnennmernsmiennteerenmion Casein suntan ail cciassamaitin Od SA | 24.4 Payable ts parent, stcbsidindas and afiiates.. jcptilaaniansia nisennin pit ies iets named
24.5 Drafts cubtesding. ne an astanabsnuhaet anapinsapemsgametapals hire nto bet
246 Lsbidy far amounts held ander uninsored plane... indecision cs mt mio sore cisiocnaniriaiata
plac ot a7 ; nen TORE, ‘Tela Habits excluding Seperate Accounts business £5088 1 12 28h ennenncnnme nounnmmenrinamnnriwnctasinoa tent A From Separate Aooounts S14 re6ith an ann ernrensnsnnen nnsesnoun ninsh monennni mre rensnrasenentenhtedyteitnttineluteentnt aioe Scaa al
“Total Rabilfies (Ene 2B.and 27} nee panenernenscinnnsnunnemanmnnninannimansnaneassomennunnininntmenemnememnennrns| sen 1T 520203 |
Prabared RO etn serntner tnveteotietptte pla bandt itt dents pin lente AN Aggmgete wstis-ns fer othes thon special sumplis finds. eee nen ia cas sates as ling pig pct cars ance cec camel fc aenin Serre rte een aesenrneneneey neem nennnemnge sarneenesermnnes saa Gross paidin and contitated seapius (Page, bine 34, Cal, 2 plus Page 4, Line $4.7, 208 fh neon ne | mene Agpregate arta-ina fer spack! suvplus Amis. eee earners i: eee Unassigned Sins daw pi re) aa nnennsnnncesneetnetencutunrdctenenstanssensunsettnan Pomerrene) rer wnnenn ETE IAD | Less inaasury stock, 2 cost :
3.1 ....8508 shares common frelua Incloded in Use 28 i cadets tacncenn tencaneae incase ab ioicinnaninmasisnccrnarin | Soca sien fe cineca
382 0200 shares preferred {value included ip Une 30 $0 nn eesnsnee nee manntancermatnntenmtenet pmrentststmtcre | mpetaeeetceniet tment | banengneNtash tetany on A47,334 S57
aa.nen nen
Rwermrerworens stat tt <b
meters niveynt repstad segue Rreseas ene Aam:npat wemeyerert nanererratnrire manent re
BERLREBESISR
wr. Surplus {Tet Lines 3f + 22 +53 + 38-438 -26}-Grcluding 4.0 in Separate ACoOUNS SROMEN nena nanan mn ABD 204.516 ee 3B. Totals of Lines 24, 30 and 97 Page $, Line G5) a enee neers eneenenemetr erento te cesta tne ast canst 15 39, Fotals of Lines 28 ond 35 Page 2 Line 28 Cot 3h. mnon G52, 984 TO
» Spe options = ShOf PSSMENS cen re ne ett . Broker deposits ont Loanad Sem ih28 en nnnnenoim en nensncna.nemm spinnin mee maenimensn meen nevitimerttetsbsbiepabees aban
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Case. 2:10-cv-09198-JVS-JDE. Document 5-1 Filed 10/29/10 Page 82 of 99 Page ID #:191
xe Soumntizheyn mete Life insurance Company of the Southwest
SUMMARY OF OPERATIONS
"8.4 income from fe2s- aasoclated wah imestment management, adminissaton end contract quarantess from Separate Accouais., B.2 Changes and fess for deposit type Contes nen ceureennen ercen ete ttn memeneenenncteeneienenrmeninnntts Minette rtenenert Bd Aggregate eribeuins for miscslancetss FON nn nearisimten ener tvtettetenit meh pce Rats manana i
Tats BES 130 BF hecnennnnenneernere nnenninnenenne Ea Ons Dest DERTS nen cteenccstemnne inn ad ceases te ese tmaln ms name eacaens ‘Matured anckwcmoents foxnluding guaranteed ehngdl pire on Ioan aida fn Meer rercenein nenrnesasee stent nina taser nre ann inate Annulty benefits Exbiba §, Par 2, Line 6.4, Cals. 4 +3}. pap anager eng betsbe rns arartner tearm pester be iNet Dsahitty tonelite and benefits under accident and health CoRR ere seat nttttnetenaretatntentenehsherihttenpantntntieoeniintnies | . Graranieed annual pure andowmants.and similar Resets. na nceaneeyseestervnsninsnetersnsoun menencemunnaeneratacceeanenetenerinee
Sumrender berefits and-ndihutrawals for 8 CON 78S, sn nni nnn ere are eueemenn seit sine ttt eenaenrnmutnmatsnuan Ea oun wavercioas... ssid rapid ian ener cap inci pcsgs inin eaeiaevenin mA nai niin Lament . Rierest and edjostrents on contract or deposiiyps contract fds natin enerntarmrnen ce unse-onsnsotechabatatatnderte
Payrpents on supplecientery contrasts with Be Comin get cles eens svansereunessmnenn meinemanineinevsecrnnemannaensneentvent
inevoase in aggregate reserves fer Ifo and senidant and heals contracts ene ner nmounetennn eerie rnnite
Forbes (LIS 19-69 19) seein narcrenesneneneneennansmeestensvmeemstsnheicheetenevmaneersserveteratatdettaptnahabetbatutar tuff mpatadntiatah ret pattie
. Commissions on premiums, fA NSAID aan sca baat nS {direct business ont}
PER 1, Part 2, Ung $1, Cad, 23ers sevenstesvenst-evsenm-avevse-rscest-psetune respatnyacanbeetbabetindnivahnba bat tertadateemted wad Commissions and expense alowances ca reinsurance assumed med fExhit 4, Prat 2, (30 28.2 Cob He eneesnecenrtnaetanni ware General insurance expenses {(Euubt 2, Line 10, Cotas 4,2, 388d 4) ee ete enter renee meeremeneet rerereet oes fo Insurance taxes, Soonpes and fees, excluding @deral innume taxes (Exhibit 5, Line 7, Cols. $42 + Spt nnn nner neneniee trerease innading on deferred and unosbected pre Hatt senor enetern mecretet retreetenann maneinseirnemnen date tatnnartetnctamaeensntn | det traristess to o¢ (hod Separate Araounts Pot Of reltseFaR CR wesw sepeeensnnge mete meen eewmernetieenehestehnenenen Rename mente
Tolets Bines 28 90 27} mes .
Net gan foe operations before dvidenis to paleyhokders and Seteral inooens taxes (line 9 milous ine 25}. ee aaa” sass Dividends ta pete yhotdets nassneimnereiseeneasnmsneamincrsap meinen cscs Neitad cm na iancneiontenbihisiiauaaemteiet Us Ret coin fom onerafons ater dividoncs tp polzyttiare and befora federal incante bases (Line 28 mines Lins FAL: een] Fadorstard ‘foreign income faxes Inourcad fexcdoding tax of Captiel GAINS) a. name nenenrcinmernee ation inioinanenssasth cua Net gain from epevaiens after dvdends to pocyholders and federal Income taxes ard belors realized
cept ga or fase) fs 1 FRENUS LR Seen nnenrsnsunen neers a Nef raalead capital quins flosses} 5) eaclading sins fesics) tensioated tothe MR) ees capital gains ta! $__2 230708
exchiding faxes of 3....{10,931,983) trensterted 9 ft PAR) wn vine nncmen main nanan nam meeenaneteneriatiyett ite aby se eet he Nat income (inte 33 plss Lita 33 cnn neeteeceeverstetnvtnstegvtebeenbadannet ets Dabsihadatet aba hanancaetarnebetnpdidndbabpaintatamatatniinanutannss | msrnmamns Obed 14 oe } CAPITAL AND SURPLUS ACCOUNT Capital ond naples, December 1, peor yaar Page 3, Lite 88, Col. Zpic neo nncennnaummtcrastannnenehbetnateefemnniann ment) Ret inonme Gite 3B) neemennnernes ne ns ad Ss hsb fama rh nimi non estat Change in nel unrealized capital qaine fosses) less cayital gains iax of $_... ese etanercept pshctind pinhatsh Change it ret urzsaiizad foreign exchange capital gait Gos) ee anseinnminersnnnenineen Change is net deterred oom Bo em eesieessnminitentine ep gecnnmsn eases mmaanenmniestshvt abide pine RAe nme a Ft Change in nonadiniited 288688 anninnennm . ten pate psnenenetnndectnteitekiechentnsatatns Chenge in Rebilty for reineurance in unautherlied Coe Da nS neve netomat atettnetnianniivenies pe ianemionintit Change in reserve on aoceumt of change in valuaSon basis, (acreags} or decrease [Exhibit SA, Line S888809, Cal, 4}. nnerunmeunnne| « Change in asset voto PaSI8 nee nenterm ins nstiminsene ne onbson tented dena pepnemmynenr est ahd ibibo asi pinene Change in treasmy sinek, Page 5, Lines $8.4 and SH.2 Col_2 minus Col. Fp eae ccc ien han akan nna aamasy Surplas (contbuied 40} withdraw Irom Separaie Accounts during period erate sapere tet tart Cther changes fn surplus in Separats Accounts Statement, nun cnomiransneunsn sans sorerrinstuin reenryni cette niente eeemneeeentere
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-Case.2:10-cv-09198-JVS-JDE- Document 5-1_Filed 10/29/10_Page 83 of. 99. Page ID #:192-. --- :
Anatemetien roses Life insurance Company of the Southwest CASH FLOW
CASH FROM OPERATIONS Premiums coltocted net of Pom SUTa R00. ane ren rence mere et ae snratenenntatir
Frome finns tect BN ci cc cr ian nema aces ASL Sas ase hip simem nce heel §. Baneda ard toss ralctad payments. annecnnrrnnmesnnnins FREON EO IA PRET WHET Eel eee Crk OOH OE TRIE TREE §. Mettanslers to Separate Accounts, Segregated Accoants and Protected Call ACCOR vane annnueruennvene anon sintlsf Santen vabnnrencineninenstins: 7. . Commissions, expences paid and augengate aliens far dedicen 2... nae con nemnnnonennammenaninnnrnmacie, mannan nmr tee, $2 8. Dividends pald oe poloyhibS06. nnn anmnmrnnneinmnnesinensminineinnnnntnnsinannneninrianeansnine| simmnnermennnndt AB] . Fadoral er} foreign income taxes paid (recovered) nel OF Sma 1X ON COPHA GAINS OSES anne arene 10, Tot fines S threogh Sp eneaneere 11. Net cash thom operations (Like 4 mints Line 10). nennee newsmen nnsnnicni iden nameneennnnnevinnsnenemee nn CASH FROM INVESTMENTS: 42. Proceaiis trom invesiments sokf, aatonad-e repaid: MS RI acces sca sncitacnnschonsbtih skeen hipaa ieee ipa ocd TR a aa os stele tnd cinema dine Are dcninen near n naipninnAmniceninamaasechusneelecn re PLS: SOROS ROE anes ieseititceseek inches Pann naraataalaisiraseassnioibcarh cisacnrecevanenscaastaial FZS Real 01a. acnerrteneetnerintacnescrmmen pan nae ara foes eh ntfs aaah es toraspceunniecrifeniacnien na ominaeAa 425 Omer ivested 656286 eee ee np ne neem 12.8 Nolgains or Sosses} on cash, cach amnitvatents ane short-term ieee Nn’ aunsnuree sarsnesnuenivnisenansnneeiebsinn4se 12.7 Miscelleneous proceeds. YZ Totel iwastnent proceadts (iteS £2.17 $5 $27) neater rerne recarnents penene enna See ieticaes a 13. Costefinvastnents amquied fong-terma cn: :
18.1 BOBS ..nnnnnenen naecnmemaaimee nem nme Rania nasehinel RisibtAthettadshib new binrtahewrntonmennnmeuminnemanste|
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Cash provided fappled:
484 iicnssieuis aersanmeae 46.5 ‘Dinhiends $0 stockRobters, ani nnnsenseneerecmenen meimenng semen poner rgd nett adjuster atin tapiniteinetarth 16.6 Gther cash provided fanpied) anne 17. Reteash fom finsncing and miscellanecus suces (Lines 18.4 1018.4 minus Lina 168 plus Line 16.8). nnnennnnne
RECGHCILIATION GF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 48. Netchange im cash, cash equivelests end shorbierm Investments {Line 11 plus Lins {5 0US UA Taennnennnmnnames| snmnennnnne 42. Cash, cash equations and shortens Investments: 19.1 Beghning of yan,
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Case. 2:10
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AngSiventixteyredta Life insurance Company of the Southwest
EXHIBIT OF NET INVESTMENT INCOME
Profasrad sincks of affiPates nin. neteern sonvnineerennenenesecnon oernenem en tenihate staat suite hs aiuto Atha seen
Commons Hvcks (UAT BACT eee mene anesve en tee tirenereveurerniete peti ubehsfvdiiehit bbe bth eltern dat eanerenenee venom COPnMO SOGKS CF ATTRA ES enetanen ntnnsen tienmrsenenenmemnnimeneeernetatinhtbtmeihanenftimdfeintetntetefetcaperttate MUN OR IN cei eee ete sicher ncn eeriante aes aanhitatuinina tan
Pend ON anccoecermienengnnenementecn i cimm arip-tsindiahdd Neil nin ncesichievenswrensnimnseenibonstuninininndge nibalaarnnsin tin
Contr Set nn ne ne werner tein nobdtnsten pera st putiahtdartcbaomrtentonreertiberetrtninannannee f Sash, cash saplvatanis and shortterm Bye ERS wenenesneninnnrroamenenme men nerimunssmeteshenatsnlehietvestes
Depreciation on reat estate and other favesiad esset8 ene
Aggregate aris-ns for deductions from Soyestment M00 Gn senne mem mre mieranate ares famine taafatamanirtannsbeiencnel Total dedugieas (Lines 141 fargughh 15} cast ner inmetctaneennetrennennneeennncinna
Net
. : 30s $893) dl ina 8 above 5 weseiealsarines beene SMNaE a cena
tae tne terete eee Hen ict rea ache rnd realty A/a hs be pce a fa
Sinan ofmntig wt ri Shor vertu page. nteeteaansatte amaa
Inchades §.. 714,045 022 eccruel ot socentioas§. ~~81.369, 72 ammontaation ol prenstan and less $.-.14 875,587 paid for accmded averest on puechases,
incdades $,_-_0 acerunt of discount ess $_...._.fi amzyization of premiom and less $0 paid Jor accrued dividends on purchases,
lnctudes $.......0 aeurual of discount tess $........0 amortization of sremasn and ESS S....cul pad tor aacnead interest on purchases.
Inelades &. nna O oe company's occupsnty of Hs own buidiags; and excites 3._......0 infarast on encumbrances,
irelades & ..._.0 semua af scape less $......0 amerizaton af premium and i999... pale dr accroed interes! on purchases,
incksies $_._...0 accrual of discount fess 3.0 amortization of premium,
incledes $..,...0 investment expenses and 3... Investment takes, fcenses and fees, axciucng federal income faxes, attributable tx Segeeneied ard Sepamte Accounb, includes $.....2250,000 interest on surplus nofes and §........0 interes! of capiiel poles,
inchsdes $.__..0 depreciation on real ostatp end $.__....0: depreciation on ather invested assets,
EXHIBIT OF CAPITAL GAINS (LOSSES 7 Zz : 3
Bonds axempt fom U.S. tit nnnnnnnnnnsneenecnnnnenns |) ‘Other bonds {unafilfiated) annem nnunninnnninnnnmet: Bonds of aisles, oe neirnrtenrenreneeenenenemenenanse seit Pepforred Sick (una TB ated} ne nnmnonsnmnmnnecnacen Paadgmed SkCkS Of ASRS ee ene erence Common stocks (unafitialed) nnn nnnninmunaenens Commun stocks of abtiates,.nesonermssecrhentneer nan stnrnenms
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196.......
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Case 2: 10- “Cv -09198- JVS-JDE © _ Document o- 1 Filed 10/29/10 Page 89 of 99 Page ID #. 198
hodtieemntoctsynsosce Life insurance eainpany of the Southwest
EXHIBIT 2 - GENERAL EXPENSES
Expense of investigation and satiermem of policy dale | co eee aNmtleR orc tet teerirneetmstenimiahd a
Foca Sart gh od aeRO | PAEGR OES nenmnenenensinen na} Printing and SOY ne tes etenentnenenninnsteinttenteenintt fire sere of furniture aad equipment. Ss equpment.__ PipnaataeeNRAeATTR Gennaio EP oad nbc pate pene orgs NTE WSURSNCe, Gute pt OF MAE OF eee ennctirmre
Rfloralanacits FASB ne ceannrerenernnunrnnenerneesemaana Coitection end hank servieg charges at neenreesenerneunevenas
pecernpenonirs ple ee pesoh -stlayrao charged off fess | re mcoverd) Agency conferentes other than Weak Mestegs we Foal estatta xen 8S. on necnenesierensrsnnpeninmaseeien movers tentneeiet investment expanses nat inchaded else heres nramuannneramenne Aggregate wete-lns fr expensas__ ore General expenses, FROUTED conn agains pea aint
. plus £9.360}4}s {a} edeseisaeagoradl oe wom ee a pomvaisiztes.
EXHIBIT 3 - TAXES, LICENSES AND FEES {EXCLUDING FEDERAL INCOME TAXES ee ee
PSL}
Aggregata wettie-3 Total Lines © eighs Boo iencnmmnemmmsninecttn sneer enthtgemendarteine he Amour Cu Sid CSS nis nnn nin nec: pemenoun meen arin
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Provision fet deferred divédend comteads, ee ence ri venue idnstetnrenionaninen hae reinrrneetetntinstersteinitranhamaiatatnansbt Amount provisionally held los deferred Ghidad coobags hel chadadin the 12 iccedcacninka stinnnmnamiennicmnas
Total Likes FO OIG 15 en nen nee genie mits ene tn Rene teetnttnttent manent ptep tat
Total Som prior year... é Total dividends ar relunds (Unas 94 15—1 16)
44
___Case 2:10-cv-09198-JVS-JDE. Document 5-1- Filed-10/29/10 Page 90 of 99 Page ID #:199
nx Seimatorteyea ote Life insurance Company of the Southwest EXHIBIT 5 - AGGREGATE RESERVE ie LIFE CONTRACTS
gone. #1803 DEN... O40N0G9. §9:0902 12% ML es ssasiantin rics ta onsitaatsanwrasimarr
DHOSOE?, 58 CSO V2 GRVM nn ssinn eset ensnetennt startin eterna ia TANG. £8 C80 4% CRYNSnncnrten cern rie eit cere ire eteneri te enatstannetatte SPOOL, SB ORO S BZN NR en nen rst tetetetetntpcpin te enter e QIGGON. SE CSOA UI CRYIN ene enn mermeiermensiemineineite innaees OCOIE, BECO 8 UAB ALB ML etree tatansinemaisesnteinietananmntibabenbattiias BINOCID, 5B C503 125 ALB CRY. on pe nentmmnnen-rnnmensninannmntheueminns dats
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Case 2 -10- “Cv -09198- SVS: IDE _Document 5- 1 Filed 10/29/10 Page 91 of 99 Page ID #:200
AnaSemettataypomecte Life Insurance Company of the Southwest EXHISHT §- AGGREGATE RESERVE FOR LIFE CONTRACTS
OA
424
Case 2:10-tv- -09198- JVS- -JDE Document o 1 Filed 10/29/10 Page 92 of 99 Page. ID #:201 |
hen Sttmeitehomnesota Life Insurance Company of the Southwest
EXHIBIT § - INTERROGATORIES ‘4.3 Hes the repoeling ently aver issued both paricpaling end res-parikpating combacts? Yes{X] No} j 4.2 tnot, dote which Gnd 's Seued__.. 2.4 Deas the reporting entity at present seve both partiinaling and nen pexieipating contiacs? Yost] RIX] 2.2 pol, state which kind is issued... NONPARTICPATING 3. Does the reperting ently af present issue of have In force eantracts Brat contain non-quarentaad elements? Yes{X} Nof } 1850, allach a statement that contains the determinciion procedures, answers tothe niscrogateries and an actuszial opinion as deserted la the Instructions. 4, Has the reporting enlity eny assessment or sipulated premium oontrects in trea? Ht so, state: Yeast j NolX] 4.4 Assoutof nsucnce: en 4.2 Amosatofzesent:. Pisciedidecin satin tetinncenies 43 Besiscfreseres: 44 Basis of regutar assassmentx 4.5 Sasis cf spacial essessments: ; 45 Assesments colacted dung year. Baenerentermnneennneneent §, Bihe soatrect loan blarest ras quarsnzed in amy ore or more of Rs current auad contects & less then $%, natin tvanca sti be contract ban rate quarenises on any such ntatads, & Does dhe reporting eniily hold reserves for any annauty onabads hal aro bess than the reserves at woakd be Bed on @ sandanl basis? Yes{ j NotR} 6.4 Eso, state the amount of reserve on such contacts on the hasis actually helt: ae ae sat 8.2 Thatweadd have boon bold fon an omc or anqeoximate basis} using the actual ages of the ancuiiznts; the interest ratefs} used in G7, and 2 tha same mortally basis ‘ose hy the reporting eniity for the valuation of comparable annully honedis Soued standard dyes. Pise seporing anity has ne companihis annally banafits ior standanl lives ip ba valued, he mortally basis shal be the table most secently apmvoved 2y he Hats of domialla ioc valuing individual annuity Denes: Saeccrantirsmane maren meenine:mamey Atach siatement of methods employed b the? valuaton, : 7. Does the sparing enliy bave any Systheis Git contracts of agreements h edectes of December 31 of fre caront year? Yost j Nef} 7.4 H yas, state the 2ofel cedar amount of assets covered by these oonvacis or agreements: - Risancn ce duracewcsinex 7.2 Specty the basis cir value, amorized cost, eft) for dafemising the ancunt 73 State the amount af reserves established for this business: Dane terme
F.4d identity ohare the sscerves ere reporied in the Blank.
EXHIBIT SA - CHANGES IN BASES OF VALUATION DURING THE YEAR [valuation Bai
12
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AndiSatmairhaya Mode Life insurance Company of the Southwest
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feud Sicemelintoe ngotm Life Insurance Company of the Southwest
‘4, Summary of Significant Accounting Policies A. Accounting Practices
The financial statements of Life Insurance Company of the Southwest ihe Company) ate presented on tie basis of accounting practices prescribed or penniited by the Texas Department of insurance.
The Texas Department of Insurance recognizes only statutory accounting practices prescribed or permiited by tha state of Texas for determining and reporiing the financial condition and resutts of operations of ar insurance company for determining #s solvency under the Texas Insurance Law. The National Associaticn of insurance Commissioners’ (NAIC) Accounting Practices and Procedures manual (NAIC SAP) has dean adopted as a component of prescribed or permitted practices by the Stata of Texas.
With permission of the Texas Department of Insurance, substantive amendments to the NAIC Accounting . Pracices and Procedures Manual for SSAP No. 10R, fscame Texes— Revised, a Temporary Replacement of peor - ig permitied. The Company recognized 2 gain in surplus of 98,246,061 with the application of AP No. TOR. .
A reconciliation of the Company's net Income and capaal and surplus hefveen NAIC SAP and practices prescribed and permitted by the State of Texas js shown below, ;
State of
Domicile 2008 2008 {1} Net Income {Lass} Fexas Stale basis 3 54,774,524 . $37,005,494} (2) State Prescribed Practice income} 1 zea 0 (3} State Permitted Practices {income) TX - 0. fa} Net Income, NAIC SAP 54,774,524 (37,005,494) (5) Slatutory Surphis Texas basis 484,063,454 426,421,387 (6) State Prescribed Practice {Surplus} TX LQ -o (7) State Permitted Practice (Surplus) _ iz 8,246,064 -0- 8) Statutory Surplus, NAIC SAP $492,309518 $ 426,121,367
8. Use of Estimates in the Preparation of the Financial Statements "The preparation of financial statement in conformity with Statutory Accounting Principles requires management ic make estimates and assumptions fhat affect the reported arnounts of assets and liabliities. }t also requires disclosure of contingent assets and jiabiliiies at the date of the financial siatements and the reported amounts of revenue and expenses during tha period. Actual results could differ from those estimates, -
C. Accounting Policy Life pramiums are recognized as income over the premian paying period of the related policies, AnnuBy considerations are recognized as revenue when received, Health premiums are earned ratebly over Bre tenis of the related Insuranea and reinsurance contracts or policies. Expenses incurred in connection wih acquiring new Insurance business, including acquisition costs such as sales commissions, are charged to . operations as incurred, ir addition, the company uses the following accounting pelicies: {4} Short-term investments are stated at amortized cost. (2) Bonds not backed by other loans are stated at amoriized cost using the Intemst method. i3} Common stocks are stated at fair market value. (4) Preferred stocks are stated in accordance with the guidance provided in SSAP No. 32: (8) Mortgage loans on real estate are stated at the aggregate unpaid balance.
(8) Loan-backed securities and sinuctured securities are stated at the lower of amorlized cost or fair market value. The rerospective adjustment meihed is used to value all securities.
(7) Not applicable. (8} The Company hes minor ownership interest in joint ventures. The Company caries @ Perinersiip
Interest based on the underlying audited GAAP equity of the investes. Investment in Non-Guaranteed Federal Low incorhe Housing Tax Credits are carried at amortized cost.
13
osu’ Sipcareat fx he yoat 2068 oFihe Life Insurance Company of the Southwest
(@) Alf. derivalives are stated at fair value.
(10} The Company anticipates investment income as a factor In the premium deficiency taiculation, in accordance with SSAP No. 54, individual and Group Accident and Health Contravis. .
(13) Liabilities for losses and loss/ciaim acljusimant expenses fer accident and health contracts are estimated by the Company's valuation actuary using statistical claim development modsis to develop dest estimates of dablities for madical expense business and using tabular reserves employing mortaltyimorbidily tables and discount rates specified by regulatory authorities for disability income business.
{12} The Company has not modifled its capitalization policy from the prior yea.
(13) Not applicable.
2. Accounting Changes and Corrections of Errors A. Material Changes in Accounting Principles and Correction of Errors None
3. Business Combinaiions and Goodwil A. Statutory Purchase Method None 8. Stabtory Marger None &. Assumpgon Reinsurance Mons D. fnpairmant Loss None 4. Discontinued Operations None 5. investments A. Mortasne Loans, including Mezzanine Real Estate Loans {1} The maximum and minimum lending tates far morigage loans during 2009 were: 7.8% and 65%. i2} During 2609 the Cornpany did not reduced interest rates of any outstanding mortgage loans.
{3} The maximum percentage of any one fosn to the value of security ai the time of fhe loan, exclusive of incured of quaratieed or purchase money mérigages was: 75%
Current Year = Prior Year
4) As of year end, the Company held morigages with Inferes? more than 180 days past dus with a recorded investment, excluding accrued interest
tA iP
a. Total interest due on mortgages with interest more than 180 days . past due § 2 $$ ++
{5} Taxes, assessments and any smouris advanced and not jncludad in the ; morigage loan total $$ G@ $__+4+
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