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What is a Coinsurance Agreement?
A coinsurance agreement is a contract between a company owner and insurance company where they agree to share the cost of a claim. In other words, this agreement establishes how much an insurance company will pay, and how much the company's copay will be. Sometimes, companies choose to share their liability with employees for each covered event, which results in a shared cost between these two parties, as well. When this is the case, the coinsurance agreement also details how these charges will work.
Overall, the coinsurance agreement serves to ensure that both parties understand their financial obligation. It also provides recourse when one party fails to pay their part.
Common Sections in Coinsurance Agreements
Below is a list of common sections included in Coinsurance Agreements. These sections are linked to the below sample agreement for you to explore.
Coinsurance Agreement Sample
KILPATRICK LIFE INSURANCE COMPANY
Shreveport, Louisiana
Salt Lake City, Utah
3.8.1
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Experience Refund Formula. The Experience Refund gain (or loss, if negative) for the then current accounting period will be calculated as
follows (all amounts shall be net of the amounts allocated to Existing Reinsurance Coverage):
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(i)
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the premiums earned on the Policies for the period in question; plus
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(ii)
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the investment income earned by the assets held in trust in relation to the Policies for the period in question; plus
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(iii)
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the total amount of the reserves on the last day of the preceding accounting period on the Policies reinsured hereunder and then in
force under this Agreement; minus
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(iv)
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the total amount of reserves on the last day of the current accounting period on the Policies reinsured hereunder and then in force under this Agreement; minus
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(v)
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the actual commission and administrative and support service expenses incurred in relation to the Policies for the period in question; minus
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(vi)
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the premium tax incurred on the Policies for the period in question; minus
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(vii)
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any benefits incurred on the Policies for the period in question, in accordance with the applicable terms of the Policies.
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3.8.2
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The Experience Refund for each accounting period shall equal 97% of the gain so calculated pursuant to Section 3.8.1.
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6.1.1
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carry on its business in the ordinary course and consistent with past practice, using reasonable efforts, equivalent in all material respects to
those business methods and practices historically followed by the Company, to maintain its relationships with those customers, Policyholders, and others with whom it has business relationships with respect to the Policies;
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6.1.2
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preserve intact the Company's present business organization, reputation and Policyholder relations;
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6.1.3
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maintain all licenses, qualifications and authorizations of the Company to do business in each jurisdiction in which it is presently licensed,
qualified or authorized; and
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6.1.4
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use reasonable efforts, equivalent in all material respects to the business methods and practices the Company uses with respect to its direct
policyholders and insureds, to service and conserve the Policies and maintain them in full force and effect.
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6.2.1
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Except as required by applicable law, the Company shall make no material change in its underwriting or reserving policies, practices or procedures
applicable to the Policies.
|
6.9.1
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the Company shall use its best efforts to conduct its affairs in such a manner so that, except as otherwise contemplated or permitted by this
Agreement, the representations and warranties of the Company contained in ARTICLE 4 hereof shall continue to be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date;
|
6.9.2
|
the Coinsurer shall use its best efforts to conduct its affairs in such a manner so that, except as otherwise contemplated or permitted by this
Agreement, the representations and warranties of Coinsurer contained in ARTICLE 5 hereof shall continue to be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date;
|
6.9.3
|
the Company shall notify the Coinsurer promptly of any event, condition or circumstance occurring from the date hereof through the Closing Date that
would constitute a material violation or breach of this Agreement by the Company; and
|
6.9.4
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Coinsurer shall notify the Company promptly of any event, condition or circumstance occurring from the date hereof through the Closing Date that
would constitute a material violation or breach of this Agreement by the Coinsurer.
|
6.13.1
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Location of Insured/Beneficiary. The Company and Coinsurer both covenant and agree that in the event any state agency, department or
division, or audit firm (or similar organization) acting on behalf of a state agency, department or division asserts that unclaimed proceeds associated with the Polices prior to the Coinsurance Effective Date were not reported and
remitted in accordance with the Statutes, any cost or effort to rebut that assertion or any cost or effort to identify, locate, and contact the insured(s) and/or beneficiary(ies) associated with the Policies in question shall be the sole
responsibility of the Company.
|
7.1.1
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Receipt of All Required Closing Date Approvals. All Required Closing Date Approvals, if any, shall have been received, and the Company shall
have delivered to the Coinsurer a copy of any Required Closing Date Approval issued by the insurance regulatory authorities in its State of domicile.
|
7.1.2
|
Truth of Representations and Warranties of Company. The representations and warranties of the Company contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date.
|
7.1.3
|
Performance of Covenants and Obligations of Company. The Company shall have performed and complied with all agreements, covenants, obligations
and conditions required by this Agreement to be so performed or complied with by the Company at or before the Closing.
|
7.1.4
|
Receipt of the Settlement Amount. The Settlement Amount shall have been paid to the Coinsurer.
|
7.1.5
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Execution and Delivery of Agreements. The Stock Purchase Agreement shall have been executed by duly authorized executive officers of the
Company and by the Shareholders and delivered to the Coinsurer.
|
7.1.6
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Delivery of Listing of Policies. The Company shall have delivered to the Coinsurer a final listing of the Policies to be reinsured by the
Coinsurer under this Agreement.
|
7.1.7
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Assignment or Bill of Sale. The Company shall assign, transfer and convey all assets included in the Settlement Amount by assignment, bill of
sale or other appropriate instrument acceptable to Coinsurer, free and clear of any lien, claim or other encumbrances.
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7.1.8
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Certificate. A certificate executed by an officer of the Company certifying that (i) the representations and warranties of the Company
contained in ARTICLE 4 are true and correct in all material respects as of the Closing Date; and (ii) all covenants to be performed, and other conditions to Closing required to be satisfied, by the Company have been duly performed or
satisfied, as applicable, in all material respects, shall have been delivered to Coinsurer.
|
7.2.1
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Receipt of All Required Closing Date Approvals. All Required Closing Date Approvals, if any, shall have been obtained.
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7.2.2
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Truth of Representations and Warranties of Coinsurer. The representations and warranties of the Coinsurer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date.
|
7.2.3
|
Performance of Covenants and Obligations of Coinsurer. The Coinsurer shall have performed and complied with all agreements, covenants,
obligations and conditions required by this Agreement to be so performed or complied with by Coinsurer at or before the Closing.
|
7.2.4
|
Execution and Delivery of Agreements. The Stock Purchase Agreement shall have been executed by duly authorized executive officers of Coinsurer
and delivered to Company.
|
7.2.5
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Certificate. A certificate executed by an officer of the Coinsurer certifying that (i) the representations and warranties of the Coinsurer
contained in ARTICLE 5 are true and correct in all material respects as of the Closing Date; and (ii) all covenants to be performed, and other conditions to Closing required to be satisfied, by the Coinsurer have been duly performed or
satisfied, as applicable, in all material respects, shall have been delivered to the Company.
|
8.2.1
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The Company and the Coinsurer agree that the unrealized gains from bonds that remain assets of the Company and are not sold and transferred as part
of this Agreement (“Retained Bonds”) shall be included in the calculation of Bond Gains. The Company and the Coinsurer agree that the amount of such unrealized gains to be included in the Bond Gains is [One Million Thirty-Six Thousand
Two Hundred Eleven Dollars ($1,036,211.00)] (“Agreed Retained Bond Gain”), based on the fair market value of the Retained Bonds provided by Asset Allocation and Management, LLC as of October 4, 2019. The Company and the Coinsurer
acknowledge and agree that the Agreed Retained Bond Gain shall be the amount added to the total amount of the net proceeds realized upon the completion of the sale of the Bonds (pursuant to Section 8.2) notwithstanding the actual gains
realized in the event any of the Retained Bonds are eventually sold, or any other unrealized gain or fair market valuation of the Retained Bonds.
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8.4.1
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At the Closing, the Company shall:
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8.4.1.1
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Transfer the cash portion of Settlement Amount to Coinsurer by wire transfer of immediately available funds;
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8.4.1.2
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Deliver to Coinsurer an executed Trust Agreement attached hereto as Exhibit 1 (the “Trust Agreement”).
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8.4.1.3
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Deliver to Coinsurer the assets identified in Schedule 8.1B, free and clear of any lien or encumbrance and in a form acceptable to Coinsurer;
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8.4.1.4
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Deliver to Coinsurer a complete listing of the Policies reinsured under this Agreement.
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8.4.2
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At the Closing, the Coinsurer shall:
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8.4.2.1
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Deliver to the Company an executed Trust Agreement.
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10.3.1
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Agreement Accounting Period. This Agreement shall be on a monthly accounting period for all accounting settlements.
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10.3.2
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Monthly Accounting Reports. Accounting reports, as required under this Agreement, shall be submitted to the Coinsurer by the Company and by
the Coinsurer to the Company, not later than 20 calendar days after the end of each calendar month. Such reports shall include information on the amount of reinsurance premiums, policy loans and policy loan interest, the commission and
expense allowance, claims, and reserves on the contracts reinsured for the preceding calendar quarter.
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10.3.3
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Monthly Accounting Period. The monthly accounting shall be on a calendar-month basis, except that the initial monthly accounting period shall
run from the Coinsurance Effective Date through the last day of the calendar month in which the Coinsurance Effective Date falls.
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10.3.4
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Accounting Reports. Annual reports shall be submitted to the Coinsurer by the Company not later than 45 calendar days after the end of each
calendar year. Such reports shall include information necessary for the NAIC Convention Blank based on the contracts reinsured hereunder. Monthly and quarterly accounting reports shall be submitted to the Coinsurer by the Company not
later than 20 calendar days after the end of each calendar month and quarter and shall include any information necessary for the NAIC Quarterly Blank. Each party shall be responsible for preparing and filing their respective financial
statements as required.
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16.1.1
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To exchange information pertaining to the amount of “net consideration” under this Agreement as defined in the Regulation;
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16.1.2
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That the Company shall submit its calculation of the "net consideration" for purposes of that Regulation to the Coinsurer not later than May 1st for
each and every taxable year for which this Agreement is in effect;
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16.1.3
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That the Coinsurer may challenge such calculation within ten (10) business days of its receipt of the Company's calculation;
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16.1.4
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That should the Coinsurer challenge the Company's calculation of the "net consideration" and the parties be unable to agree as to the appropriate
methodology to determine the "net consideration" for purposes of the Regulation, they shall refer such dispute to an outside Tax consultant unrelated to either of the parties, and the parties agree to be bound by the decision of that
consultant;
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16.1.5
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That, pursuant to such election, the party with net positive consideration with respect to this Agreement for each taxable year will capitalize
specified policy acquisition expenses with respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1) of the Code; and
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16.1.6
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That the first taxable year for which such election shall be effective is taxable year 2019.
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Salt Lake City, Utah 84157-0220
17.8.1
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The Company and the Coinsurer each will hold, and will cause its respective officers, directors, employees, agents, consultants, attorneys and other
representatives to hold, in strict confidence, unless compelled to disclose by judicial or administrative process (including, without limitation, in connection with obtaining any Required Closing Date Approval) or by other requirements of
law, all confidential documents and confidential information concerning the other party furnished to it by the other party or such other party's officers, directors, employees, agents, consultants, attorneys or representatives in
connection with this Agreement or the transactions contemplated hereby, except to the extent that such documents or information can be shown to have been (a) previously lawfully known by the party receiving such documents or information,
(b) in the public domain through no fault of the receiving party, or (c) later acquired by the receiving party from other sources not themselves bound by, and in breach of, a confidentiality agreement.
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17.8.2
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Neither the Company nor the Coinsurer will disclose or otherwise provide any such confidential information to any other person, except to that
party's respective auditors, actuaries, attorneys, financial advisors and other consultants who need access to such confidential information in connection with this Agreement and the transactions contemplated herein, or, in confidence, to
regulatory authorities or rating agencies such as A.M. Best.
|
17.8.3
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If this Agreement is terminated, each of the parties will return to the other party all confidential information furnished to that party by the other
party, and retrieve and destroy all copies of such confidential information distributed to any other person.
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KILPATRICK LIFE INSURANCE COMPANY | |
Date:10/11/2019
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By: /s/ Kenneth W. Phillips
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Name:Kenneth W. Phillips
|
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Title: President and Chief Executive Officer
|
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SECURITY NATIONAL LIFE INSURANCE COMPANY
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Date:2019-10-11
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By:/s/ Scott M. Quist
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Name:Scott M. Quist
|
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Title:CEO and President
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Net Reserves (Liabilities)
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Total
|
|||
Reserves (Life and All Annuities)
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$
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.00
|
||
Advance Premiums
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$
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.00
|
||
Claims Liability In course of Settlement
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$
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.00
|
||
Claims Liability Incurred but Unreported
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$
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.00
|
||
Less (Annuities Not Coinsured)
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$
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.00
|
||
Less Net Due Premiums
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$
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.00
|
||
Less Net Deferred Premiums
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$
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.00
|
||
Total Net Reserves
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$
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.00
|
||
RBC Transfer Amount
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$
|
.00
|
||
Settlement Amount
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$
|
.00
|
||
Ceding Commission paid by Coinsurer ($1.00)
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$
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1.00
|
||
Assets
|
||||
Cash
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$
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.00
|
||
Other Assets (Listed in Schedule 8.1B)
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$
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.00
|
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Total
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$
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.00
|
||
Cash wire from Company
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$
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.00
|
||
Settlement Amount
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$
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.00
|
Reference:
Security Exchange Commission - Edgar Database, EX-10.2 3 exh10_2.htm COINSURANCE AGREEMENT DATED OCTOBER 11, 2019 WITH KILPATRICK LIFE INSURANCE COMPANY, EXCLUDING EXHIBITS, Viewed September 19, 2022, View Source on SEC.
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