CAC LIFE AND ANNUITY INDEMNITY REINSURANCE AGREEMENT

Exhibit 10.3

CAC LIFE AND ANNUITY
INDEMNITY REINSURANCE AGREEMENT

     THIS CAC LIFE AND ANNUITY INDEMNITY REINSURANCE AGREEMENT (this “ Agreement ”), dated as of April 30, 2004, is made by and between Continental Assurance Company, an Illinois insurance company (the “ Company ”), and Swiss Re Life & Health America Inc., a Connecticut insurance company (the “ Reinsurer ”).

     WHEREAS, pursuant to that certain Asset and Stock Purchase Agreement, dated as of February 5, 2004 (the “ Purchase Agreement ”), by and between the Company and Reinsurer, Reinsurer agreed to purchase, among other things, the individual life insurance and annuity businesses and certain assets of the Company, and the capital stock of Valley Forge Life Insurance Company, a Pennsylvania insurance company, and CNA International Life Company SPC, Ltd., a segregated portfolio company organized and existing under the laws of the Cayman Islands.

     WHEREAS, under the Purchase Agreement, the Company has agreed to enter into this Agreement so as to cede to the Reinsurer, and the Reinsurer has agreed to enter into this Agreement so as to accept and assume from the Company, 100% of the Policy Liabilities (as defined below) arising under the Policies (as defined below), upon the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the mutual covenants and promises, and upon the terms and conditions, hereinafter set forth, the parties hereto agree as follows:

ARTICLE I
BUSINESS REINSURED

     1. Effective as of 12:00 a.m. on January 1, 2004 (the “ Effective Time ”), the Company hereby cedes to the Reinsurer, and the Reinsurer hereby accepts and assumes from the Company as of the Effective Time, on an indemnity reinsurance (coinsurance) basis, 100% of the Policy Liabilities arising from any and all (i) binders, endorsements, riders, policies, certificates, contracts of insurance and supplementary contracts of insurance constituting the Subject Business (as defined below) issued, renewed, or assumed by the Company prior to the Closing Date (as defined in the Purchase Agreement), including without limitation all such binders, endorsements, riders, policies, certificates, contracts and supplementary contracts lapsed and terminated with unpaid claims or amended to increase coverage or reinstated before, at or after the Closing Date as required pursuant to the terms thereof (the “ Pre-Closing Policies ”), (ii) Accommodation Policies (as defined in the CAC Life and Annuity Administrative Services Agreement between the Company and the Reinsurer dated as of the date hereof (the “ CAC Administrative Services Agreement ”)), and (iii) CAC Additional Policies (as defined in the CAC Administrative Services Agreement) (the Pre-Closing Policies, Accommodation Policies and CAC Additional Policies being referred to herein collectively as the “ Policies ”). The term “ Policyholder ” shall mean each owner of a Policy.

     2. The term “ Subject Business ” shall mean the term, universal and permanent individual life insurance and annuity products business of the Company.

     3. The term “ Policy Liabilities ” shall mean all liability and obligations of the Company, except for Excluded Liabilities (as defined below), based upon or arising out of the Policies, net of

any and all amounts (i) actually recovered by the Company under Third Party Reinsurance Agreements and (ii) that would have been collected from a Specified Reinsurer under a Specified Third Party Reinsurance Agreement, and such term shall include without limitation liabilities for:

     4. The term “ Excluded Liabilities ” shall mean any liability or obligation of the Company for:

     For the avoidance of doubt, with respect to a Specified Third Party Reinsurance Agreement, (i) amounts which would have been payable by the Company to Specified Reinsurers thereunder, in the absence of any recission, recapture or termination, shall instead be payable by the Reinsurer to the Company under this Agreement and (ii) amounts, liabilities and obligations formerly ceded to Specified Reinsurers under such Specified Third Party Reinsurance Agreement shall be deemed Excluded Liabilities and the Reinsurer shall have no liability to the Company with respect thereto.

     In addition, for the avoidance of doubt, the Reinsurer shall have the benefit of any premium tax credits and reductions attributable to guaranty fund assessments and similar assessments paid or payable by the Company with respect to the Policies but only if and to the extent that (i) the Reinsurer reimburses the Company for such guaranty fund and similar assessments pursuant to this Agreement and (ii) such credits are applied to reduce, and actually reduce, the premium tax liability of the Company (as so limited, the “Premium Tax Credits”); provided that the Company shall apply such credits and any other premium tax credits and reductions attributable to guaranty fund assessments and similar assessments on a pro rata basis.

     5. The term “ Extra Contractual Obligations ” shall mean all liabilities and obligations other than those arising under the express terms and conditions, and within the limits, of the Policies, including, without limitation, any liability for punitive, exemplary, special or any other form of extra contractual damages, relating to the Policies, which arise from any act, error or omission in bad faith, including, without limitation, any act, error or omission relating to (i) the marketing, underwriting, production, issuance, cancellation or administration of the Policies, (ii) the investigation, defense, trial, settlement or handling of claims, benefits, or payments under the Policies, or (iii) the failure to pay or the delay in payment of benefits, claims or any other amounts due or alleged to be due under or in connection with the Policies.

     6. The term “ Third Party Reinsurance Agreement ” shall have the meaning given in paragraph 3 of Article V hereof.

     7. The term “ Specified Third Party Reinsurance Agreement ” shall mean a Third Party Reinsurance Agreement under which one or more reinsurers, other than the Reinsurer or an

Affiliate thereof, on or prior to the third anniversary of this Agreement, has refused to pay when due any amounts owed to the Company under such Third Party Reinsurance Agreement to the extent resulting from such reinsurer’s declaration that the Company has breached such Third Party Reinsurance Agreement by reason of the consummation of the transactions contemplated by the Purchase Agreement or this Agreement.

     8. The term “ Specified Reinsurer ” shall mean a reinsurer, other than the Reinsurer or an Affiliate thereof, that has taken the actions referred to in Section 7 of this Article I with respect to a Third Party Reinsurance Agreement.

     9. The term “ Affiliate ” shall mean, with respect to any Person, at the time in question, any other Person controlling, controlled by or under common control with such Person.

     10. The term “ Person ” shall mean any natural person, corporation, partnership, limited liability company, trust, joint venture or other entity.

ARTICLE II
PAYMENT AND ACCOUNTING FOR CERTAIN ASSUMED POLICY LIABILITIES

     In connection with the Reinsurer’s assumption of the Policy Liabilities described in paragraphs (b), (c), (d) and (f) of Section 3 of Article I hereof (the “ Tax/Assessment Liabilities ”), it is agreed that the Company will make direct payment of such Tax/Assessment Liabilities and that the Reinsurer’s assumption of liability therefor shall be discharged by the Company reporting the Tax/Assessment Liabilities paid by the Company to the Reinsurer in accordance with Article IV and the Reinsurer reimbursing the Company for such amounts also in accordance with Article IV.

ARTICLE III
TERRITORY

     This Agreement shall apply to Policies covering persons and risks wherever resident or situated.

ARTICLE IV
POLICY ADMINISTRATION

     The Policies and the Policy Liabilities shall be administered by the Reinsurer in the name of, and on behalf of, the Company pursuant to the terms of the CAC Administrative Services Agreement. In connection therewith, the Reinsurer will provide such periodic accounting and settlement reports to the Company as are set forth in the CAC Administrative Services Agreement. Settlements of amounts due from the Reinsurer to the Company and amounts due from the Company to the Reinsurer hereunder, as set forth in such reports, shall be made on a quarterly basis as set forth in the CAC Administrative Services Agreement; provided, however, that any amounts received by the Reinsurer from a Specified Reinsurer in connection with the termination or recapture of such Specified Reinsurer’s obligations under a Specified Third Party Reinsurance Agreement shall be remitted by the Reinsurer to the Company within 15 days of receipt thereof by the Reinsurer. Notwithstanding the terms of this Agreement, no amounts settled between the Company and the Reinsurer under Article II of the Purchase Agreement shall be settled again hereunder.

ARTICLE V
PREMIUMS AND RECOVERIES

     1. Except as otherwise provided in this Agreement, the Reinsurer shall be entitled to 100% of all gross premiums, premium adjustments, reinsurance recoverables (including expense allowances), balances due from agents, principal and interest due on Policy loans, accrued interest receivables and recoveries received at and after the Effective Time by the Company or the Reinsurer with respect to the Policies, other than amounts recoverable or recovered from Specified Reinsurers under Specified Third Party Reinsurance Agreements, together with all Policy related rights of the Company, including, without limitation, subrogation and coordination of benefits rights including for the benefit of the Reinsurer any and all Premium Tax Credits to the extent provided for in Section 4 of Article I. The Company shall promptly endorse and remit and hereby assigns to the Reinsurer any premiums, premium adjustments, reinsurance recoverables (including expense allowances), balances due from agents, principal and interest due on Policy loans, accrued interest receivables, rights, assets and recoveries received or receivable by the Company at or after the Effective Time in respect of any of the Policies or the satisfaction of Policy Liabilities (including the Premium Tax Credits to the extent provided in Section 4 of Article I), other than amounts recoverable or recovered from Specified Reinsurers under Specified Third Party Reinsurance Agreements. The Company shall likewise promptly endorse and remit and hereby assigns to the Reinsurer any amount paid to the Company by a reinsurer in connection with a termination or recapture of a Third Party Reinsurance Agreement other than such amounts paid by a Specified Reinsurer under a Specified Third Party Reinsurance Agreement ( e.g. , assets transferred to the Company to effectuate a recapture). For the avoidance of doubt, any amount paid to either the Company or the Reinsurer by or on behalf of a Specified Reinsurer under a Specified Third Party Reinsurance Agreement, including without limitation in connection with a termination or recapture of such reinsurer’s obligation under such agreement, shall be for the account of the Company, and the Reinsurer shall promptly endorse and remit to the Company any such amount it receives in respect thereof. The Company shall provide reasonable assistance to the Reinsurer, upon the Reinsurer’s request therefor, and at the Reinsurer’s expense (excluding any internal expenses of the Company), in the collection of any premiums, premium adjustments, reinsurance receivables, balances due from agents, principal and interest due on Policy loans, accrued interest receivables, rights, assets and recoveries due the Company in respect of any of the Policies or the satisfaction of Policy Liabilities. Furthermore, with respect to any such remittance, the Company shall also promptly furnish the Reinsurer with all pertinent information which it receives pertaining thereto (e.g., the nature of the payment, source of funds, policy or certificate number or agreement (as appropriate) and period(s) to which it relates and any instructions accompanying same); provided, however, that the Company may retain a copy thereof.

     2. Effective as of the Closing Date, as between the Reinsurer and the Company, the Company shall have no further responsibility for billing and collecting premiums in respect of the Policies or otherwise servicing or administering any Policies, except as may otherwise be agreed upon in writing by the parties or required by applicable law. The Company hereby acknowledges that notwithstanding the foregoing or any other provision of this Agreement to the contrary, as between the Company and its Policyholders, the Company is not relieved of any obligation under the Policies, including its responsibility to service its Policyholders.

     3. A listing of ceded reinsurance agreements under which any Policy Liabilities are reinsured for the benefit of the Company to reinsurers that are not Affiliates of the Company is Schedule B to this Agreement (the “ Third Party Reinsurance Agreements ”). Effective as of the Closing Date, the Company shall have no further responsibility for ascertaining and collecting reinsurance recoverables with respect to the Policy Liabilities under the Third Party Reinsurance Agreements other than the Specified Third Party Reinsurance Agreements. The Reinsurer shall assume such responsibility for administering on behalf of the Company the Third Party Reinsurance Agreements, including the Specified Third Party Reinsurance Agreements, under the CAC Administrative Services Agreement. The collectibility of amounts due under the Third Party Reinsurance Agreements shall be at the risk of and for the account of the Reinsurer, other than amounts due from Specified Reinsurers under the Specified Third Party Reinsurance Agreements which shall be at the risk of and for the account of the Company.

     4. The Reinsurer shall have responsibility and full power and authority to act for and on behalf of the Company, and will so act in good faith pursuant to the terms of the CAC Administrative Services Agreement, and the Company shall take such measures as reasonably may be requested by the Reinsurer, with respect to any and all letters of credit outstanding or assets in trust held for the benefit of the Company pursuant to the terms of any Third Party Reinsurance Agreements, collection of amounts owed under any Third Party Reinsurance Agreements, recapture under any Third Party Reinsurance Agreements and enforcement of the terms of the Third Party Reinsurance Agreements; provided that, in no event will Reinsurer have any responsibility with respect to any Specified Reinsurer under a Third Party Reinsurance Agreement after it has become a Specified Third Party Reinsurance Agreement.

ARTICLE VI
REINSURANCE CREDIT

     1.  Licensed or Accredited Status . The Reinsurer is, and shall maintain its status as, a licensed life insurer or accredited life reinsurer in all jurisdictions of the United States so that the Company, in the statements required to be filed with its regulatory authority(ies) in such jurisdictions, shall receive full credit as admitted reinsurance for all of the Reinsurer’s share of the reserves and any other liabilities ceded hereunder (the “ Obligations ”).

     2.  Reinsurance Credit . If a jurisdiction of the United States will not permit the Company, in the statements required to be filed with its regulatory authority(ies), to receive full credit as admitted reinsurance for any of the Reinsurer’s share of the Obligations, the Company shall forward to the Reinsurer a statement of the Reinsurer’s share of such Obligations. Upon receipt of such statement, the Reinsurer shall, at its option and at its expense, promptly either:

     3.  Rating Agency or RBC Credit . (a) If at any time:

then the Reinsurer shall, at the election of the Reinsurer, take one of the following actions to ensure its performance hereunder: (A) provide to the Company a “clean”, unconditional and irrevocable letter of credit to secure the Reinsurer’s share of the Obligations or (B) transfer to a trust account unencumbered assets adequate to secure Reinsurer’s share of the Obligations (which trust account shall be established under a trust agreement substantially in the form of Exhibit A hereto) and pledge such assets to the Company under such trust agreement as reasonably satisfactory to the Company and sufficient to perfect a first priority lien security interest in favor of the Company in such assets in the trust account under Article 9 of the Uniform Commercial Code. During the term of a trust agreement established under Section 3(a) or 3(b) of this Article VI, the Reinsurer shall not, and shall direct that the trustee shall not, grant or cause to be created in favor of any third person a security interest in any of the assets in the trust whatsoever.

     (b) Notwithstanding the provisions of paragraph (a) of this Section 3 of Article VI, in the event that the insurance regulatory authority of any of the 50 states of the United States, the District of Columbia or the federal government should determine in writing that the assets in the trust account established pursuant to this Section 3 of Article VI shall not be deemed admitted assets or that the Reinsurer will be required to establish a substantially equivalent offsetting liability, for purposes of the Reinsurer’s financial statements prepared under statutory accounting principles for filing with such insurance regulatory authority, solely as a result of the perfection of the Company’s security interest under the trust agreement established pursuant to this Section 3 of Article VI, the Company and the Reinsurer shall amend the trust agreement so that the trust agreement complies with the requirements of New York Insurance Department Regulation 114, except as hereinafter

provided. The trust agreement, as so amended, shall provide that the Company shall have the right to withdraw assets from the trust account only to pay the Company for the Reinsurer’s share of the Obligations which have not been paid when due or in the event that the Company has received notice of termination of the trust account under such trust agreement. The minimum amount to be held in the trust account shall equal 100 percent of the amount required to fund the Reinsurer’s share of the Obligations.

     (c) Notwithstanding the foregoing, in the event that after a letter of credit or trust account has been established pursuant to paragraph (a) or paragraph (b) of this Section 3, the Reinsurer is assigned and maintains the financial strength rating of S&P or Moody’s referred to in subparagraph (a)(y)(i) or (a)(y)(ii), respectively, of this Section 3 of Article VI and has statutory surplus in excess of the RBC Trigger, such letter of credit or trust account shall be terminated or returned to the Reinsurer. If the Reinsurer shall thereafter fail to maintain both of such ratings or the risk based capital level, the provisions of paragraphs (a) and (b) of this Section 3 shall apply once again.

ARTICLE VII
TRANSFER OF ASSETS

     1.  Transfer of Assets . Cash and/or investment securities will be transferred to the Reinsurer by the Company in accordance with Section 2.3(b)(i) of the Purchase Agreement.

     2.  Adjustment . Adjustment of the amount due pursuant to Section 1 of this Article VII shall be made in accordance with and pursuant to Section 2.5 of the Purchase Agreement.

     3.  Ceding Commission . The Reinsurer shall pay to the Company at the Closing (as defined in the Purchase Agreement) in accordance with Section 2.3(b)(ii) of the Purchase Agreement a ceding commission in the amount of $45,000,000 plus interest thereon from January 1, 2004 through the Closing Date calculated at the Contract Interest Rate (as defined in the Purchase Agreement).

ARTICLE VIII
INSOLVENCY

     1.  Payments . In the event of the insolvency of the Company, all reinsurance, ceded, renewed or otherwise becoming effective under this Agreement shall be payable by the Reinsurer directly to the Company or to its liquidator, receiver or statutory successor on the basis of the liability of the Company under the contract or contracts reinsured without diminution because of the insolvency of the Company.

     2.  Notice of Claims . In the event of the insolvency of the Company, the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the insolvent Company on the Policies within a reasonable time after such claim is filed in the insolvency proceeding and during the pendency of such claim the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses which it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the insolvent

Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

     3.  Apportionment . Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this Agreement as though such expense had been incurred by the Company.

ARTICLE IX
RIGHTS WITH RESPECT TO THE POLICIES

     The Reinsurer’s reinsurance of the Policy Liabilities of the Company with respect to the Policies is intended for the sole benefit of the parties to this Agreement and shall not create any right on the part of any Policyholder, insured, claimant or beneficiary under such Policies against the Reinsurer or any legal relation between such Policyholders, insureds, claimants or beneficiaries and the Reinsurer.

ARTICLE X
DIVIDENDS; NON-GUARANTEED ELEMENTS; PARTICIPATING POLICIES

     1. Except as required under applicable law or regulation or under the terms of any Policy, the Company shall declare and pay dividends on any participating Policy and reset any non-guaranteed element of any Policy taking into account the recommendations of the Reinsurer. The Reinsurer shall assist the Company in determining the dividends in respect of the participating Policies, and shall administer the payment of dividends, in accordance with Article IV hereof.

     2. The Reinsurer shall remit to the Company, on a quarterly basis pursuant to the CAC Administrative Services Agreement, an amount equal to 90% of the pre-tax statutory profits, before Policyholders’ dividends, for the preceding calendar quarter on the Company’s participating Policies as determined in accordance with Schedule C hereto. In the event that there are no such profits for the preceding calendar quarter, no amounts shall be remitted by the Reinsurer to the Company pursuant to this Section 2 of Article X and the loss carryforward provisions provided in Schedule C hereto shall apply. The obligations of the Reinsurer under this Section 2 shall be the only obligations of the Reinsurer with respect to dividends on the Company’s participating Policies.

     3. The Company shall have sole responsibility for maintaining the policyholder surplus in respect of the participating Policies and for compliance with applicable law in respect thereof.

     4. The Reinsurer shall invest and maintain assets in support of the liabilities in respect of the participating Policies in accordance with the principles set forth on Schedule D hereto.

ARTICLE XI
ERRORS AND OMISSIONS

     Inadvertent delays, errors or omissions made in connection with this Agreement or any transaction hereunder shall not relieve either party from any liability which would have attached had such delay, error or omission not occurred, provided always that such error or omission is rectified as soon as possible after discovery.

ARTICLE XII
COOPERATION

     The parties shall cooperate with one another in a commercially reasonable manner to carry out and implement the terms and objectives of this Agreement, and shall perform such further acts, execute such further documents and enter into such further agreements as are commercially reasonable and reasonably necessary to carry out and implement the terms and objectives of the Agreement. Without limiting the foregoing, each party shall permit the other (and its authorized representatives) reasonable access to its premises, files and records relating to the Policies and each party shall make available to the other party (and its authorized representatives) responsible officials for consultation for the purpose of more fully carrying out the terms and objectives of this Agreement, provided that the same be requested during normal business hours upon reasonable notice and without unreasonably disrupting the business of either party. Each party shall retain, in accordance with its corporate retention policies, all files and records related to the Policies, but in any event for a period not less than six years following the Closing Date.

ARTICLE XIII
ARBITRATION

     1.  Arbitration . As a condition precedent to any cause of action, any and all disputes between the Company and the Reinsurer arising out of, relating to, or concerning this Agreement, whether sounding in contract or tort and whether arising during or after termination of this Agreement, shall be submitted to the decision of a board of arbitration composed of two arbitrators and an umpire (the “ Board ”) meeting at a site in Chicago, Illinois. The arbitration shall be conducted under the Federal Arbitration Act and shall proceed as set forth below.

     2.  Notice of Arbitration . A notice requesting arbitration, or any other notice made in connection therewith, shall be in writing and shall be sent certified or registered mail, return receipt requested to the affected parties. The notice requesting arbitration shall state in particulars all issues to be resolved in the view of the claimant, shall appoint the arbitrator selected by the claimant and shall set a tentative date for the hearing, which date shall be no sooner than ninety (90) days and no later than one hundred fifty (150) days from the date that the notice requesting arbitration is mailed. Within thirty (30) days of receipt of claimant’s notice, the respondent shall notify claimant of any additional issues to be resolved in the arbitration and of the name of its appointed arbitrator.

     3.  Arbitration Panel . Unless otherwise mutually agreed, the members of the Board shall be impartial and disinterested and shall be active or former executive officers of life insurance companies, reinsurance companies, or Lloyd’s Underwriters or active or inactive lawyers with at least twenty (20) years of experience in insurance and reinsurance. The Company and Reinsurer shall each appoint an arbitrator and the two (2) arbitrators shall choose an umpire before instituting the

hearing. If the respondent fails to appoint its arbitrator within thirty (30) days after having received claimant’s written request for arbitration, the claimant is authorized to and shall appoint the second arbitrator. If the two arbitrators fail to agree upon the appointment of an umpire within thirty (30) days after notification of the appointment of the second arbitrator, within ten (10) days thereof, the two (2) arbitrators shall request the American Arbitration Association (the “ AAA ”) to appoint an umpire for the arbitration with the qualifications set forth in this Article. If the AAA fails to name an umpire, either party may apply to the court named below to appoint an umpire with the above required qualifications. The umpire shall promptly notify in writing all parties to the arbitration of his selection and of the scheduled date for the hearing. Upon resignation or death of any member of the Board, a replacement shall be appointed in the same fashion as the resigning or deceased member was appointed.

     4.  Submission of Briefs . The claimant and respondent shall each submit initial briefs to the Board outlining the issues in dispute and the basis, authority and reasons for their respective positions within thirty (30) days of the date of notice of appointment of the umpire. The claimant and the respondent may submit reply briefs to the Board within ten (10) days after filing of the initial brief(s). Initial and reply briefs may be amended by the submitting party at any time, but not later than ten (10) days prior to the date of commencement of the arbitration hearing. Reasonable responses shall be allowed at the arbitration hearing to new material contained in any amendments filed to the briefs but not previously responded to.

     5.  Arbitration Board’s Decision . The Board shall make a decision and award with regard to the terms of this Agreement and the original intentions of the parties to the extent reasonably ascertainable. The Board’s decision and award shall be in writing and shall state the factual and legal basis for the decision and award. The decision and award shall be based upon a hearing in which evidence shall be allowed and which the formal rules of evidence shall not strictly apply but in which cross examination and rebuttal shall be allowed. At its own election or at the request of the Board, either party may submit a post-hearing brief for consideration of the Board within twenty (20) days of the close of the hearing. The Board shall make its decision and award within thirty (30) days following the close of the hearing or the submission of post-hearing briefs, whichever is later, unless the parties consent to an extension. Every decision by the Board shall be by a majority of the members of the Board and each decision and award by the majority of the members of the Board shall be final and binding upon all parties to the proceeding.

     6.  Jurisdiction . Either party may apply to the United States District Court for the Northern District of Illinois for an order confirming any decision and the award; a judgment of that Court shall thereupon be entered on any decision or award. If such an order is issued, the attorneys’ fees of the party so applying and court costs will be paid by the party against whom confirmation is sought. The Board may award interest calculated from the date the Board determines that any amounts due the prevailing party should have been paid to the prevailing party.

     7.  Expenses . Each party shall bear the expense of the one arbitrator appointed by it and shall jointly and equally bear with the other party the expense of any stenographer requested, and of the umpire. The remaining costs of the arbitration proceedings shall be finally allocated by the Board.

     8.  Production of Documents and Witnesses . Subject to customary and recognized legal rules of privilege, each party participating in the arbitration shall have the obligation to produce

those documents and as witnesses to the arbitration those of its employees as any other participating party reasonably requests providing always that the same witnesses and documents be obtainable and relevant to the issues before the arbitration and not be unduly burdensome or excessive. The parties may mutually agree as to pre-hearing discovery prior to the arbitration hearing and in the absence of agreement, upon the request of any party, pre-hearing discovery may be conducted as the Board shall determine in its sole discretion to be in the interest of fairness, full disclosure, and a prompt hearing, decision and award by the Board. The Board shall be the final judge of the procedures of the Board, the conduct of the arbitration, the rules of evidence, the rules of privilege and production and of excessiveness and relevancy of any witnesses and documents upon the petition of any participating party. To the extent permitted by law, the Board shall have the authority to issue subpoenas and other orders to enforce their decisions.

     9.  Relief Available . Nothing herein shall be construed to prevent any participating party from applying to the United States District Court for the Northern District of Illinois to issue a restraining order or other equitable relief to maintain the “status quo” of the parties participating in the arbitration pending the decision and award by the Board or to prevent any party from incurring irreparable harm or damage at any time prior to the decision and award of the Board. The Board shall also have the authority to issue interim decisions or awards in the interest of fairness, full disclosure, and a prompt and orderly hearing and decision and award by the Board.

     10.  Consolidation . In the event that there is a dispute between the Company and Reinsurer that implicates the provisions of this Agreement or the CAC Administrative Services Agreement, the Company and Reinsurer shall consolidate any such dispute under such agreements in a single arbitration proceeding.

ARTICLE XIV
GENERAL PROVISIONS

     1.  Notices . (a) Any notice, request or other communication to be given by any party hereunder shall be in writing and shall be delivered personally, sent by registered or certified mail, postage prepaid or by overnight courier with written confirmation of delivery or by facsimile transmission with telephonic confirmation of error-free transmission. Any such notice shall be deemed given when so delivered personally or if sent by facsimile transmission (and immediately after transmission confirmed by telephone), if mailed, on the date shown on the receipt therefor, or if sent by overnight courier, on the date shown on the written confirmation of delivery. Such notices shall be given to the following address:

     (b) Reinsurer shall designate by name two or more officers to provide all requests and directions to the Company concerning the Business under this Agreement and the CAC Administrative Services Agreement (the “ Designated Officers ”). The initial Designated Officers shall be Donna Kinnaird and Kenneth Stewart. The Reinsurer may change or appoint new Designated Officers by delivering written notice thereof (in accordance with the delivery methods described in Article XIV.1(a)) to the Company.

     (c) Any party may by notice given in accordance with this Section 1 of Article XIV to the other party hereto designate another address or Person for receipt of notices hereunder.

     2.  Tax Election . With respect to this Agreement, the Company and the Reinsurer hereby make the election provided for in Section 1.848-2(g)(8) of the Treasury Regulations issued under Section 848 of the Internal Revenue Code of 1986, as amended, as set forth in Exhibit C , which is made a part hereof. Each of the parties hereto agrees to take such further actions as may be necessary to ensure the effectiveness of such election.

     3.  Confidentiality . The Company and the Reinsurer shall hold and cause their respective officers, directors, employees, agents, advisors, or other representatives (each a “ Representative ”) to hold in strict confidence, unless compelled to disclose by applicable law, (i) any

term of this Agreement or the transactions contemplated hereby; and (ii) any information that is furnished by or on behalf of the other party or its Representatives in connection with the transactions contemplated by this Agreement, except to the extent such information can be shown to have been (x) previously known by the party to which it was furnished, (y) in the public domain through no fault of the party to which it was furnished, or (z) later lawfully acquired from other sources by the party to which it was furnished; provided that such source is not, to such party’s knowledge, bound by a confidentiality agreement with the other party or its Representatives and is not, to such party’s knowledge, otherwise prohibited from transmitting the information by a contractual, legal or fiduciary obligation; provided, however, that the Reinsurer may disclose the terms of this Agreement to the extent reasonably necessary for the Reinsurer to comply with its obligations under the CAC Administrative Services Agreement.

     4.  Indemnification . Each party hereto shall indemnify, defend and hold the other party harmless from and against all loss, liability and expense arising out of any failure of the indemnifying party to perform its obligations in accordance with this Agreement.

     5.  Equitable Relief . Each party hereto acknowledges that if it or its employees violate the terms of this Agreement, the other party will not have an adequate remedy at law. In the event of such a violation, the other party shall have the right, in addition to any other rights that may be available to it, to obtain in any court of competent jurisdiction injunctive relief to restrain any such violation and to compel specific performance of the provisions of this Agreement. The seeking or obtaining of such injunctive relief shall not foreclose or limit in any way relief against either party hereto for any monetary damage arising out of such violation.

     6.  Set Off . It is understood and agreed that any debits or credits, liquidated or unliquidated, in favor of or against either party under this Agreement or the CAC Administrative Services Agreement, are deemed mutual debits or credits, as the case may be, and shall be netted or set off, as the case may be, and only the balance shall be allowed or paid.

     7.  Entire Agreement; Amendments . This Agreement (including the Schedules and Exhibits hereto), the Purchase Agreement and the CAC Administrative Services Agreement contain the entire agreement and understanding between the parties with respect to the matters contemplated hereby, and supersede all prior agreements and understandings, written or oral, between the parties hereto with respect to such matters. Any change or modification to this Agreement shall be null and void unless made by amendment to this Agreement and signed by both parties hereto.

     8.  Invalidity . The invalidity or unenforceability of any provision or portion hereof shall not affect the validity or enforceability of the other provisions or portions hereof.

     9.  Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

     10.  Exclusivity . This Agreement is not intended to confer any rights upon any person other than the parties hereto and their respective successors and permitted assigns.

     11.  Binding Effect . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

     12.  Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without giving effect to the principles of conflicts of laws thereof.

     13.  Successors and Assignment . No party hereto shall assign this Agreement or any rights or obligations hereunder, or subcontract any other party to perform such party’s obligations hereunder, without the prior written consent of the other party hereto, and any such attempted assignment or subcontracting without such prior written consent shall be void and of no force and effect.

     14.  Duration and Termination . This Agreement is effective as of the Effective Time and unlimited as to its duration.

     IN WITNESS WHEREOF, the Company and the Reinsurer have each executed this Agreement as of the date first written above.

EXHIBIT A

CAC SECURITY TRUST AGREEMENT

           THIS SECURITY TRUST AGREEMENT (this “ Agreement ”) is made and entered into as of                      by and among CONTINENTAL ASSURANCE COMPANY, a stock insurance company organized under the laws of Illinois (the “ Company ”), SWISS RE LIFE & HEALTH AMERICA INC., a stock insurance company organized under the laws of Connecticut (the “ Reinsurer ”), and J.P. MORGAN TRUST COMPANY, N.A. (the “ Trustee ”).

RECITALS:

      WHEREAS , pursuant to that certain Asset and Stock Purchase Agreement, dated as of February 5, 2004 (the “ Purchase Agreement ”), by and between the Company and Reinsurer, Reinsurer agreed to purchase, among other things, the individual life insurance and annuity businesses and certain assets of the Company, and the capital stock of Valley Forge Life Insurance Company, a Pennsylvania insurance company, and CNA International Life Company SPC, Ltd., a segregated portfolio company organized and existing under the laws of the Cayman Islands;

      WHEREAS , pursuant to the Purchase Agreement, the Company and the Reinsurer entered into the CAC Life and Annuity Indemnity Reinsurance Agreement, dated as of April 30, 2004 (the “ Reinsurance Agreement ”), a copy of which is attached hereto as Exhibit A , pursuant to which the Company has ceded to the Reinsurer, and the Reinsurer has assumed from the Company, the Company’s individual life insurance and annuity business upon the terms and conditions set forth therein.

      WHEREAS , if the Reinsurer fails to meet certain ratings or risk based capital levels set forth in Article VI, Section 3, of the Reinsurance Agreement, the Reinsurer is required to establish a trust or a letter of credit for the sole benefit of the Company for the purpose of providing security to the Company for the Reinsurer’s performance under the Reinsurance Agreement in respect of the Reinsurer’s Obligations (as defined in the Reinsurance Agreement);

      WHEREAS , the Reinsurer has failed to meet either or both of the ratings and risk based capital levels and has elected to establish a trust and to deposit assets therein in accordance herewith;

      WHEREAS , the Trustee has agreed to act as Trustee hereunder and to hold such assets in trust in accordance with the terms of this Agreement; and

      WHEREAS , this Agreement is made for the sole use and benefit of the Company and for the purpose of setting forth the duties and powers of the Trustee with respect to the Trust Account (as hereinafter defined).

           NOW, THEREFORE , in consideration of the mutual promises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as

follows:

      Section 1 Defined Terms . Any capitalized term used but not defined herein shall have the meaning assigned to such term in the Reinsurance Agreement.

      Section 2 Establishment of Trust Account . Simultaneously with the execution and delivery of this Agreement, the Reinsurer, as grantor, is establishing a trust account (the “ Trust Account ”) with the Trustee for the sole use and benefit of the Company, as beneficiary, upon the terms and conditions hereinafter set forth. The parties agree that the trust created hereunder shall be treated as a “grantor trust” for federal income tax purposes, and the Reinsurer shall report all items of income, gain or loss with respect to the assets in the Trust Account on its federal income tax return. The Reinsurer hereby grants to the Company, as security for the payment and performance by the Reinsurer of the Reinsurer’s Obligations under the Reinsurance Agreement, a security interest in all of the Reinsurer’s right, title and interest in, to and under the Trust Account and under this Agreement, including all Permitted Assets (as defined in Section 6 below) and other investment property or assets now or at any time credited to or carried in the Trust Account (subject to Sections 5, 8, 9 and 17 hereof), and (subject to Section 10 hereof) all proceeds of any of the foregoing, in whatever form (collectively, the “ Collateral ”); provided, however, such security interest of the Company in any Permitted Asset, investment property or assets, or proceeds of any of the foregoing, that the Reinsurer has withdrawn, substituted for, reinvested or had paid over in accordance with Sections 5, 8, 9, 10 or 17 hereof, as applicable, shall terminate as of the date of such withdrawal, substitution, reinvestment or payment, as applicable. The Reinsurer hereby authorizes the Company to file such financing or continuation statements, or amendments thereto, as the Company may deem necessary to perfect and preserve the security interest granted hereby.

      Section 3 Initial Deposit . Within two (2) Business Days (as defined in the Purchase Agreement) after the execution of this Agreement by the Company, the Reinsurer and J.P. Morgan Trust Company, N.A. (or another trustee as mutually agreed to between the Reinsurer and the Company), the Reinsurer shall deposit with the Trustee Permitted Assets with an aggregate SAP (as hereinafter defined) book value equal to at least 100% of the Reinsurer’s Obligations as of [date of most recent calendar quarter-end preceding the date hereof for which statutory financial statements of the Company are available] (such amount being $                      ). The Reinsurer hereby certifies that as of the date of such deposit the aggregate SAP book value of the Permitted Assets so deposited shall equal at least 100% of the Obligations as of [date of most recent calendar quarter-end preceding the date hereof for which statutory financial statements of the Company are available]. For purposes of this Agreement, (i) “ SAP ” shall have the meaning set forth in the Purchase Agreement, (ii) “ book value ” shall be determined by reference to the books and records of the Reinsurer and (iii) the amount of the Obligations shall be determined by the Reinsurer in accordance with generally accepted actuarial standards and all applicable laws, rules and requirements for the filing of the Company’s statutory financial reports in the Company’s state of domicile.

      Section 4 The Reinsurer’s Continuing Obligation . Within thirty calendar days after the end of each calendar quarter beginning with the calendar quarter ended [date of end of calendar quarter in which this Agreement is dated], the Reinsurer shall (i) determine the aggregate amount of the Obligations as of the last day of such calendar quarter, (ii) determine the SAP book value of the Collateral in the Trust Account as of such calendar quarter end, (iii)

deposit with the Trustee any additional Permitted Assets necessary so that the aggregate SAP book value of the Collateral in the Trust Account shall not be less than 100% of the Obligations as of such calendar quarter end, and (iv) provide to the Company a certificate signed by an authorized officer of the Reinsurer certifying the amounts described in (i), (ii) and (iii) and compliance therewith and including reasonable supporting detail of such computations. The Trustee is authorized to receive and accept whatever additional assets the Reinsurer from time to time may transfer or remit to the Trust Account, without any duty or obligation to determine or know whether such assets are Permitted Assets, and to hold and dispose of the same for the uses and purposes and in the manner and according to the provisions set forth in this Agreement. All such trust assets at all times shall be maintained in the Trust Account, which shall continuously be located within the United States of America. The Trustee shall have no duty or responsibility whatsoever for determining or confirming the adequacy of the assets in the Trust Account. The Company shall be entitled at any time and from time to time, by means of written notice to the Reinsurer, to object to the Reinsurer’s deposit, reinvestment or substitution of assets on the grounds such assets do not constitute Permitted Assets and the Reinsurer shall as soon as practicable thereafter substitute therefor assets which constitute Permitted Assets to the reasonable satisfaction of the Company.

      Section 5 Withdrawals from the Trust Account .

Withdrawals from the Trust Account shall be made pursuant to the provisions of this Section 5:

     (a)  By the Reinsurer . Subject to Section 5(c), in the event that at any time the aggregate SAP book value of the Collateral in the Trust Account exceeds 100% of the aggregate amount of the Obligations as of the end of the immediately preceding calendar quarter, the Reinsurer shall be entitled to withdraw the excess from the Trust Account. The SAP book value of each asset in the Trust Account shall include, where applicable, all investment income and interest due and accrued on such assets. For purposes of this Agreement, SAP book value of the Collateral shall be as determined by the Reinsurer for purposes of its statutory financial statements filed with the Insurance Department of the state of domicile of the Reinsurer. The Trustee shall have no duty or responsibility whatsoever for determining such excess or such SAP book value. The parties agree, however, that the reinvestment of assets in the Trust Account in other assets in accordance with Section 9 hereof shall not be considered a withdrawal under this Section 5(a).

     (b)  By the Company . Subject to Section 5(c), the Company shall be entitled to withdraw assets from the Trust Account having a market value equal to amounts required to pay or reimburse the Company for the Reinsurer’s failure to fulfill any or all of its Obligations, including but not limited to payment of any Policy Liabilities (a “ Loss ”) (the Trustee shall have no duty or responsibility whatsoever for determining the amount of such Loss or the market value of the assets withdrawn).

     (c) Procedure . Withdrawals from the Trust Account as permitted above may be made by the Reinsurer or the Company at any time and from time to time, provided that the withdrawing party (the “ Withdrawing Party ”) has provided ten Business Days’ written notice (the “ Notice Period ”) to the other party hereto (the “ Non-Withdrawing Party ”) consisting of the following (collectively, the “ Withdrawal Notice ”): (i) a statement of the Withdrawing Party’s intent to make such withdrawal, (ii) the amount of the withdrawal, (iii) the effective date of the

withdrawal (the “ Withdrawal Date ,” which shall be at least one Business Day after the end of the Notice Period), and (iv) a certificate stating in reasonable specificity the reasons for the withdrawal. The Withdrawing Party shall certify to the Trustee in writing that the Withdrawal Notice has been given to the Non-Withdrawing Party as required and shall attach a copy of the Withdrawal Notice with such written certificate. No other statement or document need be presented to the Trustee to authorize a withdrawal from the Trust Account. Trustee shall obtain and retain a confirmation or receipt evidencing the delivery of the assets that are withdrawn pursuant to the instructions provided by the Withdrawing Party. In the event that the Company is the Withdrawing Party, during such ten Business Day period after the Company’s Withdrawal Notice, the Reinsurer may provide to the Company and the Trustee written directions as to which assets are to be withdrawn to satisfy the amount of the withdrawal. If the Reinsurer does not provide any such direction at least one Business Day prior to the Withdrawal Date, the Company shall provide written direction to the Trustee as to which assets are to be withdrawn. Upon receipt of the Withdrawing Party’s instructions and in the absence of receipt within the Notice Period by the Trustee of a written protest to the withdrawal by the Non-Withdrawing Party, the Trustee shall on the Withdrawal Date promptly take any and all necessary steps to transfer to the Withdrawing Party all right, title and interest in the assets being withdrawn, and to deliver the custody thereof to the Withdrawing Party. The Trustee shall be protected in relying upon any written demand of the Withdrawing Party for such withdrawal that contains the Withdrawal Notice and certification described in the second sentence of this Section 5(c). Furthermore, the Trustee shall have no duty or responsibility whatsoever to question the truth or validity of such demand from the Withdrawing Party or any notice of protest the Trustee may receive from the Non-Withdrawing Party (as provided for hereafter) or to determine that any amounts or assets withdrawn from the Trust Account pursuant to this Section 5 are correct or will be used and applied in a manner consistent with the terms of this Agreement. If either the Reinsurer or the Company protests such withdrawal within the Notice Period by written notice to the Trustee and the Non-Withdrawing Party, providing with reasonable specificity the reasons for such protest, and provided the Trustee has had a reasonable opportunity to act upon such notice before the assets have been withdrawn and delivered, the Trustee shall take no further action on the Withdrawal Notice (except to advise the Withdrawing Party of its receipt of the notice of protest from the Non-Withdrawing Party) until it has received (i) a final order, no longer subject to appeal, rendered in accordance with Section 18 hereof, directing the withdrawal of assets and identifying the specific assets that are to be the subject of the withdrawal or (ii) joint written instructions from the Reinsurer and the Company directing the withdrawal of assets and identifying the specific assets that are to be the subject of the withdrawal. The Trustee shall have no duty, responsibility or obligation whatsoever to participate in any dispute resolution process between the Company and the Reinsurer as provided in Section 18 hereof, unless requested by the Reinsurer or the Company, in which event the requesting party shall reimburse and indemnify Trustee for Trustee’s reasonable costs and expenses (including without limitation reasonable attorneys’ fees and expenses) in connection with such requested participation.

      Section 6 Permitted Assets .

     (a) Any a