Investment Management Agreement between General Re - New England Asset Management, Inc. and PXRE Reinsurance Company

Contract Categories: Business Finance › Investment Agreements
Summary

This agreement, dated April 8, 2002, appoints General Re - New England Asset Management, Inc. as the investment manager for a specified portion of PXRE Reinsurance Company's assets. The Manager has full discretion to make investment decisions within agreed guidelines and relevant laws, while PXRE retains the right to change these guidelines. The Manager will not have custody of the assets, which remain with a designated custodian. The agreement outlines the Manager's authority, reporting duties, and fee arrangements, and specifies how transactions and communications will be handled between the parties.

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EX-10.01 3 b319599_ex10-01.txt EXHIBIT 10.01 GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC. Investment Management Agreement This Agreement is made as of the 8th day of April, 2002, between 1. GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC., a corporation organized under the laws of the State of Delaware ("Manager"); and 2. PXRE RE1NSURANCE COMPANY, a corporation organized under the laws of the State of Connecticut (the "Client"). WHEREAS, Client desires to appoint Manager as the investment manager of that portion of Client's assets constituting the Account (as defined below) for fees agreed upon in Schedule A. III.; NOW THEREFORE, in consideration of the mutual agreements herein contained, it is agreed as follows: Section 1. The Account The cash, securities and other assets placed by Client in the account to be managed under this Agreement (the "Account") are listed on Section l.A. of Schedule A. Assets may be added to the Account at any time. Client will provide notification to the Manager of any such additions. The Account will include these assets and any changes in them resulting from transactions directed by Manager, withdrawals and additions made by Client, or dividends, interest, stock splits and other earnings, gains or losses on the assets. Assets of the Client that are not to be managed by Manager are separately identified on Schedule A ("Unmanaged Assets"). Manager may include these assets in its periodic reports to Client, but will exclude their value when calculating Manager's asset management fees. 1 Section 2. Management of the Account Manager will make all investment decisions for the Account, in Manager's sole discretion and without first consulting or notifying Client, subject to and in accordance with the investment restrictions and guidelines which are attached as Schedule B (the "Investment Guidelines"). If Manager manages only a portion of Client's portfolio, unless otherwise specified by Client in writing, Investment Guidelines' restrictions relate specifically to the assets managed by Manager. Client may change these Investment Guidelines at any time, but Manager will be bound by the changes only after it has received and agreed to them in writing. Other than by the Investment Guidelines, the insurance laws and regulations of the State of Connecticut (the "Insurance Laws"), and the terms of this Agreement, the investments made by Manager on behalf of the Client will not be restricted in any manner. Subject to the Investment Guidelines and the Insurance Laws, Manager will have full power and authority, on behalf of Client, to instruct any brokers, dealers or banks to buy, sell, exchange, convert or otherwise trade in all securities, futures or other investments for the Account. Manager will not be responsible for giving Client investment advice or taking any other action with respect to Unmanaged Assets. Client appoints Manager as the true and lawful attorney of the Client for and in the name, place and stead of Client, in Manager's unrestricted discretion, to operate and conduct the brokerage accounts of the Client relating to the Account and to do and perform all and every act and thing whatsoever requisite in furtherance of this Agreement, including the execution of all writings related to the purchase or sale, assignments, transfers and ownership of any stocks, bonds, commodities, or other securities. Manager is hereby fully authorized to act and rely on the authority vested pursuant to said power of attorney. Effective as of January 1, 2002, and until further notice, Manager will provide the investment accounting services for Client as set forth in Schedule E, and will assist Client in preparing Client's statutory Schedule D, if applicable. Client acknowledges that Manager will provide accounting data according to Manager's standard interpretation of accounting principles, unless expressly instructed otherwise by Client's prior written notice. Section 3. Transactions for the Account Manager will arrange for securities transactions for the Account to be executed through those brokers, dealers or banks that Manager reasonably believes will provide best execution. In choosing a broker, dealer or bank, Manager will consider the broker, dealer or bank's execution capability, reputation and access to the markets for the securities being traded for the Account. Manager will seek competitive commission rates, but not necessarily the lowest rates available. 2 Manager may also send transactions for the Account to brokers who charge higher commissions than other brokers, provided that Manager determines in good faith that the amount of commissions Manager pays is reasonable in relation to the value of the brokerage and research services provided, viewed in terms either of that particular transaction or Manager's overall responsibilities with respect to all clients whose accounts Manager manages on a discretionary basis. Portfolio transactions for each client account generally are completed independently. However, if Manager decides to purchase or sell the same securities for Client and other clients at about the same time, Manager may combine Client's order with those of other clients if Manager reasonably believes that it will be able to negotiate better prices or lower commission rates or transaction costs for the combined order than for Client's order alone. Client will pay the average price and transaction costs obtained for such combined orders. Manager generally will allocate securities purchased or sold as part of a combined order to Client's Account and to accounts of other clients according to the size of the order placed for each client. If Manager cannot obtain execution for the total amount of the securities in the combined orders, adjustments to the allocation will be made on a random number generator methodology. However, Manager may increase or decrease the amounts of securities allocated to each client if necessary to avoid having odd or small numbers of shares held for the account of any client. Each client that participates in a combined order will receive or pay the average share price and/or transactions costs for all transactions executed as part of the combined order. If Client directs Manager to use particular brokers, dealers or banks to execute transactions for the Account, Manager will do so, but Manager will not seek better execution services or prices for Client from other brokers, dealers or banks, and Client may pay higher prices or transaction costs as a result. Manager also may not be able to seek better execution services for Client by combining Client's orders with those of other clients. Client may direct all transactions for the Account to a particular broker, dealer or bank, by writing the name and address of that broker, dealer or bank in the space provided on Schedule A. Section 4. Transaction Confirmations Manager will instruct the brokers, dealers or banks who execute transactions for the Account to send Client all transaction confirmations, unless Client chooses not to receive confirmations. If Client does not wish to receive individual confirmations, this box should be checked. \X\ 3 Client may elect to receive individual confirmations at any time by giving Manager written notice. Section 5. Custody of Account Assets The assets in the Account will be held for Client by the custodian named on Schedule A (the "Custodian"). Manager will not have custody of any Account assets. Client will pay all fees of the Custodian. Client will authorize the Custodian to follow Manager's instructions to make and accept payments for, and to deliver or to receive, securities, cash or other investments purchased, sold, redeemed, or exchanged for the Account. Client also will instruct the Custodian to send Client and Manager monthly statements showing the assets in and all transactions for the Account during the month, including any payments of Manager's fees. Client will provide Manager with a copy of its agreement with the Custodian, and will give Manager reasonable advance notice of any change of Custodian. Section 6. Reports to Client Manager will send Client monthly written reports showing the identity, cost and current market value of the assets in the Account and each transaction made for the Account during the period covered by the report, which reports shall include the information set forth on Schedule E hereto and such other information as Client may reasonably request from time to time. The Account's performance will be sent monthly, quarterly or annually upon Client request. Section 7. Account Valuation Manager will value the securities in the Account using independent pricing sources. All securities in the Account that are listed and traded on a national securities exchange or on NASDAQ shall be valued on the valuation date at the closing price on the principal market where the securities are traded. All other securities shall be valued in accordance with any reasonable valuation method selected by Manager, consistent with industry accepted practices. While GR-NEAM does its best to obtain representative market prices for all securities in the Account, such prices do not always reflect the price actually received or paid on the open market. 4 Section 8. Manager's Fees For Manager's services, Client will pay a percentage of the value, as determined under Section 7 of this Agreement, of all assets in the Account (excluding Unmanaged Assets) as of the last trading day of each calendar month. The fees are payable at the end of each calendar quarter for services provided by Manager during the prior three months. The percentage amount of the fees is shown on Schedule A. In any partial quarter, the fees will be reduced pro rata based on the number of days the Account was managed. Client agrees to pay Manager's fees as follows: / / The Custodian will deduct the fees from Client's Account and pay them to Manager each quarter. Manager will send Client and the Custodian at the same time a bill showing the amount of Manager's fees, the Account value on which they were based and how they were calculated. The Custodian will send Client a monthly statement showing all amounts paid from the Account, including Manager's fees. /X/ Client will be billed directly by Manager and will pay Manager's fees within 30 days of receiving the bill. If Manager invests in securities issued by money market funds or other investment companies for the Account, these securities will be included in the value of the Account when Manager's fees are calculated. These same assets will be subject to additional investment management and other fees that are paid by the investment company but ultimately borne by its shareholders. These additional fees are described in each investment company's prospectus. Section 9. Proxy Voting Proxies for securities in the Account should be voted as follows: / / Client directs Manager not to vote proxies for securities held for the Account. /X/ Client directs Manager to vote all proxies for securities held for Client's Account in accordance with -- /X/ Manager's own discretion or / / Client's proxy voting guidelines attached as Schedule C. 5 Client will direct Custodian to send promptly all proxies and related shareholder communications to Manager and to identify them as relating to Client's Account. Client understands that Manager will not be able to vote proxies if they are not received on a timely basis from the Custodian as properly identified as relating to Client's Account. Manager shall not be responsible for voting proxies of foreign securities, and will forward them to Client for completion. These proxy voting instructions may be changed at any time by notifying Manager in writing. Section 10. Legal Proceedings Manager will not advise or act for Client in any legal proceedings, including bankruptcies or class actions, involving securities held in the Account or issuers of those securities. Section 11. Risk Manager cannot guarantee the future performance of the Account, promise any specific level of performance or promise that its investment decisions, strategies or overall management of the Account will be successful. The investment decisions Manager will make for Client are subject to various market, currency, economic, political and business risks, and will not necessarily be profitable. Section 12. Standard of Care; Limitation of Liability Except as may otherwise be provided by law, Manager will not be liable to Client for any loss (i) that Client may suffer as a result of Manager's good faith decisions or actions where Manager exercises the degree of care, skill, prudence and diligence that a prudent person acting in a like fiduciary capacity would use; (ii) caused by following Client's instructions; or (iii) caused by the Custodian, any broker, dealer or bank to which Manager directs transactions for the Account or any other person, except in the case of, and only to the extent that, the negligence or willful misconduct of Manager contributed to the loss. Federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith, and this Agreement does not waive or limit Client's rights under those laws. Except as set forth above with respect to the Account, Manager will not be responsible for Client's own compliance with the insurance investment laws of Client's state of domicile Notwithstanding any other provision in this Agreement, Manager shall not be responsible for Client's compliance with applicable tax laws. 6 In managing the Account, Manager will not consider any other securities, cash, or other investments or assets Client owns for diversification or other purposes. Manager shall have no responsibility whatsoever for the management of the Unmanaged Assets or any assets of Client other than the Account and shall incur no liability for any loss or damage which may result from the management of such other assets. Section 13. Client Directions The names and specimen signatures of each individual who is authorized to give directions to Manager on Client's behalf under this Agreement are set forth on Schedule D. Directions received by Manager from Client must be signed by at least one such person. If Manager receives directions from Client which are not signed by a person that Manager reasonably believes is authorized to do so, Manager shall not be required to comply with such directions until it verifies that the directions are properly authorized by Client. Manager shall be fully protected in relying upon any direction signed or given by a person that Manager reasonably believes is authorized to give such directions on Client's behalf. Manager also shall be fully protected when acting upon an instrument, certificate, or paper that Manager reasonably believes to be genuine and to be signed or presented by any such person or persons. Manager shall be under no duty to make any investigation or inquiry as to any statement contained in any writing and may accept the same as conclusive evidence of truth and accuracy of statements contained therein. Section 14. Confidentiality Except as Client and Manager otherwise agree or as may be required by law, all information concerning the Account and services provided under this Agreement shall be kept confidential. Section 15. Non-Exclusive Agreement Manager provides investment advice to other clients and may give them advice or take actions for them, for Manager's own accounts or for accounts of persons related to or employed by Manager, that is different from advice provided to or actions taken for client. Manager is not obligated to buy, sell or recommend for Client's Account any security or other investment that Manager may buy, sell or recommend for other clients or for the account of Manager or its related persons or employees. If Manager obtains material, non-public information about a security or its issuer that Manager may not lawfully use or disclose, Manager will have no obligation to disclose the information to Client or to use it for Client's benefit. 7 Section 16. Term of Agreement Either Client or Manager may cancel this Agreement at any time upon 30 days written notice. This Agreement will remain in effect until terminated. Termination of this Agreement will not affect (i) the validity of any action that Manager or Client has previously taken; (ii) the liabilities or obligations of Manager or Client for transactions started before termination; or (iii) Client's obligation to pay Manager's fees through the date of termination. Upon termination, Manager will have no obligation to recommend or take any action with regard to the securities, cash or other assets in the Account. Section 17. Agreement Not Assignable This Agreement may not be assigned within the meaning of the Investment Advisers Act of 1940 (the "Advisers Act") by Manager without Client's consent. Section 18. Governing Law The laws of the State of Connecticut will govern this Agreement. However, nothing in this Agreement will be construed contrary to any provision of the Advisers Act or the rules thereunder. Section 19. Miscellaneous If any provision of this Agreement is or becomes inconsistent with any applicable law or rule, the provision will be deemed rescinded or modified to the extent necessary to comply with such law or rule. In all other respects, this Agreement will continue in full force and effect. This Agreement contains the entire understanding between Manager and Client and may not be changed except in writing signed by both parties. Failure to insist on strict compliance with this Agreement or with any of its terms or any continued conduct will not be considered a waiver by either party under this Agreement. Section 20. Notices All notices and instructions with respect to the Account or other matters covered by this Agreement may be sent by U.S. mail express delivery services, facsimile, e-mail or other electronic means to Client and to Manager at the addresses at the end of this agreement or to another address provided in writing. Section 21. Representations of Client Client represents and warrants to Manager that (a) Client is the beneficial owner of all assets in the Account and except as specifically identified by Client, there are no restrictions on transfer or sale of any of those assets; (b) this Agreement has been duly authorized, executed, and delivered by Client and is Client's valid and binding obligation; (c) the names of the individuals who are authorized to act under this Agreement on behalf of Client have been given to Manager in writing; (d) no government authorizations, approvals, consents, or filings not already obtained are required in connection with the execution, delivery, or performance of this Agreement by Client; and (e) Client certifies that it is not an employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), nor a Person acting on behalf of any such plan. Client agrees to notify Manager in writing within five (5) days after the occurrence of an event making the above statement no longer accurate. 8 Client agrees to indemnify, defend and hold harmless Manager and its officers, directors, agents, employees, shareholders, legal representatives, successors and assigns, from and against any and all claims, actions, suits, damages, costs, liabilities, judgments, losses, charges, costs and expenses, including attorneys' fees, of Manager arising from any failure by Client to accurately disclose its status under this Section or by reason of any defect in Client's authority to appoint Manager under this Agreement. Section 22. Representations of Manager Manager represents and warrants that (i) this Agreement has been duly authorized, executed and delivered by Manager and is its valid and binding obligation, (ii) it is registered with the United States Securities Exchange Commission ("SEC") as an investment advisor under the Advisors Act, and (iii) that it has all other licenses and registrations necessary to perform its obligations under this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 9 Section 23. Form ADV Client has received and reviewed a copy of Part II of Manager's Form ADV and a copy of this Agreement. Section 24. Independent Contractor The relationship of Manager to Client is and shall remain during the term of this Agreement that of independent contractor. Manager and Client are not partners or joint venturers with each other under this Agreement, and nothing in this Agreement shall be construed so as to make them partners or joint venturers, or to impose any liability as such on either of them. AGREED TO AND ACCEPTED BY: GENERAL RE - NEW ENGLAND PXRE REINSURANCE COMPANY ASSET MANAGEMENT, INC. /s/ Gerard T. Lynch /s/ James F. Dore - ------------------------------------ ------------------------------- By: Gerard T. Lynch (Signature) Its President James F. Dore ------------------------------- (Name) Executive Vice President & Chief Financial Officer -------------------------------- (Title) Pond View Corporate Center 399 Thornall St 76 Batterson Park Road Edison NJ 08837 Farmington, Connecticut 06032 -------------------------------- (Principal Address) 06-1206728 -------------------------------- (Taxpayer Identification Number) 10 SCHEDULE A I. ACCOUNT ASSETS. A. Managed Assets - Client has deposited the following securities, cash and other assets with the Custodian identified below to be managed under this Agreement: B. Unmanaged Assets - Client also deposited with the Custodian the following assets which are not to be managed under this Agreement: II. CUSTODY OF ACCOUNT ASSETS. The assets to be managed under this Agreement and any Unmanaged Assets will be held by: JP Morgan Chase Custodial Account Number: G05140 - -------------------------------- ----------- (Name) 4 New York Plaza, 2nd Floor Custodian Contact: Lillian White - -------------------------------- ------------------ (Address) New York, NY 1004-2413 Contact Phone Number: 212 ###-###-#### - -------------------------------- --------------- - ------------------------------------------------------------------------------- III. FEES. Manager's fees for services provided under this Agreement, including assistance with Schedule D preparation provided under this Agreement shall be as follows: Annual fee of .20 % (twenty hundredths of one percent) of the first $200 million of the Stat market value of the assets under management; ..15 % (fifteen hundredths of one percent) of the next $200 million of the Stat market value of the assets under management; ..10% (ten hundredths of one percent) of the Stat market value of the remaining assets under management. - ------------------------------------------------------------------------------- IV. BROKERAGE DIRECTION. Client directs Manager to cause all transactions for the Account to be executed through the following broker, dealer or bank: - ------------------------------------------------------------------------------- Client has read, understands and accepts the limitations that this direction will place on Manager's ability to seek best execution for the Account. This direction may be changed by Client at any time by notifying Manager in writing. - ------------------------------------------------------------------------------- V. NAME OF CLIENT: VI. DATE: PXRE REINSURANCE COMPANY By: /s/ James F. Dore 4/8/02 - -------------------------------- -------------------------- 11 SCHEDULE B PXRE UNMANAGED ASSETS Bonds on Deposit for PXRE Reinsurance Company 4/8/02 17:41
Maturity Deposit with Bank Contact Par Value Desc Rate Date - ------------------------------------------------------------------------------------------------------------------------------ Oregon Department of Insurance 440 Labor and Industries Building 425,000 USTN 0.06375 8/15/02 Salem, Oregon 97310 Attn: Diane Koening Tony Tel: (503) 378-4281 ex620 ###-###-#### Fax: (503) 378-4351 California Department of Insurance Supervisor-Securities Deposit Unit 32,000 CD 6/18/03 300 Capital Mall, Suite 1300 Sacramento, CA 95814 Bank of America Attn: Mr. Jose Clarece Basken ###-###-#### ###-###-#### Office of Commissioner of Insurance Randy Thompson 7th Floor West Tower, Floyd Building Wachovia Bank, N.A. 90,000 UST 0.055 2/15/08 2 Martin Luther King, Jr. Drive Georgia Serv Center Atlantia, Georgia 30334 MC NC 31013 Attn: Branda 1 West 4th St Winston-Salem ###-###-#### NC 27101 P ###-###-#### F ###-###-#### Office of the Treasurer Fleet Bank 55 Elm Street Paul Foster 500,000 Minnesota ST 0.05000 11/1/07 Hartford, Connecticut 06106 ###-###-#### (PH) 2,000,000 Chicago Tax-a-Cent 0.04600 6/1/05 Attn: Carol Teller 1 Federal Street 4,925,000 FNMA 0.05750 2/15/08 Tel: (860) 566-5050 EXT 3122 MADE 10306 A --------- Fax: (860) 702-3041 Boston MA 02110 7,425,000 Commission of Insurance (On Deposit At Bank One) P.O. Box 94214 Baton Rouge, Lousiana 50,000 USTN 0.055 2/15/08 Attn: Cita Christian Tel: (225) 342-1201 Fax: (225) 342-7352 Division of Treasury Ms. Kaitlin Crowe 1 Ashburton Place 100,000 USTN 0.06375 8/15/02 Boston, Ma 02108 Tel ###-###-#### Fax: (617) 523-1068 Merrill Lynch 402,500 FNMA 0.0575 2/15/08 110 South Bedford Road Mt. Kisco, NY 10549 Attn: James Cotto Tel: 1 ###-###-#### Fax: 1 ###-###-#### COLLATERAL FOR LOC-NY Due SEMI Deposit with Cusip Date ANNUAL - ----------------------------------------------------------------------------- Oregon Department of Insurance 440 Labor and Industries Building 912827-G5-5 Feb/Aug 13,547 Salem, Oregon 97310 Attn: Diane Koening Tel: (503) 378-4281 ex620 Fax: (503) 378-4351 California Department of Insurance Supervisor-Securities Deposit Unit 300 Capital Mall, Suite 1300 Sacramento, CA 95814 Attn: Mr. Jose ###-###-#### Office of Commissioner of Insurance 7th Floor West Tower, Floyd Building ###-###-#### Feb/Aug 2,475 2 Martin Luther King, Jr. Drive Atlantia, Georgia 30334 Attn: Branda ###-###-#### Office of the Treasurer 55 Elm Street 604128L71 May/Nove 12,500 Hartford, Connecticut 06106 167709AT1 Jun/Dec 46,000 Attn: Carol Teller 31359MDJ9 Feb/Aug 141,594 Tel: (860) 566-5050 EXT 3122 Fax: (860) 702-3041 Commission of Insurance (On Deposit At Bank One) P.O. Box 94214 Baton Rouge, Lousiana ###-###-#### Feb/Aug 1,375 Attn: Cita Christian Tel: (225) 342-1201 Fax: (225) 342-7352 Division of Treasury Ms. Kaitlin Crowe 1 Ashburton Place 912827-G5-5 Feb/Aug 3,188 Boston, Ma 02108 Tel ###-###-#### Fax: (617) 523-1068 Merrill Lynch 31359MDJ9 Feb/Aug 11,572 110 South Bedford Road Mt. Kisco, NY 10549 Attn: James Cotto Tel: 1 ###-###-#### Fax: 1 ###-###-#### COLLATERAL FOR LOC-NY
INVESTMENT GUIDELINES: The investment guidelines to be followed by Manager in managing Client's Account are set forth below: - ------------------------------------------------------------------------------ NAME OF CLIENT: DATE: PXRE REINSURANCE COMPANY By: /s/ James F. Dore 4/8/02 ----------------------------------- ----------------------------- 12 PXRE UNMANAGED ASSETS Bonds on Deposit for PXRE Reinsurance Company 4/18/02 17:41
Maturity Deposit with Bank Contact Par Value Desc Rate Date Cusip - --------------------------------------------------------------------------------------------------------------------------------- Merrill Lynch 2,125,000 Illinois State 0.05875 8/1/14 452149UQ8 100 Campus Drive 4,000,000 Minnesota ST 0.05 11/1/07 604128L71 Park Avenue 42,500,000 UST 0.03625 8/31/03 9128277CO Fordham Park,NJ 07932 ---------- 973 ###-###-####/7792 48,625 ###-###-#### fax COLLATERAL FOR LLOYDS A/C #16M10354 Banc One Oklahoma National safe keeping services 300,000 Chicago Tax 0.046 6/1/05 167709AT1 Client Service Dept, 6th Floor A Cent Lo IL 100 N. Broadway, Oklahoma City, Ok 73102 Attn: Judith Watts P - 405 ###-###-#### F - 405 ###-###-#### Chase Manhattan Bank 6,006,478 Federal Home 0.0473 3/1/03 New York, NY Loan Mortg. Corp Purchased to cover finite deal Debt Will mature in 2 years Bank of America 150,000 FNMA 0.0575 2/15/08 31359MDJ9 BK of NYC/BOATRUST Attn: Brenda Nichols Mail Code: AR1-101-06-06 PO Box 1681 Little Rock AR ###-###-#### ###-###-#### Attn: Maria Magdalena Linera 500,000 PR Electric 0.049 07/01/05 745268WX6 P - (787) 722-8686 X 2220 Power Authority F - (787) 787 ###-###-#### P.O. Box 8330 San Juan, Puerto Rico 00910-8330 Ref - E-67 (i) Held @ Chase Due SEMI Deposit with Date ANNUAL - -------------------------------------------------------------------- Merrill Lynch Feb/Aug 62,422 100 Campus Drive May/Nove 100,000 Park Avenue Feb/Aug 770,313 Fordham Park,NJ 07932 ###-###-####/7792 ###-###-#### fax COLLATERAL FOR LLOYDS A/C #16M10354 Banc One Oklahoma National safe keeping services Jun/Dec 6,900 Client Service Dept, 6th Floor 100 N. Broadway, Oklahoma City, Ok 73102 Attn: Judith Watts P - 405 ###-###-#### F - 405 ###-###-#### Chase Manhattan Bank April/Oct 142,053 New York, NY Purchased to cover finite deal Will mature in 2 years Bank of America Feb/Aug 4,313 BK of NYC/BOATRUST Attn: Brenda Nichols Mail Code: AR1-101-06-06 PO Box 1681 Little Rock AR ###-###-#### ###-###-#### Attn: Maria Magdalena Linera Oct/March 12,250 P - (787) 722-8686 X 2220 F - (787) 787 ###-###-#### P.O. Box 8330 San Juan, Puerto Rico 00910-8330 Ref - E-67 (i) Held @ Chase
PXRE Group Revised Draft Investment Policy Statement
Performance Permitted Segment Driven By Benchmarks Investment Philosophy Investments - ------- --------- ---------- --------------------- --------------- Excess Capital Represents the balancing Weighting of: Maximize after tax reported returns Treasury Bonds portion of portfolio that is through investment in longer term Agency Bonds in excess of all actual and - Zurich Hedge debt investments, hedge funds and Municipal Bonds projected obligations as Fund of Funds other limited partnerships. Corporate Bonds represented by the Liability Index Securities and sectors likely to Mortgage-backed and Primary Capital segments. aggregate with insurance portfolio Securities Represents surplus shareholder - Lehman Aggregate to be avoided. Asset-backed funds that can be more AA Bond Index Average maturities: none securities aggressively invested to Credit quality: Minimum BBB, Hedge Funds achieve higher returns. This Depending on actual Mortgage-backed and Asset-backed Other Limited portion of the portfolio allocation in period AA. Average AA or higher. Partnerships contains the non-bond Diversification: No limit on U.S. investments in hedge fund and Government, Agency or municipal other limited partnerships. obligations. No more than the This portion of the portfolio greater of $20 million or 5% of is to be actively managed to portfolio any one corporate issuer maximize reported return and AA or better, and no more than the value across the permitted greater of $10 million or 2.5% of bond universe. The Hedge Fund portfolio for corporate issuer guidelines are addressed below AA, across all portfolio separately. segments.
Exhibit 2 Page 6 of 9 PXRE Group Investment Policy Statement
Performance Permitted Segment Driven By Benchmarks Investment Philosophy Investments - ------- --------- ---------- --------------------- --------------- Primary Capital Need to maintain a level of Lehman AA Maximize after tax reported return Treasury Bonds capital and surplus to 7 year Index while maintaining an appropriate U.S maintain licenses, for preservation of capital. Allocation Agency Bonds regulatory purposes and to between bond sectors should be Municipal Bonds conduct reinsurance managed so as to earn maximum Corporate Bonds operations. Amounts in this yields complying with overall Mortgage-backed portfolio should be adequate investment guidelines. Securities Securities and sectors likely to Asset-backed to cover deficit in cash flows aggregate with insurance portfolio Securities from operations related to to be avoided. expected possible large loss Due to the low probability events as defined in the of a large loss scenario, this Company's annual plan. The portfolio should be actively amount would be determined managed to reflect a balance from the Company's annual plan between return and liquidity and to by subtracting net written maximize returns in the premiums, related intermediate term market (1-10 reinstatement premiuns from years) with an average maturity of incurred losses net of 7 years. The portfolio should be reinsurance recoverable, managed to produce investment (giving affect to an income, while minimizing capital anticipation delay in depreciation and capital losses in collection, related commission the event of a wholesale and brokerage and the liquidation of this portfolio to projection of related payment fund a large loss. patterns associated with the Average maturity: 7 years loss.) Credit quality: Average grade AA - This portfolio should be Minimum BBB, and minimum AA for structured so as to maximize asset-backed and mortgage-backed. after-tax reported returns, Diversification: No limit on U.S. whilst maintaining an Government, Agency or municipal appropriate preservation of obligations. No more than the capital, low credit risk, and greater of $20 million or 5% of relatively liquid in order to portfolio any one corporate issuer be easily converted to cash AA or better, and no more than the and cash equivalents in the greater of $10 million or 2.5% of event of a large loss. portfolio for corporate issuer below AA, across all portfolio segments.
Exhibit 2 Page 7 of 9 PXRE Group Investment Policy Statement
Performance Permitted Segment Driven By Benchmarks Investment Philosophy Investments - ------- --------- ---------- --------------------- --------------- Liability Need to maintain investments Lehman AA Bond index Investment grade, intermediate Treasury Bonds Portfolio whose duration and cash flow with weighted maturity bonds and money market Agency Bonds is reasonably matched to the average duration investments. Maintain a portfolio Municipal Bonds Company's obligations with across Catastrophe of laddered years or directly Corporate Bonds respect to losses and loss and Finite and matched to expected liabilities. Mortgage-backed expenses (net of reinsurance Exited Lines, Securities and sectors likely to Securities recoverable) and other initially 2.5 years aggregate with insurance portfolio Asset backed liabilities arising from to be avoided. Securities reinsurance agreements. Average maturity: weighted average Treasury Bills This segment can vary in size computed quarterly. & Notes dependent upon the status of Credit Quality: BBB or better. Money Market losses and therefore should be Average credit quality AA. Foreign, Instruments: adjusted to match the expected Mortgage-backed and Asset-backed Commercial cash flow requirements of the Securities minimum AA. Paper Company's liabilities Diversification: No limit on U.S. Bankers' quarterly. Government, Agency or municipal Acceptances obligations. No more than the Certificates greater of $20 million or 5% of of Deposit portfolio any one corporate issuer Foreign AA or better, and no more than the Securities greater of $10 million or 2.5% of portfolio for corporate issuer below AA, across all portfolio segments. Foreign Securities: To match foreign exchange exposure
Exhibit 2 Page 8 of 9 SCHEDULE C PROXY VOTING GUIDELINES: The proxy voting guidelines to be followed by Manager in voting securities held in the Account are set forth below: (If none, check here /X/.) NAME OF CLIENT: DATE: PXRE REINSURANCE COMPANY By: /s/ James F. Dore 4/8/02 ----------------------------------- ----------------------------- 13 SCHEDULE D SECRETARY'S CERTIFICATE ----------------------- I, Bruce J. Byrnes, the Secretary of PXRE REINSURANCE COMPANY, (the "Corporation"), a Corporation organized and existing under the laws of the State of Connecticut hereby certify that each of the following officers of the Corporation, acting singly, is authorized in the name and on behalf of the Corporation, to give instructions to General Re-New England Asset Management, Inc. ("Manager") with respect to any and all matters, including investment and reinvestment of securities, pertaining to the Investment Management Agreement between the Corporation and Manager, and to execute and deliver any and all documents and to take any and all other action to carry out the purposes of said Investment Management Agreement. I further certify that the specimen signature set forth next to the names of such officers, is the true and genuine signature of such persons. Name of Officer Title Signature --------------- ----- --------- James F. Dore EVP & CFO /s/ James F. Dore - -------------------- ------------------------- ----------------------- R.E.J. Jeffreys V.P. & Asst. Treas. /s/ R.E.J. Jeffreys - -------------------- ------------------------- ----------------------- Gerald L. Radke President & CEO /s/ Gerald L. Radke - -------------------- ------------------------- ----------------------- This Certificate shall be in effect from the date hereof until written notice is given on behalf of the Corporation to terminate or revise it. IN WITNESS WHEREOF, I set my hand and seal of the Corporation. /s/ Bruce J. Byrnes 2/8/02 ------------------------------ ---------------------- Secretary Date (Corporate Seal) 14 Schedule E PXRE REINSURANCE COMPANY Accounting and Reporting Services Periodic Reporting of All Investment Income and Transactions 1. STAT and GAAP basis reporting 2. Review of monthly market values from reliable independent pricing sources by Asset Class Specialists 3. Monthly general ledger journal entries 4. Monthly general ledger and trial balance preparation and reconciliation to Statutory Schedule D Reports 5. Monthly reconciliation to Client custodians and discrepancy resolution 6. Monthly, quarterly and annual reporting packages delivered to Client by mail, electronic transfer or via website 7. Summary and Detail Transaction Reports 8. Investment Income Earned Report 9. Monthly Appraisal Reports 10. Rating of securities by Standard & Poor's, Moody's, Fitch 11. Periodic FAS 91 Adjustments Statutory Reporting 1. Assistance in preparation of Quarterly and Annual Statutory Schedule D Reports 2. Quarterly and Annual NAIC pricing and designations 3. Securities Valuation Office ("SVO") filings 15 GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC. Investment Management Agreement ------------------------------- This Agreement is made as of the 8 day of April, 2002, between 1. GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC., a corporation organized under the laws of the State of Delaware ("Manager"); and 2. PXRE GROUP LTD., a corporation organized under the laws of BERMUDA (the "Client"). WHEREAS, Client desires to appoint Manager as the investment manager of that portion of Client's assets constituting the Account (as defined below) for fees agreed upon in Schedule A. III.; NOW THEREFORE, in consideration of the mutual agreements herein contained, it is agreed as follows: Section 1. The Account The cash, securities and other assets placed by Client in the account to be managed under this Agreement (the "Account") are listed on Section l.A. of Schedule A. Assets may be added to the Account at any time. Client will provide notification to the Manager of any such additions. The Account will include these assets and any changes in them resulting from transactions directed by Manager, withdrawals and additions made by Client, or dividends, interest, stock splits and other earnings, gains or losses on the assets. Assets of the Client that are not to be managed by Manager are separately identified on Schedule A ("Unmanaged Assets"). Manager may include these assets in its periodic reports to Client, but will exclude their value when calculating Manager's asset management fees. 1 Section 2. Management of the Account Manager will make all investment decisions for the Account, in Manager's sole discretion and without first consulting or notifying Client, subject to and in accordance with the investment restrictions and guidelines which are attached as Schedule B (the "Investment Guidelines"). If Manager manages only a portion of Client's portfolio, unless otherwise specified by Client in writing, Investment Guidelines' restrictions relate specifically to the assets managed by Manager. Client may change these Investment Guidelines at any time, but Manager will be bound by the changes only after it has received and agreed to them in writing. Other than by the Investment Guidelines, the insurance laws and regulations of the State of Connecticut (the "Insurance Laws"), and the terms of this Agreement, the investments made by Manager on behalf of the Client will not be restricted in any manner. Subject to the Investment Guidelines and the Insurance Laws, Manager will have full power and authority, on behalf of Client, to instruct any brokers, dealers or banks to buy, sell, exchange, convert or otherwise trade in all securities, futures or other investments for the Account. Manager will not be responsible for giving Client investment advice or taking any other action with respect to Unmanaged Assets. Client appoints Manager as the true and lawful attorney of the Client for and in the name, place and stead of Client, in Manager's unrestricted discretion, to operate and conduct the brokerage accounts of the Client relating to the Account and to do and perform all and every act and thing whatsoever requisite in furtherance of this Agreement, including the execution of all writings related to the purchase or sale, assignments, transfers and ownership of any stocks, bonds, commodities, or other securities. Manager is hereby fully authorized to act and rely on the authority vested pursuant to said power of attorney. Effective as of January 1, 2002, and until further notice, Manager will provide the investment accounting services for Client as set forth in Schedule E, and will assist Client in preparing Client's statutory Schedule D, if applicable. Client acknowledges that Manager will provide accounting data according to Manager's standard interpretation of accounting principles, unless expressly instructed otherwise by Client's prior written notice. Section 3. Transactions for the Account Manager will arrange for securities transactions for the Account to be executed through those brokers, dealers or banks that Manager reasonably believes will provide best execution. In choosing a broker, dealer or bank, Manager will consider the broker, dealer or bank's execution capability, reputation and access to the markets for the securities being traded for the Account. Manager will seek competitive commission rates, but not necessarily the lowest rates available. 2 Manager may also send transactions for the Account to brokers who charge higher commissions than other brokers, provided that Manager determines in good faith that the amount of commissions Manager pays is reasonable in relation to the value of the brokerage and research services provided, viewed in terms either of that particular transaction or Manager's overall responsibilities with respect to all clients whose accounts Manager manages on a discretionary basis. Portfolio transactions for each client account generally are completed independently. However, if Manager decides to purchase or sell the same securities for Client and other clients at about the same time, Manager may combine Client's order with those of other clients if Manager reasonably believes that it will be able to negotiate better prices or lower commission rates or transaction costs for the combined order than for Client's order alone. Client will pay the average price and transaction costs obtained for such combined orders. Manager generally will allocate securities purchased or sold as part of a combined order to Client's Account and to accounts of other clients according to the size of the order placed for each client. If Manager cannot obtain execution for the total amount of the securities in the combined orders, adjustments to the allocation will be made on a random number generator methodology. However, Manager may increase or decrease the amounts of securities allocated to each client if necessary to avoid having odd or small numbers of shares held for the account of any client. Each client that participates in a combined order will receive or pay the average share price and/or transactions costs for all transactions executed as part of the combined order. If Client directs Manager to use particular brokers, dealers or banks to execute transactions for the Account, Manager will do so, but Manager will not seek better execution services or prices for Client from other brokers, dealers or banks, and Client may pay higher prices or transaction costs as a result. Manager also may not be able to seek better execution services for Client by combining Client's orders with those of other clients. Client may direct all transactions for the Account to a particular broker, dealer or bank, by writing the name and address of that broker, dealer or bank in the space provided on Schedule A. Section 4. Transaction Confirmations Manager will instruct the brokers, dealers or banks who execute transactions for the Account to send Client all transaction confirmations, unless Client chooses not to receive confirmations. If Client does not wish to receive individual confirmations, this box should be checked. |_| 3 Client may elect to receive individual confirmations at any time by giving Manager written notice. Section 5. Custody of Account Assets The assets in the Account will be held for Client by the custodian named on Schedule A (the "Custodian"). Manager will not have custody of any Account assets. Client will pay all fees of the Custodian. Client will authorize the Custodian to follow Manager's instructions to make and accept payments for, and to deliver or to receive, securities, cash or other investments purchased, sold, redeemed, or exchanged for the Account. Client also will instruct the Custodian to send Client and Manager monthly statements showing the assets in and all transactions for the Account during the month, including any payments of Manager's fees. Client will provide Manager with a copy of its agreement with the Custodian, and will give Manager reasonable advance notice of any change of Custodian. Section 6. Reports to Client Manager will send Client monthly written reports showing the identity, cost and current market value of the assets in the Account and each transaction made for the Account during the period covered by the report, which reports shall include the information set forth on Schedule E hereto and such other information as Client may reasonably request from time to time. The Account's performance will be sent monthly, quarterly or annually upon Client request. Section 7. Account Valuation Manager will value the securities in the Account using independent pricing sources. All securities in the Account that are listed and traded on a national securities exchange or on NASDAQ shall be valued on the valuation date at the closing price on the principal market where the securities are traded. All other securities shall be valued in accordance with any reasonable valuation method selected by Manager, consistent with industry accepted practices. While GR-NEAM does its best to obtain representative market prices for all securities in the Account, such prices do not always reflect the price actually received or paid on the open market. 4 Section 8. Manager's Fees For Manager's services, Client will pay a percentage of the value, as determined under Section 7 of this Agreement, of all assets in the Account (excluding Unmanaged Assets) as of the last trading day of each calendar month. The fees are payable at the end of each calendar quarter for services provided by Manager during the prior three months. The percentage amount of the fees is shown on Schedule A. In any partial quarter, the fees will be reduced pro rata based on the number of days the Account was managed. Client agrees to pay Manager's fees as follows: |_| The Custodian will deduct the fees from Client's Account and pay them to Manager each quarter. Manager will send Client and the Custodian at the same time a bill showing the amount of Manager's fees, the Account value on which they were based and how they were calculated. The Custodian will send Client a monthly statement showing all amounts paid from the Account, including Manager's fees. |x| Client will be billed directly by Manager and will pay Manager's fees within 30 days Of receiving the bill. If Manager invests in securities issued by money market funds or other investment companies for the Account, these securities will be included in the value of the Account when Manager's fees are calculated. These same assets will be subject to additional investment management and other fees that are paid by the investment company but ultimately borne by its shareholders. These additional fees are described in each investment company's prospectus. Section 9. Proxy Voting Proxies for securities in the Account should be voted as follows: |_| Client directs Manager not to vote proxies for securities held for the Account. |X| Client directs Manager to vote all proxies for securities held for Client's Account in accordance with -- |X| Manager's own discretion or |_| Client's proxy voting guidelines attached as Schedule C. 5 Client will direct Custodian to send promptly all proxies and related shareholder communications to Manager and to identify them as relating to Client's Account. Client understands that Manager will not be able to vote proxies if they are not received on a timely basis from the Custodian as properly identified as relating to Client's Account. Manager shall not be responsible for voting proxies of foreign securities, and will forward them to Client for completion. These proxy voting instructions may be changed at any time by notifying Manager in writing. Section 10. Legal Proceedings Manager will not advise or act for Client in any legal proceedings, including bankruptcies or class actions, involving securities held in the Account or issuers of those securities. Section 11. Risk Manager cannot guarantee the future performance of the Account, promise any specific level of performance or promise that its investment decisions, strategies or overall management of the Account will be successful. The investment decisions Manager will make for Client are subject to various market, currency, economic, political and business risks, and will not necessarily be profitable. Section 12. Standard of Care; Limitation of Liability Except as may otherwise be provided by law, Manager will not be liable to Client for any loss (i) that Client may suffer as a result of Manager's good faith decisions or actions where Manager exercises the degree of care, skill, prudence and diligence that a prudent person acting in a like fiduciary capacity would use; (ii) caused by following Client's instructions; or (iii) caused by the Custodian, any broker, dealer or bank to which Manager directs transactions for the Account or any other person, except in the case of, and only to the extent that, the negligence or willful misconduct of Manager contributed to the loss. Federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith, and this Agreement does not waive or limit Client's rights under those laws. Except as set forth above with respect to the Account, Manager will not be responsible for Client's own compliance with the insurance investment laws of Client's state of domicile. Notwithstanding any other provision in this Agreement, Manager shall not be responsible for Client's compliance with applicable tax laws. 6 In managing the Account, Manager will not consider any other securities, cash, or other investments or assets Client owns for diversification or other purposes. Manager shall have no responsibility whatsoever for the management of the Unmanaged Assets or any assets of Client other than the Account and shall incur no liability for any loss or damage which may result from the management of such other assets. Section 13. Client Directions The names and specimen signatures of each individual who is authorized to give directions to Manager on Client's behalf under this Agreement are set forth on Schedule D. Directions received by Manager from Client must be signed by at least one such person. If Manager receives directions from Client which are not signed by a person that Manager reasonably believes is authorized to do so, Manager shall not be required to comply with such directions until it verifies that the directions are properly authorized by Client. Manager shall be fully protected in relying upon any direction signed or given by a person that Manager reasonably believes is authorized to give such directions on Client's behalf. Manager also shall be fully protected when acting upon an instrument, certificate, or paper that Manager reasonably believes to be genuine and to be signed or presented by any such person or persons. Manager shall be under no duty to make any investigation or inquiry as to any statement contained in any writing and may accept the same as conclusive evidence of truth and accuracy of statements contained therein. Section 14. Confidentiality Except as Client and Manager otherwise agree or as may be required by law, all information concerning the Account and services provided under this Agreement shall be kept confidential. Section 15. Non-Exclusive Agreement Manager provides investment advice to other clients and may give them advice or take actions for them, for Manager's own accounts or for accounts of persons related to or employed by Manager, that is different from advice provided to or actions taken for Client. Manager is not obligated to buy, sell or recommend for Client's Account any security or other investment that Manager may buy, sell or recommend for other clients or for the account of Manager or its related persons or employees. If Manager obtains material, non-public information about a security or its issuer that Manager may not lawfully use or disclose, Manager will have no obligation to disclose the information to Client or to use it for Client's benefit. 7 Section 16. Term of Agreement Either Client or Manager may cancel this Agreement at any time upon 30 days written notice. This Agreement will remain in effect until terminated. Termination of this Agreement will not affect (i) the validity of any action that Manager or Client has previously taken; (ii) the liabilities or obligations of Manager or Client for transactions started before termination; or (iii) Client's obligation to pay Manager's fees through the date of termination. Upon termination, Manager will have no obligation to recommend or take any action with regard to the securities, cash or other assets in the Account. Section 17. Agreement Not Assignable This Agreement may not be assigned within the meaning of the Investment Advisers Act of 1940 (the "Advisers Act") by Manager without Client's consent. Section 18. Governing Law The laws of the State of Connecticut will govern this Agreement. However, nothing in this Agreement will be construed contrary to any provision of the Advisers Act or the rules thereunder. Section 19. Miscellaneous If any provision of this Agreement is or becomes inconsistent with any applicable law or rule, the provision will be deemed rescinded or modified to the extent necessary to comply with such law or rule. In all other respects, this Agreement will continue in full force and effect. This Agreement contains the entire understanding between Manager and Client and may not be changed except in writing signed by both parties. Failure to insist on strict compliance with this Agreement or with any of its terms or any continued conduct will not be considered a waiver by either party under this Agreement. Section 20. Notices All notices and instructions with respect to the Account or other matters covered by this Agreement may be sent by U.S. mail express delivery services, facsimile, e-mail or other electronic means to Client and to Manager at the addresses at the end of this agreement or to another address provided in writing. 8 Section 21. Representations of Client Client represents and warrants to Manager that (a) Client is the beneficial owner of all assets in the Account and except as specifically identified by Client, there are no restrictions on transfer or sale of any of those assets; (b) this Agreement has been duly authorized, executed, and delivered by Client and is Client's valid and binding obligation; (c) the names of the individuals who are authorized to act under this Agreement on behalf of Client have been given to Manager in writing; (d) no government authorizations, approvals, consents, or filings not already obtained are required in connection with the execution, delivery, or performance of this Agreement by Client; and (e) Client certifies that it is not an employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), nor a Person acting on behalf of any such plan. Client agrees to notify Manager in writing within five (5) days after the occurrence of an event making the above statement no longer accurate. Client agrees to indemnify, defend and hold harmless Manager and its officers, directors, agents, employees, shareholders, legal representatives, successors and assigns, from and against any and all claims, actions, suits, damages, costs, liabilities, judgments, losses, charges, costs and expenses, including attorneys' fees, of Manager arising from any failure by Client to accurately disclose its status under this Section or by reason of any defect in Client's authority to appoint Manager under this Agreement. Section 22. Representations of Manager Manager represents and warrants that (i) this Agreement has been duly authorized, executed and delivered by Manager and is its valid and binding obligation, (ii) it is registered with the United States Securities Exchange Commission ("SEC") as an investment advisor under the Advisors Act; and (iii) that it has all other licenses and registrations necessary to perform its obligations under this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 9 Section 23. Form ADV Client has received and reviewed a copy of Part II of Manager's Form ADV and a copy of this Agreement. Section 24. Independent Contractor The relationship of Manager to Client is and shall remain during the term of this Agreement that of independent contractor. Manager and Client are not partners or joint venturers with each other under this Agreement, and nothing in this Agreement shall be construed so as to make them partners or joint venturers, or to impose any liability as such on either of them. AGREED TO AND ACCEPTED BY: GENERAL RE-NEW ENGLAND PXRE GROUP LTD. ASSET MANAGEMENT, INC. /s/ Gerard T. Lynch /s/ Jeffrey L. Radke - ------------------------- -------------------------------- By: Gerard T. Lynch (Signature) Its President Jeffrey L. Radke -------------------------------- (Name) President -------------------------------- (Title) Pond View Corporate Center 99 Front Street 76 Batterson Park Road -------------------------------- Farmington, Connecticut 06032 Hamilton HM12, Bermuda -------------------------------- (Principal Address) 98-0214719 -------------------------------- (Taxpayer Identification Number) 10 SCHEDULE A I. ACCOUNT ASSETS. A. Managed Assets - Client has deposited the following securities, cash and other assets with the Custodian identified below to be managed under this Agreement: B. Unmanaged Assets - Client also deposited with the Custodian the following assets which are not to be managed under this Agreement: - ------------------------------------------------------------------------------- II. CUSTODY OF ACCOUNT ASSETS. The assets to be managed under this Agreement and any Unmanaged Assets will be held by: Custodial Account Number: - ------------------------------------- --------------- (Name) SEE ATTACHED Custodian Contact: - ------------------------------------- --------------------- (Address) Contact Phone Number: - -------------------------------------- ------------------ - ------------------------------------------------------------------------------- III. FEES. Manager's fees for services provided under this Agreement, including assistance with Schedule D preparation provided under this Agreement shall be as follows: Annual fee of .20% (twenty hundredths of one percent) of the first $200 million of the Stat market value of the assets under management; ..15% (fifteen hundredths of one percent) of the next $200 million of the Stat market value of the assets under management; ..10% (ten hundredths of one percent) of the Stat market value of the remaining assets under management. The assets of PXRE REINSURANCE COMPANY, PXRE REINSURANCE LTD. AND PXRE GROUP LTD. shall be aggregated for fee purposes. IV. BROKERAGE DIRECTION. Client directs Manager to cause all transactions for the Account to be executed through the following broker, dealer or bank: Client has read, understands and accepts the limitations that this direction will place on Manager's ability to seek best execution for the Account. This direction may be changed by Client at any time by notifying Manager in writing. - ------------------------------------------------------------------------------- V. NAME OF CLIENT: VI. DATE: PXRE GROUP LTD. By: /s/ Jeffrey L. Radke April 8 2002 -------------------------- -------------------- J. L. Radke - ------------------------------------------------------------------------------- 11 - ------------------------------------------------------------------------------- INVESTMENT GUIDELINES: The investment guidelines to be followed by Manager in managing Client's Account are set forth below: - ------------------------------------------------------------------------------- NAME OF CLIENT: DATE: PXRE GROUP LTD. By: /s/ Jeffrey L. Radke April 8, 2002 -------------------------- -------------------- J. L. Radke - ------------------------------------------------------------------------------- 12 PXRE Group Revised Draft Investment Policy Statement
Performance Segment Driven By Benchmarks Investments Philosophy Permitted Investments ------- --------- ---------- ---------------------- --------------------- Excess Capital Represents the balancing portion Weighting of: Maximize after tax reported Treasury Bonds of portfolio that is in excess returns through investment in Agency Bonds of all actual and projected - Zurich Hedge longer term debt investments, Municipal Bonds obligations as represented by Fund of Funds hedge funds and other limited Corporate Bonds the Liability and Primary Index partnerships. Securities and Mortgage-backed Capital segments. Represents sectors likely to aggregate with Securities surplus shareholder funds that - Lehman Aggregate insurance portfolio to be Asset-backed can be more aggressively AA Bond Index avoided. Average maturities: securities invested to achieve higher none Credit quality: Minimum Hedge Funds returns. This portion of the Depending on actual BBB, Mortgage-backed and Other Limited portfolio contains the non-bond allocation in period Asset-backed AA. Average AA or Partnerships investments in hedge fund and higher. Diversification: No other limited partnerships. This limit on U.S Government, Agency portion of the portfolio is to or municipal obligations. No be actively managed to maximize more than the greater of $20 reported return and value across million or 5% of portfolio any the permitted bond universe. The one corporate issuer AA Hedge Fund guidelines are or better, and no more than the addressed separately. greater of $10 million or 2.5% of portfolio for corporate issuer below AA, across all portfolio segments.
Exhibit 2 Page 6 of 9 PXRE Group Investment Policy Statement
Performance Segment Driven By Benchmarks Investments Philosophy Permitted Investments ------- --------- ---------- ---------------------- --------------------- Primary Capital Need to maintain a level of Lehman AA Maximize after-tax reported Treasury Bonds U.S. capital and surplus to maintain 7 year Index return while maintaining an Agency Bonds licenses, for regulatory appropriate preservation of Municipal Bonds purposes and to conduct capital. Allocation between bond Corporate Bonds reinsurance operations. Amounts sectors should be managed so as Mortgage-backed in this portfolio should be to earn maximum yields complying Securities adequate to cover deficit in with overall investment Asset-backed cash flows from operations guidelines. Securities and Securities related to expected possible sectors likely to aggregate with large loss events as defined in insurance portfolio to be the Company's annual plan. The avoided. Due to the low amount would be determined from probability of a large loss the Company's annual plan by scenario, this portfolio should subtracting net written be actively managed to reflect a premiums, related reinstatement balance between return and premiums from incurred losses liquidity and to maximize net of reinsurance recoverable, returns in the intermediate term (giving affect to an market (1-10 years) with an anticipation delay in average maturity of 7 years. The collection, related commission portfolio should be managed to and brokerage and the projection produce investment income, while of related payment patterns minimizing capital depreciation associated with the loss. This and capital losses in the event portfolio should be structured of a wholesale liquidation of so as to maximize after-tax this portfolio to fund a large reported returns, whilst loss. Average maturity: 7 years maintaining an appropriate Credit quality: Average grade AA preservation of capital, low - Minimum BBB. and minimum AA credit risk, and relatively for asset-backed and liquid in order to be easily mortgage-backed. converted to cash and cash Diversification: No limit on US. equivalents in the event of a Government, Agency or municipal large loss. obligations. No more than the greater of $20 million or 5% of portfolio any one corporate issuer AA or better, and no more than the greater of $10 million or 2.5% of portfolio for corporate issuer below AA, across all portfolio segments.
Exhibit 2 Page 7 of 9 PXRE Group Investment Policy Statement
Performance Segment Driven By Benchmarks Investments Philosophy Permitted Investments ------- --------- ---------- ---------------------- --------------------- Liability Need to maintain investments Lehman AA Bond Investment grade, intermediate Treasury Bonds Portfolio whose duration and cash flow is index with maturity bonds and money market Agency Bonds reasonably matched to the weighted average investments. Maintain a Municipal Bands Company's obligations with duration across portfolio of laddered years or Corporate Bonds respect to losses and loss Catastrophe and directly matched to expected Mortgage-backed expenses (net of reinsurance Finite and liabilities. Securities and Securities recoverable) and other Exited Lines, sectors likely to aggregate with Asset backed liabilities arising from initially 2.5 insurance portfolio to be Securities reinsurance agreements. This years avoided. Average maturity: Treasury Bills & segment can vary in size weighted average computed Notes dependent upon the status of quarterly. Credit Quality: BBB Money Market losses and therefore should be or better. Average credit Instruments: adjusted to match the expected quality AA. Foreign, Commercial Paper cash flow requirements of the Mortgage-backed and Asset-backed Bankers' Company's liabilities quarterly. Securities minimum AA. Acceptances Diversification: No limit on U.S. Certificates of Government, Agency or municipal Deposit obligations. No more than the Foreign greater of $20 million or 5% of Securities portfolio any one corporate issuer AA or better, and no more than the greater of $10 million or 2.5% of portfolio for corporate issuer below AA, across all portfolio segments. Foreign Securities: To match foreign exchange exposure
Exhibit 2 Pages 8 of 9 SCHEDULE C - -------------------------------------------------------------------------------- PROXY VOTING GUIDELINES: The proxy voting guidelines to be followed by Manager in voting securities held in the Account are set forth below: (If none, check here |X|) - ------------------------------------------------------------------------------- NAME OF CLIENT: DATE: PXRE Group Ltd. By: /s/ Jeffrey L. Radke April 8, 2002 -------------------------- -------------------- Jeffrey L. Radke - ------------------------------------------------------------------------------- 13 SCHEDULE D SECRETARY'S CERTIFICATE ----------------------- I, I. S. Outerbridge, the Assistant Secretary of PXRE Group LTD, (the "Corporation"), a Corporation organized and existing under the laws of BERMUDA hereby certify that each of the following officers of the Corporation, acting singly, is authorized in the name and on behalf of the Corporation, to give instructions to General Re-New England Asset Management, Inc. ("Manager") with respect to any and all matters, including investment and reinvestment of securities, pertaining to the Investment Management Agreement between the Corporation and Manager, and to execute and deliver any and all documents and to take any and all other action to carry out the purposes of said Investment Management Agreement. I further certify that the specimen signature set forth next to the names of such officers, is the true and genuine signature of such persons. Name of Officer Title Signature JEFFREY L. RADKE PRESIDENT /s/ Jeffrey L. Radke - ----------------- ----------- ----------------------- LEATRICE J. ROMAN ASSIST. CONTROLLER /s/ Leatrice J. Roman - ----------------- ------------------ ----------------------- - ----------------- ------------------ ----------------------- This Certificate shall be in effect from the date hereof until written notice is given on behalf of the Corporation to terminate or revise it. IN WITNESS WHEREOF, I set my hand and seal of the Corporation. /s/ I. S. Outerbridge April 8, 2002 - --------------------------------------- ---------------- Assistant Secretary Date [SEAL] 14 Schedule E PXRE Group LTD. Accounting and Reporting Services Periodic Reporting of All Investment Income and Transactions 1. STAT and GAAP basis reporting 2. Review of monthly market values from reliable independent pricing sources by Asset Class Specialists 3. Monthly general ledger journal entries 4. Monthly general ledger and trial balance preparation and reconciliation to Statutory Schedule D Reports 5. Monthly reconciliation to Client custodians and discrepancy resolution 6. Monthly, quarterly and annual reporting packages delivered to Client by mail, electronic transfer or via website 7. Summary and Detail Transaction Reports 8. Investment Income Earned Report 9. Monthly Appraisal Reports 10. Rating of securities by Standard & Poor's, Moody's, Fitch 11. Periodic FAS 91 Adjustments Statutory Reporting 1. Assistance in preparation of Quarterly and Annual Statutory Schedule D Reports 2. Quarterly and Annual NAIC pricing and designations 3. Securities Valuation Office ("SVO") filings 15 CUSTODY OF ACCOUNT ASSETS ------------------------- 1) Nations Funds Bank of America Collateral Acct for PXRE Reinsurance Ltd. (2) P0 Box 34602, Charlotte NC ###-###-#### Custodial Account Number: 857675 Custodian Contact: Anna Cannon Contact Phone Number: 704 ###-###-#### 2) JP Morgan For PXRE Reinsurance Ltd. 2001 Bryan Street 11th Floor Dallas, TX 75201 Custodial Account Number: PXRE Reinsurance Ltd. P 312909.2 Custodian Contact: Christopher Greene Contact Phone Number: 214 ###-###-#### 3) JP Morgan 4 New York Plaza, 2nd Floor New York, NY 10004-2413 Custodial Account Number: PXRE Reinsurance Ltd. G08509 Custodian Contact: John Dipalo Contact Phone Number: 212 ###-###-#### 4) JP Morgan 4 New York Plaza, 2nd Floor New York, NY 10004-2413 Custodial Account Number: PXRE Group Ltd. G08510 Custodian Contact: John Dipalo Contact Phone Number: 212 ###-###-#### GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC. Investment Management Agreement ------------------------------- This Agreement is made as of the 8th day of April, 2002, between 1. GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC., a corporation organized under the laws of the State of Delaware ("Manager"); and 2. PXRE REINSURANCE LTD., a corporation organized under the laws of Bermuda (the "Client"). WHEREAS, Client desires to appoint Manager as the investment manager of that portion of Client's assets constituting the Account (as defined below) for fees agreed upon in Schedule A. III.; NOW THEREFORE, in consideration of the mutual agreements herein contained, it is agreed as follows: Section 1. The Account The cash, securities and other assets placed by Client in the account to be managed under this Agreement (the "Account") are listed on Section I.A. of Schedule A. Assets may be added to the Account at any time. Client will provide notification to the Manager of any such additions. The Account will include these assets and any changes in them resulting from transactions directed by Manager, withdrawals and additions made by Client, or dividends, interest, stock splits and other earnings, gains or losses on the assets. Assets of the Client that are not to be managed by Manager are separately identified on Schedule A ("Unmanaged Assets"). Manager may include these assets in its periodic reports to Client, but will exclude their value when calculating Manager's asset management fees. 1 Section 2. Management of the Account Manager will make all investment decisions for the Account, in Manager's sole discretion and without first consulting or notifying Client, subject to and in accordance with the investment restrictions and guidelines which are attached as Schedule B (the "Investment Guidelines"). If Manager manages only a portion of Client's portfolio, unless otherwise specified by Client in writing, Investment Guidelines' restrictions relate specifically to the assets managed by Manager. Client may change these Investment Guidelines at any time, but Manager will be bound by the changes only after it has received and agreed to them in writing. Other than by the Investment Guidelines, the insurance laws and regulations of the State of Connecticut (the "Insurance Laws"), and the terms of this Agreement, the investments made by Manager on behalf of the Client will not be restricted in any manner. Subject to the Investment Guidelines and the Insurance Laws, Manager will have full power and authority, on behalf of Client, to instruct any brokers, dealers or banks to buy, sell, exchange, convert or otherwise trade in all securities, futures or other investments for the Account. Manager will not be responsible for giving Client investment advice or taking any other action with respect to Unmanaged Assets. Client appoints Manager as the true and lawful attorney of the Client for and in the name, place and stead of Client, in Manager's unrestricted discretion, to operate and conduct the brokerage accounts of the Client relating to the Account and to do and perform all and every act and thing whatsoever requisite in furtherance of this Agreement, including the execution of all writings related to the purchase or sale, assignments, transfers and ownership of any stocks, bonds, commodities, or other securities. Manager is hereby fully authorized to act and rely on the authority vested pursuant to said power of attorney. Effective as of January 1, 2002, and until further notice, Manager will provide the investment accounting services for Client as set forth in Schedule E, and will assist Client in preparing Client's statutory Schedule D, if applicable. Client acknowledges that Manager will provide accounting data according to Manager's standard interpretation of accounting principles, unless expressly instructed otherwise by Client's prior written notice. Section 3. Transactions for the Account Manager will arrange for securities transactions for the Account to be executed through those brokers, dealers or banks that Manager reasonably believes will provide best execution. In choosing a broker, dealer or bank, Manager will consider the broker, dealer or bank's execution capability, reputation and access to the markets for the securities being traded for the Account. Manager will seek competitive commission rates, but not necessarily the lowest rates available. 2 Manager may also send transactions for the Account to brokers who charge higher commissions than other brokers, provided that Manager determines in good faith that the amount of commissions Manager pays is reasonable in relation to the value of the brokerage and research services provided, viewed in terms either of that particular transaction or Manager's overall responsibilities with respect to all clients whose accounts Manager manages on a discretionary basis. Portfolio transactions for each client account generally are completed independently. However, if Manager decides to purchase or sell the same securities for Client and other clients at about the same time, Manager may combine Client's order with those of other clients if Manager reasonably believes that it will be able to negotiate better prices or lower commission rates or transaction costs for the combined order than for Client's order alone. Client will pay the average price and transaction costs obtained for such combined orders. Manager generally will allocate securities purchased or sold as part of a combined order to Client's Account and to accounts of other clients according to the size of the order placed for each client. If Manager cannot obtain execution for the total amount of the securities in the combined orders, adjustments to the allocation will be made on a random number generator methodology. However, Manager may increase or decrease the amounts of securities allocated to each client if necessary to avoid having odd or small numbers of shares held for the account of any client. Each client that participates in a combined order will receive or pay the average share price and/or transactions costs for all transactions executed as part of the combined order. If Client directs Manager to use particular brokers, dealers or banks to execute transactions for the Account, Manager will do so, but Manager will not seek better execution services or prices for Client from other brokers, dealers or banks, and Client may pay higher prices or transaction costs as a result. Manager also may not be able to seek better execution services for Client by combining Client's orders with those of other clients. Client may direct all transactions for the Account to a particular broker, dealer or bank, by writing the name and address of that broker, dealer or bank in the space provided on Schedule A. Section 4. Transaction Confirmations Manager will instruct the brokers, dealers or banks who execute transactions for the Account to send Client all transaction confirmations, unless Client chooses not to receive confirmations. If Client does not wish to receive individual confirmations, this box should be checked. |_| 3 Client may elect to receive individual confirmations at any time by giving Manager written notice. Section 5. Custody of Account Assets The assets in the Account will be held for Client by the custodian named on Schedule A (the "Custodian"). Manager will not have custody of any Account assets. Client will pay all fees of the Custodian. Client will authorize the Custodian to follow Manager's instructions to make and accept payments for, and to deliver or to receive, securities, cash or other investments purchased, sold, redeemed, or exchanged for the Account. Client also will instruct the Custodian to send Client and Manager monthly statements showing the assets in and all transactions for the Account during the month, including any payments of Manager's fees. Client will provide Manager with a copy of its agreement with the Custodian, and will give Manager reasonable advance notice of any change of Custodian. Section 6. Reports to Client Manager will send Client monthly written reports showing the identity, cost and current market value of the assets in the Account and each transaction made for the Account during the period covered by the report, which reports shall include the information set forth on Schedule E hereto and such other information as Client may reasonably request from time to time. The Account's performance will be sent monthly, quarterly or annually upon Client request. Section 7. Account Valuation Manager will value the securities in the Account using independent pricing sources. All securities in the Account that are listed and traded on a national securities exchange or on NASDAQ shall be valued on the valuation date at the closing price on the principal market where the securities are traded. All other securities shall be valued in accordance with any reasonable valuation method selected by Manager, consistent with industry accepted practices. While GR-NEAM does its best to obtain representative market prices for all securities in the Account, such prices do not always reflect the price actually received or paid on the open market. 4 Section 8. Manager's Fees For Manager's services, Client will pay a percentage of the value, as determined under Section 7 of this Agreement, of all assets in the Account (excluding Unmanaged Assets) as of the last trading day of each calendar month. The fees are payable at the end of each calendar quarter for services provided by Manager during the prior three months. The percentage amount of the fees is shown on Schedule A. In any partial quarter, the fees will be reduced pro rata based on the number of days the Account was managed. Client agrees to pay Manager's fees as follows: |_| The Custodian will deduct the fees from Client's Account and pay them to Manager each quarter. Manager will send Client and the Custodian at the same time a bill showing the amount of Manager's fees, the Account value on which they were based and how they were calculated. The Custodian will send Client a monthly statement showing all amounts paid from the Account, including Manager's fees. |X| Client will be billed directly by Manager and will pay Manager's fees within 30 days of receiving the bill. If Manager invests in securities issued by money market funds or other investment companies for the Account, these securities will be included in the value of the Account when Manager's fees are calculated. These same assets will be subject to additional investment management and other fees that are paid by the investment company but ultimately borne by its shareholders. These additional fees are described in each investment company's prospectus. Section 9. Proxy Voting Proxies for securities in the Account should be voted as follows: |_| Client directs Manager not to vote proxies for securities held for the Account. |X| Client directs Manager to vote all proxies for securities held for Client's Account in accordance with -- |X| Manager's own discretion or |_| Client's proxy voting guidelines attached as Schedule C. 5 Client will direct Custodian to send promptly all proxies and related shareholder communications to Manager and to identify them as relating to Client's Account. Client understands that Manager will not be able to vote proxies if they are not received on a timely basis from the Custodian as properly identified as relating to Client's Account. Manager shall not be responsible for voting proxies of foreign securities, and will forward them to Client for completion. These proxy voting instructions may be changed at any time by notifying Manager in writing. Section 10. Legal Proceedings Manager will not advise or act for Client in any legal proceedings, including bankruptcies or class actions, involving securities held in the Account or issuers of those securities. Section 11. Risk Manager cannot guarantee the future performance of the Account, promise any specific level of performance or promise that its investment decisions, strategies or overall management of the Account will be successful. The investment decisions Manager will make for Client are subject to various market, currency, economic, political and business risks, and will not necessarily be profitable. Section 12. Standard of Care; Limitation of Liability Except as may otherwise be provided by law, Manager will not be liable to Client for any loss (i) that Client may suffer as a result of Manager's good faith decisions or actions where Manager exercises the degree of care, skill, prudence and diligence that a prudent person acting in a like fiduciary capacity would use; (ii) caused by following Client's instructions; or (iii) caused by the Custodian, any broker, dealer or bank to which Manager directs transactions for the Account or any other person, except in the case of, and only to the extent that, the negligence or willful misconduct of Manager contributed to the loss. Federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith, and this Agreement does not waive or limit Client's rights under those laws. Except as set forth above with respect to the Account, Manager will not be responsible for Client's own compliance with the insurance investment laws of Client's state of domicile Notwithstanding any other provision in this Agreement, Manager shall not be responsible for Client's compliance with applicable tax laws. 6 In managing the Account, Manager will not consider any other securities, cash, or other investments or assets Client owns for diversification or other purposes. Manager shall have no responsibility whatsoever for the management of the Unmanaged Assets or any assets of Client other than the Account and shall incur no liability for any loss or damage which may result from the management of such other assets. Section 13. Client Directions The names and specimen signatures of each individual who is authorized to give directions to Manager on Client's behalf under this Agreement are set forth on Schedule D. Directions received by Manager from Client must be signed by at least one such person. If Manager receives directions from Client which are not signed by a person that Manager reasonably believes is authorized to do so, Manager shall not be required to comply with such directions until it verifies that the directions are properly authorized by Client. Manager shall be fully protected in relying upon any direction signed or given by a person that Manager reasonably believes is authorized to give such directions on Client's behalf. Manager also shall be fully protected when acting upon an instrument, certificate, or paper that Manager reasonably believes to be genuine and to be signed or presented by any such person or persons. Manager shall be under no duty to make any investigation or inquiry as to any statement contained in any writing and may accept the same as conclusive evidence of truth and accuracy of statements contained therein. Section 14. Confidentiality Except as Client and Manager otherwise agree or as may be required by law, all information concerning the Account and services provided under this Agreement shall be kept confidential. Section 15. Non-Exclusive Agreement Manager provides investment advice to other clients and may give them advice or take actions for them, for Manager's own accounts or for accounts of persons related to or employed by Manager, that is different from advice provided to or actions taken for Client. Manager is not obligated to buy, sell or recommend for Client's Account any security or other investment that Manager may buy, sell or recommend for other clients or for the account of Manager or its related persons or employees. If Manager obtains material, non-public information about a security or its issuer that Manager may not lawfully use or disclose, Manager will have no obligation to disclose the information to Client or to use it for Client's benefit. 7 Section 16. Term of Agreement Either Client or Manager may cancel this Agreement at any time upon 30 days written notice. This Agreement will remain in effect until terminated. Termination of this Agreement will not affect (i) the validity of any action that Manager or Client has previously taken; (ii) the liabilities or obligations of Manager or Client for transactions started before termination; or (iii) Client's obligation to pay Manager's fees through the date of termination. Upon termination, Manager will have no obligation to recommend or take any action with regard to the securities, cash or other assets in the Account. Section 17. Agreement Not Assignable This Agreement may not be assigned within the meaning of the Investment Advisers Act of 1940 (the "Advisers Act") by Manager without Client's consent. Section 18. Governing Law The laws of the State of Connecticut will govern this Agreement. However, nothing in this Agreement will be construed contrary to any provision of the Advisers Act or the rules thereunder. Section 19. Miscellaneous If any provision of this Agreement is or becomes inconsistent with any applicable law or rule, the provision will be deemed rescinded or modified to the extent necessary to comply with such law or rule. In all other respects, this Agreement will continue in full force and effect. This Agreement contains the entire understanding between Manager and Client and may not be changed except in writing signed by both parties. Failure to insist on strict compliance with this Agreement or with any of its terms or any continued conduct will not be considered a waiver by either party under this Agreement. Section 20. Notices All notices and instructions with respect to the Account or other matters covered by this Agreement may be sent by U.S. mail express delivery services, facsimile, e-mail or other electronic means to Client and to Manager at the addresses at the end of this agreement or to another address provided in writing. Section 21. Representations of Client 8 Client represents and warrants to Manager that (a) Client is the beneficial owner of all assets in the Account and except as specifically identified by Client, there are no restrictions on transfer or sale of any of those assets; (b) this Agreement has been duly authorized, executed, and delivered by Client and is Client's valid and binding obligation; (c) the names of the individuals who are authorized to act under this Agreement on behalf of Client have been given to Manager in writing; (d) no government authorizations, approvals, consents, or filings not already obtained are required in connection with the execution, delivery, or performance of this Agreement by Client; and (e) Client certifies that it is not an employee benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA") or a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), nor a Person acting on behalf of any such plan. Client agrees to notify Manager in writing within five (5) days after the occurrence of an event making the above statement no longer accurate. Client agrees to indemnify, defend and hold harmless Manager and its officers, directors, agents, employees, shareholders, legal representatives, successors and assigns, from and against any and all claims, actions, suits, damages, costs, liabilities, judgments, losses, charges, costs and expenses, including attorneys' fees, of Manager arising from any failure by Client to accurately disclose its status under this Section or by reason of any defect in Client's authority to appoint Manager under this Agreement. Section 22. Representations of Manager Manager represents and warrants that (i) this Agreement has been duly authorized, executed and delivered by Manager and is its valid and binding obligation, (ii) it is registered with the United States Securities Exchange Commission ("SEC") as an investment advisor under the Advisors Act; and (iii) that it has all other licenses and registrations necessary to perform its obligations under this Agreement. (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK) 9 Section 23. Form ADV Client has received and reviewed a copy of Part II of Manager's Form ADV and a copy of this Agreement. Section 24. Independent Contractor The relationship of Manager to Client is and shall remain during the term of this Agreement that of independent contractor. Manager and Client are not partners or joint venturers with each other under this Agreement, and nothing in this Agreement shall be construed so as to make them partners or joint venturers, or to impose any liability as such on either of them. AGREED TO AND ACCEPTED BY: GENERAL RE-NEW ENGLAND PXRE REINSURANCE LTD. ASSET MANAGEMENT, INC. /s/ Gerard T. Lynch /s/ Jeffrey L. Radke - ------------------------- -------------------------------- By: Gerard T. Lynch (Signature) Its President Jeffrey L. Radke -------------------------------- (Name) President -------------------------------- (Title) Pond View Corporate Center 99 Front Street 76 Batterson Park Road -------------------------------- Farmington, Connecticut 06032 Hamilton HM12, Bermuda -------------------------------- (Principal Address) 98-0214718 -------------------------------- (Taxpayer Identification Number) 10 SCHEDULE A I. ACCOUNT ASSETS. A. Managed Assets - Client has deposited the following securities, cash and other assets with the Custodian identified below to be managed under this Agreement: B. Unmanaged Assets - Client also deposited with the Custodian the following assets which are not to be managed under this Agreement: - ------------------------------------------------------------------------------- II. CUSTODY OF ACCOUNT ASSETS. The assets to be managed under this Agreement and any Unmanaged Assets will be held by: Custodial Account Number: - ------------------------------------- --------------- (Name) SEE ATTACHED Custodial Contact: - ------------------------------------- --------------------- (Address) Contact Phone Number: - -------------------------------------- ------------------ - ------------------------------------------------------------------------------- III. FEES. Manager's fees for services provided under this Agreement, including assistance with Schedule D preparation provided under this Agreement shall be as follows: Annual fee of .20% (twenty hundredths of one percent) of the first $200 million of the Stat market value of the assets under management; ..15% (fifteen hundredths of one percent) of the next $200 million of the Stat market value of the assets under management; ..10% (ten hundredths of one percent) of the Stat market value of the remaining assets under management. The assets of PXRE REINSURANCE COMPANY, PXRE REINSURANCE LTD. AND PXRE GROUP LTD. shall be aggregated for fee purposes. IV. BROKERAGE DIRECTION. Client directs Manager to cause all transactions for the Account to be executed through the following broker, dealer or bank: Client has read, understands and accepts the limitations that this direction will place on Manager's ability to seek best execution for the Account. This direction may be changed by Client at any time by notifying Manager in writing. - ------------------------------------------------------------------------------- V. NAME OF CLIENT: VI. DATE: PXRE REINSURANCE LTD. By: /s/ Jeffrey L. Radke April 8, 2002 -------------------------- -------------------- Jeffrey L. Radke - ------------------------------------------------------------------------------- 11 - ------------------------------------------------------------------------------- INVESTMENT GUIDELINES: The investment guidelines to be followed by Manager in managing Client's Account are set forth below: - ------------------------------------------------------------------------------- NAME OF CLIENT: DATE: PXRE REINSURANCE LTD. By: /s/ Jeffrey L. Radke April 8 2002 -------------------------- -------------------- Jeffrey L. Radke - ------------------------------------------------------------------------------- 12 PXRE Group Revised Draft Investment Policy Statement
Performance Segment Driven By Benchmarks Investment Philosophy Permitted Investments ------- --------- ---------- --------------------- --------------------- Excess Capital Represents the balancing portion Weighting of: Maximize after tax reported Treasury Bonds of portfolio that is in excess returns through investment in Agency Bonds of all actual and projected - Zurich Hedge longer term debt investments, Municipal Bonds obligations as represented by Fund of Funds hedge funds and other limited Corporate Bonds the Liability and Primary Index partnerships. Securities and Mortgage-backed Capital segments. sectors likely to aggregate with Securities Represents surplus shareholder - Lehman Aggregate insurance portfolio to be Asset-backed funds that can be more AA Bond Index avoided. securities aggressively invested to Average maturities: none Hedge Funds achieve higher returns. This Depending on actual Credit quality: Minimum BBB, Other Limited portion of the portfolio allocation in period Mortgage-backed and Asset-backed Partnerships contains the non-bond AA. Average AA or higher. investments in hedge fund and Diversification: No limit on U.S. other limited partnerships. Government, Agency or municipal This portion of the portfolio obligations. No more than the is to be actively managed to greater of $20 million or 5% of maximize reported return and portfolio any one corporate value across the permitted issuer AA or better, and no more bond universe. The Hedge Fund than the greater of $10 million guidelines are addressed or 2.5% of portfolio for separately. corporate issuer below AA, across all portfolio segments.
Exhibit 2 Page 6 of 9 PXRE Group Investment Policy Statement
Performance Segment Driven By Benchmarks Investment Philosophy Permitted Investments ------- --------- ---------- --------------------- --------------------- Primary Capital Need to maintain a level of Lehman AA Maximize after tax reported Treasury Bonds U.S. capital and surplus to maintain 7 year Index return while maintaining an Agency Bonds licenses, foe regulatory appropriate preservation of Municipal Bonds purposes and to conduct capital. Corporate Bonds reinsurance operations. Amounts Allocation between bond sectors Mortgage-backed in this portfolio should be should be managed so as to earn Securities adequate to cover deficit in maximum yields complying with Asset-backed cash flows from operations overall investment guidelines. Securities related to expected possible Securities and sectors likely to large loss events as defined in aggregate with insurance the Company's annual plan. The portfolio to be avoided. amount would be determined from Due to the low probability of a the Company's annual plan by large loss scenario, this subtracting net written portfolio should be actively premiums, related reinstatement managed to reflect a balance premiums from incurred losses between return and liquidity and net of reinsurance recoverable, to maximize returns in the (giving affect to an intermediate term market (1-10 anticipation delay in years) with an average maturity collection, related commission of 7 years. The portfolio should and brokerage and the projection be managed to produce investment of related payment patterns income, while minimizing capital associated with the loss. This depreciation and capital losses portfolio should be structured in the event of a wholesale so as to maximize after-tax liquidation of this portfolio to reported returns, whilst fund a large loss. maintaining an appropriate Average maturity: 7 years Credit preservation of capital, low quality: Average grade AA - credit risk, and relatively Minimum BBB, and minimum AA for liquid in order to be easily asset-backed and converted to cash and cash mortgage-backed. equivalents in the event of a Diversification: No limit on large loss. U.S. Government, Agency or municipal obligations. No more than the greater of $20 million or 5% of portfolio any one corporate issuer AA or better, and no more than the greater of $10 million or 2.5% of portfolio for corporate issuer below AA, across all portfolio segments.
Exhibit 2 Page 7 of 9 PXRE Group Investment Policy Statement
Performance Segment Driven By Benchmarks Investment Philosophy Permitted Investments ------- --------- ---------- --------------------- --------------------- Liability Need to maintain investments Lehman AA Bond Investment grade, intermediate Treasury Bonds Portfolio whose duration and cash flow is index with maturity bonds and money market Agency Bonds reasonably matched to the weighted average investments. Maintain a Municipal Bands Company's obligations with duration across portfolio of laddered years or Corporate Bonds respect to losses and loss Catastrophe and directly matched to expected Mortgage-backed expenses (net of reinsurance Finite and liabilities. Securities Asset recoverable) and other Exited Lines, Securities and sectors likely to backed liabilities arising from initially 2.5 aggregate with insurance Securities reinsurance agreements. years portfolio to be avoided Treasury Bills & This segment can vary in size Average maturity: weighted Notes Money dependent upon the status of average computed quarterly. Market losses and therefore should be Credit Quality: BBB or better. Instruments: adjusted to match the expected Average credit quality AA. Commercial Paper cash flow requirements of the Foreign, Mortgage-backed and Bankers' Company's liabilities quarterly. Asset-backed Securities minimum Acceptances AA. Certificates of Diversification: No limit on US. Deposit Foreign Government, Agency or municipal Securities obligations. No more than the greater of $20 million or 5% of portfolio anyone corporate issuer AA or better, and no more than the greater of $10 million or 2.5% of portfolio for corporate issuer below AA, across all portfolio segments. Foreign Securities: To match foreign exchange exposure
Exhibit 2 Page 8 of 9 SCHEDULE C - -------------------------------------------------------------------------------- PROXY VOTING GUIDELINES: The proxy voting guidelines to be followed by Manager in voting securities held in the Account are set forth below: (If none, check here |X|) - ------------------------------------------------------------------------------- NAME OF CLIENT: DATE: PXRE REINSURANCE LTD. By: /s/ Jeffrey L. Radke April 8, 2002 -------------------------- -------------------- Jeffrey L. Radke - ------------------------------------------------------------------------------- 13 SCHEDULE D SECRETARY'S CERTIFICATE ----------------------- I, DAVID J. DOYLE, the Secretary of PXRE REINSURANCE LTD, (the "Corporation"), a Corporation organized and existing under the laws of BERMUDA hereby certify that each of the following officers of the Corporation, acting singly, is authorized in the name and on behalf of the Corporation, to give instructions to General Re-New England Asset Management, Inc. ("Manager") with respect to any and all matters, including investment and reinvestment of securities, pertaining to the Investment Management Agreement between the Corporation and Manager, and to execute and deliver any and all documents and to take any and all other action to carry out the purposes of said Investment Management Agreement. I further certify that the specimen signature set forth next to the names of such officers, is the true and genuine signature of such persons. Name of Officer Title Signature JEFFREY L. RADKE PRESIDENT /s/ Jeffrey L. Radke - ----------------- ----------- ----------------------- LEATRICE J. ROMAN ASSIST. CONTROLLER /s/ Leatrice J. Roman - ----------------- ------------------ ----------------------- - ----------------- ------------------ ----------------------- This Certificate shall be in effect from the date hereof until written notice is given on behalf of the Corporation to terminate or revise it. IN WITNESS WHEREOF, I set my hand and seal of the Corporation. /s/ DAVID J. DOYLE April 8, 2002 - --------------------------------------- ---------------- Secretary Date [SEAL] 14 Schedule E PXRE REINSURANCE LTD. Accounting and Reporting Services Periodic Reporting of All Investment Income and Transactions 1. STAT and GAAP basis reporting 2. Review of monthly market values from reliable independent pricing sources by Asset Class Specialists 3. Monthly general ledger journal entries 4. Monthly general ledger and trial balance preparation and reconciliation to Statutory Schedule D Reports 5. Monthly reconciliation to Client custodians and discrepancy resolution 6. Monthly, quarterly and annual reporting packages delivered to Client by mail, electronic transfer or via website 7. Summary and Detail Transaction Reports 8. Investment Income Earned Report 9. Monthly Appraisal Reports 10. Rating of securities by Standard & Poor's, Moody's, Fitch 11. Periodic FAS 91 Adjustments Statutory Reporting 1. Assistance in preparation of Quarterly and Annual Statutory Schedule D Reports 2. Quarterly and Annual NAIC pricing and designations 3. Securities Valuation Office ("SVO") filings 15 CUSTODY OF ACCOUNT ASSETS ------------------------- 1) Nations Funds Bank of America Collateral Acct for PXRE Reinsurance Ltd. (2) PO Box 34602, Charlotte NC ###-###-#### Custodial Account Number: 857675 Custodian Contact: Anna Cannon Contact Phone Number: 704 ###-###-#### 2) JP Morgan For PXRE Reinsurance Ltd. 2001 Bryan Street 11th Floor Dallas, TX 75201 Custodial Account Number: PXRE Reinsurance Ltd. P 312909.2 Custodian Contact: Christopher Greene Contact Phone Number: 212 ###-###-#### 3) JP Morgan 4 New York Plaza, 2nd Floor New York, NY 10004-2413 Custodial Account Number: PXRE Reinsurance Ltd. G08509 Custodian Contact: John Dipalo Contact Phone Number: 212 ###-###-#### 4) JP Morgan 4 New York Plaza, 2nd Floor New York, NY 10004-2413 Custodial Account Number: PXRE Group Ltd. G08510 Custodian Contact: John Dipalo Contact Phone Number: 212 ###-###-####