[Federal Register Volume 59, Number 232 (Monday, December 5, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29793]
[[Page Unknown]]
[Federal Register: December 5, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20737; File No. 812-9224]
Citicorp Life Insurance Company, et al.
November 28, 1994.
AGENCY: Securities and Exchange Commission (the ``Commission'' or the
``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``1940 Act'').
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Applicants: Citicorp Life Insurance Company (``Citicorp Life''), First
Citicorp Life Insurance Company (``First Citicorp''), Citicorp life
Variable Annuity Separate Account (the ``Separate Account''), First
Citicorp Life Variable Annuity Separate Account (the ``First Citicorp
Separate Account'') (together the ``Separate Accounts''), and The
Landmark funds Broker-Dealer Services, Inc.
Relevant 1940 Act Sections: Order requested under Section 6(c) for
exemptions from Sections 26 (a)(2) and 27(c)(2) of the 1940 Act.
Summary of Application: Applicants seek an order to permit the
deduction from the assets of the Separate Accounts of a mortality and
expense risk charge under certain variable annuity contracts.
Filing Date: An application was filed on September 12, 1994.
Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the SEC's Secretary and
serving Applicants with a copy of the request, personally or by mail.
Hearing requests should be received by the SEC by 5:30 p.m. on December
23, 1994, and should be accompanied by proof of service on Applicants
in the form of an affidavit or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. Applicants, 800 Silver Lake
Boulevard, Dover, DE 19901.
FOR FURTHER INFORMATION CONTACT:
Wendy Finck Friedlander, Senior Attorney, at (202) 942-0670, Office of
Insurance Products (Division of Investment Management).
SUPPLEMENTARY INFORMATION: Following is a summary of the application.
The complete application is available for a fee from the Commission's
Public Reference Branch.
Applicants' Representations
1. Citicorp Life is a stock life insurance company organized under
the laws of Arizona. Citicorp Life is a wholly-owned subsidiary of
Citibank Delaware, which is, in turn, a wholly-owned subsidiary of
Citicorp, a bank holding company. Citicorp Life is licensed to do
business in 46 states and the District of Columbia. Citicorp Life is
the depositor and sponsor of the Separate Account.
2. First Citicorp, a wholly-owned subsidiary of Citicorp Life, is a
stock life insurance company organized under the laws of New York.
First Citicorp is licensed to do business only in New York and Arizona.
First Citicorp is the depositor and sponsor of the First Citicorp
Separate Account.
3. The Separate Account and the First Citicorp Separate Account
were established by Citicorp Life and First Citicorp, respectively, to
fund certain individual flexible premium deferred variable annuity
contracts (``Contracts''). The Separate Accounts are registered as unit
investment trusts under the 1940 Act and the Contracts are registered
under the Securities Act of 1933. The Separate Accounts are divided
into sub-accounts, each of which invests solely in the shares of the
corresponding portfolio of one of the following series investment
companies: the Landmark Variable Insurance Products Fund, the Fidelity
Variable Insurance Products Fund, the A.I.M. Variable Insurance Funds,
Inc., and the M.F.S. Variable Insurance Trust (collectively, the
``Funds''). Additional sub-accounts may be established in the future to
invest in other portfolios of the funds or other investment companies
or unit investment trusts.
4. The Contracts are individual flexible premium deferred variable
annuity contracts designed to provide benefits in connection with
retirement plans that qualify for special federal tax treatment, or on
a non-qualified basis. Contract owners may allocate payments to one or
more sub-accounts or to the Fixed Account Option that is part of the
general account of either Citicorp Life or First Citicorp.
5. The Landmark Funds Broker-Dealer Services, Inc., registered as a
broker-dealer under the Securities Exchange Act of 1934 and a member of
the National Association of Securities Dealers, Inc., will serve as the
principal underwriter of the Contracts.\1\
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\1\Applicants represent that, during the Notice Period, the
application will be amended to reflect this representation.
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6. There is an annual Contract administration charge of $30 that is
deducted in reliance on Rule 26a-1. Applicants do not anticipate any
profit from this charge.
7. There is a daily administrative charge at an annual rate of
0.05% of the assets of the Separate Accounts. This charge is guaranteed
not to increase and is deducted in reliance on Rule 26a-1 under the
1940 Act. Applicants do not expect a profit from this charge.
8. The Contracts do not provide for a front-end sales charge to be
deducted from purchase payments. Instead, a surrender or contingent
deferred sales charge (``CDSC'') of up to 7% of the amount withdrawn or
surrendered is charged. During each Contract year, up to 10% of all
purchase payments, less prior withdrawals, may be withdrawn without the
imposition of a surrender charge. The following table shows the charges
applied to purchase payments withdrawn or surrendered, on a first-in-
first-out basis:
------------------------------------------------------------------------
Charge as
percentage
of purchase
Number of years since date of purchase payment payment
withdrawn
(percent)
------------------------------------------------------------------------
0-1........................................................ 7
1-2........................................................ 6
2-3........................................................ 5
3-4........................................................ 4
4-5........................................................ 3
5+......................................................... 0
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9. Citicorp Life and First Citicorp will deduct a mortality and
expense risk charge that is equal, on an annual basis, to 1.25% of the
average daily net asset value of the Separate Accounts: approximately
.50% for mortality risks and .75% for expense risks.
The mortality risks assumed by Citicorp Life and First Citicorp
arise from their guarantees to make annuity payments as provided in the
Contracts regardless of how long all annuitants or any individual
annuitant lives. Also, Citicorp Life and First Citicorp bear mortality
risks associated with the Contracts' death benefit provisions. The
expense risks assumed by Citicorp Life and First Citicorp are the risks
that actual administrative costs will exceed the amount recovered from
the administration charges, processing fees, if any, and the annual
contract fee.
10. Premium taxes of states and other governmental entities,
currently ranging up to 3.5%, are deducted from Contract Value either
at the time the Contract is surrendered, on the annuity income date, or
at such other time as the taxes are assessed.
11. Currently no fee is charged for transfers among the sub-
accounts and the Fixed Account. However, Citicorp Life and First
Citicorp reserve the right to charge $25 for the 13th and each
subsequent transfer during a Contract year. Applicants represent that
this charge, if imposed, would be deducted in reliance on Rule 26a-1
under the 1940 Act. Citicorp Life and First Citicorp do not anticipate
any profit from this charge.
12. Currently no processing fee is charged for withdrawals.
However, Citicorp Life and First Citicorp reserve the right to charge
the lesser of $25 or 2% of the amount withdrawn for the 13th and each
subsequent withdrawal during a Contract year. This charge would be
deducted in reliance on Rule 26a-1 under the 1940 Act. Applicants do
not expect a profit from this charge.
Applicants' Legal Analysis and Conditions
1. Sections 26(a)(2) and 27(c)(2) of the 1940 Act prohibit a
registered unit investment trust and any depositor or underwriter
thereof from selling periodic payment plan certificates unless the
proceeds of all payments are deposited with a qualified trustee or
custodian and held under arrangements which prohibit any payment to the
depositor or principal underwriter except a fee, not exceeding such
reasonable amounts as the Commission may prescribe, for performing
bookkeeping and other administrative services.
2. Applicants request an order under Section 6(c) exempting them
from Sections 26(a)(2) and 27(c)(2) of the 1940 Act to the extent
necessary to permit the deduction of the mortality and expense risk
charge from the assets of the Separate Accounts under the Contracts.
3. Applicants represent that the mortality and expense risk charge
is within the range of industry practice with respect to comparable
annuity products. Applicants base this representation on an analysis of
publicly available information about comparable products, taking into
consideration such factors as current charge levels, the existence of
charge level guarantees, and guaranteed annuity rates. Citicorp Life
and First Citicorp represent that they will maintain at their
administrative offices memoranda, available to the Commission, setting
forth in detail this analysis.
4. To the extent the CDSC is insufficient to cover the actual cost
of distribution costs will be paid from Citicorp Life's and First
Citicorp's general assets, including the profits, if any, from the
mortality and expense risks charges. Applicants represent that there is
a reasonable likelihood that the proposed distribution financing
arrangements will benefit the Separate Accounts and Contract owners.
The basis for such conclusion will be set forth in memoranda maintained
by the Citicorp Life and First Citicorp at their administrative offices
and available to the Commission upon request.
5. Citicorp Life and First Citicorp represent that the Separate
Accounts will invest only in management investment companies that
undertake, in the event the company adopts a plan to finance
distribution expenses under Rule 12b-1 under the 1940 Act, to have a
board of directors, a majority of whom are not interested persons of
the company within the meaning of Section 2(a)(19) of the 1940 Act,
formulate and approve any such plan.
Conclusion
Applicants assert that, for the reasons and upon the facts set
forth above, the requested exemptions from Sections 26(a)(2) and
27(c)(2) of the 1940 Act to deduct the mortality and expense risk
charge from the assets of the Separate Accounts under the Contracts
meet the standards in Section 6(c) of the 1940 Act. Applicants assert
that the exemptions requested are necessary and appropriate in the
public interest and consistent with the protection of investors and the
purpose fairly intended by the policies and provisions of the 1940 Act.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-29793 Filed 12-2-94; 8:45 am]
BILLING CODE 8010-01-M
