[Federal Register Volume 60, Number 178 (Thursday, September 14, 1995)]
[Notices]
[Pages 47792-47794]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-22849]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21343; No. 812-9594]
Hartford Life Insurance Company, et al.
September 8, 1995.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').
ACTION: Notice of application for an order under the Investment Company
Act of 1940 (``1940 Act'').
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APPLICANTS: Hartford Life Insurance Company (``Hartford``), Hartford
Life Insurance Company-ICMG Secular Trust Separate Account (``Separate
Account''), and Hartford Equity Sales Company, Inc. (``HESCO'').
RELEVANT 1940 ACT SECTIONS: Order requested under Section 6(c) of the
1940 Act granting exemptions from the provisions of Sections
26(a)(2)(C) and 27(c)(2) of the 1940 Act.
SUMMARY OF APPLICATION: Applicants seek an order to permit the
deduction of a mortality and expense risk charge from the assets of the
Separate Account or any other separate account (``Other Accounts'')
established by Hartford to support certain group flexible premium
deferred annuity contracts and individual certificates thereunder
(``Contracts'') as well as other variable annuity contracts that are
substantially similar in all material respects to the Contracts
(``Future Contracts''). In addition, Applicants propose that the order
extend the same exemptions granted to HESCO to any other broker-dealer
that may in the future serve as principal underwriter for the Contracts
or Future Contracts. Any such broker-dealer will be registered under
the Securities Exchange Act of 1934 as a broker-dealer and will be a
member of the National Association of Securities Dealers, Inc.
(``NASD'').
[[Page 47793]]
FILING DATE: The application was filed on May 11, 1995, and amended on
August 10, 1995 and September 5, 1995.
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
September 27, 1995, 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 requester's
interest, the reason for the request, and the issues contested. Persons
may request notification of a hearing by writing to the Secretary of
the SEC.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th
Street NW., Washington, DC 20549. Applicants, Scott K. Richardson,
Esq., ITT Hartford Life Insurance Companies, 200 Hopmeadow Street,
Simsbury, CT 06070.
FOR FURTHER INFORMATION CONTACT:
Pamela K. Ellis, Senior Counsel, or Wendy Finck Friedlander, Deputy
Chief, both 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 SEC's Public
Reference Branch.
Applicants' Representations
1. Hartford, a stock life insurance company, is organized in
Connecticut and licensed to do business in all states of the United
States and in the District of Columbia.
2. The Separate Account is a separate account established by
Hartford to fund the Contracts. The Separate Account is registered with
the Commission as a unit investment trust under the 1940 Act, and
interests in the Contracts are registered as securities under the
Securities Act of 1933.
3. Hartford has established for each investment option offered
under the Contract a Separate Account subaccount (``Subaccount''),
which will invest solely in a specific corresponding portfolio of
certain designated investment companies (``Funds''). The Funds will be
registered under the 1940 Act as open-end management investment
companies. Each portfolio of the Funds will have separate investment
objectives and policies.
4. HESCO will serve as the principal underwriter of the Contracts.
HESCO, a wholly-owned subsidiary of Hartford, is registered under the
1934 Act as a broker-dealer and is a member of the NASD.
5. The Contracts are tax-deferred individually allocated group
flexible premium deferred annuity contracts, and are offered to
employee-participants of nonqualified deferred compensation and
supplemental executive retirement plans. The Contacts may be purchased
with an initial premium payment of $1,000. The minimum subsequent
premium payment for the Contracts is $1000 (certain plans may permit
smaller initial and subsequent periodic premium payments). Net premium
payments may be allocated to one or more of the Separate Account
Subaccounts that have been established to support the Contracts.
6. The Contracts provide for a series of annuity payments beginning
on the annuity date. The Contract owner may select from several annuity
payout options.
7. The Contracts provide for a death benefit if the annuitant dies
during the accumulation period or prior to the annuitant or Contract
owner attaining age 85. The death benefit is the greater of: (1) the
Contract value as determined on the date of receipt of due proof of
death by Hartford; or (2) 100% of all premium payments made by the
Contract owner under the Contract reduced by the amount of any partial
withdrawals.
8. Certain charges and fees are assessed under the Contracts.
Hartford will deduct an administration charge from a Contract owner's
account value to reimburse it for expenses relating to the
administration and maintenance of the Contract and for administration
of the Separate Account. The Contract provides for an administrative
expense charge of $2.50 to be deducted from account value on the
commencement date of the Contract and monthly thereafter. The deduction
will be made pro rata according to the value in each Subaccount under a
Contract.
9. Applicants represent that the administration charge will not
increase during the life of the Contracts. In addition, Applicants
represent that these charges are at cost with no anticipation of
profit.
10. A maximum front-end sales charge of 4.6% of premium payments,
will be imposed for expenses related to the sales and distribution of
the Contracts. Applicants state that the front-end sales charge will
not increase during the life of the Contracts.
11. Hartford proposes to deduct a daily mortality and expense risk
charge. Hartford represents that this charge is equal to an effective
annual rate of .65% of the net asset value of the Separate Account, and
that it will not increase. Of this amount, approximately .45% is for
mortality risks and .20% is for expense risks.
12. Hartford assumes the mortality risk that the life expectancy of
the annuitant will be greater than that assumed in the guaranteed
annuity purchase rates, thus requiring Hartford to pay out more in
annuity income than it had planned. In addition, Hartford is
contractually obligated to provide a death benefit prior to the annuity
date. Thus, Hartford assumes the risk that the owner may die at a time
when the amount of the death benefit payable exceeds the then net
surrender value of the Contracts. The expense risk assumed by Hartford
is that the contract administration charge will be insufficient to
cover the cost of administering the Contracts.
13. In the event the mortality and expense risk charges are more
than sufficient to cover Hartford's costs and expenses, any excess will
be a profit to Hartford.
14. Should the owner live in a jurisdiction that levies a premium
tax, Hartford will pay the taxes when due. Hartford represents that
state premium taxes may range up to 4.0% of premium payments and are
subject to change. Hartford will deduct premium taxes when they are
paid.
15. In addition Hartford will deduct a current charge of .43% of
each premium payment for the federal tax cost resulting from Section
848 of the Internal Revenue Code. This charge may be increased or
decreased to reflect changes in federal tax laws.
Applicants' Legal Analysis
1. Section 6(c) of the 1940 Act authorizes the Commission, by order
upon application, to conditionally or unconditionally grant an
exemption from any provision, rule or regulation of the 1940 Act to the
extent that the exemption is necessary or appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the 1940 Act.
2. Sections 26(a)(2)(C) and 27(c)(2) of the 1940 Act, in relevant
part, prohibit a registered unit investment trust, its depositor or
principal underwriter, from selling periodic payment plan certificates
unless the proceeds of all payments, other than sales loads, are
deposited with a qualified bank and held under arrangements which
prohibit
[[Page 47794]]
any payment to the depositor or principal underwriter except a
reasonable fee, as the Commission may prescribe, for performing
bookkeeping and other administrative duties normally performed by the
bank itself.
3. Applicants request exemptions from Sections 26(a)(2)(C) and
27(c)(2) of the 1940 Act to the extent necessary to permit the
deduction from the net assets of the Separate Account and the Other
Accounts in connection with the Contracts and Future Contracts of the
.65% charge for the assumption of mortality and expense risks. In
addition, Applicants request that the order extend the same exemptions
granted to HESCO to any other broker-dealer that may in the future
serve as principal underwriter for the Contracts or Future Contracts.
4. Applicants assert that the terms of the relief requested with
respect to any Future Contracts funded by the Separate Account or Other
Accounts are consistent with the standards enumerated in Section 6(c)
of the 1940 Act. Without the requested relief, Applicants would have to
request and obtain exemptive relief for each new Other Account it
establishes to fund any Future Contract, as well as for each Future
Broker-Dealer that distributes the Contract or Future Contracts.
Applicants submit that any such additional request for exemption would
present no issues under the 1940 Act that have not already been
addressed in this application, and that investors would not receive any
benefit or additional protections thereby.
Applicants submit that the requested relief is appropriate in the
public interest because it would promote competitiveness in the
variable annuity contract market by eliminating the need for Applicants
to file redundant exemptive applications, thereby reducing their
administrative expenses and maximizing the efficient use of their
resources. The delay and expense involved in having repeatedly to seek
exemptive relief would reduce Applicants' ability effectively to take
advantage of business opportunities as they arise.
Applicants further submit that the requested relief is consistent
with the purposes of the 1940 Act and the protection of investors for
the same reasons. Applicants thus assert that the requested exemptions
are appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the 1940 Act.
5. Applicants represent that the .65% per annum mortality and
expense risk charge is within the range of industry practice for
comparable annuity contracts. This representation is based upon an
analysis of publicly available information about similar industry
products, taking into consideration such factors as the current charge
levels and benefits provided, the existence of expense charge
guarantees, and guaranteed annuity rates. Hartford will maintain at its
principal offices, available to the Commission, a memorandum setting
forth in detail the products analyzed in the course of, and the
methodology and results of, Applicants' comparative review. In
addition, Applicants will keep, and make available to the Commission, a
memorandum setting forth the basis for the same representations with
respect to the Future Contracts offered by the Separate Account or
Other Accounts.
6. Hartford has concluded that there is a reasonable likelihood
that the Separate Accounts and Other Accounts' proposed distribution
financing arrangements will benefit the Separate Accounts and their
investors. Hartford represents that it will maintain and make available
to the Commission upon request a memorandum setting forth the basis of
such conclusion.
7. The Separate Accounts and Other Account will be invested only in
management investment companies that undertake, in the event the
company should adopt a plan for financing distribution expenses
pursuant to Rule 12b-1 under the 1940 Act, to have such plan formulated
and approved by the company's board members, the majority of whom are
not ``interested persons'' of the management investment company within
the meaning of Section 2(a)(19) of the 1940 Act.
Conclusion
For the reasons set forth above, Applicants represent that the
exemptions requested are necessary and appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy 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. 95-22849 Filed 9-12-95; 8:45 am]
BILLING CODE 8010-01-M
