[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
------------------------------------------------------------------------

    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