[Federal Register Volume 62, Number 104 (Friday, May 30, 1997)]
[Notices]
[Pages 29380-29382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14123]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22680; File No. 812-10362]
United Investors Life Insurance Company, et al.
May 22, 1997.
AGENCY: The Securities and Exchange Commission (the ``SEC'' or
``Commission'').
ACTION: Notice of Application for an Exemption Pursuant to the
Investment Company Act of 1940 (the ``Act'').
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APPLICANTS: United Investors Life Insurance Company (``United
Investors''), RetireMAP Variable Account (the ``Variable Account''),
and MAP Investments Incorporated (``MAP'').
RELEVANT ACT SECTIONS: Order requested pursuant to Section 6(c) of the
Act, granting exemptions from Sections 2(a)(32), 22(c), and 27(i)(2)(A)
of the Act and Rule 22c-1 thereunder.
SUMMARY OF APPLICATION: Applicants seek exemptive relief to the extent
necessary to permit United Investors, with respect to the Variable
Account and any other separate accounts which United Investors may
establish in the future (``Other Account''), to deduct prorated death
benefit charges, upon surrender of a variable annuity policy, under an
optional death benefit rider (the ``Optional Death Benefit Rider'') to
the variable annuity policies currently offered through the Variable
Account (``Policies'') and future variable annuity policies that are
similar in all material respects to the Policies (``Future Policies'').
Exemptive relief also is requested to the extent necessary to permit
the offer and sale of Policies and Future Policies for which certain
broker-dealers other than MAP serve as the principal underwriter.
FILING DATE: The application was filed on September 23, 1996, and
amended on January 31, 1997, and March 7, 1997.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the Secretary of the Commission 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 June 16,
1997, 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
Commission.
ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW., Washington, DC 20549. Applicants, c/o James L. Sedgwick,
Esq., United Investors Life Insurance Company, 2001 Third Avenue South,
Birmingham, Alabama 35233.
FOR FURTHER INFORMATION CONTACT: Michael B. Koffler, Staff Attorney, or
Kevin M. Kirchoff, Branch Chief, Office of Insurance Products, Division
of Investment Management, at (202) 942-0670.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application is available for a fee from the
Public Reference Branch of the Commission.
Applicants' Representations
1. United Investors is a stock life insurance company that was
incorporated in the State of Missouri on August 17, 1981. United
Investors is a wholly-owned subsidiary of United Investors Management
Company (formerly TMK/United, Inc.), which in turn is indirectly owned
by Torchmark Corporation. United Investors is principally engaged in
offering life insurance and annuity contracts and is admitted to do
business in the District of Columbia and all states except New York.
2. The Variable Account was established on September 20, 1996, to
fund tax-qualified and non-tax-qualified variable annuity policies. The
Variable Account will be divided into a number of divisions
(``Investment Divisions''), each of which will invest exclusively in a
portfolio (``Portfolio'') of a designated mutual fund (``Fund'').
3. MAP is the principal underwriter and the distributor of the
Policies. MAP is registered with the Commission as a broker-dealer
under the Securities Exchange Act of 1934 and is a member of the
National Association of Securities Dealers, Inc. (``NASD''). MAP is not
affiliated with United Investors.
4. Applicants reserve the right to designate the shares of another
Portfolio of the Funds or of other management investment companies of
the series type as the exclusive investment vehicle for each new
Investment Division that may be created in the future.
5. The Policies may be purchased and used in connection with
pension plans that qualify or do not qualify for favorable federal
income tax treatment.
6. An owner of a variable annuity issued by United Investors
(``Policyowner'') determines in the application for the Policy how the
initial net purchase payment will be allocated among the Investment
Divisions of the Variable Account and a fixed account of United
Investors (``Fixed Account''). The Policyowner may allocate any whole
percentage of net purchase payments, from 0% to 100%, to each
Investment Division and the Fixed Account. The value of the policy will
vary with the investment performance of the Investment Divisions
selected, and the Policyowner bears the entire risk for amounts
allocated to the Variable Account.
7. The Policyowner may transfer all or part of the policy value
attributed to each investment Division to one or more of the other
Investment Divisions at any time prior to the retirement date. The
Policyowner may transfer all or a part of the policy value attributed
to the Fixed Account to one or more of the Investment Divisions once
per policy year prior to the retirement date. This restriction will not
apply to automatic monthly transfers of a pre-selected dollar amount
from the Fixed Account to the Investment Divisions.
8. Prior to the retirement date, the Policyowner may authorize
automatic transfers of a fixed dollar amount from the Fixed Account or
the money market Investment Division to up to four of the other
Investment Divisions. Automatic transfers will be made on a monthly
basis at the unit values determined on the date of each transfer. The
Policyowner may surrender the Policy or make a partial withdrawal from
the policy value and time prior to the retirement date.
9. The Policy pays a death benefit to the beneficiary if the
Policyowner dies prior to the retirement date while the Policy is in
force. The regular death benefit (``Basic Death Benefit'') payable on
the death of the Owner through attained age 75 is the greatest of: (a)
The policy value; (b) the total purchase payments made, adjusted for
any amount withdrawn and any withdrawal charges on the amounts
withdrawn; and (c) the highest policy values on the 2nd, 4th, or 6th
anniversaries that the policy went into effect (``Policy
Anniversaries''), and every 6th Policy Anniversary thereafter. Purchase
payments made after the Policy
[[Page 29381]]
Anniversary having the highest policy value will be added to the Basic
Death Benefit, and adjustments will be made for any amounts withdrawn
and any withdrawal charges since that anniversary. Withdrawal and
withdrawal charges will result in a reduction of the Basic Death
Benefit in the same proportion that the amount reduced the policy value
on the date of the withdrawal.
10. Under the Optional Death Benefit Rider the death benefit
payable on the death of the Policyowner (``Optional Death Benefit'')
through attained age 75 will be the greater of: (a) the policy value;
and (b) the total purchase payments made, less withdrawals and
withdrawal charges, accumulated at an annual effective rate of 5%,
subject to a cap of 200% of purchase payments less withdrawals and
withdrawal charges. The Optional Death Benefit payable on the death of
the Policyowner after attained age 75 will be equal to the amount of
the Optional Death Benefit on the Policy Anniversary on which age 76 is
attained and will not increase thereafter.
11. The Policyowner has the sole right to elect (in the application
for the Policy) or change (at lease 30 days before the retirement date)
an annuity payment option during the lifetime of the Policyowner. The
first annuity payment will be made as of the retirement date. The
Policyowner may select the retirement date in the application for the
Policy. The Policyowner may change the retirement date at any time at
least 30 days prior to the new retirement date. The retirement date may
be changed to the first day of any calendar month commencing 30 days
after the first Policy Anniversary. The amount of each annuity payment
under the annuity payment options will depend on the sex and age of the
annuitant at the time the first payment is due. The payment options
currently available all involve life contingencies.
12. There will be a charge made each year (``Optional Death Benefit
Rider Charge'') for expenses related to the Optional Death Benefit
available under the terms of the Optional Death Benefit Rider. United
Investors deducts this charge through the cancellation of accumulation
units at each Policy Anniversary and at surrender to compensate it for
the increased risk associated with providing the Optional Death
Benefit. The charge at full surrender will be a pro rata portion of the
annual charge. United Investors guarantees that this charge will never
exceed the annual rate of 0.17% of the average death benefit amount,
which is the mean of the death benefit amount on the current Policy
Anniversary (or date of surrender) and the death benefit amount on the
immediately preceding Policy Anniversary.
Applicants' Legal Analysis
1. Section 2(a)(32) of the Act defines ``redeemable security'' as
any security under the terms of which the holder, upon its presentation
to the issuer, is entitled to receive approximately his proportionate
share of the issuer's current net assets, or the cash equivalent
thereof.
2. Rule 22c-1, promulgated under Section 22(c) of the Act, in
pertinent part, prohibits a registered investment company issuing a
redeemable security, a person designated in such issuer's prospectus as
authorized to consummate transactions in such security, and the
principal underwriter of, or dealer in, any such security from selling,
redeeming, or repurchasing any such security except at a price based on
the current net asset value of such security.
3. Section 27(i)(2)(A) of the Act, in pertinent part, makes it
unlawful for any registered separate account funding variable insurance
contracts, or for the sponsoring insurance company of such account, to
sell any such contract unless such contract is redeemable security.
4. The optional death benefit represents an optional insurance
benefit that United Investors may provide through the life of the
Policy. United Investors assesses the Optional Death Benefit Rider
Charge to compensate it for the increased risk it bears if a
Policyowner elects the Optional Death Benefit Rider. Normally, the
Optional Death Benefit Rider Charge accrues each policy year and is
deducted retroactively on each Policy Anniversary, for the prior policy
year. By paying a prorated Optional Death Benefit Rider Charge upon a
surrender of the policy, the Policyowner compensates United Investors
for the additional risk the company bears during the period between the
last Policy Anniversary and the date of surrender.
5. Applicants submit that the assessment of a prorated Optional
Death Benefit Rider Charge upon a Policyowner's surrender, which is
fully disclosed in the prospectus for the Policy, should not be
construed as a restriction on redemption. Applicants maintain that the
imposition of the prorated Optional Death Benefit Rider Charge upon
surrender represents nothing more than the proportionate deduction of
an insurance charge that could otherwise be deducted daily through the
life of the Policy. Moreover, the Optional Death Benefit Rider Charge
is assessed only if the Policyowner has elected it.
6. Accordingly, Applicants request that the Commission issue an
order pursuant to Section 6(c) of the Act exempting them from Sections
2(a)(32), 22(c), and 27(i)(2)(A) thereof and Rule 22c-1 thereunder to
the extent necessary to permit the Applicants to assess a prorated
Optional Death Benefit Rider Charge upon surrender of a Policy where
the Policyowner has elected the Optional Death Benefit Rider.
Applicants assert that the requested relief is substantially the same
as exemptive relief the Commission has granted to other applicants.
7. Applicants seek relief not only with respect to the Policies,
but also with respect to Future Policies issued by the Variable Account
or Other Accounts. Applicants also seek relief with respect to Future
Underwriters, which will be members of the NASD.
8. Applicants state that, without the requested class relief,
exemptive relief for Future Policies, any Other Account, or any Future
Underwriter would have to be requested and obtained separately.
Applicants assert that such additional requests for exemptive relief
would not present additional issues under the Act. Applicants state
that if they were to repeatedly seek exemptive relief, investors would
not receive additional protection or benefit, and investors and the
Applicants could be disadvantaged by increased costs resulting from
such additional requests for relief. Applicants argue that the
requested class relief is appropriate in the public interest because
the relief will promote competitiveness in the variable annuity market
by eliminating the need for United Investors to file redundant
exemptive applications, thereby reducing administrative expenses and
maximizing efficient use of resources. Elimination of the delay and the
expense of repeatedly seeking exemptive relief would, Applicants
assert, enhance their ability to effectively take advantage of business
opportunities as such opportunities arise.
Conclusion
For the reasons summarized above, Applicants believe that the
requested exemptions 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 Act.
[[Page 29382]]
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-14123 Filed 5-29-97; 8:45 am]
BILLING CODE 8010-01-M