[Federal Register Volume 67, Number 233 (Wednesday, December 4, 2002)]
[Notices]
[Pages 72237-72239]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30666]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25836; File No. 812-12890]


Allstate Life Insurance Company, et al.; Notice of Application

November 27, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of an application for an order of exemption pursuant to 
Section 17(b) of the Investment Company Act of 1940 (the ``Act'') from 
Section 17(a) of the Act.

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    Applicants: Allstate Life Insurance Company (``Allstate''), 
Allstate Financial Advisers Separate Account I (``Allstate Separate 
Account I''), Northbrook Life Insurance Company (``Northbrook''), 
Northbrook Variable Annuity Account (``Northbrook VA''), and Northbrook 
Variable Annuity Account II (``Northbrook VA II,'' together with the 
Northbrook VA, the ``Northbrook Separate Accounts'').
    Summary of Application: Applicants seek an order of exemption to 
the extent necessary to permit a transfer of assets and assumption of 
liabilities of Northbrook VA and Northbrook VA II by Allstate Separate 
Account I.
    Filing Date: The application was filed on October 7, 2002 and 
amended and restated on November 26, 2002.
    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 Secretary of 
the Commission and serving Applicants with a copy of the request, 
personally or by mail. Hearing requests must be received by the 
Commission by 5:30 p.m. on December 23, 2002, and must 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

[[Page 72238]]

hearing by writing to the Secretary of the Commission.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th 
Street, NW, Washington, DC 20549-0609. Applicants, Charles Smith, Esq., 
Assistant Counsel, Allstate Life Insurance Company, 3100 Sanders Road, 
Northbrook, Illinois 60062; with a copy to Richard T. Choi, Esq., Foley 
& Lardner, 3000 K Street, NW, Suite 500, Washington, DC 20007.

FOR FURTHER INFORMATION CONTACT: Alison Toledo, Senior Counsel, or 
Lorna MacLeod, Branch Chief, Office of Insurance Products, Division of 
Investment Management, at (202) 942-0670.

SUPPLEMENTARY INFORMATION: The following is a summary of the amended 
and restated application; the complete amended and restated application 
is available for a fee from the Public Reference Branch of the 
Commission.

Applicants' Representations

    1. Allstate is a stock life insurance company organized under the 
laws of the State of Illinois in 1957. Allstate's home office is 
located at 3100 Sanders Road, Northbrook, Illinois 60062. Allstate is 
licensed to operate in the District of Columbia, Puerto Rico, and all 
states except New York. Allstate is a wholly owned subsidiary of 
Allstate Insurance Company, a stock property-liability insurance 
company incorporated under the laws of Illinois. All of the outstanding 
capital stock of Allstate Insurance Company is owned by The Allstate 
Corporation.
    2. Allstate established Allstate Separate Account I as a separate 
account pursuant to Illinois law. Allstate Separate Account I is a 
``separate account,'' as defined by Section 2(a)(37) of the Act, and is 
registered with the Commission pursuant to the Act as a unit investment 
trust.
    3. Certain variable annuity contracts sponsored by Allstate and 
issued through Allstate Separate Account I (``Allstate contracts'') are 
registered with the Commission pursuant to the Securities Act of 1933 
(the ``Securities Act'').
    4. Allstate Separate Account I is divided into 59 sub-accounts, 
each of which invests exclusively in shares of a corresponding 
portfolio of an open-end, diversified management investment company 
registered under the Act (the ``Funds'').
    5. Northbrook is a stock life insurance company organized under the 
laws of the State of Arizona in 1998. Previously, from 1978 to 1998, 
Northbrook was organized under the laws of the State of Illinois. 
Northbrook's headquarters are located at 3100 Sanders Road, Northbrook, 
Illinois, 60062. Northbrook is a direct, wholly owned subsidiary of 
Allstate. Northbrook is currently licensed to operate in the District 
of Columbia, Puerto Rico, and all states except New York. Northbrook 
and Allstate entered into a reinsurance agreement effective December 
31, 1987. Under the reinsurance agreement, Allstate reinsures all of 
Northbrook's liabilities under its annuity and life insurance 
contracts.
    6. Northbrook established the Northbrook Separate Accounts as 
separate accounts pursuant to Illinois law, and the Northbrook Separate 
Accounts are currently subject to Arizona law following Northbrook's 
redomestication to Arizona in 1998. Each of the Northbrook Separate 
Accounts is a ``separate account,'' as defined by Section 2(a)(37) of 
the Act, and is registered with the Commission pursuant to the Act as a 
unit investment trust.
    7. Certain variable annuity contracts sponsored by Northbrook and 
issued through the Northbrook Separate Accounts (the ``Northbrook 
contracts,'' and together with the ``Allstate contracts,'' the 
``Contracts'') are registered with the Commission pursuant to the 
Securities Act.
    8. Northbrook VA is divided into 12 sub-accounts, each of which 
invests exclusively in shares of a corresponding portfolio of the 
Funds. Northbrook VA II is divided into 54 sub-accounts, each of which 
invests exclusively in shares of a corresponding portfolio of the 
Funds.
    9. Allstate and Northbrook have determined to engage in 
transactions whereby Northbrook will be reorganized with and merged 
into Allstate, with Allstate as the surviving corporation (such 
transactions, collectively, the ``Merger''). By resolutions dated 
September 11, 2002, a Merger Agreement and Articles of Merger 
(collectively ``Agreement'') were approved and adopted by the 
respective boards of directors of Allstate and Northbrook. Prior 
approval of the Merger and the Agreement also will be obtained from the 
insurance departments of Arizona and Illinois, the states of domicile 
for Northbrook and Allstate, respectively.
    10. On the effective date of the Merger: (a) Allstate will assume 
ownership of all the assets of Northbrook, including all the assets 
held in the Northbrook Separate Accounts; (b) Allstate will conduct the 
business presently conducted by Northbrook, and will be responsible for 
satisfaction of all of the liabilities and obligations of Northbrook; 
and (c) Northbrook will cease to exist as a separate corporate entity. 
Allstate will then control the merged separate account supporting the 
Contracts.
    11. After considering the nature and purpose of each separate 
account, the respective boards of directors of Allstate and Northbrook 
have determined that the efficiency of the operations of the separate 
accounts after the Merger could be improved, and the overall 
administration enhanced, by merging Northbrook VA and Northbrook VA II 
into Allstate Separate Account I (collectively, ``Separate Accounts''). 
The Merger will be structured so there will be no change in the rights 
and benefits of persons having an interest in any of the Contracts 
issued by the Separate Accounts. Allstate, or an affiliate, will pay 
all expenses incurred in connection with the Merger. The Merger 
provides for the transfer of Northbrook VA's and Northbrook VA II's 
assets to Allstate Separate Account I and the assumption of the 
liabilities and contractual obligations of each of Northbrook VA and 
Northbrook VA II by Allstate Separate Account I in return for the 
crediting of accumulation units of Allstate Separate Account I to 
Northbrook VA and Northbrook VA II contract owners. Once this process 
has been completed, the units of Northbrook VA and Northbrook VA II 
would be cancelled, Northbrook VA and Northbrook VA II would each 
submit an application to the Commission pursuant to Section 8(f) of the 
Act to effect its deregistration as an investment company and would 
cease to exist, and Allstate Separate Account I would continue to 
exist.
    12. Immediately following the Merger, each Northbrook VA and 
Northbrook VA II contract owner will possess a number of Allstate 
Separate Account I units, (both full and fractional) with an aggregate 
unit value equal to the aggregate unit value of the units the contract 
owner had in the respective Northbrook Separate Account immediately 
before the consummation of the Merger.
    13. Upon the effective date of the Merger, Allstate will succeed to 
all of the business and operations of Northbrook, including the 
obligations pursuant to the Northbrook contracts. Allstate will 
distribute to each existing Northbrook VA and Northbrook VA II contract 
owner:
    (a) A contract rider indicating that such contracts are thereafter 
funded by Allstate Separate Account I; (b) a letter informing such 
contract owners of the Merger; and (c) prospectus disclosure that 
reflects Allstate's sponsorship of

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the surviving separate account as a result of the Merger.
    14. Except for the change in the depositor and the separate account 
funding the variable annuity contracts, all the rights and benefits of 
the Northbrook contract owners will remain unchanged after the Merger. 
Further, the fees and charges under the Northbrook contracts will not 
change as a result of the Merger.
    15. Allstate and Northbrook assert that the Merger will have no tax 
consequences for Northbrook contract owners. In addition, no payments 
will be required or charges imposed under the Northbrook contracts in 
connection with, or by virtue of, the Merger that would not otherwise 
be required or imposed.

Applicants' Legal Analysis

    1. Section 17(a) of the Act provides generally that it is unlawful 
for any affiliated person of a registered investment company, or any 
affiliated person of such a person, acting as principal to knowingly 
purchase or to sell any security or other property from or to such 
registered company.
    2. Section 17(b) of the Act provides generally that the Commission 
may grant an order exempting a transaction otherwise prohibited by 
Section 17(a) of the Act if evidence establishes that: (a) The terms of 
the proposed transaction, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching on 
the part of any person concerned; (b) the proposed transaction is 
consistent with the policy of each registered investment company 
concerned; and (c) the proposed transaction is consistent with the 
general purposes of the Act.
    3. The Merger may be subject to the provisions of Section 17(a) of 
the Act because it could be viewed as involving an investment company 
(Northbrook VA or Northbrook VA II) selling its assets to another 
investment company (Allstate Separate Account I) that is affiliated by 
reason of having sponsoring insurance companies that are under common 
control, or by reason of having common directors.
    4. Applicants request an order of the Commission pursuant to 
Section 17(b) of the Act to the extent necessary to exempt the Merger 
from the provisions of Section 17(a) of the Act.
    5. Applicants assert that the terms of the Merger are fair and 
reasonable. The transfer of assets held by Northbrook VA and Northbrook 
VA II, respectively, will be made at the relative net asset values of 
the sub-accounts. Consequently, the interests of Allstate Separate 
Account I owners will not be diluted by the Merger, and each Northbrook 
VA and Northbrook VA II contract will be credited, immediately after 
the Merger, with units of Allstate Separate Account I having the same 
aggregate value as the aggregate value of the units of Northbrook VA 
and Northbrook VA II credited to such contract immediately prior to the 
Merger. The Merger will not result in any change in charges, costs, 
fees or expenses borne by any Contract owner. No direct or indirect 
costs will be incurred by any Separate Account concerned as a result of 
the Merger. Therefore, the proposed transactions will not result in 
dilution of the economic interests of any Contract owners. In addition, 
the Merger will result in no change in the investment options available 
to Northbrook contract owners. Each sub-account of the Separate 
Accounts will continue to invest in the same Fund as that sub-account 
invested in prior to the Merger.
    6. Applicants assert that the Merger does not involve overreaching 
on the part of any party involved and is consistent with the general 
purposes of the Act. The purpose of the Merger is to consolidate three 
separate accounts, each of which issues variable annuity contracts, 
into a single separate account. The Merger will allow for 
administrative efficiencies and cost savings by Allstate because it can 
consolidate its separate account operations. The Merger will not dilute 
or otherwise adversely affect the economic interests of the owners of 
the Northbrook contracts, nor will the Merger affect the values 
determined under the Northbrook contracts. The Merger will not affect 
any current Allstate contract owners. Allstate, or an affiliate, will 
pay all expenses incurred in connection with the Merger.
    7. Applicants represent that the Merger is consistent with the 
policy of each Separate Account as set forth in its registration 
statement. The policy of each Separate Account is to invest in the 
Funds. As noted above, the Merger will result in no change to any Fund 
underlying the Northbrook Separate Accounts. Each sub-account of the 
Separate Accounts will continue to invest in the same Fund as that sub-
account invested in prior to the Merger. Accordingly, the assets 
underlying the Contracts will continue to be invested in accordance 
with the policies recited in the Separate Accounts' respective 
registration statements.

Conclusion

    For the reasons summarized above, Applicants assert that the terms 
of the Merger, including the consideration to be paid or received, are 
reasonable and fair and do not involve overreaching on the part of any 
person concerned, are consistent with the policies of Allstate Separate 
Account I and the Northbrook Separate Accounts as recited in their 
registration statements, are consistent with the general purposes of 
the Act, and therefore meet the conditions for exemptive relief 
established by Section 17(b).
    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-30666 Filed 12-3-02; 8:45 am]
BILLING CODE 8010-01-P