[Federal Register: December 4, 2002 (Volume 67, Number 233)]
[Notices]
[Page 72237-72239]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04de02-93]
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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
[[Page 72239]]
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