[Federal Register Volume 78, Number 211 (Thursday, October 31, 2013)]
[Notices]
[Pages 65393-65396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25831]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 30764; File No. 812-14189]
Ameritas Life Insurance Corp., et al; Notice of Application
October 25, 2013.
AGENCY: The Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order approving the substitution
of certain securities pursuant to Section 26(c) of the Investment
Company Act of 1940, as amended (the ``1940 Act'').
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Applicants: Ameritas Life Insurance Corp., Ameritas Life Insurance
Corp. of New York, The Union Central Life Insurance Company (each, a
``Life Insurance Company'' and, collectively, the ``Life Insurance
Companies''), and their respective separate accounts: Ameritas Variable
Separate Account VA-2, Ameritas Variable Separate Account V, Ameritas
Variable Separate Account VA, Ameritas Variable Separate Account VL
(the ``Ameritas Life Accounts''); Ameritas Life of NY Separate Account
VA, Ameritas Life of NY Separate Account VUL (the ``Ameritas Life of NY
Accounts''); and the Carillon Life Account (each an ``Account'' and
together with the Life Insurance Companies, the ``Applicants'').
Summary of Application: The Applicants seek an order under Section
26(c) of the 1940 Act approving the substitution of shares of the VIP
Money Market Portfolio, Initial Class (the ``Replacement Portfolio'')
of the Variable Insurance Products Fund V (``VIPFV'') for shares of the
Calvert VP Money Market Portfolio (the ``Current Portfolio'') of the
Calvert Variable Series, Inc. (``CVSI'') held by the Accounts to
support certain variable annuity contracts or variable life insurance
contracts (collectively, the ``Contracts'') issued by the Life
Insurance Companies (the ``Substitution'').
DATES: Filing Date: The application was filed on July 31, 2013, and an
amended and restated application was filed on October 25, 2013.
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 Commission's Secretary
and serving Applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on November 14, 2013, and should be accompanied by proof of
service on the 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, 100 F Street
NE., Washington, DC 20549-1090. Applicants: Ameritas Life Insurance
Corp., Ameritas Variable Separate Account VA-2, Ameritas Variable
Separate Account V, Ameritas Variable Separate Account VA, and Ameritas
Variable Separate Account VL, 5900 ``O'' Street, Lincoln, Nebraska
68510; Ameritas Life Insurance Corp. of New York, Ameritas Life of NY
Separate Account VA, Ameritas Life of NY Separate Account VUL, 1350
Broadway, Suite 2201, New York, New York 10018; and The Union Central
Life Insurance Company and Carillon Life Account, 5900 ``O'' Street,
Lincoln, Nebraska 68510.
FOR FURTHER INFORMATION CONTACT: Michelle Roberts, Senior Counsel, or
Joyce M. Pickholz, Branch Chief, Insured Investments Office, Division
of Investment Management at (202) 551-6795.
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
[[Page 65394]]
Applicants' Representations
1. The Life Insurance Companies, on their own behalf and on behalf
of their respective separate accounts, propose to substitute shares of
the Replacement Portfolio for shares of the Current Portfolio held by
the Accounts to fund the Contracts.
2. Ameritas Life Insurance Corp. is the depositor and sponsor of
the Ameritas Life Accounts. Ameritas Life Insurance Corp. of New York
is the depositor and sponsor of the Ameritas Life of NY Accounts. The
Union Central Life Insurance Company is the depositor and sponsor of
the Carillon Life Account.
3. Each Account is a ``separate account'' as defined by Rule 0-1(e)
under the 1940 Act, and is registered with the Commission as a unit
investment trust. Security interests under the Contracts have been
registered under the Securities Act of 1933, as amended (the ``1933
Act''). The application sets forth the registration statement file
numbers for the Contracts and the Separate Accounts.
4. Each Account is divided into subaccounts, each of which invests
exclusively in shares of a corresponding investment portfolio (a
``Portfolio'') of a series-type management investment company,
including CVSI.
5. Pursuant to the Contracts, the Life Insurance Companies reserve
the right to substitute shares of one Portfolio for shares of another.
The prospectuses for the Contracts also disclose that the Life
Insurance Companies reserve this right.
6. CVSI is an open-end management investment company (File No. 811-
03591) that currently consists of six investment portfolios, including
the Current Portfolio, and issues a separate series of shares in
connection with each. CVSI has registered such shares under the 1933
Act (File No. 002-80154).
7. Calvert Investment Management, Inc. (``CIM'') serves as the
investment adviser to each CVSI Portfolio. CIM is an indirect wholly-
owned subsidiary of AMHC.
8. The VIPFV is an open-end management investment company (File No.
811-05361) that currently consists of 32 investment portfolios, one of
which, the Replacement Portfolio, is the subject of the proposed
Substitution. VIPFV issues a separate series of shares in connection
with each Portfolio and has registered such shares under the 1933 Act
(File No. 033-17704).
9. Fidelity Management & Research Company (``FMR'') serves as the
manager of each Portfolio of VIPFV. FMR receives an investment
management fee from each Portfolio. Fidelity Investments Money
Management, Inc. (``FIMM'') and other affiliates of FMR serve as sub-
advisers for the Replacement Portfolio. FIMM has the day-to-day
responsibility of choosing investments for the Replacement Portfolio.
In addition, other affiliates of FMR serve as sub-advisers for the
Replacement Portfolio and may provide investment research and advice
for the Replacement Portfolio. None of VIPFV, FMR, FIMM, or other
affiliates of FMR are affiliated persons (or affiliated persons of
affiliated person) of any of the Applicants. Likewise, none of the
Applicants are affiliated persons (or affiliated persons of affiliated
persons) of VIPFV, FMR, FIMM or other affiliates of FMR.
10. The Applicants state that Replacement Portfolio's and Current
Portfolio's respective investment objectives, strategies and risks are
substantially the same. A comparison of the investment objectives,
strategies and risks of the Replacement Portfolio and the Current
Portfolio is included in the application.
11. The following table compares the fees and expenses of the
Current Portfolio and the Replacement Portfolio as of the year ended
December 31, 2012:
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Current portfolio Replacement
-------------------- portfolio
-------------------
Calvert Variable Variable Insurance
Series, Inc., Products Fund V,
Calvert VP Money VIP Money Market
Market Portfolio Portfolio, Initial
Class
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Management Fee.................. 0.25%............. 0.17%.
Distribution and Service (12b-1) None.............. None.
Fee.
Other Expenses.................. 0.14%............. 0.09%.
Total Operating Expenses........ 0.39%............. 0.26%.
Fee Waivers and Expense None \1\.......... None.
Reimbursements.
Net Operating Expenses.......... 0.39% \2\......... 0.26%.
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\1\ The Investment Advisor, CIM, has contractually agreed to limit
direct net annual portfolio operating expenses through April 30, 2014
to 0.40%. Under the terms of the contractual expense limitation,
operating expenses do not include interest expense, brokerage
commissions, taxes and extraordinary expenses. Only the Board of
Directors of CVSI may terminate a Portfolio's expense cap before the
contractual period expires.
\2\ The Advisor further voluntarily reimbursed expenses of $88,900 or
0.11%, for Net Operating Expenses of 0.28% to maintain a positive
yield during the year ended December 31, 2012.
12. The Applicants state that the proposed Substitution is in
response to a decision by the Board of Directors for CVSI, at a meeting
held on June 5, 2013, to approve the dissolution of the Current
Portfolio on or about November 15, 2013 (the ``Liquidation Date''). The
board's decision to liquidate the Current Portfolio requires the Life
Insurance Companies to transfer accumulated Contract value invested in
the Current Portfolio to an alternative investment option available
under the Contracts on or before the Liquidation Date. Currently, the
only money market portfolio investment option offered under the
Contracts is the Current Portfolio. Accordingly, the proposed
Substitution is necessary in order to provide the Contract owners with
continued access to a money market portfolio investment option.
Consequently, the Life Insurance Companies have determined to replace
the Current Portfolio with the Replacement Portfolio via the
Substitution.
13. The Life Insurance Companies submit that the Replacement
Portfolio is an appropriate alternative for Contract owners for several
reasons. First, its investment objectives, strategies and risks are
substantially the same as those of the Current Portfolio. Second, it is
substantially larger than the Current Portfolio, has had lower overall
expense levels than the Portfolio in recent years, and has had higher
yields in recent years than the Current Portfolio. Third, the Contracts
and other variable annuity and variable life insurance contracts issued
by the Life Insurance Companies currently offer one or more VIPFV
portfolios (other than the Replacement Portfolio).
14. The Applicants believe that Contract owners would benefit from
the significantly larger size of the Replacement Portfolio and the
somewhat higher yields of the Replacement Portfolio, as contrasted
[[Page 65395]]
with the size and recent yields of the Current Portfolio. The yield for
the Current Portfolio for the seven days ending December 31, 2012 was
0.01%. The net asset value of the Current Portfolio was $85,913,000 as
of December 31, 2012. The yield for the Replacement Portfolio Initial
Class shares for the seven days ending December 31, 2012 was 0.08%. The
net asset value of the Replacement Portfolio supporting Initial Class
shares was $889,797,000 as of December 31, 2012.
15. The Applicants believe that Contract owners will benefit from
the reduction in overall expenses of the Replacement Portfolio as
compared to the Current Portfolio. Specifically, the management fee,
other expenses, and total operating expenses are less than those of the
Current Portfolio. Both Portfolios have no charge for Rule 12b-1
distribution and services fees. The total annual operating expense of
the Replacement Portfolio is less than that of the Current Portfolio.
Given this decrease, the Applicants believe that the Substitution would
benefit Contract owners by reducing the overall level of Portfolio
expenses.
Legal Analysis and Conditions
1. The Applicants request that the Commission issue an order
pursuant to Section 26(c) of the 1940 Act approving the proposed
Substitution. Section 26(c) of the 1940 Act requires the depositor of a
registered unit investment trust holding securities of a single issuer
to obtain Commission approval before substituting the securities held
by the trust.
2. Applicants submit that the proposed Substitution is not the type
of substitution that Section 26(c) was designed to prevent. Section
26(c) was intended to provide for Commission scrutiny of a proposed
Substitution which could, in effect, force shareholders dissatisfied
with the substitute security to redeem their shares, thereby possibly
incurring a loss of the sales load deducted from initial premium, an
additional sales load upon reinvestment of the proceeds of redemption,
or both, as well as possibly suffering adverse tax consequences upon
redemption. Consequently, the section was designed to forestall the
ability of a depositor to present holders of interest in a unit
investment trust with situations in which a holder's only choice would
be to continue an investment in an unsuitable underlying security, or
to elect a costly and, in effect, forced redemption.
3. Applicants submit that the proposed substitution will provide
Contract owners with substantially the same investment vehicle and
would not raise any of the aforementioned concerns that Congress
intended to address when the 1940 Act was amended to include Section
26(c).
4. Applicants represent that redemptions and purchases will occur
simultaneously so that contract values will remain fully invested at
all times. All redemptions of shares of the Current Portfolio and
purchases of shares of the Replacement Portfolio will be effected in
accordance with Section 22(c) of the Act and Rule 22c-1 thereunder. The
Substitution will take place at relative net asset value as of the
effective date of the Substitution (``Effective Date'') with no change
in the amount of any Contract owner's contract value or death benefit
or in the dollar value of his or her investments in the money market
subaccount of the applicable Account.
5. Contract values attributable to investments in the Current
Portfolio will be transferred to the Replacement Portfolio without
charge (including sales charges or surrender charges) and without
counting toward the number of transfers that may be permitted without
charge. Contract owners will not incur any additional fees or charges
as a result of the Substitution, nor will their rights or the Life
Insurance Companies' respective obligations under the Contracts be
altered in any way and the Substitution will not change Contract
owners' insurance benefits under the Contracts. All expenses incurred
in connection with the Substitution, including legal, accounting,
transactional, and other fees and expenses, including brokerage
commissions, will be paid by the Life Insurance Companies. In addition,
the Substitution will not impose any tax liability on Contract owners.
6. The Applicants also represent that the Substitution will not
cause the Contract fees and charges currently paid by existing Contract
owners to be greater after the Substitution than before the
Substitution. The Life Insurance Companies will not exercise any right
they may have under the Contracts to impose restrictions on transfers
under the Contracts for the period beginning on the date of the Pre-
Substitution Notice (defined below) through at least thirty (30) days
following the Effective Date.
7. Existing Contract owners will be notified of the proposed
Substitution by means of a prospectus or prospectus supplement for each
of the Contracts (``Pre-Substitution Notice'') at least thirty (30)
days before the Effective Date. New purchasers of the Contracts will be
provided the Pre-Substitution Notice, the Contract prospectus, and the
prospectus for the Replacement Portfolio in accordance with all
applicable legal requirements.
8. The Pre-Substitution Notice will: (i) State that the Applicants
filed the application seeking approval of the Substitution; (ii) set
forth the anticipated Effective Date; (iii) explain that the Contract
values attributable to investments in the Current Portfolio would be
attributable to the Replacement Portfolio as of the Effective Date;
(iv) state that, from the date of the Pre-Substitution Notice until the
Effective Date, Contract Owners are permitted to transfer Contract
value out of any Current Portfolio sub-account to any other sub-
account(s) offered under the Contract without the transfer being
treated as a transfer for purposes of transfer limitations and fees
that would otherwise be applicable under the terms of the Contract; (v)
advise Contract owners that any contract value remaining in the Current
Portfolio sub-account on the Effective Date will be transferred to a
sub-account investing in the Replacement Portfolio, and that the
Substitution will take place at relative net asset value; (vi) inform
Contract owners that for at least thirty (30) days following the
Effective Date, the applicable Life Insurance Company will permit
Contract owners to make transfers of contract value out of the sub-
account investing in the Replacement Portfolio to any other available
sub-accounts offered under their Contracts without the transfer being
counted as a transfer for purposes of transfer limitations and fees, if
any, that would otherwise be applicable under the terms of the
Contracts; and (vii) inform Contract owners that, except as described
in the market timing limitations section of the relevant prospectus,
the applicable Life Insurance Company will not exercise any rights
reserved by it under the Contracts to impose additional restrictions on
transfers out of the sub-account investing in the Replacement Portfolio
for at least thirty (30) days after the Effective Date.
9. All Contract owners will have received a copy of the most recent
prospectus for the Replacement Portfolio prior to the Substitution. In
addition, within five (5) days following the Substitution, Contract
owners affected by the Substitution will be notified in writing that
the Substitution was carried out. This notice will restate the relevant
information set forth in the Pre-Substitution Notice, and will also
explain that the contract values attributable to investments in the
Current Portfolio were transferred to the Replacement Portfolio without
charge
[[Page 65396]]
(including sales charges or surrender charges) and without counting
toward the number of transfers that may be permitted without charge.
10. The Applicants represent that the Life Insurance Companies will
not receive, for three (3) years after the Effective Date, any direct
or indirect benefits from the Replacement Portfolio, its advisor or
underwriter (or their affiliates), in connection with assets
attributable to the Contracts affected by the Substitution, at a higher
rate than the Life Insurance Companies had received from the Current
Portfolio, its advisor or underwriter (or their affiliates), including
without limitation 12b-1 fees, revenue sharing or other arrangements.
The Applicants further represent that the Substitution and the
selection of the Replacement Portfolio were not motivated by any
financial consideration paid or to be paid to a Life Insurance Company
or its affiliates by the Replacement Portfolio, its advisor or
underwriter, or their affiliates.
11. Applicants submit that the replacement of the Current Portfolio
with the Replacement Portfolio is consistent with the protection of
Contract owners and the purposes fairly intended by the policy and
provisions of the 1940 Act and, thus, meets the standards necessary to
support an order pursuant to Section 26(c) of the 1940 Act. In
addition, the Applicants submit that the proposed Substitution meets
the standards that the Commission and its staff have applied to
Substitutions that have been approved in the past.
Conclusion
For the reasons and upon the facts set forth above in the
application, the Applicants believe that the requested order meets the
standards set forth in Section 26(c) of the 1940 Act and should
therefore be granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-25831 Filed 10-30-13; 8:45 am]
BILLING CODE 8011-01-P