SECURITIES AND EXCHANGE COMMISSION

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON. D.C. 20549

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DIVISION OF

INVESTMENT MANAGEMENT

May 17, 1996

Stephen E. Roth, Esq.

Sutherland, Asbil & Brennan

1275 Pennsylvania Avenue, N.W.

Washigton, D.C. 20004-2404

Re:

Metropolitan Life Insurance Company,

New England Mutual Life Insurance Company and

New England Variable Life Insurance Company

Dear Mr. Roth:

Enclosed is our response to your letter of May 16, 1996. In any future correspondence

on this matter, please refer to our Reference No. IP-5-96.

Sincerely

.,

! /iL/--..

.J (, /

Susan Nash

Assistant Director

Enclosure .

Sutherland, Asbill & Brennan

-EL: 12021 383-0100

FAX: 12021 637-3593

1275 PENNSYLVANIA AVENUE. N. W.

ATLA

WASHINGTON. D.C. 20004- 2404

NEW YORK

AuST

W ASllGTON

STEPHEN E. ROTH

DIRECT LINE: 12021383-0158

INTERNET: srothlWsablaw.com

May 16, 1996

BY HAND DELIVERY

Susan Nash, Esquire

Assistant Director

Offce of Insurance Products

Division of Investment Management

Securities and Exchange Commission

Room 10162, Stop 10-6

450 Fifth Street, N.W.

Washington, D.C. 20549

Re: Metropolitan Life Insurance Company, New England Mutual Life

Insurance Company and New England Variable Life Insurance Company

Dear Ms. Nash:

We are writing on behalf of Metropolitan Life Insurance Company

("MetLife") and New England Mutual Life Insurance Company ("NEMLICO") to request

the staffs assurance that it would not recommend that the Securities and Exchange

Commission (the "Commission") take any enforcement action against MetLife or

NEMLICO under Section 5 of the Securities Act of 1933, as amended (the "1933 Act"),

and Rule 145 thereunder, or Sections 8 and 11 of the Investment Company Act of 1940,

as amended (the "1940 Act"), if certain variable annuity separate accounts of NEMLICO,

each registered as an investment company under the 1940 Act, are transferred to

MetLife (the "Transfers") in connection with the proposed merger of NEMLICO and

MetLife (the "Merger"), as described below. We also are requesting the staffs assurance

that it would not recommend that the Commission take any enforcement action against

MetLife or NEMLICO if, after consummation of the Merger, MetLife continues to rely

on exemptive orders and no-action assurances obtained on behalf of NEMLICO, its

variable annuity separate accounts, and any other parties named therein, without the

filng with the Commission or the staff of amended or new applications for the same

exemptive orders or no-action requests for the same assurances, or for relief for the

deduction of the mortality and expense risk charge from the assets of New England

Variable Annuity Fund i.

We also are writing on behalf of New England Variable Life Insurance

Company ("NEVLICO"), a subsidiary of NEMLICO, to request the staffs assurance that

it would not recommend that the Commission take any enforcement action against

Susan Nash, Esquire

May 16, 1996

Page 2

NEVLICO under Section 5 of the 1933 Act, and Rule 145 thereunder, if NEVLICO does

not fie new registration statements for its variable annuity contracts and variable life

insurance policies to report a change in its domicile.

i. BACKGROUND

A. Metropolitan Life Insurance Company and its Separate Accounts

MetLife. MetLife is a mutual life insurance company

organized in 1866

under the laws of the State of New York, which has engaged in the life hisurance

business under its present name since 1868. MetLife is licensed to sell life insurance

policies and annuity contracts in all 50 states and the District of Columbia. As of

December 31, 1995, MetLife had total assets of over $142 bilion and adjusted capital in

excess of $9.1 bilion.

MetLife Accounts. Currently, two separate accounts of MetLife

(collectively, the iiMetLife Accounts") are registered with the Commission as investment

companies under the 1940 Act.Y The MetLife Accounts are separate accounts .

established pursuant to New York insurance law. The MetLife Accounts are registered

accounts, each investing exclusively in shares

as unit investment trusts and consist of sub

of a portfolio of

an open-end investment company registered under the 1940 Act.

MetLife Contracts. The MetLife Accounts fund variable life insurance

contracts and variable annuity contracts (collectively, the "MetLife Contracts"). Interests

in the MetLife Accounts funding the MetLife Contracts are registered as securities with

the Commission under the 1933 Act.Y The MetLife Contracts generally permit

additional payments and allow transfers among subaccounts, subject to certain conditions.

A general account optkm is available under the MetLife Contracts; this option is not

registered with the Commission in reliance on certain exemptive and exclusionary

provisions in the federal securities laws.

Y See Registration Statement on Form N-4 for Metropolitan Life Separate Account E,

File No. 811-4001, and Registration Statement on Form N-8B-2 for Metropolitan Life

Separate Account UL, File No. 811-6025.

Y See Registration Statement on Form N-4 for variable annuity contracts funded by

Metropolitan Life Separate Account E, File No. 2-90380, and Registration Statements on

Form S-6 for variable life insurance policies funded by Metropolitan Life Separate

Account UL, File Nos. 33-32813, 33-47927, 33-57320 and 33-91226.

Susan Nash, Esquire

May 16, 1996

Page 3

. B. New England Mutual Life Insurance Company and its Separate Accounts

NEMLICO. NEMLICO is a mutual life insurance company organized in

1835 under the laws of the Commonwealth of Massachusetts, with its home offce in

Boston, Massachusetts. NEMLICO is licensed to sell life insurance policies and annuity

contracts in all 50 states, the District of Columbia and Puerto Rico. As of December 31,

1995, NEMLICO had total consolidated assets of over $17.45 billon and surplus in

excess of $ 1.05 bilion.

NEMLICO Accounts. Currently, three separate accounts of NEMLICO

(the "NEMLICO Accounts") are registered with the Commission as investment

companies under the 1940 Act. Each of the NEMLICO Accounts was established as a

separate account pursuant to Massachusetts insurance law. The oldest -NEMLICO

Account, established in 1969, is New England Variable Annuity Fund I ("V A Fund I"),

which is r~gistered with the Commission as a management investment company under the

1940 Act.¥ The other two separate accounts, namely, New England Life Retirement

Investment Account, established in 1981, andThe New England Variable Account,

established in 1987, are each registered as unit investment trusts with the Commission

under the 1940 Act.1J Each of the latter two separate accounts consists of subaccounts,

each investing exclusively in shares of a portfolio of an open-end, diversified management

investment company registered under the 1940 Act (the "Underlying Funds").

Approximately $1.3 bilion in total assets was held in the NEMLICO Accounts as of

December 31, 1995.

ii exemptive relief from the

1940 Act as was customary for variable annuity separate accounts at the time each was

Each NEMLICO Account obtained "start-up

registered with the Commission. In particular, in 1970, VA Fund I obtained an order of

exemption from Section 17(f) to permit the safekeeping of thé account's assets in

NEMLICO's vault, from Section 22( d) to permit waivers of sales load charges on the

application of death proceeds to an annuity option or any apportionment of surplus to

of

all payments under such contracts to be held by NEMLICO. The application filed on

behalf of VA Fund I did not explicitly request: nor did the order explicitly grant, relief

from Sections 26 and 27 for the deduction of the mortality and expense risk charge.

the contracts funded by VA Fund I, and from Section 27( c )(2) to permit the proceeds

'J See Registration Statement on Form N-3, File No. 811-1930.

1/ See Registration Statements on Form S-6, File No. 2-74407 and N-8B-2, File No. 811­

3285 for the New England Life Retirement Investment Account, and Registration

Statement on Form N-4, File No. 811-5338 for The New England Variable Account.

',,-­

Susan Nash, Esquire

May 16, 1996

Page 4

However, the exemptive order was expressly conditioned on NEMLICO's consent that

the adminstrative charges under the contracts funded by VA Fund I would not exceed

such reasonable amounts as the Commission shall prescribe, and that the payment of

sums and charges out, of the assets of the account would not be deemed to be exempted

from regulation by the Commission by reason of the exemptive order.2/

In 1982, New England Life Retirement Investment Account obtained an

deduction of a

sales load in the form of a contingent deferred sales load, from Sections 26(a) and

27(c)(2) to permit the safekeeping of the account's assets by NEMLICO, from Sections

order of exemption from various provisions of the 1940 Act to permit the

26(a) and 27(c)(2) to permit the deduction of administrative fees, a mortality and

expense risk charge and a

premium taX charge, and from Section

11 to permit

subaccount transfers.Q1 .' ,

order of

exemption from Sections 26(a)(2)(C) and 27(c)(2) of the 1940 Act for the deduction of a

mortality and expense risk charge from the assets of the separate account.1

In 1988, The New England Variable Account obtained an

NEMLICO Contracts. Each of the NEMLICO Accounts funds variable

annuity contracts CUNEMLICO Contracts"). Interests in the NEMLICO Accounts funding

the NEMLICO Contracts are, registered as securities with the Commission under the

1933 Act.~ The NEMLICO Contracts permit additional payments and allow transfers

among subaccounts, subject to certain conditions. Currently, only variable annuity

contracts funded by The New England Variable Account (marketed under the name

"Zenith Accumulator") are being offered for new sales to the public. The Zenith

Accumulator Contracts also offer a general account option, which is not registered with

2/ New England Life Variable Annuity Fund i. et aI., Inv. Co. Act. ReI..Nos. 6257, Nov.

25, 1970 (Notice) and 6285, Dec. 11, 1970 (Order).

Mutual Life Ins. Co.. et aI., Inv. Co. Act ReI. Nos. 12218, Feb. 8, 1982

(Notice) and 12277, March 5, 1982 (Order).

QI New England

11 New England Mutual Life Ins. Co.. et aI., Inv. Co. Act ReI. Nos. 16484, July 18, 1988

(Notice) and 16528, Aug. 16, 1988 (Order).

~ See Registration Statements on Form N-4 for variable annuity contracts funded by

The New England Variable Account, File No. 33-17377, and New England Retirement

Investment Account, File No. 2~ 74407, and on Form N-3 for variable annuity contracts

funded by New England Variable Annuity Fund I, File No. 2-34420.

Susan Nash, Esquire

May 16, 1996

Page 5

the Commission in reliance on certain exemptive and exclusionary provisions in the

federal securities laws.

C. New England Variable Life Insurance Company and its Separate Accounts

NEVLICO. NEVLICO is a wholly-owned subsidiary ofNEMLICO.

NEVLICO was organized as a stock life insurance company under Delaware law in 1980.

, NEVLICO is authorized to operate in all states, the District of Columbia and Puerto

Rico. NEVLICO's home office is in Wilmington, Delaware and its administrative offce

is in Boston, Massachusetts.

NEVLICO Accounts. Currently, two separate accounts of NEVLICO (the

"NEVLICO Accountstl) are registered with the Commission under the 1940 Act, each as

a unit investment trust.21 The NEVLICO Accounts are separate accounts established

.pursuant to Delaware insurance law. Each NEVLICO Account consists of subaccounts,

ea,ch investing exclusively in shares of a portfolio of an open-end, diversified management

investment company registered under the 1940 Act. Most of these portfolios are

Underlying Funds for the Zenith Accumulator Contracts issued by NEMLICO.

NEVLICO Contracts. One NEVLICO Account funds variable annuity

contracts and the other NEVLICO Account, variable life insurance policies (collectively,

the t1NEVLICO Contracts"). Interests in the NEVLICO Accounts funding the

NEVLICO Contracts are registered as securities with the Commission under the 1933

Act.lQ The NEVLICO Contracts permit additional payments and allow transfers

among subaccounts, subject to certain conditions. The NEVLICO Contracts also offer a

general account option, which is not registered with the Commission in reliance on

certain exemptive and exclusionary provisions in the federal securities laws.

21 See Registration Statement on Form N-4 for the New England Variable Annuity Separate

Account, File No. 811-6530, and Registration Statement on Form N-8B-2 for New England

Variable Life Separate Account, File No. 811-8828.

lQ See Registration Statement on Form N-4 for variable annuity contracts funded by New

England Variable Annuity Separate Account (File No. 33-85442) and Registration

Statements on Form S-6 for variable life insurance policies funded by New England Variable

Life Separate Account, File Nos. 33-88082; 33-66864; 33-64170; 33-52050; 33-19540; 33­

10954; and 2-82838. In addition, a registration statement on Form N-4 is pending for New

England Variable Annuity Separate Account (File No. 33-64879) and a registration

statement on Form S-6 is pending for New England Variable Life Separate Account (File

No. 33-65263).

Susan Nash, Esquire

May 16, 1996

Page 6

D. New England Securitie.s. New England Securities Corporation, a

as the principal underwter for the

NEMLICO Contracts and the NEVLICO Contracts. New England Securities is an

"affilated person," as that term is defined in Section 2(a)(3) of the 1940 Act, of

wholly-owned subsidiary of NEMLICO, acts

NEMLICO and NEVLICO.

II. THE PROPOSED TRASACTIONS

The Merger. For certain business reasons, MetLife and NEMLICO have

entered into an agreement and plan of merger dated as of August 16, i995

(the "Merger

Agreement"), pursuant to which NEMLICO will merge with and into MetLife, with

MetLife the survving corporation. MetLife and NEMLICO contemplate that the

Merger wil be consummated on or aboutMay 31, 1996 (the "Effective Date"), subject to

certain state insurance regulatory approvals and approvals of policyholders (as defined

below).

Impact of Merger on NEMLICO, NEMLICO Accounts and NEMLICO

Contracts. Upon consummation of the Merger, NEMLICO's separate corporate

existence wil cease by operation of law, and MetLife will assume legal ownership of all

of the assets of NEMLICO, including the NEMLICO Accounts and their respective

assets. By virtue of the Merger, MetLife also wil become responsible for all of

NEMLICO's liabilties and obligations, including those created under the NEMLICO

Contracts outstanding at the time of the Merger ("Outstanding NEMLICO Contracts").

Outstanding NEMLICO Contracts will thereby become variable contracts issued through

separate' accounts of MetLife, and each owner of an Outstanding NEMLICO Contract

will become a contractowner of MetLife by operation of law. Under the Merger

Agreement, the Merger wil have no effect on MetLife Contractowners, and each owner

of a MetLife Contract will continue to be a contractowner of MetLife.

The Merger Agreement contemplates that the NEMLICO, Accounts, as in

existence on the Effective Date, wil be transferred intact to MetLife in connection with

the Merger, and wil remain intact after the Effective Date as new separate accounts of

MetLife for so long as they hold assets funding Outstanding NEMLICO Contracts. As a

result of the Merger, the NEMLICO Accounts, which are registered under the 1940 Act,

will continue to maintain their status as investment companies under the 1940 Act and as

separate accounts under applicable state insurance law. The MetLife Accounts and the

NEMLICO Accounts are not parties to the Merger Agreement, which was entered into

company (depositor or sponsor) leveL. No portion of the assets of any

of the NEMLICO Accounts wil be combined with any other separate accounts in

connection with the Merger. After the Effective Date, the assets in each of the

will remain legally segregated from MetLife's other business, just as

at the insurance

NEMLICO Accounts

Susan Nash, Esquire

May 16, 1996

Page 7

they are now from NEMLICO's other business. Also, the NEMLICO Accounts will

continue to consist of the same tye of assets currentIy comprising the NEMLICO

Accounts -- namely, shares of the Underlying Funds in the case of those NEMLICO

Accounts registered as unit investment trusts,' and portfolio securities in the case of VA

accounts) in effect

Fund i. The unit value for each of the NEMLICO Accounts (or sub

immediately after the Merger will be identical to the unit value in effect immediately

prior to the

Merger. Thus, the only change to the NEMLICO Accounts resulting from

consummation of the Merger is that, after the Effective Date, the NEMLICO Accounts

will be separate accounts of MetLife, rather than of NEMLICO.

Moreover, except for MetLife's succession to NEMLICO's obligations and

liabilties arising under Outstanding NEMLICO Contracts, the Transfers of the

NEMLICO Accounts pursuant to the Merger wil not affect the provisions of, or rights

and obligations under, the NEMLICO Contracts, nor wil the Transfers affect any values

determined under the NEMLICO Contracts. The Transfers wil not cause any change in

any of the terms or provisions of the NEMLICO Contracts. There is no current

intention to make any new investment options available to owners of the NEMLICO

Contracts in connection with the Transfers, or to substitute or terminate any of the

existing Underlying Funds in connection with the Transfers. No payments will be

required or charges imposed under the NEMLICO Contracts in connection with the

Transfers that would not otherwse be required or imposed.ll Any costs or expenses

relating to effecting the Transfers' or consummating the Merger wil be borne by MetLife

and NEMLICO, and wil not be borne by the NEMLICO Accounts or NEMLICO

Contractowners. The Transfers will not affect the unit value of any NEMLICO Accounts

accounts ); these unit values as in effect immediately after the Transfers will

be identical to the unit values in effect immediately prior to the Transfers. Finally,

MetLife's succession to NEMLICO's obligations and liabilties under the NEMLICO

(or their sub

Contracts wil not dilute or otherwse adversely affect the economic interests of the

NEMLICO Contractowners in their contracts.

Procedural Matters Relating to the Merger Agreement. The Merger

Agreement has been approved by the Boards of Directors of MetLife and NEMLICO in

ll Because the Transfers would be effected as of the end of a valuation period under the

NEMLICO Contracts, under the terms of the NEMLICO Contracts certain payments or

period. ­

deductions for charges may be required to be made, as a matter of course, during that

Susan Nash, Esquire

May 16, 1996

Page 8

accordance with applicable state law..! Under applicnble Massachusetts laws and

Agreement also must be submitted to the Massachusetts

regulations, the Merger,

insurance commissioner. Under the regulations, the commissioner may elect to conduct a

public hearing, of which notice is to be given to policyholders and others as the

commissioner deems appropriate, to consider, among other things, the fairness of the

terms and conditions of the proposed merger, whether the interests of policyholders are

public interest. NEMLICO anticipates that

the Massachusetts insurance commissioner wil conduct a fairness hearig on the Merger

Agreement, and that NEMLICO policyholders will be notified of the hearing and given

an opportunity to appear. (As of the date of this letter, no date had been set for this

protecteci, ånd whether the. merger is in the

hearing.) The regulations further require the commissioner to grant or withhold

authorization of the merger agreement after conducting such a hearing.

Massachusetts insurance laws and regulations also require that

the Merger Agreement be approved by holders of NEMLICO participating policies and

Applicable

others who quali~ under Massachusetts law as members of NEMLICO, (collectively

Ipolicyholders")..l Accordingly, NEMLICO intends to give NEMLICO

Contractowners, 'as policyholders, an opportunity to vote on the Merger at a meeting to

be held for allNEMLICO policyholders. Materials relating to that meeting forwarded to

policyholders will conform to applicable Massachusetts regulations for notices of a

.! NEMLICO and MetLife anticipate that the Merger Agreement may be amended in

connection with obtaining regulatory approvals. If the Merger Agreement is amended, the

amended agreement will be submitted to the board of directors of each company, and the

amended agreement, rather than the original Merger Agreement, will be the subject of the

fairness hearing discussed in the paragraph above and the policyholder meeting discussed

in the following paragraph.

JJ Under New York insurance law, the Merger Agreement must also be approved by

MetLife's policyh()lders. As of the date of this letter, no notice ofa meeting had yet been

published, or a date set for the meeting.

Susan Nash, Esquire

May 16, 1996

Page 9

policyholder meeting to vote on a merger.HI (As of the date of this letter, no such

materials had been sent, nor had a date yet been set for such meeting.)

The adviser to VA Fund I and advisers and sub-investment advisers for

certain of the Underlying Funds are affiiated with NEMLICO. The consummation of

the Merger may be deemed to result in ,an "assignment" of their investment advisory

agreements for purposes of the 1940 Act and the Investment Advisers Act of 1940.

Accordingly, in order to ensure that investment advisory agreements are in effect on the

Effective Date, new iiivestment advisory agreements between VA Fund I and the,

Underlying Funds and their respective advisers and sub-investment advisers have been

approved by the board of managers of VA Fund I and the boards of trustees of the

Underlying Funds, as well as by their security holders. More particularly, at meetings

held on December 28, 1995, security holders of VA Fund I approved a new investment

advisory agreement for that account and security holders of the Underlying Funds

approved new investment advisory agreements for the Underlying Funds. As security

holders of VA Fund I, owners of NEMLICO Contracts funded by that account had ån

opportunity to vote in person or by proxy on the new investment advisory agreement.

Owners of NEMLICO Contracts funded by the other NEMLICO Accounts had an

opportunity to provide voting instructions in person or by proxy, to NEMLICO, as a

security holder' of the Underlying Funds, with rtspect to the approval of investment

advisory agreements for the Underlying Funds.W Votes and voting instructions were

HI It is our understanding that the solicitation of policyholders' approval of various

corporate governance matters for mutual insurance companies has not been considered to

be subject to the proxy rules under the Securities Exchange Act of 1934 (the "1934 Act").

For the proxy rules to be implicated, the basis for the proxy solicitation must relate t,o equity

securities issued by the insurance company. However, the interest of policyholders of a

mutual insurer has not been viewed as being an equity security' interest ~nder the 1934 Act.

It has been observed that the "SEC has never had jurisdiction over mutual insurance

companies except on their occasional issuance of debt securities, because they do not issue

stock and § 3(a)(8) of the 1933 Act exempts insurance policies and annuities. .." See IV

Loss and Seligman, Securities Regulation 1796 (emphasis in original).

Of interest, since the 1964 amendments to the federal securities laws, stock insurance

companies have been able to rely on an explicit exemption from the proxy rules, provided

a regulatory agency of their domiciliary state provides substantially similar regulation as to

proxies, consents and authorizations. See Section 12(g)(2)(G) of the 1934 Act.

12 Owners of NEVLICO Contracts funded by NEVLICO Accounts investing in the

(continued.. )

~ ':~

Susan Nash, Esquire

May 16, 1996

Page 10

to proxy solicitation materials for the respective security holder

solicited pursuant

meetings, which were prepared and filed in accordance with the proxy rules under the

1934 Act and 1940 Act.

Disclosure Considerations. NEMLICO has supplemented prospectuses for

the NEMLICO Contracts to provide information about the Merger and related

Underlying Funds have supplemented their prospectuses to

provide information relating to new approvals of the investment advisory agreements.

Copies of these s!lPplements have been forwarded to existing NEMLICO

ContractoWIers..i As discussed above, NEMLICO ContraGtowneis also have received

proxy materials soliciting security holder approval of various investment advisory

agreements and will receive materials relating to the policyholders' meeting for

consideration of the Merger Agreement (as it may be amended).

matters..w Similarly, the

Life intends to acc;ept additional payments

under the Outstanding NEMLICO Contracts made in acc,ordance with their terms, and to

continue the offering of Zenith Accumulator Contracts, as variable annuity contracts of

MetLife. To ensure that any payments so accepted wil be covered by effective

registration statements reflecting MetLife's succession to NEMLICO's obligations and

liabilties under the NEMLICO Contracts, new 1933 Act registration statements for the

NEMLICO Contracts funded by the NEMLICO Accounts wil be fied with the

Commission in a timely manner to ensure that the new registration statements wil

After the Effective Date, Met

become effective on the Effective Date. (The new registration statement for the Zenith

Accumulator Contracts also will cover any new contracts issued by MetLife after the

These registration statements wil include MetLife's financial

statements, but wil retain the historical tinancial information of the NEMLICO

Accounts. The prospectus information included in these registration statements relating

Effective Date.)

to consummation of the Merger wil be sent to existing NEMLICO Contractowners.

12 (...continued)

Underlying Funds also had the opportunity to provide voting instructions with respect to the

approval of investment advisory agreements for the Underlying Funds.

.w Given that MetLife is to survve the Merger and that it is substantially larger than

NEMLICO, MetLife did not supplement prospectuses for MetLife Contracts to provide

information about the Merger.

11 Owners of NEVLICO Contracts funded by NEVLICO Accounts investing in the

Underlying Funds also have been forwarded supplements to the Underlying Funds'

respective prospectuses.

Susan Nash, Esquire

May 16, 1996

Page 11

Redomestication of NEVLICO. The Merger Agreement provides that

MetLife upon consummation of the

Merger. MetLife and NEMLICO anticipate that, in connection with the Merger

approval process, NEVLICO may take appropriate corporate action, to change its state

of domicile from Delaware to Massachusetts. It has not yet been decided whether the

change in domicile would be effected before or after the Merger is, consummated,

although it is probable that an effort will be made to effect the Redomestication on the

NEVLICO wil become a wholly-owned subsidiary of

Merger is effected. It also is likely that NEVLICO's name will be

changed to "New England Life Insurance Company'" at the time the Redomestication is

effected. The Redomestication of NEVLICO is not a condition to consummation of the

same day as the

Merger. With respect to appropriate corporate action, both Delaware and Massachusetts

have adopted laws ("redomestication laws")W permitting an insurer to change its state

of domicile by various methods. One such method that has been used by insurers

changing domicile is the filing by the insurer of appropriate "articles of redomestication"

with the state in which domicile is sought. This approach ensures that there is no change

in the corporate entity, as a matter of state law, resulting from the redomestication.

Under Massachusetts' redomestication law, the certifcate of authority,

agents' appointments and licenses, rates and other items in existence for an insurer at the

time of redomestication in Massachusetts wil continue in full force and effect unless the

commissioner provides otherwise. Moreover, the redomestication law provides that all

outstanding policies of the insurer wil remain in full force and, effect and need not be

endorsed as to the new name of the insurer or its new location, if applicable, unless so

ordered by the commissioner. In the absence of these provisions, the insurer would be

required to obtain a new certificate of authority, reapply for agent appointments and

licenses, and obtain new approvals of outstanding as well as new policy forms -- a

significantly burdensome and time-consuming process. The redomestication laws

effectively exempt an insurer changing domicile from these requirements in recognition of

the fact that there is no change in the corporate entity as a result of the redomestication.

Under the Delaware and Massachusetts redomestication laws, prior

approval of both the Massachusetts and Delaware insurance commissioners is required

for an insurer to change its domicile from Delaware to Massachusetts. NEVLICO will

not go forward with the Redomestication unless it obtains the approvals of both

commissioners. NEVLICO has no reason to believe that it will not be able to obtain the

approvals of both commissioners. In view of the provisions of the Massachusetts

W See Delaware Ins. Code Section 4946 and Mass. Ins. Code Section 175:49A.

Susan Nash, Esquire

May 16, 1996

,Page 12

redomestication law discussed above, NEVLICO anticipates that its Redomestication will

not result in any changes to outstanding NEVLICO Contracts.12

With respect to the differences between Massachusetts and Delaware

insurance laws, the states' respective laws and regulations for separate accounts are

substantially the same. While there are a few differences, these differences either are

not relevant to the current operations of the NEVLICO Accounts or the provisions of

outstanding NEVLICO Contracts, or are not expected to have any impact on the

operation of the NEVLICO Accounts after the Redomestication.

III. ANALYSIS

Af: discussed more fully below, it is our view, with regard to the Merger,

that:

1. Section 5 of the 1933 Act and Rule 145 thereunder are inapplicable

to the Transfers of the NEMLICO Accounts pursuant to the

Merger, and no registration statements on Form N-14 ate required;

2. Section 8 of the 1940 Act is inapplicable to the Transfers of the

NEMLICO Accounts pursuant to the Merger;

3. Section 11 of the 1940 Act is inapplicable to the Transfers of the

NEMLICO Accounts pursuant to the Merger; and

4. Any and all exemptive orders and no-action assurances obtained

before the Merger by NEMLICO, the NEMLICO Accounts, and/or

any other parties named therein under the Federal securities laws

with respect to the NEMLICO Accounts and the NEMLICO

Contracts may continue to be relied upon by MetLife, the

NEMLICO Accounts, and such other parties named therein after

the Effective Date without the filng of amended or new exemptive

applications or no-action requests with the Commission or its staff,

or for relief for the deduction of the mortality and expense risk

charge from the assets of VA Fund I.

12 Upon the consummation of the Redomestication, NEVLICO wil disclose the

its domicile in a manner that complies with the 1933 Act.

change in

Susan Nash, Esquire

May 16, 1996

Page 13

with regard to the Redomestication, that Section 5 of the 1933

Further, it is our view,

Act and Rule 145 thereunder are inapplicable to the Redomestication of NEVLICO, and

that no new registration statements with respect to NEVLICO Contracts are required to

fied by NEVLICO to reflect the Redomestication.

be

A No-Action Relief Requested With Regard to the Merger

1. Section 5 of the 1933 Act and Rule 145

Thereunder are Inapplicable

to the Transfers of NEMLICO Accounts Pursuant to the Merger

It is our view that MetLife's succession to NEMLICO's obligations and

liabilties under the NEMLICO Contracts as a result of the Merger will not result in the

offer or sale of any new or different security, or in the creation of a new or different

investment company issuer issuing a new security, in exchange for Outstanding

NEMLICO Contracts, for purposes of Section 5 of the 1933 Act or Rule 145 thereunder.

Section 5 generally prohibits the affer or sale of a new security without compliance with

the registration requirements of the 1933 Act. Rule 145, an interpretive rule adopted by

the Commission, provides guidance on when certain corporate reorganizations may entail

the offer or sale of a new sècurity in exchange for outstanding securities of a corporation

involved in the reorganization.

Rule 145 provides, in relevant part, that an "offer," "offer to sell," "offer for

sale," or "sale" is deemed to occur "so far as the security holders of (a person) are

concerned, where, (pursuant to state law or controllng governing documents,) there is

submitted for the vote or consent of such security holders a plan or agreement for. . . a

statutory merger or consolidation or similar plan of acquisition in which securities of such

. . . person held by such security holders will become or be exchanged for securities of

any person. .." The release accompanying the adoption of Rule 145 emphasizes that "an

offer occurs under the rule only as to security holders who are entitled to vote or consent

on the matter and who hold securities which become or will be exchanged for new

securities."~ Thus, if the matter on which a security holder is given an opportunity to

vote provides for his outstanding securities to be exchanged for new securities, the vote

entails an investment decision as to the new securities.

As discussed above under "Procedural Matters Relating to the Merger

Agreement," two matters relating to the Merger are expected to be or have been

owners for vote: approval of the Merger Agreement as

policyholders of a mutual life insurance company, and approval of certain investment

submitted to NEMLICO Contract

~ Sec. Act ReI. No. 5316 (Oct. 6, 1972), 14 (emphasis added).

Susan Nash, Esquire

May 16, 1996

Page 14

advisory agreements with investment advisers or sub-investment advisers to VA Fund I or

the Underlying Funds. In light of Rule 145, these matters may at first appear to

implicate an investment decision as to the security that ,NEMLICO Contractowners hold.

whether to accept a

new or different security in place of the security NEMLICO Contractowners wil hold as

of the Effective Date. The security they ,vill then hold is represented by the securities

aspects of the NEMLICO Contracts funded by the NEMLICO Accounts, Le., the cash

values, surrender vnlues, and other benefits based on the NEl\1LICO Accounts. As

VIe submit, however, that these matters do not involve a decision

discussed more

fully below, nèÌthcr matter as to which NEMLICO Contractowners may

vote (or direct votes) involves a decision related to accepting a new or diff.erent security

in place of the security held by NEMLICO Contractowners on the Effective Date.

In the case of policyholder approval of the Merger Agreement as it relates

to NEMLICO Contractowners, the Transfers of the NEMLICO Accounts pursuant to the

Merger wil not affect those aspects of the NEMLICO Contracts that cause them to be

treated as securities. The Transfers wil not result in any change in the NEMLICO

, AccQunts or their operations. The assets of the NEMLICO Accounts will not be

combined with those of any other separate account or other entity in connection with the

Transfers. Each of tlie NEMLICO Accounts wil remaiIl intact after the Effective Date

for so long as they hold assets funding NEMLICO Contracts. After the Effective Date,

the assets of the NEMLICO Accounts wil be legally segregated from Met

Life's other

business, just as they are now from NEMLICO's other business. The NEMLICO

assets currently comprising the

of the

or result iii the imposition of any

charges against the NEMLICO Accounts or NEMLICO Contract values that would not

otherwise apply. Thus, there wil be no change in the securities aspects of the

NEMLICO Contracts as a result of the Merger that could be viewed as resulting in a

security that is new or different from what those Contract owners wil hold immediately

before the Merger is consummated.

Accounts wil continue to consist of the same pool of

NEMLICO Accounts. Moreover, the Transfers wil not cause any change in any

terms or provisions of the NEMLICO Contracts

In the case of security holder approval of new investment advisory

agreements, we do not believe that the solicitation of NEMLICO Contractowner

approval and voting instructions falls within the intended scope of Rule 145. Rule 145

applies to votes solicited in connection with certain corporate reclassifications, mergers,

consolidations or transfers of assets involving the issuance of new securities. The

approval of an investment advisory agreement, while admittedly a material event for the

investment company that is a party to the agreement, simply is not an event of the type

covered by Rule 145, nor, to our knowledge, has such an event otherwise been viewed

generally as changing the security issued by the investment company.

Susan Nash, Esquire

May 16, 1996

Page 15

We belitve that our view is supported by substantial no-action precedent.

in most

cases, also Rule 145, for transfers of separate accounts in connection with mergers of life

insurance companies.W In a good number of the no-action letters, representations

There are a number of no-action letters providing relief from Section 5 and,

decision.m '

were made that affected variable contract owners would not be given any opportunity to

vote on i:l1y matters relating to the merger or otherwse be presented with an investment

'l See Massachusetts Mutual Life Ins. Co.. et al. (pub. avaiL. Feb. 15, 1996); Phoenix

Mutual Life Ins. Co.. et al. (pub. avaiL. Apr. 13, 1992); Intramerica Life Ins. Co.

Oct.

(pub. avaiL.

29. 1992); California-Western States Life Ins. Co. (pub. avaiL. Dec. 9, 1991); UN

Life Ins. Co. (pub. avaiL. Oct. 24, 1991); Merril Lynch Life Ins. Co. (pub. avaiL. Sept. 26,

1991); Lincoln National Pension Ins. Co. (pub. avaiL. Dec. 29, 1988); Hartford Life Ins. Co.

et al. (pub. avaiL. Feb. 16, 1988) ("Hartford nr'); Jefferson National Life Ins. Co. (pub. avaiL.

Oct. 9, 1986); American General Life Ins. Co. of Delaware (pub. avaiL. Mar. 13, 1986); and

Voyager Life Ins. Co. (pub. avaiL. Jan. 10, 1986) (collectively referred to herein as "merger

no-action letters"). See 'also Hartford Variable Annuity Life Ins. Co. (pub. avaiL. May j1,

1977) ("Hartford II"); Variable Annuity Accounts B & C of Aetna Variable Life"Ins. Co.

(pub. avail. May 10, 1976); Hartford Variable Annuity Life Ins. Co. (pub. avaiL. Sept. 1,

1975) ("Hartford I"); and American Variable Annuity Life Assurance Co. (pub. av~il. Sept.

6, 1974) (collectively referred to herein as "change in domicile no-action letters"). The

foregoing merger and change in domicile no-action letters concerned intact transfers of

separate accounts effected in connection with a merger of two or more insurers. There is

also a long line of no-action letters concerning intact transfers of separate accounts effected

pursuant to assumption reinsurance transactions. For, all practical purposes, this line of

letters has raised the same issues and resulted in the same no-action assurances, as has been

the case for the merger no-action letters. See,~, Metropolitan Life Ins. Co.. et al. (pub.

avaiL. Apr. 26, 1995); Security First Life Ins. Co. (pub. avaiL. Jan. 17, 19Q2); The Great~West

Life Assurance Co. (pub. avaiL. Dec. 27, 1991); Allegiance Life Ins. Co. (pub. avaiL. July 31,

1990); Mass Life Ins. Co. of New York, et al. (pub. avaiL. Nov. 14, 1989); Anchor National

Life Ins. Co. (pub. avaiL. Nov. 8, 1989); and Provident Mutual Life Ins. Co. of Philadelphia

(pub. avaiL. Feb. 2, 1987) (collectively referred to herein as "assumption reinsurance noaction letters").

'l With respect

to the merger no-action letters, see Intramerica Life Ins. Co.;

California-Western States Life Ins. Co.; UNUM Life Ins. Co.; Merril Lynch Life Ins. Co.;

Lincoln National Pension Ins. Co.; Hartford III; and American General Life Ins. Co. of

Delaware cited above, n. 21. With respect to the assumption reinsurance no-action letters,

see Metropolitan Life Ins. Co.. et al; Security First Life Ins. Co.; The Great-West Life

( continued..)

'"

Susan Nash, Esquire

May 16, 1996

Page 16

However, several no-action letters involving separate account transfers in

connection with mergers indicate that contract owners would, bè (or were) given an

opportunity to vote on matters relating to the merger or having some proximity to the

merger pursuant to which the separate accounts would be (or were) transf~rred.~

For example, in three different cases involving separate account transfers, contractowners

received proxy statements for the election of new board members and/or the approval of

new investment advisory agreements that also disclosed pending merger transactions.W

In five other cases of separate account transfers, contract owners were also to be given

the right to vote on the merger: in three cases, the companies involved in the merger

were stock life insurance companies;i2 in two cases, the companies involved were

mutual life insurance companies.2§

Several no-action letters involved mergers proposed to be" effected solely

for the purpose of changing domicile;W other letters involved mergers proposed to be

effected for purposes of merging affiiated insurersfW or

unaffilated insurers.22

'l (...continued)

Assurance Co.; Allegiance Life Ins. Co.; Mass Life Ins. Co. of New York. et al.; Anchor

National Life Ins. Co.; and Provident Mutual Life Ins. Co. of Philadelphia, cited above, n.

21.

~ See Massachusetts Mutual Life Ins. Co.; Phoenix Mutual Life Ins. Co.; Jefferson

National Life Ins. Co.; Voyager Life Ins. Co.; and all of the change in domicile no-action'

letters, cited above, n. 21. .

W See Voyager Life Ins. Co.; Jefferson National Life Ins. Co.; .and Variable Annuity

Accounts B & C of Aetna Variable Life Ins. Co., cited above, n. 21.

i2 See Hartford II; Hartford I; and American Variable Annuity Life Assurance Co., cited

above, n. 21.

2§ See Massachusetts Mutual Life Ins. Co. and Phoenix Mutual Life Ins. Co., cited above,

n.21.

W Hartford II; Variable Annuity Accounts B & C of Aetna Variable Life Ins. Co.; Hartford

1; and American Variable Annuity Life Assurance Co., cited above, n. 21.

28/ See Intramerica Life Ins. Co.; California-Western States Life Ins. Co.; UNU Life Ins.

Co.; Merril Lynch Life Ins., Co.; Lincoln National Pension Ins. Co.; Hartford Life Ins. Co.

et al.;, Jefferson National Life Ins. Co.; and American General Life Ins. Co. of Delaware,

cited above, n. 21.

Susan Nash, Esquire

May 16, 1996,

Page 17

Whatever the business. .reason, the same result would ensue for the separate accounts

involved: a change in the insurer obligated under the contracts, but no change in the

separate account operations. In this regard, all of the no-action letters represented,

regardless of whether a vote may have been solicited on related matters, that the assets

and liabilties

which comprised the funding separate account would be

transferred intact

pursuant to the merger, and, as separate account assets and liabilties, would remain

other business of the survving insurance company, just as is

legally segregated from the

to be the case for the NEMLICO Accounts after the Effective Date.

Consistent with our view that Section 5 and Rule 145 are inapplicable to

the Transfers of the NEMLICO Accounts pursuant to the Merger, we believe that no

registration statement on Form N-14 should be required to be fied with respect to the

Transfers.~ However, we acknowledge that a registration statement for the

NEMLICO Contracts funded by each NEMLICO Account, as a separate account of

MetLife, needs to be in effect under the 1933 Act to cover any securities issued after the

Effective Date, such as any additional payments accepted on the NEMLICO Contracts

outstanding at the time the Transfers are effected.

As discussed above under "Disclosure Considerations," MetLife and the

NEMLICO Accounts wil file new registration statements with the Commission under the

1933 Act for the NEMLICO Contracts and wil request that these registration statements

be declared effective on the Effective Date. The new registration statements will reflect

MetLife's assumption of NEMLICO's contractual obligations and liabilties with respect

to the NEMLICO Contracts pursuant to the Merger. The regištrâtion statements also

will include appropriate financial information for MetLife reflecting the consummation of

the Merger. We note that this approach, of fiing new registration statements to cover

securities issued after the merger is consummated, is consistent with relevant no-action

precedent.ll " ,

'l (...continued) ,

'l See Massachusetts Mutual Life Ins. Co.; Phoenix Mutual Life Ins. Co.; and Voyager Life

Ins. Co., cited above, n. 21. See also Allegiance Life Ins. Co. (transfer of separate account

pursuant to assumption reinsurance transaction between unaffilated insurers), cited above,

n.21.

~ We note that the Form N-14 registration statement, by its terms, does not apply to

separate accounts registered as unit investment trusts.

31/ See the merger no-action letters cited above, n. 21. The change in domicile no-action

letters cited above, n. 21, concerned separate account transfers made in connection with

mergers effected for purposes of changing the insurer's domicile. In these no-action letters,

(continued.. )

Susan Nash, Esquire

May 16, 1996

Page 18

For the foregoing reasons, we are of the view that neither Section 5 nor

Rule 145 is applicable to the Transfers of the NEMLICO Accounts pursuant to the

Merger and that no Form N-14 registration statement need be filed. Accordingly, we

request assurance that the staff concurs in our view. '

2. Section 8 of the 1940 Act is Inapplicable to Transfers of the

NEMLICO Accounts Pursuant to the Merger

It is our view that MetLife's succession to NEMLICO's obligations and

liabilties under tht NEMLICO Contracts pursuant to the Merger would not result in the

organizÇltion or creation of a new investment company pursuant to Section 8 of the 1940

Act. Section 8 of the 1940 Act requires the registration of an investment company with

the Commission pursuant to the filing of such forms and compliance with such

by the Commission. The Transfers of the NEMLICO Accounts

wil involve a change in the insurance company obligated under the NEMLICO

causing a change in the depositor or sponsor of the NEMLICO

Accounts. This change, however, will not change the registered investment company,

namely, each of the NEMLICO Accounts. More particularly, as discussed above under

"Impact on NEMLICO, NEMLICO Accounts and NEMLICO Contractowners," the

Transfers will not change the structure or operations of the NEMLICO Accounts or the

relationship of the NEMLICO Accounts to the insurance company obligated under the

NEMLICO Contracts or to the NEMLICO Contractowners. The NEMLICO Accounts

will continue to be treated as separate entities for all relevant purposes under the 1940

Act, including financial reporting.

regulations as prescribed

Contracts, thereby

However, we acknowledge that the import of the Transfers, specifcally,

MetLife's succession to NEMLICO as the depositor or sponsor- of the NEMLICO

Accounts and the transfer of contractual obligations and liabilties from NEMLICO to

MetLife as of the Effective Date, should be reflected in the existing 1940 Act registration

statements of the NEMLICO Accounts. Accordingly, MetLife propose~ to amend the

1940 Act registration statements for the NEMLICO Accounts to reflect those changes.

This procedure would obviate the filng of new notifications of registration and

registration statements for the NEMLICO Accounts pursuant to Section 8 of the 1940

Act. MetLife and the NEMLICO Accounts undertake to amend the existing 1940 Act

W (..continued)

requestors sought assurance that they could rely on Rule 414 under the 1933 Act, which

permits the successor issuer in a change in domicile merger to adopt the registration

statement of the predecessor issuer by means of filing a post-effective amendment rather

than a new registration statement.

Susan Nash, Esquire

May 16, 1996

Page 19

registration statements for the NEMLICO Accounts as part of the process of filing new

1933 Act registration statements discussed above for the NEMLICO Accounts.W

We note that our view, and the procedure outlined above, is supported by

substantial no-action precedent.nI Accordingly, we request assurance that the staff

concurs in our view that no new registration statements need to be' filed under the 1940

Act, and that the filing of amendments to existing 1940 Act registration statements of the

NEMLICO Accounts will satisfy any updating obligations under the 1940 Act with

respect to the Transfers of the NEMLICO Accounts pursuant to the Merger.

3. Section 11 of the 1940 Act is Inapplicable to the Transfers of the

NEMLICO Accounts Pursuant to the Merger

Section 11 of the 1940 Act prohibits an offer to exchange one investment

company security for another, unless the terms of the offer have first been approved by

the Commission. In the case of investment company securities, Section 11 generally is

implicated whenever consideration is being given to whether a transaction may entail the

issuance of a new security in exchange for an outstanding security. However, based on

the analysis set forth above relating to Section 5 of the 1933 Act and Rule 145

thereunder, it is our view that the Transfers should not be viewed as involving an

exchange of securities, namely the Outstanding NEMLICO Contracts on the Effective

Date, issued by an investment company for any other security of an investment company,

for purposes of ~ection 11 of the 1940 Act. Thus, Commission approval should not be

required under Section 11 of the 1940 Act in connection with the Transfers of the

NEMLICO Accounts pursuant to the Merger.

In the few no-action letters concerning transfers of separate accounts

between unaffiliated insurers, the staff provided assurance that no exemptive order under

Section 11 was required in connection with the transfers.W For the foregoing

32/ In this regard, we note that the NEMLICO Accounts use the same registration

statement form for 1940 Act registration purposes as for 1933 Act registration purposes.

Accordingly, the amendments to their respective 1940 Act registration statements would be

effected by the same filng as would be made under the 1933 Act discussed above under

"Disc1osure Considerations."

ni See the merger and assumption reinsurance no-action letters, cited above, n. 21.

W See Massachusetts Mutual Life Ins. Co. and Phoenix Mutual Life Ins. Co., cited above,

n. 21. See also Allegiance Life Ins. Co., cited above, n. 21 (transfer of separate account

between unaffilated insurers pursuant to an assumption reinsurance transaction).

Susan Nash, Esquire

May 16, 1996

Page 20

reasons, we are of the view that Section 11 is inapplicable to tlle Transfers of the

NEMLICO Accounts pursuant to the Merger, and request assurance that the staff

concurs in our view.

4. Exemptive Orders and No-Action Assurances Previously Granted

Should Bè Continued

It is our view that the exemptive orders granted by the Commission and noaction assurances provided by the staff under the Federal securities laws to NEMLICO,

the NEMLICO Accounts, and any other parties named therein~ should continue to

be applicable to MetLife, the NEMLICO Accounts, and any other parties named therein,

after the Effective Date, to the extent that these exemptive orders and no-action

assurances wil continue to be relied upon, without the rilng with the Commission or its

staff of amended or new applications for the same exemptive orders or no-action

requests for the same assurances.~ The continued applicabilty of these exemptions

and no-action assurances is appropriate because the Merger, practically speaking, will not

change either the structure or operations of the NEMLICO Accounts, nor the

relationship of the NEMLICO Accounts to their depositor or sponsor, or to the

NEMLICO Contractowners. The only resulting change wil be thesuècession of MetLife

to NEMLICO's obligations and liabilties under outstanding NEMLICOContracts.

In particular, it is our view that a new exemptive order should not be

required for MetLife to continue deducting a charge for mortality and expense risks from

the assets of VA Fund i. A charge at an annual rate of up to 0.95% is deducted from

the assets of this separate account. This separate account was established in 1969 and

obtained start-up relief in 1970. The application for start-up relief for this separate

account, consistent with contemporaneous applications for other separate accounts,

sought relief for the safekeeping of the separate account's assets in NEMLICO's vault,

~ See New England Mutual Life Ins. Co., et aI., Inv. Co. Act ReI. No. 16528, Aug. 16, 1988

(Order); New England Mutual Life Ins. Co., et aI., Inv. Co. Act ReI. No. 15796, Sept. 11,

1987 (Order); New England Mutual Life Ins. Co., et aI., Inv. Co. Act ReI. No. 13413, July

29, 1983 (Order); New England Mutual Life Ins. Co., et aI., Inv. Co. Act ReI. No. 12277,

Mar. 5, 1982 (Order); New England Mutual Life Ins. Co. (pub. avaiL. March 13, 1981); New

England Mutual Life Ins. Co., et aI., Inv. Co. Act ReI. No. 8240, Feb. 20, 1974 (Order); New

England Mutual Life Ins. Co., et aL, Inv. Co. Act ReI. No. 8205, Jan. 30, 1974 (Order); and

New England Mutual Life Ins. Co., et aI., Inv. Co. Act ReI. No. 6285, Dec. 11, 1970 (Order).

~ Subsequent to the granting of certain of these orders, the Commission adopted several

exemptive rules which may provide some, but not all, of the relief granted in these orders.

Susan Nash, Esquire

May 16, 1996

Page 21

waivers of sales load charges in certain situations, and NEMLICO's holding of the

proceeds of all payments under the contracts funded by the separate account, but did not

seek explicit relief for the deduction of the mortality and expense risk charge. Indeed, to

our knowledge, explicit exemptive relief for the deduction of a mortality and expense risk

charge from the assets of a variable annuity separate account was not required or

provided for thè first time until 1979.IJ It has been reported that the circumstance

that caused the staff to require explicit exemptive relief in that case was a proposal to

impose a sales load in'the form of a contingent deferred sales charge; such a charge had

not been imposed previously on variable annuity contracts. In this regard, the staffs

primary concern was that the mortality and expense risk charge could be used to finance

expenses not recovered from collected contingent deferred sales

a shortfall in distribution

charges.~

Generally since 1979, insurers have been required to obtain explicit

exemptive relief for the deduction of mortality and expense risk charges. However, we

are not aware that the Commission or its staff has requested any separate account

established before 1979 to obtain explicit exemptive relief for the deduction of any

mortality and

expense risk charge (unless other changes were being made to the separate

or contracts funded by the separate account). Moreover, the

NEMLICO Contracts funded by VA Fund I provide for front-end sales load charges, and

do not impose any contingent deferred sales charges. These contracts, therefore, do not

account operations

present any of the concerns that led the staff to require explicit exemptive relief for

mortality and expense risk charges beginning in 1979. Furthermore, the fact that the

ultimate recipient of the charge wil change, as a matter of corporate identity, because of

viewed as

grounds for requiring MetLife to obtain a new exemptive order to permit the deduction

of the charge. There is no intention to change the amount of the mortality and expense

risk charge deducted from the assets of VA Fund I; indeed the terms of the NEMLICO

Contracts funded by VA Fund I would not allow a unilateral increase in the charge.

the Transfer of VA Fund I to MetLife pursuant to the Merger, should not be

Moreover, under the terms of the order of exemption currently in effect, the Commission

stil retains jurisdiction over the charge.

IJ See Nationwide Life Ins. Co., Inv. Co. Act ReI. Nos. 10557, Jan. 15, 1979 (Notice) and

10590, Feb. 12, 1979 (Order).

'J For a discussion of the history of Commission and staff regulatory policy concerning the

mortality and expense risk charge, see the comment letter submitted by the American

Council of Life Insurance dated June 5, 1987, on reproposed Rule 26a-3 under the 1940 Act

(File No. S7-6-87).

'"

Susan Nash, Esquire

May 16, 1996

In short, in our view, MetLife's succession to NEMLICO will have no

impact upon, or call into question, the, exemptive order& or no-action assurances that

were previously

'1

J

Page 22

granted or provided, or the justifications offered therefor. Accordingly,

we are of the view that MetLife need not apply on its own for the exemptive orders and

no-action assurances on which NEMLICO and the NEMLICO Accounts currently rely

and, in particular, no exemptive order should be required in order for MetLife to

continue deducting, the mortality and expense risk. charge from the assets of VA Fund I

after the Effective pate. We note that our view is supported by substantial no-action

precedent.~ We therefore request assurance that the staff concurs in our view.

B. No-Action Relief With Regard to Redomestication of NEVLICO

It is our view that the Redomestication of NEVLICO should not be viewed

as resulting in the issuance of a new or different security for purposes of Section 5 of the

1933 Act or Rule 145 and therefore that the filing of new registration statements under

the 1933 Act with respect to the NEVLICO Contracts is not necessary. With regard to

to the rule provide that the rule is not intended to cover a

transaction in which a corporation changes its domicile. In view of the notes to Rule 145,

we believe that Rule 145 on its face is inapplicable to the Redomestication.

Rule 145, the notes

Witn' regard to Section 5 generally, we do not believe that the

Redomestication entails the issuance of a new or different security in exchange for

NEVLICO Contracts outstanding at the time the Redomestication is effected. As a

matter of applicable corporate law, NEVLICO wil remain the same corporate entity,

though domiciled in a different state.1Q As described above under "Redomestication

of NEVLICO," under Massachusetts law, the Redomestication wil not affect any

outstanding NEVLICO Contracts. Further, the Redomestication wil not have any effect

on the securities aspects of the outstanding NEVLICO Contracts, since Massachusetts

~ See the merger, change in domicile and assumption reinsurance letters cited above, n.

21.

1Q The redomestication of an insurance company needs to be distinguished from two-part

or three-party corporate reorganizations in which an existing corporation achieves a change

in domicile by merging itself into a newly-formed corporation incorporated in the desired

state. Such reorganizations involve the issuance of new securities by a new issuer in

exchange for outstanding securities of the original issuer, as a matter of corporate law.

Nonetheless, the Commission has adopted rules, such as Rule 414, and the staff has given

no-action assurances that provide relief from 1933 Act registration requirements for most

such reorganizations. See, e.g., the change in domicile no-action letters, cited above, n. 21.

.

.

Susan Nash, Esquire

May 16, 1996

Page 23

and Delaware have substantially similar laws governíng insurance company separate

accounts. Moreover, we believe that the Redomestic::tion would not necessitate the filing

of a new registration statement. As discussed above under "Redomestication of

NEVLICO," the intent of the Massachusetts redomestication law is to ensure that a

redomestication is effected with as few consequences as possible. Indeed, the statute

ordinarily does not require any notice to polk)'holders of the redomestication, or any

changes or even endorsements to outstanding policies.

In view of the reasons discussed in the preceding paragraph, the

Redomestication will not result in the issuance of a new or different secuiity for purposes

of Section 5 of the 1933 Act or Rule 145 and will not affect any outstanùing NEVLICO

Contracts. For the foregoing reasons, we are of the view that Section 5 of the 1933 Act,

and Rule 145 thereunder, are Iiiapplicable to the RedomestIcation, and that no new

registration statements with respect to the NEVLICO Contracts are required to be filed

by NEVLICO to reflect the Redomestication. We therefore request assurance that the

staff concurs in our view.

iv. NO-ACfION REQUEST

Iii summary, we respectfully request that the staff issue a letter stating that

the staff wil not recommend that the Commission take any enforcement' action against

, MetLife or NEMLICO in connection with the Transfers of the NEMLICO Accounts

pursuant to the Merger, wìth respect to Section 5 of the 1933 Act and Rule 145

thereunder, and Sections 8 and 11 of the 1940 Act. In addition, we request that the staff

indicate in its letter that the staff would not recommend that the Commission take any

enforcement action if: (i) the Transfers of the NEMLICO Accounts to MetLife pursuant

to the Merger and MetLife's succession to NEMLICO as depositor and/or sponsor of the

NEMLICO Accounts are reflected in the 1940 Act registration statements for the

NEMLICO Accounts through the fiing of amendments thereto; and (ii) any isecurities

issued in connection with the NEMLICO Contracts after the Effective Date are

registered under new 1933 Act registration statements for the NEMLICO Contracts fied

by MetLife and the NEMLICO Accounts.

Further, we request that the staff indicate in its letter that the exemptive

orders and no-action assurances cited herein obtained by NEMLICO and the NEMLICO

Accounts, to the extent that these exemptive orders and no-action assurances continue to

be relied upon, wil continue to be applicable after the Effective Date, in the manner

described above, to MetLife, the NEMLICO Accounts, and any other parties named

therein, without the fiing with the Commission or the staff of amended or new

applications for the same exemptive orders or no-action requests for the same

a

....

..

Susan Nash, Esquire

May 16, 1996

Page 24

assurances, orfor relief for the deduction of the mortality and expense risk charge from

the assets of VA Fund I after the Effective Date.

Lastly, with respect to NEVLICO, we request that the staff indicate in its

letter that it will not recommend that the Commission take any enforcement action

if

new 1933 Act registration statements for the NEVLICO

against NEVLICO under Section 5 of the 1933 Act, and Rule 145 thereunder,

NEVLICO does not file

Contracts to report a change in its domicile.

If you have any questions or require further information with respect to this

matter, please call me at (202) 383-0158 or my colleague Susan Krawczyk at (202) 383­

0197.

Sincerely,

cc: Marie Swift, Esq.

New England Mutual Life Insurance Company

Kenneth J~ Bialkin, Esq.

Skadden, Ars, Slate, Meagher & Flom

Christopher Nicholas, Esq.

Metropolitan Life Insurance Company

"MAY, \ 7J99:6~

PUBLIC.

Our Reference No. IP-5-96

Metropolitan Life Ins. Co.

REPONSE OF TH OFFCE OF New England Mutual Life Ins: Co.

PRODUCTS New England Varable Life Ins. Co.

INSURCE

DIVISION OF INTMNT MANAGEMENT File Nos. 811-1930. 811-3285. 811-5338

By letter dated May 16, 1996, you seek assurace that the sta of the Division of

Investment Management willnot recommend enforcement action to the Commission agaist

Metropolita Life Insurace Company ("MetLife") or New England Mutual Life Insurace

Company ("NECO") under Section 5 of the Securities Act of 1933, as amended (the '

Company Act

"1933 Act"), and Rule 145 thereunder, or Sections 8 and 11 of the Investment

of 1940, as amended (the "1940 Act"), if cert varable anuity separte accounts of

NEUCO (the "NEICO Accounts") are trasferred to MetLife in connection with the

proposed merger of MetLife andNEUCO (the "Merger"), as described in your letter.

You also request assurance that the staf wil not recommend enforcement action to the

Commission if: (i) the transfers of the NEUCO Accounts to MetLife pursuant to the

Merger and MetLife's succession to NELICO as depositor and/or sponsor of the

NELICO Accounts are reflected in the 1940 Act registration statements for the NELICO

Accounts through the fiing of amendment~ thereto; and (ii) any securities issued in

connection with the variable annuity contracts funded by the NEMLICO Accounts (the

"NEMLICO Contracts") after the effective date of the Merger are registered under new 1933

Act registration statements for the NEUCO Contracts fied by MetLife and the NEUCO

Accounts.

You further request assurance that the staff wil not recommend enforcement action to

the Commission against MetLife or NEUCO if, after consummation of the Merger,

MetLife continues to rely on the exemptive orders and no-action assurances cited in your

letter and obtained on behalf of NELICO, the NELICO Accounts, and any other parties

named therein, without the filing with the Commission or its staff of amended or new

applications for the same exemptive orders or no-action requests for the same assurances, or

for relief for the deduction of the mortlity and expense risk charge from the assets of the

New England Variable Annuity Fund i.

You also request assurance that the staff wil not recommend enforcement action to

the Commission against New England Variable Life Insurance Company ("NEVUCO")

under Section 5 of the 1933 Act or Rule 145 thereunder if NEVUCO, which'wil become a

changes its state of

wholly-owned subsidiary of MetLife upon consummation of the Merger,

domicile from Delaware to Massachusetts and does not fie new registration statements for its

variable annuity contracts and variable life insurance policies to report the change in its state

of domicile.

You state that MetLife and NECO are mutual

lie insurance companies that issue

variable annuity contracts and variable life insurance policies through separate 'accounts

organized either as unit investment trusts or management investment companies that are

registered as investment companies under the 1940 Act. Interests in the variable annuity

contracts and variable life insurance policies are registered as securities under the i 933 Act.

In your letter, you explai that MetLife and NEUCOhave entered into an agreement and

plan of merger (the "Merger Agreement"), pursuant to which NECO wil be merged into

MetLife, with MetLife as the surviving entity. You state that the varous separte accounts

pares to the Merger Agreement, which was entered into

of MetLife and NECO are not

at the lie insurance company leveL.

You also state that the Merger Agreement provides that NEVUCO wil become a

wholly-owned subsidiar of MetLife upon consummation of the Merger. You further state

that MetLife and NEUCO anticipate that, in connection with the Merger approval process,

NEVLICO may tae ,appropriate corporate action to' change its state of domicile from

Delaware to Massachusetts.

Based on the facts

and representations in your letter, and without necessary agreeing

to the Commission

with your legal analysis, we would not recommend enforcement action

against MetLife or NEUCO under Section 5 of the 1933 Act and Rule 145 thereunder or

Sections 8 and 11 of the 1940 Act if the NELICO Accounts are transferred to MetLife in

connection with the proposed Merger. 1/ In addition, we would not recommend

1/ We note that your letter does not seek no-action assurance under Section 17(a) or

17(d) of the 1940 Act with respect to the transfer of the NELICO Accounts in

connection with the Merger. On a number of previous occasions, the staff has been

asked to provide no-action assurances (which it has granted) under Sections 17(a) and

17(d) in situations when insurance companies merged and transferred separate

accounts in connection with the merger. See,~, Intramerica Life Ins. Co. (pub.

avaiL. Oct. 29, 1992); California-Western States Life Ins. Co. (pub. avail. Dec. 9,

1991); UN Life Ins. Co. (pub. avaiL. Oct. 24, 1991); Lincoln National Pension

Ins. Co. (pub. avaiL. Dec. 29, 1988); and American General Life Ins. Co. of

Delaware (pub. avaiL. Mar. 13, 1986).

The staff believes that neither Section 17(a) nor Section 17(d) of the 1940 Act is

applicable in the case of a transaction, lie the present one, when (1) two insurance

companies, whether or not affilated, merge and a separate account is transferred from

the merged company to the surviving company; (2) the trasferred 'separte account is

not a party to the merger and does not purchase or sell any security or other property

in connection with the transaction; (3) the assets of the transferred separate account

are not combined with those of any other separate account or other entity in

connection with the transaction; (4) the transferred separate account remains intact

after the transaction, as a segregated pool of assets; (5) the transaction does not result

in any expenditure or receipt of funds by the transferred separte accôunt or in the

sharig by the trasferred separte account in the profits or losses of any venture with

any other person; and (6) the merging insurance companies bear all expenses relating

to the transaction. The staff does not intend to issue further no-action letters in this

area absent novel facts and circumstances.

2

)

enforcement action to the Commission if: (i) the transfers of the NEUCO Accounts to

depositor and/or

MetLife pursuant to the Merger and MetLife's succession to NEUCO as

sponsor of the NEUCO Accounts are reflected in the 1940 Act registration statements for

the NEUCO Accounts through the filg of amendments thereto; and (ü) any securities

issued in connection with the NECO Contracts afer the effective date of the Merger are

registered under new 1933 Act registrtion statements for the NECO Contracts fied by

MetLife and the NECO Accounts. .

We also would not recommend enforcement action to the Commission agaist MetLife

or NECO if, af~r consummation of the Merger, MetLife continues to rely on the

exemptive orders and no-action assuraces cited in your letter and obtained on behal of

NEUCO, the NECO Accounts, and any other paries named therein, without the filg

with the Commission or its staff of amended or new applications for the same exemptive

orders or no-action requests for the same assurances, or for relief for the deduction of the

mortlity and expense risk charge from the assets of the New England Variable Annuity

Fund i.

Our position is based particularly on your representations that: (1) the succession of

MetLife to NELICO's obligations and liabilties under the NELICO Contracts as a result

of the Merger wil not result in the offer or sale of any new or different security or the

creation of a new or different investment company issuer issuing a new security, in exchange

for a NELICO Contract; (2) MetLife and the NELICO Accounts wil fie an amendment

to the existing registration statements of theNELICO Accounts under the 1940 Act to

of the NELICO Accounts from

NELICO to MetLife; (3) MetLife and the NELICO Accounts wil fie new registration

statements under the 1933 Act for the NELICO Contracts to reflect the transfer of

contractual obligations and liabilties from NELICO to MetLife, which wil become

effective on the effective date of the Merger; and (4) the owners of NELICO Contracts

wil receive a prospectus that reflects MetLife's sponsorship of the transferred NELICO

Accounts, but which retains the historical financial information of the NEUCO Accounts.

reflect the change in legal ownership of the assets

Furthermore, we would not recommend enforcement action to the Commission against

NEVLICO under Section 5 of the 1933 Act or Rule 145 thereunder if NEVLICO changes its

state of domicile from Delaware to Massachusetts and does not fie new registration

statements for its variable annuity contracts and variable lie insurance policies to report the

change in domicile. We base our position upon your representations that: (1) there wil be

no change in the corporate entity of NEVUCO, as a matter of state law, resulting from the

redomestication; (2) NEVUCO wil effect its change in domicile in compliance with

applicable state law, and NEVUCO wil obtain the approvals of the Massachusetts and

Delaware insurance commissioners for its change in domicile; (3) all outstanding policies of

NEVUCO wil remain in full force and effect upon the change in domicile, and the change

in domicile wil not result in any changes to outstanding NEVUCO Contracts; and (4) upon

the consummation of the change in domicile, NEVLICO wil disclose the change in domicile

in a manner that complies with the 1933 Act.

3

, ~::

on the facts and representations in. your letter, you

should note that different facts or representations may require a diferent conclusion.

'Further, this response expresses the Division's position on enforcement actiOn only, and does

not puiport, to express any legal conclusions on the issues presented.

Because our position is based

llO:9-'

Attorney

,\

,~

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