Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices 62901

mailing that the individual or

organization for whom the mailing was

made has submitted a check for

nonsufficient funds. New routine use

No. 8 permits such disclosure.

The proposed routine use is

compatible with the purpose for

collecting the information, that is,

facilitating debt collection and

preventing the future acceptance of bad

checks from repeat offenders. Because

the disclosures allowed by this routine

use will enable the Postal Service to

protect itself from bad-check writers, the

routine use is clearly compatible with

the purpose of USPS Privacy Act system

050.005.

The categories of individuals segment

of the system notice formerly included

the language ‘‘customers whose checks

are returned by the bank.’’ That

language, intended to cover records that

include existing local lists of such

customers, was removed in an

administrative error. This notice

restores the language.

All records within USPS Privacy Act

system 050.005 continue to be kept in

a secured environment, with automated

data processing (ADP) physical and

administrative security and technical

software applied to data on computer

media. Paper records are kept in a

secured area of the post office and are

made available internally on an official

need-to-know basis. Contractors who

maintain data collected by USPS

Privacy Act system 050.005 are subject

to subsection (m) of the Privacy Act and

are required to apply appropriate

protections subject to the audit and

inspection of the Postal Inspection

Service.

Pursuant to 5 U.S.C. 552a(e)(11),

interested persons are invited to submit

written data, views, or arguments on

this proposal. A report of the proposed

system has been sent to Congress and to

the Office of Management and Budget

for their evaluation.

USPS Privacy Act system 050.005 was

last published in its entirety in the

Federal Register on October 26, 1989

(54 FR 43666–43667) and was amended

in the Federal Register on December 22,

1994 (59 FR 66061–66062). The Postal

Service proposes amending USPS

Privacy Act system 050.005 as shown

below.

USPS 050.005

SYSTEM NAME:

Finance Records—Accounts

Receivable Files, 050.005.

* * * * *

CATEGORIES OF INDIVIDUALS COVERED BY THE

SYSTEM:

[CHANGE TO READ] Postal Service

debtors such as the following:

Contractors who fail either to provide

equipment, supplies, or services to the

Postal Service as agreed or to purchase

property from the Postal Service as

agreed; customers who have written

checks returned by the bank; payees of

money orders who make an erroneous

payment, improper payment, or

overpayment; employees or former

employees who make an erroneous

payment, improper payment, or

overpayment; employees, former

employees, or private parties who lose

or damage Postal Service property

through carelessness, negligence, or

malice.

* * * * *

ROUTINE USES OF RECORDS MAINTAINED IN THE

SYSTEM, INCLUDING CATEGORIES OF USERS AND

THE PURPOSES OF SUCH USES:

[CHANGE TO READ] Routine use

statements a, b, c, d, e, f, g, h, j, k, l, and

m listed in the prefatory statement at the

beginning of the Postal Service’s

published system notices apply to this

system. Other routine uses are as

follows:

* * * * *

[ADD THE FOLLOWING]

8. Disclosure of information about

postal customers who write

nonsufficient funds checks for postal

services may be made to the permit

holder or presenter of a mailing being

made on the customer’s behalf.

Disclosure is limited to the identity of

the customer, the date of the mailing,

and the date and amount of the check.

Stanley F. Mires,

Chief Counsel, Legislative.

[FR Doc. 95–29756 Filed 12–6–95; 8:45 am]

BILLING CODE 7710–12–P

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC—21560; File No. 812–9660]

Connecticut General Life Insurance

Company, et al.

November 30, 1995.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’) or ‘‘Commission’’).

ACTION: Notice of application for an

order under the Investment Company

Act of 1940 (the ‘‘1940 Act’’).

APPLICANTS: Connecticut General Life

Insurance Company (‘‘CG Life’’), CG

Variable Life Insurance Separate

Account A (‘‘Separate Account’’), and

CIGNA Financial Advisors, Inc.

(‘‘CFA’’).

RELEVANT 1940 ACT SECTIONS: Order

requested under Section 6(c) of the 1940

Act granting exemptions from Section

27(c)(2) of the 1940 Act and Rule 6e–

3(T)(c)(4) thereunder.

SUMMARY OF APPLICATION: Applicants

request an order permitting the Separate

Account and any separate accounts

established in the future by CG Life to

support certain group variable universal

life insurance contracts to deduct from

premium payments received an amount

that is reasonably related to the

increased federal tax burden of CG Life

resulting from the application of Section

848 of the Internal Revenue Code of

1986, as amended.

FILING DATE: The application was filed

on July 12, 1995. An amended and

restated application was filed on

October 13, 1995.

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 on this application by writing

to the Secretary of the Commission and

serving Applicants with a copy of the

request, personally or by mail. Hearing

requests must be received by the

Commission by 5:30 p.m. on December

26, 1995, and should be accompanied

by proof of service on Applicants in the

form of an affidavit or, for lawyers, by

certificate. Hearing requests should state

the nature of the 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, SEC, 450 Fifth

Street, N.W., Washington, DC 20549.

Applicants, c/o Michael Berenson, Esq.,

Jorden Burt Berenson & Johnson LLP,

1025 Thomas Jefferson Street, N.W.,

Suite 400 East, Washington, DC 20007–

0805.

FOR FURTHER INFORMATION CONTACT:

Barbara J. Whisler, Senior Counsel, or

Patrice M. Pitts, Special Counsel, Office

of Insurance Products (Division of

Investment Management) at (202) 272–

0670.

SUPPLEMENTARY INFORMATION: Following

is a summary of the application. The

complete application is available for a

fee from the Public Reference Branch of

the Commission.

Applicants’ Representations

1. CG Life, a stock life insurance

company organized in Connecticut, is

an indirect wholly-owned subsidiary of

CIGNA Corporation (‘‘CIGNA’’).

2. The Separate Account was

established by CG Life under the laws

of the state of Connecticut, and is

registered as a unit investment trust
62902 Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices

1 In determining the after tax rate of return used

in arriving at this discount rate, CG Life considered

a number of factors including: the cost of capital

incurred by its parent, CIGNA; market interest rates;

inflation; and the market’s perception of how well

CIGNA is doing.

As of December 31, 1994, 81% of the capital of

CIGNA consisted of equity, with the remainder

long-term debt. CIGNA’s cost of capital can be

determined using the proportions of financing

components (i.e., debt and equity) to calculate a

weighted average cost of capital. As of August 1995,

the average current yield to maturity of CIGNA’s

outstanding long-term debt issues was 7.67 percent.

Using a corporate tax rate of 35 percent, the after

tax cost of debt for CG Life is 4.98 percent. An

estimate for the cost of equity capital for CIGNA—

computed by using the Capital Asset Pricing

Model—is 15.8 percent. Using these component

costs of capital and their related proportions, the

weighted average cost of capital for CIGNA is 13.7%

(i.e., [(0.19 × 0.0498) + (0.81 × 0.158]).

The remaining factors (e.g., itnerest rates,

inflation, and the market’s perception of how well

CIGNA is doing) are unpredictable and can

fluctuate widely over long periods of time, causing

the cost of capital to vary at any given time. Taking

these factors into account, as well as the analysis

above, CG Life has concluded that the 15% cost of

capital is appropriate and reasonable to use in

calculating the tax burden charge.

under the 1940 Act. The assets of the

Separate Account are owned by CG Life,

but are held separately from the other

assets of CG Life and are not chargeable

with liabilities incurred in any other

business operation of CG Life. The

income, capital gains and capital losses

incurred on the assets of the Separate

Account are credited to or charged

against the assets of the Separate

Account, without regard to the income,

capital gains or capital losses arising out

of any other business CG Life may

conduct.

3. The Separate Account consists of a

number of subaccounts, each of which

invests exclusively in the shares of one

of seven investment portfolios of four

investment companies (the ‘‘Funds’’)

registered under the 1940 Act. The

number and identity of available Funds

and investment portfolios may change

from time to time.

4. In the future, the Board of Directors

of CG Life may establish additional

separate accounts (the ‘‘Future

Accounts’’) which may serve as funding

vehicles for group variable universal life

insurance contracts issued by CG Life.

The Future Accounts will be organized

as unit investment trusts and will file

registration statements under the

Securities Act of 1933 and under the

1940 Act.

5. CFA will serve as the distributor

and principal underwriter of certain

group variable universal life insurance

contracts (the ‘‘Contracts’’) and any

group variable universal life insurance

contracts made available in the future

(the ‘‘Future Contracts’’) through the

Separate Account or Future Accounts.

CFA is a wholly-owned subsidiary of

CG Life. CFA is registered under the

Securities Exchange Act of 1934 as a

broker-dealer, and under the Investment

Advisers Act of 1940 as an investment

adviser. CFA is a member of the

National Association of Securities

Dealers.

6. In the Omnibus Budget

Reconciliation Act of 1990, Congress

amended the Internal Revenue Code of

1986 (the ‘‘Code’’) by, among other

things, enacting Section 848 thereof.

Section 848 changed the federal income

taxation of life insurance companies by

requiring them to capitalize and

amortize over a period of ten years part

of their general expenses for the current

year. Under prior law, these expenses

were deductible in full from the current

year’s gross income.

7. The amount of expenses that must

be capitalized and amortized under

Section 848 generally is determined

with reference to premiums for certain

categories of life insurance and other

contracts (‘‘specified contracts’’). More

specifically, an amount of expenses

equal to a percentage of the current

year’s net premiums (i.e., gross

premiums minus return premiums and

reinsurance premiums) must be

capitalized and amortized for each

specified contract. The percentage

varies, depending on the type of

specified contract in question, in

accordance with a schedule set forth in

Section 848.

8. The effect of Section 858 is to

accelerate the realization of income

from insurance contracts covered by

that Section and, accordingly, the

payment of taxes on the income

generated by those contracts.

9. The Contracts and any Future

Contracts to which a charge for the

federal tax burden related to deferred

acquisition costs (the ‘‘tax burden

charge’’) will be applied are/will be

among the specified contracts. They

fall/will fall into the category of life

insurance contracts under Section 848

for which 2.05% of the net premiums

received must be capitalized and

amortized.

10. The increased tax burden resulting

from the application of Section 848 may

be quantified as follows. For each

$10,000 of net premiums received by CG

Life under the Contracts in a given year,

CG Life may capitalize $2.05 (i.e., 205%

of $10,000). $10.25 of that $205 may be

deducted in the current year, leaving

$194.75 (i.e., $205 minus $10.25)

subject to taxation at the corporate tax

rate of 35 percent. This works out to an

increase in tax for the current year of

$68.16 (i.e., 0.35 x $194.75) This

increased federal income tax burden

will be partially offset by deductions

allowed during the next ten years as a

result of amortizing the remainder of the

$205—$20.50 in each of the following

nine years, and $10.25 in year ten.

11. To the extent the capital must be

used by CG Life to satisfy its increased

tax burden under Section 848, such

profits are not available to CG Life for

investment. CG Life submits that the

cost of capital used to satisfy its

increased federal income tax burden

under Section 848 is, in essence, its

after tax rate of return on capital.

Because CG Life seeks an after tax rate

of return of 15% on its invested capital,1

CG Life submits that a discount rate of

15% is appropriate for use in

calculating the present value of its

future tax deductions resulting from the

amortization described above.

12. Using a corporate tax rate of 35

percent, and assuming a discount rate of

15 percent, the present value of the

federal income tax effect of the

increased deductions allowable in the

following ten years is $35.12. Because

this amount partially offsets the

increased tax burden, Section 848

imposes an increased tax burden on CG

Life equal to a present value of $33.04

(i.e., $68.16 minus $35.12) for each

$10,000 of net premiums received under

the Contracts.

13 CG Life does not incur incremental

federal income tax when it passes on

state premium taxes to contract owners

because state premium taxes are

deductible when computing federal

income taxes. In contrast, federal

income taxes are not tax-deductible

when computing an insurer’s federal

income taxes. Therefore, to offset fully

the impact of Section 848, CG Life must

impose an additional charge that would

make it whole not only for the $33.04

additional federal income tax burden

attributable to section 848, but also for

the tax on the additional $33.04 itself.

This additional charge can be computed

by dividing $33.04 by the complement

of the 35% federal corporate income tax

rate (i.e., 65%), resulting in an

additional charge of $50.83 for each

$10,000 of net premiums, or 0.51% of

net premiums.

14. Based on its prior experience, CG

Life expects that all of its current and

future deductions will be fully taken.

CG Life submits that a charge of 0.5%

of net premium payments would

reimburse it for the impact of Section

848 (as currently written) on its federal

tax liabilities. CG Life represents that a

0.5% charge is reasonably related to its

increased tax burden under Section 848,

taking into account the benefit to CG

Life of the amortization permitted by
Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices 62903

Section 848 and the use by CG Life of

a discount rate of 15% (which is

equivalent to its cost of capital) in

computing the future deductions

resulting from such amortization.

15. CG Life asserts that it may choose

to increase the 0.5% charge if future

changes in, or interpretations of, Section

848 or any successor or related

provisions result in a further increased

tax burden resulting from the receipt of

premiums. Such an increase could

result from, among other things, a

change in the federal corporate income

tax rate, a change in the 2.05% figure,

or a change in the amortization period.

Applicants’ Legal Analysis

1. Section 6(c) of the 1940 Act

provides, in pertinent part, that the

Commission, by order upon application,

may exempt any person, security or

transaction (or any class or classes of

persons, securities or transactions) from

provisions of the 1940 Act or any rules

thereunder, if and to the extent that the

exemption is necessary or appropriate

in the public interest and consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

2. Applicants request an order of the

Commission pursuant to Section 6(c)

exempting them from the provisions of

section 27(c)(2) of the 1940 Act and

Rule 6e–3(T)(c)(4)(v) thereunder to

permit Applicants to deduct form

premium pavements received in

connection with the Contracts and

Future Contracts an amount that is

reasonable in relation to CG Life’s

increased federal income tax burden

related to the receipt of such premiums.

Applicants further request an exemption

from Rule 6e–3(T)(c)(4)(v) of the 1940

Act to permit the proposed deductions

to be treated as other than ‘‘sale load’’

for the purposes of Section 27 of th3

1940 Act and the exemptions from

various provisions of that Section found

in Rule 6e–3(T)(b)(13).

3. Section 27(c)(2) of the 1940 Act

prohibits the sale of periodic payment

plan certificates unless the proceeds of

all payments (except such amounts as

are deducted for sales load) are held

under an indenture or agreement

containing in substance the provisions

required by Sections 26(a)(2) and

26(a)(3) of the 1940 Act. Sections

27(a)(1) and 27(h)(1), in effect, limit

sales load on periodic payment plan

certificates to 9% of total payments.

4. Certain provisions of Rule 6e–3(T)

provide a range of exemptive relief for

the offering of flexible premium variable

life insurance policies such as the

Contracts and any Future Contracts. For

example, subject to certain conditions,

Rule 6e–3(T)(b)(13)(iii) provides

exemptions from Section 27(c)(2) that

include permitting the payment of

certain administrative fees and

expenses, the deduction of a charge for

certain mortality and expense risks, and

the ‘‘deduction of premium taxes

imposed by any state or other

governmental entity.’’

5. Rule 6e–(T)(c)(4)(v) defines ‘‘sales

load’’ charged during a contract period

as the excess of any payment made

during the period over the sum of

certain specified charges and

adjustments, including ‘‘[a] deduction

for and approximately equal to state

premium taxes.’’ Applicants submit that

the proposed tax burden charge is akin

to a state premium tax charge in that it

is an appropriate charge related to CG

Life’s federal tax burden attributable to

premiums received under the Contracts

and any Future Contracts.

6. Applicants represent that the

requested exemptions from Rule 6e–

3(T)(c)(4)(v) are necessary in connection

with Applicants’ reliance on certain

provisions of Rule 6e–(T)(b)(13),

particularly on subparagraph (b)(13)(i),

which provides exemptions from

Sections 27(a)(1) and 27(h)(1) of the

1940 Act. Issuers and their affiliates

may rely on Rule 6e–3(T)(b)(13)(i) if

they meet the Rule’s alternative

limitations on ‘‘sales load,’’ as defined

in Rule 6e–3(T)(c)(4). Depending on the

load structure of a particular contract,

these alternative limitations may not be

met if the deduction for the increase in

an issuer’s federal tax burden is

included in sales load. Applicants

acknowledge that a deduction for an

insurance company’s increased federal

tax burden does not fall squarely within

any of the specified charges or

adjustments which are excluded from

the definition of ‘‘sales load’’ in Rule

6e–3(T)(c)(4). Nevertheless, Applicants

submit that there is no public policy

reason for treating such increased

federal tax burden as ‘‘sales load.’’

7. Applicants assert that the public

policy which underlies Rule 6e–

3(T)(b)(13)(i), like that which underlies

Sections 27(a)(1) and 27(h)(1), is to

prevent excessive sales loads from being

charged in connection with the sale of

periodic payment plan certificates.

Applicants submit that the treatment of

a federal income tax charge attributable

to premium payments a sales load

would in no way further this legislative

purpose because such a deduction has

no relation to the payment of sales

commissions or other distribution

expenses. Applicants assert that the

Commission has concurred in this

conclusion by excluding deductions for

state premium taxes from the Rule 6e–

3(T)(c)(4) definition of ‘‘sales load.’’

8. Applicants assert that the genesis of

Rule 6e–3(T)(c)(4) supports this

analysis. In this regard, Applicants note

that Section 2(a)(35) of the 1940 Act

provides a scale against which the

percent limits of Sections 27(a)(1) and

27(h)(1) thereof may be measured.

Applicants submit that the

Commission’s intent in adopting Rule

6e–3(T)(c)(4) was to tailor the general

terms of Section 2(a)(35) of the 1940 Act

to variable life insurance contracts in

order, among other things, to facilitate

verification by the Commission of

compliance with the sales load limits

set forth in Rule 6e–3(T)(b)(13)(i).

Applicants submit that Rule 6e–

3(T)(c)(4) does not depart, in principal,

from Section 2(a)(35).

9. Applicants assert that the language

of Section 2(a)(35) suggests that the only

charges or deductions intended to fall

within the definition of ‘‘sales load’’ are

those that are ‘‘properly chargeable to

sales or promotional activities.’’ Because

the proposed tax burden charge will be

used to pay costs attributable to CG

Life’s federal tax liabilities, and such

costs are not properly chargeable to

sales or promotional activities,

Applicants submit that not treating the

proposed tax burden charge as sales

load is consistent with the purposes

intended by the policies of the 1940 Act.

10. Applicants further assert that

Section 2(a)(35) excludes from the

definition of ‘‘sales load’’ under the

1940 Act deductions from premiums for

‘‘issue taxes.’’ Applicants submit that

the exclusion of charges for expenses

attributable to federal taxes from sales

load (as defined in Section 2(a)(35)) is

consistent with the policies of the 1940

Act. By extension, Applicants submit, it

is equally consistent to exclude such

charges, including the proposed tax

burden charge, from the definition of

‘‘sales load’’ in Rule 6e–3(T)(c)(4).

11. For these reasons, Applicants

assert that deducting a charge from

variable life insurance contract

premium payments for an insurer’s tax

burdens attributable to its receipt of

such payments, and excluding that

charge from sales load, is consistent

with the policies of the 1940 Act.

Applicants submit that this is because

such a deduction is an appropriate

charge related to the insurer’s tax

burden attributable to the premium

payments received.

12. Applicants seek the relief

requested with respect to Contracts and

Future Contracts which may be issued

by CG Life. Without the requested relief,

CG Life would have to request and

obtain exemptive relief for each Future
62904 Federal Register / Vol. 60, No. 235 / Thursday, December 7, 1995 / Notices

1The Trust was established in November 1986 to

function as the underlying investment medium for

the separate account of an otherwise unaffiliated

insurance company and subsequently of a separate

account of an affiliate of that insurance company.

Those two separate accounts, together with the

Account, are the only separate accounts invested in

the Trust. The unaffiliated insurance company

separate accounts hold shares in all the Portfolios

of the Trust except the BP, Fixed Income and

Aggressive Growth Portfolios.

Contract to be issued. Such additional

requests for exemptive relief would

present no issues under the 1940 Act

not already addressed in this request for

exemptive relief.

13. Applicants assert that the

standards of Section 6(c) of the 1940 Act

are satisfied because the requested relief

is appropriate in the public interest and

consistent with the purposes of the 1940

Act and the protection of investors.

Applicants submit that the requested

relief would promote competitiveness in

the variable life insurance market by

eliminating the need for CG Life to file

redundant exemptive applications,

thereby reducing its administrative

expenses and maximizing efficient use

of its resources. Applicants further

submit that the delay and expense

involved in having to seek exemptive

relief repeatedly would impair the

ability of CG Life to take full advantage

of business opportunities as they arise.

Moreover, if CG Life were required to

seek exemptive relief repeatedly with

respect to the issues addressed in this

application, investors would not receive

any benefit or additional protection

thereby, and might be disadvantaged as

a result of increased overhead expenses

for CG Life.

Conditions for Relief

Applicants agree to comply with the

following conditions for relief.

1. CG Life will monitor the tax burden

imposed on it, and undertakes to reduce the

tax burden charge to the extent of any

significant decrease in tax burden.

2. The registration statement for any

Contracts and Future Contracts under which

a tax burden charge is deducted will: (i)

disclose the charge; (ii) explain the purpose

of the charge; and (iii) state that the charge

is reasonable in relation to CG Life’s increase

federal income tax burden under Section 848

of the Code resulting from the receipt of

premiums.

3. The registration statement for any

Contracts and Future Contracts under which

a tax burden charge is deducted will contain

as an exhibit an actuarial opinion as to: (i)

the reasonableness of the charge in relation

to CG Life’s increased federal income tax

burden under Section 848 resulting from the

receipt of premiums; (ii) the reasonableness

of the after tax rate of return used in

calculating such charge, and the relationship

of that charge to CG Life’s cost of capital; and

(iii) the appropriateness of the factors taken

into account by CG Life in determining the

after tax rate of return.

Conclusion

For the reasons and upon the facts set

forth above, Applicants submit that the

requested exemptions from Section

27(c)(2) of the 1940 Act and Rule 6e–

3(T)(c)(4)(v) thereunder—to permit the

deduction of 0.5% of premium

payments under the Contracts and any

Future Contracts—would be appropriate

in the public interest and consistent

with the protection of investors and the

purposes fairly intended by the policy

and provisions of the 1940 Act.

For the Commission, by the Division of

Investment Management, by delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 95–29830 Filed 12–6–95; 8:45 am]

BILLING CODE 8010–01–M

[Rel. No. IC–21559; File No. 812–9706]

PaineWebber Life Insurance Company,

et al.

November 30, 1995.

AGENCY: Securities and Exchange

Commission (the ‘‘SEC’’ or the

‘‘Commission’’).

ACTION: Notice of application for an

order under the Investment Company

Act of 1940 (the ‘‘1940 Act’’).

APPLICANTS: PaineWebber Life Insurance

Company (‘‘PaineWebber Life’’), and

PaineWebber Variable Annuity Account

(the ‘‘Account’’).

RELEVANT 1940 ACT SECTIONS: Approval

requested under Section 26(b) of the

1940 Act.

SUMMARY OF APPLICATION: Applicants

seek an order pursuant to Section 26(b)

of the 1940 Act approving the

substitution of shares of the Balanced

Portfolio (‘‘BP’’) of the PaineWebber

Series Trust (‘‘Trust’’) for the shares of

the Asset Allocation Portfolio (‘‘AAP’’)

of the Trust.

FILING DATE: The application was filed

on August 4, 1995.

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 on this application by writing

to the Secretary of the SEC and serving

Applicants with a copy of the request,

personally or by mail. Hearing requests

must be received by the Commission by

5:30 p.m. on December 26, 1995 and

should be accompanied by proof of

service on Applicants in the form of an

affidavit or, for lawyers, a certificate of

service. Hearing requests should state

the nature of the interest, the reason for

the request, and the issues contested.

Persons may request notification of a

hearing by writing to the Secretary of

the SEC.

ADDRESSES: Secretary, Securities and

Exchange Commission, 450 Fifth Street,

N.W., Washington, D.C. 20549.

Applicants, Mr. Richard J. Tucker,

PaineWebber Life Insurance Company,

1200 Harbor Boulevard, Weehawken,

New Jersey 07087.

FOR FURTHER INFORMATION CONTACT:

Joseph G. Mari, Senior Special Counsel,

or Wendy Friedlander, Deputy Chief,

both at (202) 942–0670, Office of

Insurance Products, Division of

Investment Management.

SUPPLEMENTARY INFORMATION: Following

is a summary of the application. The

complete application is available for a

fee from the Commission’s Public

Reference Branch.

Applicants’ Representations

1. PaineWebber Life is a stock life

insurance company organized under

California law in 1956. PaineWebber

Holdings, Inc., a wholly-owned

subsidiary of PaineWebber Group, Inc.,

owns 100 percent of the stock of

PaineWebber Life. The Account,

established by PaineWebber Life to fund

variable annuity contracts (‘‘Contracts’’)

on December 31, 1992, pursuant to

California law, is registered with the

Commission as a unit investment trust.

The assets of the Account are divided

among ten investment divisions

(‘‘Divisions’’), each of which invests in

shares of one of the ten designated

portfolios of the Trust, including the BP

and AAP, each with its own investment

objectives and investment portfolio. The

Trust is an open-end diversified

management investment company

registered under the 1940 Act.1 Mitchell

Hutchins Asset Management, Inc.

(‘‘Mitchell Hutchins’’), a registered

investment adviser under the

Investment Advisers Act of 1940, is the

investment adviser and administrator

for the Trust.

2. PaineWebber Incorporated (‘‘PWI’’),

a wholly-owned subsidiary of

PaineWebber Group, Inc., a brokerdealer registered under the Securities

Exchange Act of 1934 and a member of

the National Association of Securities

Dealers, Inc., acts as principal

underwriter for the Contracts.

3. The BP seeks total return while

preserving capital by investing in equity

securities and by investing no less than

25% of its assets in fixed income

securities. The BP pays its investment

adviser an annual fee of .75% of average

daily net assets. The total assets of the