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WASHINGTON, Oct. 22The Securities and Change Fee issued the next no-action letter on Oct. 21, 2022:

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To: Stephen E. Roth, Eversheds Sutherland (US) LLP

Electronic mail: [email protected]

Re: Everlake Life Insurance coverage Firm

By letter dated October 20, 2022, you request permission underneath Regulation S-X Sec.3-13 (“Rule 3-13”) for Everlake Life Insurance coverage Firm (“ELIC”) to file audited monetary statements ready in accordance with statutory accounting ideas/1 (“SAP”), instead of monetary statements ready in accordance with accounting ideas typically accepted in the USA of America (“GAAP”), in registration statements on Type S-1 filed sooner or later for sure contracts in satisfaction of the monetary info required by Type S-1, together with the necessities of Gadgets 11(e), 11(g), and 16(b) of Type S-1, as described in your letter. These contracts (collectively, the “Contracts”) are deferred annuity contracts with market worth adjustment options and deferred listed linked annuity contracts.

Background

ELIC

You state that ELIC is a inventory life insurance coverage firm, domiciled within the State of Illinois, that’s topic to regulation by the Illinois Division of Insurance coverage. You additionally state that ELIC is a direct wholly-owned subsidiary of Everlake US Holdings Firm, a holding firm integrated within the state of Delaware, which is, in flip, a direct wholly owned subsidiary of Everlake US Mother or father Firm, a holding firm additionally integrated within the state of Delaware, which in flip is a direct wholly owned subsidiary of Everlake Holdings, LP, a Cayman Islands restricted partnership, whose common accomplice is Blackstone ISG Funding Companions – A Administration Associates (Cayman) – NQ L.P., a Cayman Islands exempted restricted partnership (“BISG Administration Associates“). You additional state that BISG Administration Associates is an oblique subsidiary of Blackstone Inc., a Delaware company, which is a publicly traded firm listed on the New York Inventory Change (“Blackstone”).

You state that ELIC prepares SAP monetary statements which are audited by an impartial auditor and filed with the Illinois Division of Insurance coverage and with the Nationwide Affiliation of Insurance coverage Commissioners (“NAIC”), and that ELIC manages its enterprise on the premise of SAP monetary statements. You additionally state that ELIC at the moment prepares GAAP monetary statements in reference to the Contracts which are registered on Type S-1, however doesn’t put together full entity stage GAAP monetary statements, a GAAP reporting bundle or partial GAAP monetary statements for another function./2

You state that ELIC depends upon the exemption, supplied by rule 12h-7 underneath the Securities Change Act of 1934 (“Change Act”), from submitting periodic studies required by the Change Act and can depend on this exemption and adjust to the situations of the rule as long as ELIC depends on the requested permission./3 On this regard, you be aware that: (1) ELIC is topic to supervision by the Illinois Division of Insurance coverage; and (2) ELIC recordsdata annual statements of its monetary situation with, and is supervised and its monetary situation is periodically examined by, the Illinois Division of Insurance coverage./4

The Contracts

You state that the Contracts are deferred annuity contracts with market worth adjustment options (“MVA Contracts”) or deferred annuity contracts with index linked crediting options (“RILA Contracts”):

MVA Contracts. You state that the MVA Contracts are both standalone single or versatile premium annuity contracts that supply fastened price funding choices with market worth adjustment options, or are mixture contracts that supply fastened price funding choices with MVA options in addition to variable funding choices. You additional state that the fastened price funding choices within the Contracts, which ELIC has registered on Type S-1, assure an curiosity fee at a specified fastened price larger than or equal to 0% for a specified time period interval. You additionally state that withdrawals from or transfers out of a hard and fast price funding possibility earlier than the top of the desired time period are topic to a optimistic or damaging market worth adjustment that’s calculated based on a system prescribed by the Contracts.

RILA Contracts. You state that the RILA Contracts, which ELIC additionally has registered on Type S-1, are single premium deferred listed linked annuity contracts. You additional state that throughout the accumulation part of the RILA Contracts, Contract homeowners choose an funding possibility interval for his or her Contract and will choose amongst a set of curiosity crediting methods which are every linked to a market index or benchmark. You additionally state that the Contract makes use of the motion of the index as the premise to calculate the efficiency of every funding possibility, however efficiency is topic to specified minimal efficiency charges and most efficiency charges outlined within the Contract that rely upon the funding possibility(s) chosen.

You state that ELIC doesn’t supply the Contracts on the market, however current Contract homeowners could proceed to allocate subsequent premiums or further contract worth to out there fastened price funding choices within the MVA Contracts and likewise could proceed to rollover their present allocations to new time period intervals in each the MVA and RILA Contracts. You additionally state that: (1) the Contracts don’t and won’t represent an fairness curiosity in ELIC and are, and might be, topic to regulation underneath Illinois insurance coverage legal guidelines;/5 (2) the Contracts usually are not and won’t be listed, traded or quoted on an alternate, different buying and selling system, inter-dealer citation system, digital communications community, or another comparable system, community, or publication for buying and selling or quoting, and ELIC has taken, and can proceed to take, steps moderately designed to make sure that a buying and selling marketplace for the Contracts doesn’t develop;/6 and (3) prospectuses for the Contracts have disclosed, and can proceed to reveal, that ELIC depends on the reduction supplied by rule 12h-7./7

Dialogue

You be aware that Rule 3-13 gives that the Fee could, upon the casual written request of the registrant, and the place in step with the safety of traders, allow the omission of a number of of the monetary statements required by Regulation S-X or the submitting in substitution therefor of acceptable statements of comparable character. You say that, for the Type S-1 registration assertion of the Contracts, SAP monetary statements audited by an impartial auditor/8 are acceptable statements of a comparable character to GAAP monetary statements and could be in step with investor safety.

In help of this declare, you are saying that traders within the Contracts might be most all for info related to assessing the issuing Firm’s capacity to meet its contractual obligations./9 You say that SAP monetary statements would offer traders within the Contracts with ample info to evaluate ELIC’s solvency and its capacity to fulfill its contractual obligations./10

On this regard, you declare that SAP monetary statements include detailed details about ELIC’s belongings and liabilities, together with its regulatory capital and surplus, which function monetary cushions for paying contract proprietor claims. As well as, you declare that SAP monetary statements allow state regulators to find out ELIC’s capacity to fulfill contract proprietor obligations based mostly on the supply of readily marketable belongings when obligations are due.

Based mostly on the info and representations set forth in your letter as summarized above, in addition to the situations outlined above, and with out essentially agreeing with your entire evaluation, your request for permission underneath Rule 3-13 for ELIC to file SAP monetary statements, audited by an impartial auditor, in lieu of GAAP monetary statements in registration statements filed for the Contracts on Type S-1, because it pertains to the accounting foundation of these monetary statements solely and as described above, is granted./11

If in case you have any questions concerning this letter, please name the Chief Accountant’s Workplace of the Division of Funding Administration at (202) 551-6918.

Sincerely,

Jenson Wayne, Chief Accountant

Division of Funding Administration

For the Fee, by the Division of Funding Administration, pursuant to delegated authority

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Footnotes:

1/ You be aware that these ideas are these which are prescribed or permitted by the Firm’s domiciliary state regulator.

2/ On this regard, you state that whereas sure of both ELIC’s guardian firms, or the overall accomplice of Everlake Holdings, LP or different entities within the chain of management (e.g., Blackstone) do, or sooner or later sooner or later may, put together GAAP monetary statements, ELIC will not be required to organize full entity stage GAAP monetary statements, a GAAP reporting bundle or partial GAAP monetary statements in connection therewith, and doesn’t intend to take action if the permission requested by this letter is granted and relied upon.

3/ Rule 12h-7 exempts insurance coverage firms from submitting Change Act studies with respect to sure specified varieties of securities which are topic to state insurance coverage regulation and are registered underneath the Securities Act of 1933 if sure different situations are happy. 17 CFR 240.12h-7.

4/ Rule 12h-7(a) and (c) specify that an issuer qualifying underneath the rule is an organization topic to the supervision of the insurance coverage commissioner, financial institution commissioner, or any company or officer performing like capabilities, of any State (as outlined within the Change Act); and recordsdata an annual assertion of its monetary situation with, and is supervised and its monetary situation examined periodically by, the insurance coverage commissioner, financial institution commissioner, or any company or officer performing like capabilities, of the issuer’s domiciliary State.

5/ Rule 12h-7(b) specifies that the securities that will in any other case set off Change Act reporting obligations should not represent an fairness curiosity within the issuer, and should both be securities topic to regulation underneath the insurance coverage legal guidelines of the domiciliary State of the issuer or ensures of securities which are topic to regulation underneath the insurance coverage legal guidelines of that jurisdiction.

6/ Rule 12h-7(d) requires that these securities should not be listed, traded, or quoted on an alternate, different buying and selling system, inter-dealer citation system, digital communications community, or another comparable system, community, or publication for buying and selling or quoting. Rule 12h-7(e) requires that an issuer take steps moderately designed to make sure that a buying and selling marketplace for the securities doesn’t develop.

7/ Rule 12h-7(f) gives that the prospectus for the securities should include an announcement indicating that the issuer is counting on the exemption supplied by the rule.

8/ You state that the impartial auditor engaged to audit the SAP monetary statements will fulfill the independence requirements of Article 2 of Regulation S-X and might be registered with and topic to inspection by the Public Firm Accounting Oversight Board.

9/ You be aware the Fee acknowledged, in proposing variable annuity registration kinds, that contract homeowners, individuals, and annuitants could not need or want disclosure concerning the monetary efficiency of the insurance coverage firm, however as a substitute could also be solely within the insurer’s solvency. Registration Type for Insurance coverage Firm Separate Accounts that Supply Variable Annuity Contracts, Securities Act Launch No. 6502 and Funding Firm Act Launch No. 13689 (Dec. 22, 1983).

10/ You additionally be aware that, whereas GAAP monetary statements help traders in understanding ELIC’s going concern worth, traders within the Contracts don’t want info concerning ELIC’s going concern worth since there is no such thing as a secondary market within the Contracts.

11/ Our evaluation underlying this assurance has been developed in session with the employees of the Fee’s Workplace of the Chief Accountant. This permission is supplied for the Contracts described in your letter based mostly on the info disclosed therein, together with that the Contracts in search of to depend on the permission are non-variable annuity contracts categorised as market-value adjusted annuities, contingent deferred annuities, and/or listed annuities. As to any Contract registered or materially amended sooner or later, this permission is topic to the Fee employees’s evaluation of the Contract’s registration assertion for consistency with the info described in your letter and the supposed product sorts. On this regard, you could have acknowledged that ELIC will notify the employees, in a letter accompanying the submitting of any new registration assertion for a Contract or any post-effective modification to an current registration assertion that displays a cloth change to a Contract, of its intent to depend on the permission granted on this letter.

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Authentic textual content right here: https://www.sec.gov/recordsdata/everlake-life-insurance-company-102122.pdf





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