Principal Life Insurance Co Separate Account B
Filed: 15 Jul 13, 12:00am
July 15, 2013
VIA EDGAR
Sonny Oh
Senior Counsel
Division of Investment Management
Office of Insurance Products
Securities and Exchange Commission
100 F Street, N.E.
Mail Stop 8629
Washington D.C. 20549-8629
RE: Principal Life Insurance Company Separate Account B
Principal Investment Plus Variable AnnuitySM
(For Applications Signed On Or After August 1, 2013)
Post-Effective Amendment on Form N-4 number 171
File Numbers 333-188293, 811-02091
Dear Mr. Oh:
This letter responds, on behalf of Principal Life Insurance Company Separate Account B (the “Registrant”), to the comments of the Staff of the Securities and Exchange Commission (“Commission”), which you communicated to me by letter dated July 2, 2013, with respect to the initial registration statement and pre-effective amendment number 1 to the Registrant’s registration statement on Form N-4 (“the Amendment”). The Initial Registration Statement was filed on May 2, 2013, and the Amendment was filed with the Commission on May 6, 2013, pursuant to Rule 485(a) under the Securities Act of 1933 (the “1933 Act”). Changes in response to Staff comments as described below will be made by the Registrant in a post-effective amendment that will be filed with the Commission.
GENERAL MATTERS
COMMENT 1. | Please revise the prospectus such that the prospectus only discusses and offers the riders that will actually be available upon the effective date of the registration statement and delete all references to "older" versions of the rider "for applications signed before August 1, 2013." | |
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| RESPONSE: Registrant will make the requested revisions. | |
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COMMENT 2. | Please advise the staff whether there are any types of guarantees (e.g., as to any of the insurance company's obligations under the contract) or will the company be solely responsible for any such obligations. Please also advise the staff whether there are any support agreements with third parties pertaining to the capitalization of the company. | |
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| RESPONSE: Principal Life Insurance Company will be solely responsible for its obligations under the contracts. In other words, there are neither reinsurance arrangements nor any other third party support agreements pertaining to the contracts. With regard to the second sentence of this comment, we do not utilize a third party support agreement at this time. Rather, our risk management processes of evaluating potential capital needs under stressed scenarios and events are utilized in our capital planning efforts to ensure an appropriate capital reserve is maintained. | |
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COMMENT 3. | Please revise the Class identifier so that it is identical to the contract name appearing on the front cover page of the prospectus. | |
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| RESPONSE: Registrant has made the requested revision. | |
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COMMENT 4. | Premium Payment Credit Rider | |
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| a. The front cover page of the prospectus explains that the credit may be recaptured if the Contract is returned during the examination offer period or upon full annuitization of the Contract prior to the third Contract anniversary. | |
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| Please advise the staff how such recapture is consistent with Section 27(i) of the Investment Company Act of 1940. If recapture will be pursuant to an order of the Commission, then please also provide the citations for the applicable notice and order. | |
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| RESPONSE: The recapture is allowable pursuant to an Order of the Commission. The citation for such Order is Release No. IC-26743, and it is dated February 1, 2005. The File Number is 812-13109. The notice of the filing of the application was issued on January 3, 2005 (Rel. No. IC-26716). For the same reasons set forth in the foregoing notice of filing and because the bonus credits (and the recapture thereof) under the present registration will be calculated the same as contemplated in the Commission’s Order, the terms of the Order should extend to the present registration. | |
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| b. Based on the description of the Separate Account charge when the rider is elected at bottom of page 11 and the shaded box at the bottom of page 82, please revise the example at the top of page 83 to better explain how the charge results in the values provided under the "Sample Division Unit Value" column. | |
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| RESPONSE: Registrant will footnote the “Sample Division Unit Value” heading in the table as follows: | |
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| “(1) For a detailed description of how the unit value is calculated, see subsection Accumulated Value under 1. THE CONTRACT.” | |
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| c. For the illustration on page 84, please note that when "non-standardized" performance is shown with the credit, "standardized" performance must also be shown, i.e., the surrender charge is reflected in performance. Please revise the illustration accordingly. | |
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| RESPONSE: Registrant confirms that the table to which the Staff refers does reflect surrender charges. In addition, Registrant will add the following language as the second sentence to the paragraph immediately above the table: | |
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| “The table reflects surrender charges, when applicable.” | |
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| d. Please highlight the third to last bullet point on page 82 and the second to last bullet point after the chart on page 83. | |
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| RESPONSE: The lack of shading on which the Staff is commenting only appears in the compare document. The bullet points identified by the Staff are shaded in the “clean” version filed with the Commission and it will be shaded in the version provided to customers. | |
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PROSPECTUS |
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COMMENT 5. | Front Cover Page |
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| a. On the front cover page and as a preamble to the Glossary, please briefly explain that certain terms are defined in the Glossary and the means by which a reader can identify such terms in the prospectus, e.g., words that are capitalized or italicized. | |
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| RESPONSE: Registrant will make the requested revisions. | |
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| b. In the shaded text regarding the Premium Payment Credit Rider, please state that a contract with the rider will cost more than a contract without the rider rather than "[a] Contract without this rider will cost less." For example, note the second sentence of the first paragraph of the preamble to the fee tables on page 10. | |
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| RESPONSE: Registrant will make the requested revision. | |
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| c. Please add that the prospectus describes all material features of the contract. Please note that this should include material differences due to state variations, e.g., states in which certain riders are not available. | |
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| RESPONSE: Registrant will make the requested revision. | |
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COMMENT 6. | Summary of Expense Information (page 10) | |
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| a. Contract owner transaction expense. | |
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| Please reverse the order of all maximum and current charges so that the higher fee is shown first, e.g., the surrender charges. | |
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| RESPONSE: Registrant will make the requested revision. | |
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| b. Periodic Expenses | |
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| Please provide a clear caption preceding the actual Separate Account Annual expenses on page 11. | |
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| RESPONSE: Registrant will make the requested revision. | |
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| c. Optional Riders | |
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| i. Please include a brief description of the For Life withdrawal benefit base and Investment Back withdrawal benefit base in, respectively, footnotes 7 and 8 on page 14. | |
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| RESPONSE: Registrant will make the requested revisions. | |
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| ii. Please briefly explain how election of the step-up may impact the current and maximum charges of the PIB 3 and PIB 10 riders ("GMWB Riders") in, respectively, footnotes 7 and 8 on page 14. | |
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| RESPONSE: Registrant will make the requested revisions. Registrant also notes to the Staff that owners do not elect the step-up; rather, the step-up feature is automatic unless the owner opts out. | |
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| d. Example | |
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| Please note that pursuant to General Instruction 21(h) and (i), the example may not necessarily have to provide values for when the contract is annuitized. Please revise accordingly. | |
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| RESPONSE: Registrant has not revised the example. With regard to General Instruction 21(h), the example includes values for complete surrender because surrender charges are incurred for certain of the years required to be provided under the General Instructions. With regard to General Instruction 21(i), Registrant is required to show values for fully annuitizing because the owner would receive different amounts than if the owner fully surrenders the contract. | |
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COMMENT 7. | The Contract (page 21) |
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| a. Allocating Premium Payments (page 22) | |
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| As you have done in footnote 1 to the list of underlying mutual funds on page 2, please disclose that there are allocation restrictions when a GMWB Rider is elected. | |
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| RESPONSE: Registrant will make the requested revision. | |
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| b. Accumulated Value (page 24) | |
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| i. For clarity, in the first sentence of the last paragraph on page 24, please specify that the time for the close of normal trading on the NYSE is generally 4:00 p.m. Eastern Time. | |
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| RESPONSE: Registrant will make the requested revision. | |
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| ii. The last sentence of the last paragraph of this subsection on page 25 appears to be the one time the disclosure regarding the ability to increase your accumulated value to avoid termination is set forth in the prospectus. Therefore, in the first bullet point appearing under "Termination" in the Summary on page 20, please disclose the ability to increase accumulation value to avoid termination. | |
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| RESPONSE: Registrant will make the requested revision. | |
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COMMENT 8. | Charges and Deductions (page 26) | |
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| a. Surrender Charge (page 26) | |
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| Please explain whether the charge is deducted from the amount surrendered or the remaining accumulated value. For example, please refer to the last sentence of the first paragraph under "Transaction Fee" on page 30. | |
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| RESPONSE: Registrant will make the requested revision. | |
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| b. Principal Income Builder 10 (PIB 10) Rider (page 34) | |
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| Please reconcile the description of the basis of the charge in the first two paragraphs which refer to the For Life withdrawal benefit base with the third paragraph and the fee table on page 12 which refer to the Investment Back withdrawal benefit base. | |
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| RESPONSE: The references to “For Life” in the provision identified by the Staff should have stated “Investment Back”. Registrant will correct these errors. | |
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COMMENT 9. | Living Benefit- Guaranteed Minimum Withdrawal Benefit (GMWB) – page 39) | |
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| a. The paragraph following the chart at the top of page 40 is very confusing because it refers to riders no longer offered and described in a completely different prospectus. Please delete it. | |
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| RESPONSE: Registrant will make the requested revision. | |
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| b. Please delete the first three paragraphs under "Calculating the Principal Income Builder 3 For Life Withdrawal Benefit Payment" and "Calculating the Principal Income Builder 10 For Life Withdrawal Benefit Payment" on, respectively, pages 47 and 66. | |
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| RESPONSE: Registrant will make the requested revisions. | |
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| c. Please delete the second through fourth paragraphs under "Principal Income Builder 3 - GMWB Bonus" and "Principal Income Builder 10 - GMWB Bonus" on, respectively, pages 53 and 71. | |
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| RESPONSE: Registrant will make the requested revisions. | |
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| d. In the second paragraph under "Required Minimum Distribution (RMD) Program for GMWB Riders" on page 52, please highlight, if true, that an owner must be enrolled in the Program in order for an RMD amount not to be deemed an excess withdrawal. | |
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| This comment also applies to the corresponding subsection of the PIB 10 section on page 70. | |
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| RESPONSE: Registrant will make the requested clarifications. | |
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| e. Under "Principal Income Builder 3- GMWB Step-Up" beginning on page 55, please provide more details as to how the Step-Up value is calculated. In the first sentence of the second paragraph, it appears to equal accumulated value if that value is greater than the withdrawal benefit base. However, on page 45, the formula for calculating the withdrawal benefit base is the greater of two prongs, one of which is also accumulated value. | |
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| This comment also applies to the corresponding subsections of the PIB 10 section on pages 71 (second sentence of second paragraph) and 64 (two prongs of benefit base formula). | |
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| RESPONSE: For both riders, the GMWB Step-Up is an automatic feature that will increase a withdrawal benefit base to the contract accumulated value if the contract accumulated value is greater on the contract anniversary. The withdrawal benefit base is calculated as indicated in item 2 under the withdrawal benefit base section of each GMWB rider. Since the withdrawal benefit base may reflect the contract accumulated value (as a result of step-up) instead of the calculation reflected in item 2, Registrant reflected in the definition of withdrawal benefit base that it will be the greater of the contract accumulated value or the calculation shown in item 2. For the PIB 10 rider, which has both a For Life and Investment Back withdrawal option, the withdrawal benefit base for each withdrawal option is compared independently to the contract accumulated value to determine if a step-up will apply and this information is included in both the withdrawal benefit base and GMWB Step-Up descriptions. | |
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| To further clarify the mechanics of the above relationship, Registrant has revised the Principal Income Builder 3 - Withdrawal Benefit Base subsection to read as follows: | |
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| “On each Contract anniversary, the withdrawal benefit base is reset to the greater of 1 or 2, where: | |
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| 1= the accumulated value on the Contract anniversary (see Principal Income Builder 3 – GMWB Step-Up).” | |
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| Registrant has made a similar revision in the Principal Income Builder 10 - Withdrawal Benefit Base subsection. | |
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| f. The subsection "Remaining Withdrawal Benefit Base" is provided on page 65 for PIB 10. Please provide a corresponding subsection for the PIB 3. | |
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| RESPONSE: Registrant has not made the suggested revision because there is no remaining withdrawal benefit base feature offered with the Principal Income Builder 3 rider. In the “Principal Income Builder 10 Terms”, which is a part of the Overview of Principal Income Builder 10 subsection, Registrant already has included the following to clarify to readers that the remaining withdrawal benefit base feature does not apply to PIB 3: | |
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| “Remaining withdrawal benefit base — the amount available for future withdrawal benefit payments under a withdrawal option. The remaining withdrawal benefit base for each withdrawal option is calculated separately. (not applicable to PIB3)” | |
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COMMENT 10. | Annuity Benefit Payment Options (page 91) | |
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| In the fifth paragraph, please also briefly describe the impact that frequency and duration of payments has on the level of the annuity payment. | |
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| RESPONSE: Registrant will make the requested revision. | |
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COMMENT 11. | Death Benefit (page 93) | |
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| a. Standard Death Benefit Formula (page 94) | |
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| Please clarify who is eligible or required to elect the standard death benefit. | |
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| RESPONSE: Registrant will make the requested clarification. | |
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| b. GMWB Death Benefit - Principal Income Builder 3 (page 95) | |
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| The formula for calculating the PIB 3 Death Benefit on page 95 (greatest of 1, 2, or 3) appears identical to the formula for the standard death benefit on page 94 (greatest of a, b, or c). | |
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| Please revise either or both formulas to better distinguish their differences and revise Appendix G accordingly. | |
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| This comment also applies to the formula for the PIB 10 Death Benefit on page 99. | |
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| RESPONSE: Registrant will add the following clarification in the GMWB Death Benefit subsections: | |
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| “The GMWB Death Benefit is similar to the Standard Death Benefit with the exception of how withdrawals reduce the death benefit amount.” | |
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| For further response to this Comment, Registrant points out that language following each of the death benefit calculations describes the differences relating to how withdrawals reduce the respective death benefit amounts. Registrant has added a footnote within the formula that directs the reader to the more detailed description of the difference between how withdrawals affect death benefits under the standard death benefit as opposed to the GMWB death benefit. To further clarify the different treatment, Registrant has added the following language under the GMWB Death Benefit - Principal Income Builder 3 and GMWB Death Benefit - Principal Income Builder 10 subsections: | |
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| “Note, this is different than how withdrawals reduce the standard death benefit.” | |
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| c. In the "If the Contract Accumulated Value is Zero" table beginning on page 101, please confirm the accuracy of the disclosure in the "Then ..." column of the first and fourth rows. For example, compare these to the disclosure in the "Then ..." column of the first and third rows of the corresponding table for the PIB 3 beginning on page 96. | |
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| RESPONSE: Registrant confirms the accuracy of information included in the cells identified by the Staff. For further response, Registrant notes that the PIB 3 and PIB 10 tables differ because there is no remaining withdrawal benefit base feature in the PIB 3 rider. | |
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COMMENT 12. | Appendix G |
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| a. In each of the examples appearing in Appendix G, please clarify how the "Available For Life withdrawal benefit payment" is determined. | |
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| RESPONSE: Registrant will make the clarification immediately above the first example. | |
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| b. At the end of examples 3, 4, and 5, please revise the disclosure to better explain how prong "2" of the calculation of the GMWB Death Benefit on respectively, January 15, January 15, and December 30 relate to the first "NOTE" following the GMWB Death Benefit formula on page 95 of the prospectus. | |
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| In addition, please expand either prong 2 of the formula and/or the first "NOTE" to better explain the proportional reduction that takes place with Excess Withdrawals. | |
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| RESPONSE: Registrant will make the requested revisions to examples 3, 4, and 5. Registrant will make further revisions to the “NOTE” to which the Staff refers to expand on the description of how the proportional reduction works. | |
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STATEMENT OF ADDITIONAL INFORMATION ("SAl") | ||
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COMMENT 13. | Please disclose the name of the depositor on the front cover page of the SAI. Item 15(a)(ii). | |
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| RESPONSE: Registrant will make the requested disclosure. | |
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COMMENT 14. | Please update the second paragraph under "Calculation of Performance Data" on page 4 in light of the fact that this is an initial filing of the registration statement. | |
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| Also, please confirm that any standardized performance data provided does not pre-date the creation of the applicable sub-account. If any do, please revise the performance information to reflect performance since the creation of the subaccount. | |
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| RESPONSE: Registrant will make the requested revision. Registrant also confirms the information set forth in the second paragraph of this Comment. | |
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PART C |
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COMMENT 15. | For any exhibits incorporated by reference to another filing, please provide the applicable file numbers and clearly label all applicable accession numbers, e.g. , exhibits 8e4 and 8g2. | |
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| RESPONSE: Registrant will add the requested disclosure with the exhibit list expanded to include the requested information (when applicable). | |
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COMMENT 16. | In the initial registration statement, please note that all exhibits for exhibit 3 and exhibit 4 have been labeled "EX-3" and "EX-4," respectively. Please revise the labels such that the EDGAR exhibit labels match up with those provided in Part C. | |
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| RESPONSE: Registrant will make the requested revisions. | |
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COMMENT 17. | For Item 25, please provide the principal business addresses for the executive officers (other than directors). | |
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| RESPONSE: Registrant will make the requested revision. | |
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We understand that the Registrant is responsible for the accuracy and adequacy of the disclosure in the filing and that Staff comments or our changes to the disclosure in response to the Staff comments do not foreclose the Commission from taking any action with respect to the filing. In addition, the Registrant may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Please call me at 515-362-2384 if you have any questions.
Sincerely,
/s/ Doug Hodgson
Doug Hodgson
Counsel, Registrant
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