Jordan K. Thomsen
Assistant Vice President and Counsel
(212)314-5431
August 13, 2010
VIA EMAIL
Sonny Oh, Esquire
Office of Insurance Products
Division of Investment Management
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
RE: AXA Equitable Life Insurance Company:
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Separate Account No. 49 of AXA Equitable Life Insurance Co.
Protected Capital Strategies
Initial Registration Statement filed on Form N-4
File Nos. 811-07659 and 333-165395, and
Initial Registration Statement filed on Form S-3
File No. 333-165396
Dear Mr. Oh:
On behalf of AXA Equitable Life Insurance Company ("AXA Equitable" or
the "Company"), we respond below to your letter dated July 30, 2010, which
provided the SEC staff's additional comments to our response letter dated June
22, 2010 to your original comment letter, dated June 4, 2010, on the
above-referenced registration statements. We set forth each specific staff
comment and then provide our response. We have attached a revised draft
prospectus reflecting our responses. The page reference numbers in the comments
refer to the courtesy copy that we provided to the staff with the filing of the
initial registration statements. The page reference numbers in the responses
refer to the draft prospectus attached to this letter. Item references are to
the Item numbers set forth in Form N-4 or Form S-3 as applicable.
COMMENT 1. GENERAL
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COMMENT 1.a.
We had asked that you revise the "Calculation of Registration Fee" as
it is not clear why the values appearing in the table are appropriate.
These values included some $1.4 million as the amount of interests to
be registered and as the maximum aggregate offering price, and an
offering price per unit of "100%."
In response, you explained that there is some variation in the manner
in which registrants complete the Calculation of Registration Fee
table in Form S-3 and S-1 registration statements relating to
insurance products, due to due to the fact that the table was not
designed with such products in mind. You noted that the $1.4 million
reflected the minimum dollar amount that could be registered using a
$100 filing fee. You agreed to replace the 100% with Not Applicable.
We believe the "Amount to be registered" column is to reflect the
number of units of interest, not dollar amounts. As you have noted,
these interest are sold only in dollar amounts, not units.
Accordingly, we believe it more appropriate to leave the column blank
or footnoted to note that the interests are sold only in dollar
amounts, and to enter the dollar amount in the "maximum aggregate
offering price" column. Please ensure that the correct dollar amount
is noted in this column.
RESPONSE 1.a.
The recommended changes have been made to the "Calculation of
Registration Fee."
COMMENT 1.b.
We had asked that you explain to the staff whether AXA intends to offer
additional similar options through separate registration statements.
You responded that the Company does not expect to file a new 1933 Act
registration statement in order to use the PIO in connection with any
variable contract in addition to Protected Capital Strategies.
In support of this position, you stated that the Protected Investment
Option ("PIO") prospectus disclosure that would be used in connection
with any additional forms of variable contracts would be substantially
similar to the PIO prospectus disclosure that is used in connection
with Protected Capital Strategies. You also noted that a single 1933
Act registration statement (e.g., "MVA" products) can be used with more
than one variable contract prospectus filed on Form N-4
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Please note that the staff does not believe this approach is appropriate
where the prospectus for the general account security contains disclosure
is a virtual copy of the prospectus for the variable contract. If the
registrant wishes to incorporate the description of a general account
security such as the PIO provided on Form S-3 into future variable
annuity contracts on Form N-4, it should use a stand-alone prospectus
that only described the features of that general account security.
RESPONSE 1.b.
The staff's position has been noted.
COMMENT 1.c.
Please clarify supplementally in what states the registrant has filed
to offer the product and what the status of those filings is.
RESPONSE 1.c.
Our response to this comment was provided through a separate letter date
August 6, 2010.
COMMENT 1.d.
The staff is concerned with the use of the word "Protected" in the name
"Protected Investment Option" and "Protected Capital Strategies." The
staff believes that the terms could mislead investors in an insurance
product as to the risks that the products entail. Please either revise
the name used to describe the option and the contract or clarify
supplementally why you believe the phrase would not mislead investors.
RESPONSE 1.d.
Our response to this comment was provided through a separate letter date
August 6, 2010.
COMMENT 1.e.
Notwithstanding the inclusion of a Glossary, after further review we
believe the disclosure becomes difficult to follow where terms that
have not been defined in the text are used for the first time. See,
e.g., the fourth and fifth bullet points in the Protected Investment
Option subsection of the Key Features section. Please revise the
prospectus to define terms the first time they are used and avoid
defined terms in the prospectus to the extent possible.
RESPONSE 1.e.
We experimented with several approaches that would clearly define terms
the first time they were used without cluttering the presentation of
the disclosure. The purpose of the "At a glance - key features" and
"Risk factors" sections, where most defined terms are used for the
first time, was undermined when we attempted to insert definitions.
Those sections are meant to be concise and
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digestible. As a compromise solution, we now provide a clear
cross-reference to the "Definition of key terms" and "Contract features
and benefits" sections in both the "At a glance - key features" and "Risk
factors" sections. It was unavoidable to use defined terms in those
discussions, but we would like to point out that the "At a glance - key
features" section immediately follows "Definitions of key terms" and
"Risk factors" appears only three pages later. Please note, that
beginning after "Risk factors" we have inserted prominent definitions for
all key terms the first time they appear. We feel this is more
appropriate and user-friendly, because definitions are now presented in
sections where they are first discussed in detail.
PROSPECTUS
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COMMENT 2. FRONT COVER PAGE
COMMENT 2.a.
In the third paragraph, please set off the last sentence providing the
cross-reference to the Risk Factors section so that it is more prominent.
RESPONSE 2.a.
We have made the requested edit.
COMMENT 2.b.
We had asked that the cover page make clearer that the Segment Return
will apply only to amounts held to maturity. While the Key Features
section makes this disclosure, the cover page only states that Segments
"are designed to be held to maturity." This paragraph does not provide
any meaningful description of the consequence of a decision to take an
early distribution. Please revise the paragraph to make that clear.
RESPONSE 2.b.
This paragraph has been revised.
COMMENT 2.c.
We had asked that the cover page clarify that negative adjustments will
be made to withdrawals made before a Segment matures. The cover page
now states that "the interim value of a [S]egment may be more or less
than your initial investment." This statement can be misleading,
because prior withdrawals can make interim values less than the initial
investment without regard to any adjustments at all. Please revise this
language accordingly.
Separately, we believe it would be helpful to briefly summarize the
circumstances under which a negative adjustment is more likely,
independent of the direction of the market, e.g., where the market is
more volatile and where the withdrawal is
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made earlier in the Segment. Please revise the prospectus accordingly,
and make corresponding changes elsewhere in the prospectus where "may be
more or less" or similarly constructed disclosure as to adjustments on
withdrawal is provided (e.g., sixth bullet on page 7 and the fourth Risk
Factors bullet on page 13).
RESPONSE 2.c.
We have revised the disclosure in the appropriate locations.
COMMENT 2.d.
We had asked that the cover page provide a more general description of
the option. The cover page now includes a statement that the option is
"designed to provide a combination of ... [downside] protection and
limitation on participation in certain increases in the index." Please
expand on this to note that the downside protection is limited to the
first 10 to 30 percent of loss, depending on the length of the Segment.
Please also add this disclosure to the first bullet point in the Risk
Factors section.
RESPONSE 2.d.
The suggested disclosure has been added in both locations.
COMMENT 2.e.
In the third sentence of the third paragraph, in addition to providing
a more descriptive cross-reference to Appendix I as requested, please
also disclose that Appendix I contains all material variations from the
contract described in the prospectus. Please also make corresponding
changes to the disclosure on page 9.
RESPONSE 2.e.
The suggested disclosure has been added in both locations.
COMMENT 2.f.
With respect to the second to last sentence of the fourth paragraph on
the front cover page and the sentence preceding the chart at the bottom
of page 16 regarding the insurance company's ability to refuse to accept
or place further limits on contribution, please highlight the impact that
refusal of contributions may have on the value and benefits of an owner's
contract, i.e., that it will limit the contract value and death benefit.
In doing so, please also describe more fully on page 16 the circumstances
under which the registrant may refuse contributions may be refused or
place further limits on them.
RESPONSE 2.f.
The disclosure has been revised in both locations.
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COMMENT 2.g.
The initial filing provided a section called "Protected Investment Option
Definitions" where terms relevant to the Protected Investment Option were
defined and also provided an "Index of key words and phrases" where the
page number on which the definition of other terms were indicated.
However, it now appears that the two sections have been combined into a
single new Definitions of key terms" section that now appears after the
table of contents. Please ensure that all terms originally contained in
the "Index of key words and phrases" in the initial filing are included
in the new "Definitions of key terms."
RESPONSE 2.g.
All essential terms have been included in the "Definition of key terms"
section. Those terms that were not carried over from the "Index of key
words and phrases" were points of reference that did not require
definitions.
COMMENT 2.h.
The last paragraph should be revised to reflect the appropriate
registration statement. For example, the front cover page and disclosure
under "Financial statements" of a prospectus on Form S-3 should not make
references to a statement of additional information ("SAI") given that
the SAI is not part of the Form S-3 registration statement.
RESPONSE 2.h.
The requested change has been made.
COMMENT 2.i.
Please add disclosure to the bolded language noting the risk of a
substantial loss of principal to the effect that notes this risk is not
present in traditional investments offered through the registrant's
general account.
RESPONSE 2.i.
The suggested disclosure has been added.
COMMENT 2.j.
The statement on the cover page that the contract "governs" with respect
to all rights and obligations, coming immediately after the statement
that the prospectus "provides a description of all material rights and
obligations," implies that there may be material terms as to which the
contract could contradict the prospectus and in that case prevail as a
matter of federal securities law. Please revise the prospectus to remove
this suggestion.
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RESPONSE 2.j.
The referenced sentence has been placed at the beginning of the
paragraph to remove this suggestion.
COMMENT 3. PROTECTED INVESTMENT OPTION DEFINITIONS (PAGE 5)
COMMENT 3.a.
The use of "Segment Business Day," "Scheduled Holiday," and "Unscheduled
Close Date" remains confusing.
Specifically, a Segment Business Day is defined in part as a "business
day," which by definition must be a day on which the NYSE is open. If
this is true, defining a Scheduled Holiday based in part on whether the
NYSE is open becomes circuitous, at least as to NYSE based indices (as
illustrated by the third sentence of the definition for "Unscheduled
Close Date").
It would seem much more concise to define a "Segment Business Day" as a
"business day" on which a value for all underlying Indices of a Segment
are scheduled to be published, and to explain that days on which an
underlying Index of a Segment would not be published include scheduled
(e.g., holidays) and unscheduled circumstances (e.g., emergency
conditions as determined by the SEC.) Under this approach, use of the
terms "Scheduled Holiday" and "Unscheduled Close Date" would be
unnecessary, and the few instances in which these terms elsewhere in the
prospectus could be replaced with slightly more disclosure. Please
consider revising the prospectus accordingly.
In addition, please confirm supplementally that a Segment Business Day
must still be a day on which all values for underlying indices for all
Segments are scheduled to be published or made available as originally
defined. If still true, please state that more clearly in the definition.
RESPONSE 3.a.
The defined terms "Schedule Holiday" and "Unscheduled Close Date" have
been removed. Instead, per the staff's advice, we have provided a
description of what does not constitute a Segment Business Day within the
definition of Segment Business Day. The disclosure has been modified
where applicable to conform with this change.
The Segment Business Day definition has been rewritten to highlight
that it must be a day on which values for all indices are scheduled to
be published.
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COMMENT 3.b.
Based on current definitions, it appears to be appropriate to insert
"Segment Business Day" in lieu of "business day" in third sentence of
second paragraph under "Your contract's value in the protected investment
options" on page 27. Please revise the disclosure accordingly.
RESPONSE 3.b.
The sentence has been edited.
COMMENT 4. PROTECTED CAPITAL STRATEGIES AT A GLANCE - KEY FEATURES
(PAGES 7 AND 8)
COMMENT 4.a.
Please clarify in the Protected Investment Option subsection what
benefits an investor can expect from the Protected Investment Option
relative to other indexed fixed account options that do not expose
investors to the risk of loss to the extent that this product does.
RESPONSE 4.a.
This bolded bullet-point has been revised.
COMMENT 4.b.
The second bullet in the Protected Investment Option subsection states
that the "[i]nvestments in Segments are not investments in underlying
mutual funds..." Please make this the first sentence in the bullet and
add disclosure to the effect that the investments are held in the
registrant's general account.
RESPONSE 4.b.
The sentence has been moved and disclosure regarding where the
investments are held has been added.
COMMENT 4.C.
The prospectus notes that the Series ADV contract is purchased through
a fee-based account maintained by a registered broker-dealer. Please
clarify supplementally the circumstances under which these fee-based
accounts would not be maintained by a financial adviser.
RESPONSE 4.C.
The fee-based accounts will be maintained by registered investment
advisers. The disclosure has been revised accordingly.
COMMENT 4.D.
The Tax advantages subsection is incomplete inasmuch as it does not
provide equally prominent disclosure of the tax disadvantages to
holding the contract,
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e.g., ordinary income tax rates applicable to income received under the
contract. Please revise this subsection to provide equally prominent
disclosure of tax disadvantages and revise the heading for the subsection
accordingly.
RESPONSE 4.D.
This section has been renamed and revised accordingly.
COMMENT 4.E.
The Payout Options subsection lists the Variable Immediate Annuity
payout options and the Income Manager payout options. These options are
not options under the contract described in the prospectus.
Accordingly, please delete them from the list of available options. You
may, if you wish, make a general reference to the fact that AXA offers
contracts that provide income solutions.
RESPONSE 4.E.
Specific discussion of the Variable Immediate Annuity and Income
Manager products has been removed from the prospectus.
COMMENT 5. FEE TABLE (PAGE 10)
COMMENT 5.a.
We had asked that the existence and extent of the early withdrawal
adjustment in the fee table be provided in the fee table , along the
lines of the disclosure provided in the prospectus filed by AXA Equitable
under 1933 Act File No. 333-161963 (" MSO Prospectus "). In response, you
stated that you do not consider the Segment Interim Value to be an
application of an early withdrawal penalty and, therefore, that there is
no withdrawal charge appropriate for inclusion in the fee table. You
noted that you revised Appendix II to explain in more detail the
calculation of Segment Interim Value.
The staff does not agree that the presence of a penalty is a prerequisite
for inclusion of a potential expense in the fee table. Even assuming it
was, the staff is not persuaded that the adjustment called for in the
calculation of the Segment Interim Value can avoid that characterization,
because the adjustment for estimated downside loss is not limited on a
pro-rata basis even though the adjustment for estimated upside gain is.
Most importantly, the staff believes that inclusion of the potential for
loss in a fee table will assist in bringing that potential to the
attention of investors. Please revise the fee table currently in the Form
S-3 prospectus as requested.
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RESPONSE 5.a.
The fee table has been revised as requested.
COMMENT 5.b.
The fee table includes a column for waivers, but none are listed, and the
footnote indicates only that "there is no guaranteed expense limitation
in effect." Please clarify supplementally the purpose of this footnote
and ensure that the use of waivers in the table complies with staff
requirements. Separately, please ensure that the captions in the table
for the two series listed on page 12 are consistent.
RESPONSE 5.b.
The columns entitled "Fee waivers and/or Expense Reimbursements" and "Net
Annual Expenses (After Expense Limitations)", along with the
corresponding footnote, have been removed from the Fee table.
COMMENT 6. RISK FACTORS (PAGE 13)
COMMENT 6.a.
Please revise the third and fourth bullet point of the Risk Factors
section for plain English. In addition, the third bullet in the Risk
Factors section now states that failure to elect a Performance Cap
Threshold risks the possibility that returns in the Segment may be
lower than one of the other available investment options. For clarity,
please revise this sentence to provide disclosure to the effect that
this failure could result in amounts being invested that are tied to an
Index with a risk/return profile that the investor finds unacceptable.
Please make corresponding changes to the disclosure in the paragraph on
page 23 discussing why the registrant does not require the investor to
specify a Performance Cap Threshold.
RESPONSE 6.a.
The suggested revisions have been made in both locations.
COMMENT 6.b.
The first bullet point in the second column of the Risk Factors section
now notes the risk that, because withdrawals are assessed as a percent
of contributions the impact of withdrawals from Segments are greater
when the Segment Interim Value of principal being withdrawn is less
than the "contribution being withdrawn" This risk is true for any
amounts invested under a Series B contract and not just for those
amounts invested under that contract that are allocated to a Segment.
Please revise the Risk Factors section to note this separately as a
risk for any amounts invested under those contracts.
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RESPONSE 6.b.
The risk is now addressed in a separate bullet point.
COMMENT 6.c.
We requested expanding the disclosure under the fourth bullet point to
identify all circumstances that would result in the application of the
Segment Interim Value- Despite the modifications made, there is still a
need to incorporate all circumstances that would result in application
of the Segment Interim Value adjustments (e.g., cancellation,
surrender, or death, as disclosed in the fourth sentence of the third
to last paragraph under "Segment Types" on page 21). Please disclose
those not already identified in the first sub-bullet point under the
fourth bullet point in a separate sub-bullet point.
RESPONSE 6.c.
The disclosure has been expanded in a new sub-bullet point.
COMMENT 6.d.
The second bullet point indicates that a Segment Return may be lower
than would be the case if the investor "invested directly in the
applicable Index." The staff understands that, while an investor may
invest in instruments whose performance track the performance of an
index, direct investment is not possible. Please confirm this
supplementally and, if so, revise the prospectus accordingly.
RESPONSE 6.d.
We have revised the bullet point to refer to investments in mutual
funds or exchange-traded funds, rather than any investment directly in
an index.
COMMENT 6.e.
In the example provided in the first bullet point in the second column
of page 13 in the Risk Factors section, please disclose the amount of
the withdrawal charge that is expressed both in dollar terms and as a
percentage of the amount withdrawn.
RESPONSE 6.e.
The example has been revised accordingly.
COMMENT 6.f.
Please revise the Risk factors section to address the key risks
associated with the variable investment options.
RESPONSE 6.f.
New disclosure has been included to address the risks associated with
the variable investment options.
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COMMENT 6.g.
In the third bullet point in the second column of page 13 in the Risk
Factors section, please address AXA's ability to change indices during
the course of a Segment.
RESPONSE 6.g.
The disclosure in this bullet point has been expanded accordingly.
COMMENT 6.h.
Please expand the fourth bullet point in the second column on page 13
regarding AXA's responsibility for obligations owed under the contract
to note that investors must look to AXA's financial strength to assess
its ability to satisfy those obligations.
RESPONSE 6.h.
The requested disclosure has been added.
COMMENT 7. CONTRACT FEATURES AND BENEFITS - HOW YOU CAN MAKE YOUR
CONTRIBUTIONS (PAGE18)
COMMENT 7.a.
The staff asked that the references to "we" in the second and third
sentences in the set off definition of "business day" on page 19 be
clarified as to what entity it was intended to refer to, i.e., to AXA
Equitable or the New York Stock Exchange ("NYSE").
You responded that the references to "we" in the definition of
"business day" correctly referred to AXA Equitable, and that on a day
that the SEC declares a closure of the NYSE due to emergency
conditions, AXA Equitable would either close early or not open for
business.
Therefore, for clarity, please revise the definition of "business day"
as provided on pages 5, 19, and 54 to incorporate your response above.
Specifically, the definitions should make it clear that AXA Equitable
would close for business because the SEC declares emergency conditions,
and, as a consequence, the NYSE has also closed.
RESPONSE 7.a.
The definition of "business day" has been rewritten to clarify that
that AXA Equitable would close for business if the SEC declared an
emergency condition, and, as a consequence, the NYSE also closed.
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COMMENT 7.b.
Please clarify the circumstances under which each contract type is
available through which series.
RESPONSE 7.b.
The table has been edited to clarify that Series B and Series ADV are
available for each contract type.
COMMENT 8. CONTRACT FEATURES AND BENEFITS - PROTECTED INVESTMENT OPTION
(PAGE 21)
COMMENT 8.a.
The prospectus now states that the investor's Performance Cap Threshold
"is ...not" an annual rate of return. Since investors may more clearly
understand specifying an annual rate, please either provide disclosure
to the effect that specification of the threshold on that basis will in
fact be allowed or clarify supplementally the grounds for not allowing
the threshold to be expressed on that basis.
RESPONSE 8.a.
The Segments are designed to provide a point-to-point rate of return.
Expressing a rate of return as an annual rate of return implies an
annual crediting rate. That would be misleading.
COMMENT 8.b.
Please clarify where an investor may find historical performance
information on the Gold Index and the Oil Index.
RESPONSE 8.b.
We have provided the web addresses where this historical data can be
found.
COMMENT 8.c.
For clarity, please indent the subsections discussing the preconditions
required for sweeping funds into a Segment so that they are clearly
understood as subsections relating to the Segment Sweep subsection.
RESPONSE 8.c.
These subsections have been numbered to indicate that they are the
segment participation requirements. The term "Segment Sweep" has been
replaced with "Segment Participation Requirements."
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COMMENT 8.d.
The prospectus now states on page 23 that Segment Maturity Value may be
transferred into another Segment Type Holding Account "at any time
before the next Segment Start Date."
RESPONSE 8.d.
This is a true statement in the context of the paragraph. If a Segment
matures and, due to the circumstances enumerated in the paragraph, the
Segment Maturity Value does not enter a new Segment that month, the
owner has the option to transfer that value any time before the next
Segment Start Date.
COMMENT 8.e.
The prospectus states in the first full paragraph on page 21 that if
there is delay in a Segment Maturity Date due to an Unscheduled Close
Date, then the registrant will use "reasonable efforts" to honor the
maturity instructions of investors with assets allocated to that
Segment. The prospectus then states in the second sentence that the
Segment Start Date for all Segments will be the same day as the Segment
Maturity Date for the Segments affected by the Unscheduled Close Date
"if [the registrant is] able to do this." Please clarify what happens
if the registrant is unable to honor those instructions as to any
investor or as to some investors but not others. Separately, please
revise that second sentence for plain English.
RESPONSE 8.e.
We have rewritten this section to address the concerns the staff raised
in this comment, as well as in Comments 8.f., 8.g., and 8.j.
COMMENT 8.f.
The prospectus still states in the first sentence of the second full
paragraph on page 25 that the registrant "may" create new Segments of a
Segment Type using a different index if a Segment Maturity Date for a
Segment is delayed under certain circumstances. This suggests that the
creation is intended to address the delay. However, the prospectus then
states in the next sentence that the registrant would regardless be
unable to transfer in that month amounts in the matured Segment to
Segments using the different index. If this is true, please either
clarify supplementally why the first sentence is stated this way or
revise the first sentence to remove the implication that the creation
of different Segments would be done in response to the delay.
RESPONSE 8.f.
See Response 8.e.
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COMMENT 8.G.
The first sentence of the third to last paragraph under "Effect of
Unscheduled Closing Date" appearing on page 25 states the following:
"If the New York Stock Exchange does not open for regular
trading on any day, then that day is not a business day or
Segment Business Day under the contract."
For clarity, please insert, "and therefore, by definition, not a" in
lieu of "or" in between "business day" and "Segment Business Date." The
last paragraph of the subsection should similarly be revised.
RESPONSE 8.g.
See Response 8.e.
COMMENT 8.h.
The last paragraph under "Suspension, Termination and Changes to
Segment Types and Indices" states that the company has the right, for
various reasons, to substitute an alternative index or add additional
indices at any time. Please provide additional disclosure as to this
right to address the following issues:
COMMENT 8.h.i.
We had asked how an alternative index will affect the Index Performance
Rate, Segment Rate of Return, and ultimately the Segment Maturity Value
that an owner can expect. You responded that the performance of the
Index Performance Rate, Segment Rate of Return and Segment Maturity
Value will be affected by an alternative index, but that an alternative
index would only be used for an existing Segment if the new index is
similar to the index that is being replaced. If a similar index cannot
be found, the Segment will be terminated. Please incorporate this
response into the second to last paragraph. In addition, please clarify
what would constitute a "similar index" by way of objective criteria
and example.
RESPONSE 8.h.i.
The disclosure has been revised accordingly.
COMMENT 8.h.ii.
We also requested that you disclose that there may times when no
Segments of any or all Segment Types will be offered including what
would become of all amounts allocated to the Protected Investment
Option. However, the last paragraph added to the subsection to address
comment still needs to explain what would become of all amounts
previously allocated to Protected Investment Option, i.e., monies held
in existing Segments and Segment Type Holding Accounts.
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RESPONSE 8.h.ii.
The requested disclosure has been added.
COMMENT 8.i.
You state in the new sentence now provided at the end of the fourth to
last paragraph of the subsection "Segment Types" on page 21 that
Segment Types with greater protection tend to have lower Performance
Cap Rates than other Segment Types that use the same Index and duration
but provide less protection. Please highlight the sentence and also
include this disclosure in the Risk Factors section.
RESPONSE 8.i.
This disclosure has been bolded on page 23 and has been included in the
"Risk factors" section.
COMMENT 8.j.
Please expand on the fourth paragraph on page 25 to specify what
constitutes "reasonable efforts to calculate the Segment Maturity Value"
(e.g., along the lines of disclosure relating to fair value
determinations) and to disclose what are the consequences if the Segment
Maturity Value cannot be calculated.
RESPONSE 8.j.
See Response 8.e.
COMMENT 8.k.
The prospectus notes in the first paragraph of the "Partial withdrawal
provision for lack of Segment" subsection on page 26 that, amounts in a
Holding Account may be withdrawn without paying withdrawal charges if
no Segments are created "because [the registrant] has terminated or
suspended" that Segment Type. Please clarify why a Segment might be
suspended or terminated.
RESPONSE 8.k.
The paragraph has been revised accordingly.
COMMENT 8.l.
For clarity, in lieu of identifying the Segment Start Date on page 22
and Segment Maturity Date on page 23 by a specific date (respectively,
the 15th and 14th of each month where the latter could fall on a
non-business day), please consider identifying them in the same manner
as described in the first paragraph under "Setting the Segment Maturity
Date and Segment Start Date" on page 24, i.e.,
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respectively, the first segment Business Day and second Segment Business
Day occurring after the 13th of the month.
RESPONSE 8.l.
These terms are now defined based on their relation to the 13th of the
month.
COMMENT 8.m.
The disclosure relating to returning funds either to the investor or to
a Segment Type Holding Account in case a Segment Type is suspended or
cancelled is difficult to follow and incomplete. For example, if no
Segment Type is created because of cancellation of suspension, it is
unclear from what account funds are being moved that would otherwise
trigger the withdrawal charge in the first place. It is also unclear
what other options are available to the investor, other than retaining
funds in the affected holding account in case of suspension. Further,
it is unclear what is intended by the statements that amounts returned
to a holding account "will not be greater than [the] account value" in
the corresponding holding account, and that amounts transferred to the
money market option "may not be greater than the amount transferred"
from the holding account. Please revise this section completely and for
plain English.
RESPONSE 8.m.
The disclosure regarding the cancellation provision has been revised
accordingly.
COMMENT 8.n.
Under "Your right to cancel within a certain numbers of days" beginning
on page 25, please clarify whether return of contract value reflects
Segment Interim Value.
RESPONSE 8.n.
The disclosure has been revised to clarify that the return of account
value reflects Segment Interim Value.
COMMENT 8.o.
The Segment Types subsection of the Protected Investment Option section
on page 21 states that you are not obligated to offer any one particular
Segment Type. Please also disclose, as applicable, the extent to which
you are obligated to offer any Segment Type at all.
RESPONSE 8.o.
The first sentence of the second to last paragraph in the "Segment Types"
subsection provides this disclosure.
17
COMMENT 8.P.
In the last paragraph of the first column on page 21, you note that an
investor "will be protected" from the first 20% of an Index's decline.
Please revise this sentence to note that AXA is obligated to return the
full amount of principal in case of an index's decline that does not
exceed the stated percent. Please make corresponding changes elsewhere
in the prospectus, as appropriate.
RESPONSE 8.P.
The recommended disclosure has been added.
COMMENT 9. DETERMINING YOUR CONTRACT'S VALUE (PAGE 27)
COMMENT 9.a.
The third paragraph under the subsection, "Your contract's value in the
protected investment options," was added in response to our comment to
provide a plain English explanation of how the Segment Interim Value is
calculated and why it is imposed. The staff believes that the paragraph
requires further revisions for plain English, in particular the third
sentence of the paragraph. In addition, please summarize in plain
English each of the four adjustments involved in calculating the
Segment interim Value.
RESPONSE 9.a.
This paragraph has been revised accordingly.
COMMENT 9.b.
In the third sentence of the second paragraph under "Your contract's
value in the protected investment options" on page 27 (and wherever
else applicable, e.g., first sentence of Appendix II), please confine
that the Segment Interim Value is calculated on each business day or
Segment Business Day between the Segment Start and Segment Maturity
Dates.
RESPONSE 9.b.
The requested disclosure has been provided.
COMMENT 10. TRANSFERRING YOUR MONEY AMONG INVESTMENT OPTIONS (PAGE 28)
COMMENT 10.a.
We had asked you to expand the disclosure under "Transferring your
account value" to address any limitations with respect to transfers in
and/or out of or among the variable investment options. You replied
that the current limitations with respect to transfers are listed on
page 28. However, these restrictions are described as applying to the
Protected Investment Option (e.g., among and
18
between Segments and Segment Type Holdings Accounts). Please expand on
this disclosure to note the transfer restrictions with respect to
transfers among the variable investment options.
RESPONSE 10.a.
The requested disclosure has been provided.
COMMENT 10.b.
The prospectus notes in the paragraph following the bullet points under
"Transferring your account value" that the registrant will provide
advance notice of any changes or additions to transfers restrictions.
Please revise the prospectus to clarify how and when owners will be told.
RESPONSE 10.b.
The disclosure has been revised.
COMMENT 11. HOW WITHDRAWALS ARE TAKEN FROM YOUR ACCOUNT? (PAGE 31)
The first sentence of the fifth paragraph on page 31 states that withdrawals
from a Segment prior to your Segment Maturity Date reduces the Segment
Investment on a pro rata basis by the same proportion that the Segment Interim
Value is reduced on the date of the withdrawal. Please confirm whether this
necessarily true for the very first withdrawal made from a Segment.
RESPONSE 11.
This is true for all withdrawals.
COMMENT 12. YOUR ANNUITY PAYOUT OPTIONS (PAGE 31)
In the last sentence in the paragraph under "Annuity maturity date" on page 34,
please disclose what the default payout option is.
RESPONSE 12.
The requested disclosure has been added.
COMMENT 13. CHARGES AND EXPENSES (PAGE 35)
COMMENT 13.a.
In the fuller description of the "Transfer charge" on page 35, please
disclose what is provided in consideration for the charge.
RESPONSE 13.a.
The requested disclosure has been provided.
19
COMMENT 13.b.
In the last sentence under "10% free withdrawal amount" on page 36 you
say that in certain states, the free withdrawal is not taken into account
when calculating a full surrender of the contract. Please add this
disclosure to "Surrendering your contract to receive its cash value" on
page 31.
RESPONSE 13.b.
This disclosure has been added to "Surrendering your contract to
receive its cash value."
COMMENT 13.c.
The prospectus states on page 36 that withdrawal charges equal a
percentage of contributions. Please revise the prospectus to clarify
how contributions that correspond to a withdrawal are determined.
RESPONSE 13.c.
The third sentence under the chart in "Withdrawal charges" continues
the explanation of how the withdrawal process works. Contributions that
have been invested the longest are withdrawn first.
COMMENT 14. MORE INFORMATION (PAGE 53)
COMMENT 14.a.
Please add the phrase ", including our obligations with respect to
amounts invested in the Protected Investment Option," after the word
obligations in the first sentence in the "About the general account"
section on page 54.
RESPONSE 14.a.
The proposed phrase has been added.
COMMENT 14.b.
Please revise the third bullet point under "Contributions, transfers,
withdrawals and surrenders" on page 55 to make it clear that the bullet
point is addressing variable investment options and the Segment Holding
Account and that withdrawals or surrenders will be made based on the unit
value next determined after the company receives the required
information.
RESPONSE 14.b.
The third bullet point has been revised accordingly.
COMMENT 15.
We had asked you to update the disclosure under "Independent Registered Public
Accounting firm" section appearing in the initial filing. You responded that the
section has been moved to the Statement of Additional Information and will be
updated when the Company files the pre-effective amendment. You also noted that
no information pursuant
20
to Item 10 in the prospectus regarding experts was required because there were
none having the interests of the type on which disclosure under the Item is
predicated. As you aware, the carve out provided by Instruction l to Item 509 of
Regulation S-K as to what constitutes such an interest explicitly excludes
accountants. Please confirm supplementally that the accountants for whom
disclosure would otherwise be required have an interest of the type referred to
above.
RESPONSE 15.
We have moved the section from the SAI to its original location in
"Incorporation of certain documents by reference." We have not yet referenced
our independent registered public accounting firm by name, because that would
require a consent. The auditor's consent will be provided in our next
pre-effective amendment. Given the volume and depth of the comments from this
letter, we felt it would be premature to request the consent until we've
resolved the outstanding comments with the staff.
COMMENT 16. APPENDIX II - PREAMBLE
COMMENT 16.a.
The prospectus now states in the second sentence that the formula is
"designed to estimate the fair value ...of [the registrant's]
obligation to credit the Segment Maturity Value...." This is too
oblique a summation of the primary purpose of the adjustment, which is
to have the Segment Interim Value reflect the investor's agreement to
be both exposed to the stated downside risk and to benefit from the
limited potential for gain. Please revise this sentence accordingly.
RESPONSE 16.a.
This sentence has been revised to reflect the suggested disclosure.
COMMENT 16.b.
The prospectus now states in the third sentence introducing how the
Segment Interim Value is calculated that the formula used "refers" to
investments in fixed instruments and derivatives. The use of the word
"refers" is unclear and does not clarify why the formula does this.
Please revise this sentence to more clearly convey how these
investments relate to the formula and at least provide in the sentence
a cross reference to the overview as to what are the risks and
exposures the stated elements of the formula are intended to address.
RESPONSE 16.b.
This sentence has been revised to reflect the suggested disclosure. A
cross reference to the risks has been provided in the fourth sentence.
21
COMMENT 16.c.
The fourth sentence of the preamble now states that the registrant
"may" hold in the derivatives that are used in the formula, but is "not
required to do so." It appears to be highly likely that the Fair Value
of Derivatives will have to depend on derived values because of the
very specific Segment Maturity Dates, Segment Buffers and Participation
Cap Rates used. Accordingly, please revise this disclosure to note that
the estimates for the Fair Value of Derivatives will in all likelihood
be based on the derived values for hypothetical derivatives.
RESPONSE 16.c.
This sentence has been revised to reflect the suggested disclosure.
COMMENT 16.d.
Please note in the preamble that the adjustment resulting in the
Segment Interim Value could cause an investor to lose principal, even
where the relevant Index has increased since the Segment Start Date,
and that loss could be substantial. Please further note that this is
due to the fact that that there is always some risk that the relevant
Index would have declined by the Segment Maturity Date.
RESPONSE 16.d.
This sentence has been revised to reflect the suggested disclosure.
COMMENT 16.e.
The third sentence of the preamble to Appendix II notes that the
formula described includes an adjustment relating to the "Performance
Cap Calculation," which "was performed assuming that the Segment would
continue until the Segment Maturity Date." Please revise this sentence
for plain English.
RESPONSE 16.e.
This sentence has been revised.
22
COMMENT 17. APPENDIX II - OVERVIEW
COMMENT 17.a.
The first paragraph of the Overview now states what the purpose of the
Fair Value of Fixed Derivatives is. The second paragraph appears
intended to do the same for the Fair Value of Derivatives, and the
third sentence achieves that goal, but it is unclear what is intended
by the first sentence. Please revise the paragraph to put the third
sentence first, and clarify supplementally what is intended by the
first sentence.
RESPONSE 17.a.
The third has been moved to the beginning of the paragraph and the
first sentence has been deleted. A new second sentence has been added
to clarify the intention of the original, deleted first sentence.
COMMENT 17.b.
For clarity, please use captions preceding the first, second, fourth,
and fifth paragraph of the Overview to note the discussions of the Fair
Value of Fixed Instruments adjustment, the Fair Value of Derivatives
adjustment, the Cap Calculation Factor, and the Performance Cap Rate
limiting factor.
RESPONSE 17.b.
The recommended captions have been added.
COMMENT 17.c.
The first bullet point in the second paragraph of the new Overview that
discusses the Fair Value of Derivatives Adjustment uses only one
sentence to describe both the use of one call option to calculate the
estimate of future gain and the use of the other call option to limit
that gain. For clarity, please separate the summary of the two
derivatives into two different sentences to more easily explain the
function of each. In addition, please either clarify in the two bullet
points what is intended by the phrases "Out of the Money" and "At the
Money" or delete them.
RESPONSE 17.c.
This section has been revised to provide a clear introduction to the
call options that represent components of the calculation of the fair
value of derivatives.
COMMENT 17.d.
We note that adjustments for early withdrawals to account for upside
gains limit increases to a pro-rata percentage of the Performance Cap
Rate. Please confirm supplementally that the strike price used to
calculate the value of the hypothetical put option is not similarly
adjusted to pro-rate the downside protection from declines in the
relevant index.
RESPONSE 17.d.
There is no similar adjustment to pro-rate the downside protection.
23
COMMENT 17.e.
Please clarify supplementally whether adjustments for early withdrawals
to account for the agreed upon downside risk are similarly limited on
the same logic (i.e., that the Segments are, in the words of the
prospectus, "designed on the understanding that an owner will obtain
the full Segment Maturity Value only on the Segment Maturity Date"). If
there is no such limit, then please delete the quoted language from
paragraph as it suggests a symmetry in limiting the adjustments that
the product does not provide. In this case, please also disclose to the
investors that, while upside potential in an early withdrawal is
limited on a pro-rata basis, downside potential is not limited at all
other than what may be provided by a Segment Buffer.
In addition, please confirm supplementally that the hypothetical put
option strike price used to calculate the effect of the Segment Buffer
is not similarly adjusted to pro-rate the Segment Buffer.
RESPONSE 17.e.
The referenced sentence has been deleted and the recommended disclosure
has been included to remove the suggestion of such a symmetry. We
confirm that there is no similar adjustment to pro-rate the downside
protection prior to maturity.
COMMENT 18. APPENDIX II - DETAILED DESCRIPTION - FAIR VALUE OF FIXED
INSTRUMENTS
The second sentence in this new discussion states that "swap rates are the risk
free rates widely used in derivative markets." Critical to understanding how the
Segment Interim Value operates is a concrete description of the fixed rate the
registrant will choose as the interest rate input to the Fair Value of Fixed
Instruments formula that is more specific than a generic reference to some rate
that is "widely used." This is also true with respect to understanding the Fair
Value of Derivatives formula's interest rate input described on page B-3. Please
clarify specifically the swap rate, including duration that the registrant
intends to use in both of these circumstances.
RESPONSE 18.
The suggested disclosure was provided.
COMMENT 19. APPENDIX II - DETAILED DESCRIPTION - FAIR VALUE OF DERIVATIVES
COMMENT 19.a.
The first sentence of the first paragraph in this new discussion notes
that the registrant "designates three options." For clarity, please
instead be specific that the registrant calculates or derives the value
of three different hypothetical options. In addition, please add a new
sentence after the first sentence that reiterates the purpose of each.
Please also separate the following disclosure describing what a put
option and a call option are into a new paragraph, and put the last
sentence of the Fair Value of Derivatives subsection, relating to
inverse and direct relationships of option value, in this new
paragraph.
RESPONSE 19.a.
The suggested changes were made.
24
COMMENT 19.b.
In the discussion of the Out of the Money Call Option in subparagraph
(2), please provide new disclosure to the effect that the estimated
value of this option offsets the value of the other call option so as
to put a limit on the estimated value of future gains in a manner that
is consistent with the Performance Rate Cap.
RESPONSE 19.b.
The subparagraph has been expanded to reflect the suggested disclosure.
COMMENT 19.c.
In the discussion of the Out of the Money Put Option, the new
disclosure states that the fair value of this option represents the
market value of the potential "to receive an amount equal to the excess
of the negative return ...beyond the Segment Buffer." For clarity,
please provide disclosure instead to the effect that this potential is
to incur the losses equal to that excess.
RESPONSE 19.c.
The sentence has been amended to reflect the suggested disclosure.
COMMENT 19.d.
In the discussion of Net Convenience Value, please provide a plain
English discussion of the purpose of this value, what it is intended to
model, why it is included in the model, and provide more specifics on
who provides the estimates of the value.
RESPONSE 19.d.
The disclosure has been revised.
COMMENT 20. APPENDIX II - EXAMPLES
COMMENT 20.a.
We had asked you to revise the basis used to describe duration to
months. You replied that you preferred this basis of presentation as it
was consistent with how durations were presented in the prospectus.
Notwithstanding that presentation, we believe simply noting the Segment
Duration and Valuation Date in months is a more effective way to convey
the passage of time essential to understanding the effect of the
adjustments in the Segment Interim Value. Please revise the
presentations accordingly. You may, if you wish, add the length in
years parenthetically.
RESPONSE 20.a.
The Segment Duration, Valuation Date and Time to Maturity are now all
expressed in terms of months.
25
COMMENT 20.b.
In the examples for Partial Withdrawals, please include additional line
entries to demonstrate the effect of the withdrawal charge. Please also
revise the basis on which Time to Maturity is presented in accordance
with the comment provided in 20a, above.
RESPONSE 20.b.
The partial withdrawal example now includes a footnote, which discloses
that the amount withdrawn is net of any applicable withdrawal charge.
COMMENT 21.
You have stated that all appropriate changes in response to initial comments
given on Part II for Form S-3, and the SAI and Part C for From N-4 have been or
will be provided in the next pre-effective amendment. You have also represented
that all financial statements, exhibits, and certain other information as well
as appropriate representations will be filed via pre-effective amendment. Please
note that the remaining sections of both Forms S-3 and N-4 will be subject to
further review to ensure that all appropriate changes as represented have been
made to the satisfaction of the staff.
RESPONSE 21.
We have filed a pre-effective amendment on Form S-3 only. Given the extent of
the staff's comments, we would prefer to resolve these issues prior to
undertaking the requirements necessary for filing a pre-effective amendment on
Form N-4. With the staff's permission, we renew our commitment to file all
financial statements, exhibits, and certain other information as well as
appropriate representations via our next pre-effective amendment. We recognize
that the aforementioned items are still subject to review. In addition, please
note that the changes reflected in the prospectus that accompany this filing are
identical to the changes that will be reflected in the prospectus included in
our future our Form N-4 pre-effective amendment.
Please contact either Chris Palmer, Esq., of Goodwin Procter at (202) 346-4253
or me if you have any questions on our responses to the staff's comments. We
appreciate your assistance with this filing.
Very truly yours,
/s/ Jordan K. Thomsen
---------------------
Jordan K. Thomsen
cc: Christopher E. Palmer, Esq.