[SUNAMERICA LOGO]
VIA EDGAR AND ELECTRONIC MAIL
January 11, 2012
Mr. Jeffrey Foor
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Variable Separate Account ("Registrant")
SunAmerica Annuity and Life Assurance Company ("Depositor")
Post-Effective Amendment to Registration Statement on Form N-4
File Nos. 333-172003 and 811-03859
Dear Mr. Foor:
Thank you for your comments provided on December 21, 2011, regarding
the Post-Effective Amendment to the Registration Statement on Form N-4 filed
pursuant to Rule 485(a) on November 2, 2011 as referenced above. We have
considered your comments and provided our responses below.
1. Highlights, page 4
Comment -- Please prominently disclose that electing the optional
living benefit will result in having to invest in accordance with
investment requirements that may limit the upside potential of a
contract owner's investment and that such restrictions may also
reduce the likelihood that the contract owner may need to rely on
the protection offered by these benefits.
Response -- The following disclosure has been added to the
definition of "Optional Living Benefits" in the "Highlights"
section of the prospectus:
"Electing an optional living benefit will require you to
invest in accordance with certain Investment Requirements.
PLEASE SEE OPTIONAL LIVING BENEFITS IN THE PROSPECTUS.
Investing within these requirements may potentially limit the
performance of your investment and may also reduce the
likelihood that you will need to rely on the protection
offered by these benefits."
2. Fee Table, page 5
a. Comment -- Please disclose updated fund expenses as of December
31, 2011.
Response -- Because we will be filing a post-effective
amendment in January, we will not have updated year-end fund
expenses from all advisors. Therefore, we are unable to revise
the fund expense range as of December 31, 2011 at the time of
filing. We commit to filing an updated fund expense range in
connection with our annual updates to the Registration
Statement this April.
b. Comment -- Please explain whether the estimated expenses of the
SunAmerica Dynamic Allocation Portfolio will be reflected in the
range of fund expenses.
Response -- The estimated expenses of the SunAmerica Dynamic
Allocation Portfolio are not expected to be the highest or
lowest expenses in the range of fund expenses reflected in the
fee table, and therefore, will be within the range of fund
expenses currently listed in the Registration Statement.
3. Fee Table, Footnote 6, page 6
Comment -- Explain to the Staff the impact of the adjustment from
the value of the VIX to the average value of the VIX. Does it
increase or decrease the fee? Is the change for prospective
contracts only?
Response -- The adjustment from the value of the VIX to the
average value of the VIX over a quarter may increase or
decrease the fees for a particular policy owner, depending on
the overall average value of the VIX over the contract
quarter. However, we anticipate that using the average value
of the VIX, as opposed to the value of the VIX on a given day,
will provide a more equitable and predictable fee. The change
to quarterly averaging will be applicable to prospectively
issued contracts only.
4. Investment Options, page 11
Comment -- You currently disclose that the insurance companies do
not provide investment advice. Address that statement in light of
the companies' involvement in providing the formula to the
adviser.
Response -- The insurance companies are not acting as
investment advisers. In developing the formula, the insurance
companies created a model intended to estimate future
volatility of the equity markets based on historical data. As
described below, the formula provides a targeted equity
exposure but does not dictate the types of investments to be
made. The adviser, SunAmerica Asset Management Corp. ("SAAMCo"
or the, "Adviser") will determine the allocation between the
fund-of-funds component and the overlay component of the fund.
All investment decisions in the fund-of-funds component will
be made by the Adviser. The subadviser, AllianceBernstein L.P.
(the "Subadviser") will make all investment decisions for the
overlay component and has full discretion to choose in which
instruments to invest the assets of the overlay component,
subject to oversight by the Adviser.
The insurance companies do not have investment discretion.
They do not act pursuant to a contractual agreement with the
Adviser, and they receive no compensation for providing the
formula. In fact, the insurance companies do not recommend any
specific investments or securities. The role of the insurance
companies is less involved than the role of consultants that
commonly provide certain fund managers with asset allocation
targets, but that are not deemed to be acting as investment
advisers under the Investment Company Act of 1940 in that
role.
2
While the formula may be adjusted in the future, it is
expected to be changed rarely. The Adviser would review and
consider any such proposed adjustments and determine whether
to present the proposal to the Board of Trustees. Only after a
change was approved by the Board, including a majority of the
Independent Trustees, would a change to the formula be
implemented.
5. SunAmerica Sereis Trust -- Class 3 Shares, page 12
a. Comment -- The disclosure regarding the SunAmerica Dynamic
Allocation Portfolio states that the "formula is provided by
SAAMCo and developed by the Company." The Trust prospectus states
that the insurance company provides the formula. Please reconcile
the inconsistency.
Response -- The disclosure has been revised to state that the
formula is "developed by the Company and provided by SAAMCo to
the Subadviser."
b. Comment -- The Trust prospectus discloses that the company can
change the formula but the product prospectus does not state this.
Please disclose the companies' ability to alter the formula.
Response -- The following disclosure has been added to the
"SunAmerica Series Trust -- Class 3 Shares" section of the
prospectus:
"The formula used by the Subadviser may change over time based
on proposals by the Company. Any changes to the formula
proposed by the Company will be implemented only if they are
approved by the investment adviser and the Dynamic Allocation
Portfolio's Board of Trustees, including a majority of the
Independent Trustees."
c. Comment -- Disclose the formula as well as its impact and goals
Response -- Disclosure of the actual formula is not helpful
and may result in more confusion than clarity for an investor
in understanding the mechanics of the overlay component. The
formula is intended to provide guidance to the Subadviser with
respect to allocation of the overlay component's investments
among general asset categories. The Subadviser must exercise
its own discretion as to how to invest the overlay component
to adjust the Portfolio's net equity exposure. Furthermore,
the formula consists of intellectual property developed by the
insurance company, and is considered proprietary. In addition,
disclosure may allow investors to arbitrage against it.
6. Secure Value Account, page 14, 16, 18, 25
Comment - Add disclosure from page 14 to other discussions of the
Secure Value Account stating that allocations to the Secure Value
Account may not be moved from the Secure Value Account to a fixed
account or Variable Portfolio.
Response -- The requested change has been made, to pages 16
and 18. The discussion of the Secure Value Account has been
removed from page 25, as this section has been removed
pursuant to our response to comment 8 below.
3
7. Defined Terms, page 26
Comment -- Please do not use the term investment requirements to
define investment requirements.
Response -- The definition of Investment Requirements has been
revised as follows:
"We will allocate a certain percentage of every Purchase
Payment and Continuation Contribution, if any, to the Secure
Value Account. The remaining amount of every Purchase Payment
and Continuation Contribution, if any, must be allocated by
you in accordance with the investment options outlined below."
8. Income Option Table, page 27
a. Comment -- Please revise the table and related disclosure for
clarity and explain the use of the terms "Dynamic Income Option"
and "Custom Income Option."
Response -- The requested changes have been made and a sample
of the revised table and disclosure we intend to use is
attached hereto as Exhibit A. In addition, we have removed the
references to "Dynamic Income Option" and "Custom Income
Option" from the Registration Statement. We have replaced
these references with "Income Option 1, 2, 3 and Income Option
with Custom Allocation".
b. Comment -- Please explain what it means to say "income option"
as opposed to and distinguished from "annuity income option" used
later in the prospectus.
Response -- "Income option" defines options used to take
income from optional living benefits, whereas the "annuity
income option" defines options used to take income upon
annuitizing the contract.
9. Investment Requirements Table, page 28
Comment - Why do you have an "Equity" heading for the funds in the
second group when not all funds invest in equities, i.e. high
yield bond.
Response -- We have added a footnote to the title "Equity"
noting that not all funds in this classification have exposure
to equity markets.
We appreciate your assistance. If you have any questions or comments,
please call me at 310-772-6545.
Very truly yours,
/s/ Manda Ghaferi
Manda Ghaferi
Assistant General Counsel
EXHIBIT A
<Table>
<Caption>
------------------------------------------------------------------------------------------------------
NUMBER OF
COVERED PERSONS SUNAMERICA SUNAMERICA SUNAMERICA
AND AGE OF YOUNGER INCOME PLUS INCOME PLUS INCOME PLUS
COVERED PERSON INCOME INCOME INCOME
AT FIRST WITHDRAWAL* OPTION 1 OPTION 2 OPTION 3
------------------------------------------------------------------------------------------------------
One Covered Person (Age 64 and Younger) 6.0% / 3.0%** 6.0% / 3.0%** 4.0% / 4.0%
------------------------------------------------------------------------------------------------------
One Covered Person (Age 65 and older) 6.0% / 4.0% 7.0% / 3.0% 5.25% / 5.25%
------------------------------------------------------------------------------------------------------
Two Covered Persons (Age 64 and Younger) 5.5% / 3.0%*** 5.5% / 3.0%*** 3.5% / 3.5%
------------------------------------------------------------------------------------------------------
Two Covered Person (Age 65 and Older) 5.5% / 4.0% 6.5% / 3.0% 4.75% / 4.75%
------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------
SUNAMERICA
NUMBER OF INCOME PLUS
COVERED PERSONS INCOME OPTION
AND AGE OF YOUNGER WITH
COVERED PERSON CUSTOM
AT FIRST WITHDRAWAL* ALLOCATION
----------------------------------------------------------------------
One Covered Person (Age 64 and Younger) 5.0% / 3.0%**
----------------------------------------------------------------------
One Covered Person (Age 65 and older) 5.0% / 4.0%
----------------------------------------------------------------------
Two Covered Persons (Age 64 and Younger) 4.5% / 3.0%***
----------------------------------------------------------------------
Two Covered Person (Age 65 and Older) 4.5% / 4.0%
----------------------------------------------------------------------
</Table>
<Table>
<Caption>
----------------------------------------------------------------------
NUMBER OF
COVERED PERSONS
AND AGE OF YOUNGER SUNAMERICA
COVERED PERSON INCOME
AT FIRST WITHDRAWAL* BUILDER
----------------------------------------------------------------------
One Covered Person (Age 64 and Younger) 4.0% / 4.0%**
----------------------------------------------------------------------
One Covered Person (Age 65 and older) 5.0% / 5.0%
----------------------------------------------------------------------
Two Covered Persons (Age 64 and Younger) 3.5% / 3.5%***
----------------------------------------------------------------------
Two Covered Person (Age 65 and Older) 4.5% / 4.5%
----------------------------------------------------------------------
</Table>
The first percentage represents the Maximum Annual Withdrawal Percentage
and the second percentage represents the Protected Income Payment
Percentage for each of the options shown.
* If there is One Covered Person but there are joint Owners, the Covered
Person is the older Owner. If there are Two Covered Persons, the age at
first withdrawal is based on the age of the younger of Two Covered
Persons, if applicable.
** If One Covered Person is elected, the Protected Income Payment Percentage
is 4.0% if the Income Base is increased to a new highest Anniversary
Value on or after the Covered Person's 65th birthday.
*** If Two Covered Persons are elected, the Protected Income Payment
Percentage is 4.0% if the Income Base is increased to a new highest
Anniversary Value on or after the younger Covered Person's 65th birthday.